MMP Resources - all 'snowed in'?

Among the endless heaps of never-give-up quotes out there, there is one that goes: "Character consists of what you do on the third and fourth tries".

That may not always be applicable in the corporate world as much as the personal realm. And sometimes, companies need to call it as they see it.

A reality check such as that may be long overdue for ailing MMP Resources. The mainboard-listed firm - which was listed in 2008, and until two years ago called itself Sino Construction - has barely had a good run.

That's putting it mildly. It began as a construction firm in China, then tried to venture into the mining business in South Africa (it didn't pan out) and later, shifted its focus to micro powerplants in South Korea (this was what had led to the company's name change but it would, ironically, exit the business a year later). Now its latest pursuit involves a ski business in Japan.

Last March, the company found itself on the Singapore Exchange's (SGX) watch list for reporting three consecutive years of losses. It got a double shot of that dreaded tag again this June - this time, for not meeting the minimum trading price rule.

This followed the company's earlier attempt to transfer to the Catalist board which was rebuffed by the SGX in January last year on the basis that its ability to operate as an ongoing concern was in doubt.

Even amid the company's protracted and deep financial struggles - it sank deeper into losses of S$2.3 million for the nine months to September period from S$37,000 a year ago - there are elements that pique curiousity.

The revolving door of its boardroom has spun one too many times over the past four years, and its stock has seen unusual price and volume movements. In 2015, between Feb 27 to March 3, MMP shares went through a "dramatic crash" from 26 Singapore cents to six Singapore cents. Its value has dwindled even further with the stock trading at 0.6 Singapore cent now.

Two years ago, not too long after Drew Ethan Madacsi was appointed as executive director in February 2015, MMP Resources inked a restructuring agreement with an advisory firm that was 90 per cent owned by Mr Madacsi, hence it was categorised as an interested person transaction.

In a circular issued in May last year - in the same month that Mr Madacsi was redesignated non-executive chairman - it was disclosed that Mr Madacsi's consultancy firm would be paid some US$1.7 million by shares for certain key performance indicators being fulfilled.

Then, more recently, in September this year, MMP entered into an advisory services agreement with Maiora Asset Management and Maiora Asian Structured Finance Fund (MASFF). This too, which involved a fee of US$650,000, is an interested person transaction.

MASFF, a fund managed by Maiora Asset, is MMP's controlling shareholder while two of MMP's directors - Christopher Michael Peck and Jason Block who were appointed in March last year and September this year, respectively - each own 25 per cent of Maiora Asset.

Cost is ratcheting up for the company while it seeks a business rescue plan and yet, there has been no visible improvement (in fact, quite the opposite) in the company's fundamentals.

The clock has started to tick for MMP Resources which has three years to get its act together (from the time that it entered the watch list) or face getting the boot from the exchange. That, as many other companies struggling to yank themselves out of that unenviable corner of the exchange, can be as treacherous as, well, walking in the snow.

This begs the question: At what point should companies call it quits on a failing business and give shareholders an exit option? Should the watchdog weigh in on this one? Fortunately, there are no fees for guessing this one.

Anita Gabriel

16 November 2017