TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issu...
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R Sivanithy
12 June 2015
Shares in commodities firm Noble Group may have enjoyed some respite from their recent weakness when they bounced S$0.06 from a six-year low to close at S$0.705 on Thursday after its chairman Richard Elman sent a letter to shareholders and staff to reassure them that management is working hard behind the scenes. But unless the company takes radical steps to win over the market’s confidence, there is every chance that weakness may quickly resume.
Noble’s shares have been falling for months and almost all sessions over that time; they have not strayed far from the top of the daily lists of actively traded stocks, so the slide has come in high volume.
This cannot be a good sign, especially when the weakness has been accompanied by a deafening silence from the company in the face of mounting public scrutiny of its accounts.
Noble’s problems started when a self-proclaimed corporate whistle-blower named Iceberg Research on Feb 15 released a 17-page report attacking Noble’s accounting practices, in particular its classification of Australian-listed Yancoal as an associate instead of an investment.
The day before the report was issued, Noble’s shares closed at S$1.205, which means that even with Thursday’s rebound, they have now plunged about 42 per cent in four months.
Since February, two other critics have emerged - short-seller Muddy Waters and retired investment banker Michael Dee.
Latest salvo
Both have argued along similar lines as Iceberg, though with different intentions - in Muddy Waters’ case the objective is clearly to make a profit from having shorted the stock, whilst Mr Dee operates from a standpoint of governance and transparency.
His latest salvo came in the form of a May 29 memo to Noble’s employees telling them that the collapse in their company’s shares should be a signal that “there is something very wrong” with their company and that time is running out to fix it.
Mr Elman’s letter on Thursday was likely written in response to Mr Dee’s memo though this was not explicitly stated; meanwhile, at least one house has turned negative on the stock - OCBC Investment Research on Thursday said it has reduced its valuation from 13.5 to 8 times FY15 forecast earnings, which reduces its fair value for Noble from S$1.05 to S$0.61.
What might be Noble’s best course of action?
Privatisation springs to mind as a remote possibility - after all, Noble was originally listed in Hong Kong and delisted there in 1996 in favour of Singapore when its chairman Richard Elman, frustrated by Hong Kong’s inability to recognise the value of his business, led a consortium of investors to buy out shareholders at HK$2.05 per share (then S$0.37) before listing in Singapore in 1997 at US$0.88 per share.
However, this option would surely prove most unpalatable to the majority of shareholders, particularly institutions who have been buying - albeit in small amounts and as a show of support - on the way down over the past few months at higher prices.
Concerns
A much better way forward would be for the company to directly address areas of the market’s greatest concern, issues which Iceberg, Muddy Waters and Mr Dee have raised and which appear to have not been satisfactorily answered.
For instance, Yancoal’s value, which on Noble’s books is 30 times its market value. Even though Noble has dismissed the market price as not being reliable because Yancoal’s shares are not actively traded, it has not yet disclosed the formula it employs in its valuation.
This must be done as soon as possible; after all even if the market does sometimes mis-price illiquid stocks, surely the mis-pricing cannot persist for months and years, and surely the valuation gap cannot be that large?
On the contrary, the share price weakness of the past four months suggests the market believes Noble’s critics not only know the company’s business, but also seem to have a firm handle on what might go wrong.
Making the appropriate disclosures would be an important first step in winning back the market’s confidence, especially since months of denial have not worked.