Questionable decisions by the board of directors of Tiger Synergy Berhad sees a 91% decline in the share price of the company.
The issuance of Redeemable Convertible Notes and rampant share options has caused Tiger Synergy Berhad’s share price to decline from a high of RM0.58 in 2015 to an all-time low of RM0.065.
What has sparked controversy in amongst retail investors and private companies is the fact that there is a concentrated effort to reduce the value of the shares via dilution.
The board is currently family controlled with Datuk Tan Wei Lan serving as the executive chairman. His daughter Tan Lee Chin serving as the managing director and his wife Sek Chain Nee serving as the executive director.
The structure of the board of directors at this company allows for Datuk Tan Wei Lan to exercise considerable control.
The scheme to privatize the company
When a company has a high amount of assets in the form of land holdings and property developments it becomes an attractive target to privatize.
It will be expensive to privatize a company that is doing well financially, it makes more sense to reduce the value or the perceived value of the listed company so that the shares can be acquired for a cheap price.
This is exactly the story of Tiger Synergy Berhad and this is how they did it.
Step 1: Make the company look unattractive by making large investments with large pay outs.
RM 24 million has been paid out of the company but the developments have not even started. The strategy here is make the company look unattractive by making large investments with high cash considerations but to not push these projects forward.
July 2016: Tiger Synergy agrees to inject RM 3,000,000 in a joint venture with Kemajuan Rowther Sdn Bhd
Despite it saying that the project will take three years to complete as of time of writing the property has not even started development and is not even listed on the company website.
July 2017: Tiger synergy agrees to inject RM 5,000,000 in a joint venture with Credence Property Management Sdn Bhd
Despite the money being injected into the company in 2017, there has been no development of the land bank in Sungei Kendis.
July 2017: Tiger Synergy agrees to inject RM 5,000,000 in a joint venture with LJ
What’s critical here is that the directors of LJ developments are family members of Datuk Tan Li Li. As at time of writing there has been no movement in the development of the project. Despite the agreement taking place in July 2017, the development has not been listed on tiger’s website.
June 2018: A grand total of RM 8,000,000 was injected into Tristar Frontier Sdn Bhd & Nujade Garden Sdn Bhd to develop property in Klang
There is currently no news on this development. Nothing can be found as future projects or on going projects on the Tiger Synergy website.
What is interesting here is that under the bursa disclosure announcement the deal can be terminated very easily. Tiger Synergy can terminate the agreement by threatening to not complete the project on time.
There will also be a full refund if Tiger Synergy decides to not proceed with the project. If the companies involved are owned and controlled by Datuk Tan Wei Lan’s proxies and family then it will be a simple transfer back of the money.
June 2018: RM 3,000,000 is injected as consideration for a development with Harapan Handal Sdn Bhd.
Similarly there has been no movement on this Klang project. It is also not listed as a development on Tiger Synergy’s website.
Link: https://ift.tt/32wFywv
None of these projects have begun development as of time of writing. However the consideration amounts that were injected amount to a total of RM 24 million.
By making these ‘investments’, the audited accounts of the company will show that the company is losing money. This will drive the stock price of the company down.
Step 2: Ensure that all companies are held by proxies and or companies controlled by you
All companies that received the RM 24million investment use the same company secretary and two of the 5 companies involved include family members to Datuk Tan Wei Lan.
Tan Li Li and Joanna Yong are related to this family. Source: https://ift.tt/2VlR2Bp
Step 3: Devalue stock value and cheat shareholders by diluting shares.
To achieve this Tiger Synergy uses Redeemable Convertible Notes & Employee Share Options Scheme to devalue the stocks
How Redeemable Convertible Notes work
A redeemable convertible note is a debt/equity hybrid financial instrument. Think of it as an option to receive cash back after a fixed period or to convert it into shares.
In order for us to understand how shareholders are being misled it’s important to understand how redeemable convertible notes work. Imagine that I want to raise RM 10 million but I don’t want to raise that from a bank.
So I create an RCN and I give you an option to either
a) take the future value of my shares RM 10d,000,000 with at a discounted rate of 10% or
b) to take back your cash with interest
Despite a string of stalled and failed projects, the board of Tiger Synergy is pushing for a private placement of Redeemable Convertible Notes to the value of RM 389,527,105. This will effectively drive the market down as it amounts to 1,355,506,194 shares being released into the market.
The board of Tiger Synergy has also come up with an Employment Share Options Scheme that will award 70% of the total value of RM 399,375,195 to their senior management. This will result in there being a further 1,499,399,873 shares flooding the market.
With the current leadership so concerned with enriching themselves despite only attending 4 meetings a year it is no wonder the share price is currently in the toilet. They even offered the shares to themselves at a discounted rate of between 20% – 40%.
The creation of these shares from thin air has resulted in the retail investor losing out due to dilution in value. With new shares being created in the billions it is the hard working retail investor who has to bear the cost.
Company Performance
All this is being done whilst the company recorded a net profit of RM35,000 for the financial year ended June 30,2019 (FY2019).
The company also only has RM 14.87 million in cash and bank balances but is conducting an employment scheme valued at RM 399,375,195 with the majority going to their already rich senior management.
Justice for shareholders
Family controlled – Despite nepotism on the board and years of poor company performance, the executive received large remuneration packages.
- Wei Lian, Lee Chin and Sek received RM1.64 million in salary, emoluments and share-based payments in FY2018, and RM3.61 million in FY2017.
After four consecutive years of losses since FY2015, Tiger Synergy needs a change at the helm whereby a new set of directors on the board can provide the leadership, expertise and resolve required to safeguard shareholders’ interest and eventually improve the company’s outlook
Step 4 (in the process): Once the share price is low they will acquire as many shares as possible over time
Acquiring of shares will be done directly and indirectly through the use of proxys. This is done so that they can obtain a majority of the company shares so that they can move forward with privatization.
This is already in the process:
Factions aligned to Datuk Wei Lan are already acquiring shares actively.
By acquiring 51% of a company, they will be able to effectively block all competing bids as they will be the majority shareholder.
Based on this they will drag the company performance down so that they can acquire the shares more cheaply and slowly buy shares until they have 75%.
Bursa requires at least 25% of total shares are in the hands of the public. Once Tiger Synergy no longer reaches this amount they will be forced to delist under Bursa’s ruling.
The privatization of a company is always hurts minority shareholders like us the most.
How can we stop this from happening: Three reasons we must exercise our rights and remove the current leadership.
- The company is becoming worthless under the current leadership
The writing is on the wall, high level of non cash earnings mixed in with shareholders diluting everyone for their own personal gain. We must collectively take action!
2.The dilution of shares has caused the pe ratio and price of shares to drop so we have little to no hope of selling the stock
PE ratio at present is unprecedented. The real estate industry average for PE ratio in Malaysia is 10.2x meanwhile Tiger Synergy Berhad is at 1794.9x. A lower PE ratio indicates that a company’s value in relation to how much shareholders pay and how much revenue is generated. Investors are instead paying an extremely high price for the stock compared to the company’s earnings.
3.There has been no dividend payout for years
Dividend has not been paid by the company since board has been in place. It is unlikely that dividend will ever be paid with the current board in power. By market standards, even the bottom 25% on average pay out a 2% dividend. This speaks loudly of gross mismanagement. Yet they award themselves high share options and bonuses amounting in the millions.
How do we make a change?
In order for the board to be removed, there needs to be a turn out by individual investors and private companies. It would not be surprising if the current board uses proxies to represent individual shareholders in order to maintain their position.
This is a common practice used by those who want to remain in power. It is impossible to check the authenticity of all proxies in only 3 days.
This phantom voting is similar to the elections held in Malaysia. It can only be solved by turning up to vote.
Despite high revenue during many quarters the company is bleeding money. It is time to exercise your right to vote. Exercise your right to vote at New World Petaling Jaya Hotel at Paradigm Mall on Monday 2nd March at 9am or you will pay dearly.
A change in leadership can only be achieved with your vote. Share this so we can get our money back.
The post 91% of Shareholder Value Removed : Tiger Synergy Berhad Pays Out 70% of RM 399 Million Employee Benefits To Board of Directors & Senior Management appeared first on The Coverage Edisi BM.
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