The LCS debacle: Over budget and late

The RM9.13 billion littoral combat ship (LCS) project caused a public outcry when the Public Accounts Committee (PAC) revealed that not a single vessel has been delivered to date, 11 years after the ship-building job was commissioned.

The contract was awarded to Boustead Holdings Bhd’s 68.85%-owned Boustead Naval Shipyard Sdn Bhd (BNS) in December 2011 by the Ministry of Defence. The other shareholders of BNS are Boustead Heavy Industries Corp Bhd (20.77%) and Lembaga Tabung Angkatan Tentera (LTAT) (10.38%).

The six LCS to be built were initially slated to be delivered on a staggered basis, with the first ship to be sent in April 2019 and the last ship delivered by June 2023. But BNS failed to do so, despite the government having disbursed RM6.08 billion for the project, according to the PAC.

This has raised doubts about BNS’ competency to do the job. It also needs more money from the government to complete the ships. BNS CEO Captain Azhar Jumaat explained to the media that the RM6.05 billion disbursement was used to procure equipment worth RM3.5 billion while RM2.5 billion was spent on overhead, project management, financing costs, insurance, electricity and infrastructure.

As the public uproar grew, former Navy chief and BNS managing director Tan Sri Ahmad Ramli Mohd Nor was charged in August with three counts of criminal breach of trust involving RM21.08 million worth of BNS funds. He pleaded not guilty to all charges.

Over the 11 years, there have been four defence ministers — namely Deputy Prime Minister Datuk Seri Zahid Hamidi (when the contract was awarded), Datuk Seri Hishammuddin Hussein, Mohamad Sabu and Datuk Seri Ismail Sabri. Hishammuddin oversaw the defence portfolio twice during this period — the first term from May 2013 to May 2018, and the second term from August 2021 to October 2022. Tan Sri Lodin Che Lodin Wok Kamaruddin was at the helm of LTAT and Boustead group when the LCS contract was given to BNS.

He stepped down from all the posts in LTAT and Boustead group in 2018. Investigations into the project revealed that there were financial mismanagement, cash flow issues, irregularities and lack of proper governance. Despite the red flags, BNS remains the contractor after the previous government took into consideration the Navy’s needs and the involvement of over 400 vendors in the project, with a financial implication of over RM4 billion.

Newly minted Defence Minister Datuk Seri Mohamad Hasan has reaffirmed that the LCS project will be continued, but subject to a review.

Singapore’s 2013 penny stock crash mastermind John Soh sentenced to 36 years in jail

Malaysian businessman John Soh, who has been found guilty of masterminding Singapore's largest stock market manipulation — the 2013 penny stock rout — has been sentenced to 36 years in jail. His co-conspirator Quah Su Ling was ordered to serve a 20-year term. The sentences were handed down by the Singapore High Court on Wednesday (Dec 28) after a near four-year trial that started in March 2019.

The two — described during trial as "long-time partners in both business and personal affairs" — were found by the court to have orchestrated an elaborate scheme to manipulate the share prices of Blumont Group, Asiasons Capital and LionGold Corp between August 2012 and October 2013, besides cheating two financial institutions, according to a joint statement from the Singapore police, the republic's Attorney General's Chambers, and the Monetary Authority of Singapore (MAS). The stocks crashed in October 2013 and destroyed some S$8 billion (RM26.2 billion) in market value.

Soh, 62, was convicted in May this year of criminal conspiracy, including false trading, price manipulation, deception and cheating. He was found guilty of 180 of the 188 charges he faced. Quah, 57, was convicted of 169 out of 178 charges. Both are appealing against their conviction and sentences.

The scheme masterminded by the duo led to large losses by investors and harmed public confidence in the integrity of Singapore's capital markets, said MAS assistant managing director of policy payments and financial crime Loo Siew Yee. "The successful prosecution and stiff sentences leave no doubt as to the authorities' resolve in acting against such misconduct."

Serba Dinamik fiasco: potential delisting after compound paid, minorities still in the dark

Those involved in making the false statement regarding RM6.01 billion revenue in Serba Dinamik Holdings Bhd may have faced some repercussions this year, but minority shareholders remained in the dark while the group’s market capitalisation was wiped out almost entirely, with the company now at risk of being delisted.

Back in April, Serba Dinamik and the group’s four top executives were granted a discharge and acquittal by the court after paying a total of RM16 million in compounds issued by the Securities Commission Malaysia (SC).

The four are: CEO and then-largest shareholder Datuk Mohd Abdul Karim Abdullah, executive director Datuk Syed Nazim Syed Faisal, group chief financial officer Azhan Azmi, and vice-president of accounts and finance Muhammad Hafiz Othman.

The compounds were issued after the Attorney General’s Chambers accepted a legal representation from the accused. A few weeks after that, the SC saw the resignation of several top officials, including chairman Datuk Syed Zaid Albar who was just six months into his three-year contract extension.

Shares of Serba Dinamik, which was suspended from trading in October 2021, plunged 68% upon resumption of trading in May. The once high-flying counter that peaked at RM4.40 with a market capitalisation of RM7.49 billion, last traded at one sen before the stock was suspended by the exchange as it failed to submit its annual report. Its market capitalisation shrank to RM37.27 million — down 99.5%.

Following the end of its audit saga-turned-legal tussle with its former auditor and regulators, Serba Dinamik was dogged by financial troubles. It posted an annual net loss of RM1.09 billion for its financial year ended June 30, 2022, on revenue of RM1.35 billion. Total borrowings stood at RM3.65 billion against a cash balance of RM57.49 million.

While the group heads towards potential delisting in June 2023, those who lost their investments in Serba Dinamik may never find out what went wrong.

5G rollout: Uncertainty abounds after government announces review

There was finally a sense of clarity about Malaysia’s 5G network rollout after mobile network operators (MNOs) and state-owned Digital Nasional Bhd (DNB) cleared several hurdles to the single wholesale network (SWN) plan and executed their respective access agreements (AAs) in October to lease DNB’s 5G network. But this was short-lived as the new government then expressed its intention to review the plan.

The year began with much uncertainty over whether the deployment would continue with the SWN model, or would the government relent and go with the MNOs' calls for a dual wholesale network. Ultimately, a compromise was reached with the then government maintaining the SWN model, while MNOs were offered a collective 70% ownership in DNB.

On Oct 7, four out of Malaysia's six MNOs executed the share subscription agreements to take up a cumulative 65% stake in DNB. Celcom Axiata Bhd and Digi Telecommunications took up 12.5% each while YTL Communications and Telekom Malaysia Bhd 20% each. Maxis Bhd and U Mobile Sdn Bhd, however, declined the offer.

Celcom, Digi, YTL, TM and U Mobile — which collectively serve over 20 million subscribers — signed their respective 10-year AAs with DNB on Oct 31, which would facilitate work to commence on making retail 5G services available.

Maxis raised some eyebrows when it said it would be seeking shareholders’ approval prior to entering into the AA with DNB. The telco has yet to announce the date of the extraordinary general meeting.

All was looking well for Malaysia’s 5G network plan, with DNB sharing on Dec 11 that the rollout is ahead of schedule, with coverage of populated areas (Copa) nationwide exceeding 40%, and on track to attain the 80% Copa commitment by 2024 or earlier.

However, following the 15th general election, Prime Minister Datuk Seri Anwar Ibrahim said his administration would review the plan for the state-owned 5G network as “ it was not done in a transparent manner”.

Neither Anwar nor his administration has disclosed details on what the “review” would involve. Nonetheless the premier’s remark has again cast uncertainty over the future of the nation’s 5G network plan.

Celcom-Digi merger: Axiata and Telenor succeed in second attempt

Over a year after announcing their return to the negotiation table, Axiata Group Bhd and Telenor Asia Pte Ltd’s second attempt at a merger finally came to fruition. The merger between the mobile telecommunications network operations of Celcom Axiata Bhd and Digi.com Bhd was successfully completed in end-November 2022, resulting in the formation of the merged entity of Celcom Digi.

The pair touted the merged entity as the nation’s “largest local-listed technology company on Bursa Malaysia", boasting a pro forma revenue of RM13 billion for the financial year 2021. Serving an estimated 20 million customers, the entity had an earnings before interest, tax, depreciation and amortisation of RM5.8 billion.

Axiata and Telenor hold equal ownership of 33.1% each in Celcom Digi. As part of the merger, Axiata received RM2.47 billion cash from Digi.com and RM297.92 million from Telenor. Axiata said the bulk of the cash proceeds will be channelled towards strengthening the group’s balance sheet by paring down its debt.

After the merger, Axiata declared a dividend of four sen per share.

Axiata and Telenor first attempted a merger in 2019. The deal to merge their Asian operations, however, fell through after a few months. The failed attempt was attributed to the proposal not being accepted by some authorities in the countries they operate in.

Scars of their past failure led the pair to downsize the scope of their second attempt, whereby they put only their Malaysian businesses on the negotiation table. The completion of the merger came after the exercise received the nods of the Malaysian Communications and Multimedia Commission, Securities Commission Malaysia, and shareholders of Axiata and Digi.

SC initiates legal action to prevent ACE Group from taking control of Apex Equity

ACE Group, which remained a shareholder of stockbroking firm Apex Equity Holdings Bhd after the latter’s proposed merger with Mercury Securities was called off in April 2021, has exited the group after the Securities Commission Malaysia went to court to prevent it from taking control of Apex Equity.

The regulator, which had requested that ACE Group exit Apex Equity during the proposed merger, initiated the legal action to seek a declaration that Apex Equity's subsidiary, Apex Securities Sdn Bhd, had contravened securities laws as ACE Holdings Bhd — a part of ACE Group — had “become a controller of Apex Securities when ACE Holdings is not a fit and proper person” to be one. A controller of a capital markets services licence (CMSL) holder controls at least 15% of the company, has the power to appoint a majority of its directors, or the power to effect decisions in the business.

The regulator, in the suit filed in November, also wanted a declaration that ACE Holdings had knowingly been involved in the contravention by Apex Securities, together with an order from the court to refrain ACE Holdings from being a controller of not just Apex Securities but of any capital markets services licence holder. It also wanted ACE Holdings to remove relevant directors and senior management personnel from both Apex Equity and Apex Securities.

It was previously reported that the SC’s reservations about ACE Group stemmed from previous breaches of securities regulations by ACE Holdings, which led to the regulator censuring and banning the company from fundraising activities.

While Apex Equity said it would “strenuously defend” the case,  ACE Group, which was the second largest shareholder in Apex Equity with a 14.98% stake, began disposing of the stake. By Dec 23 — when ACE Group no longer held any shares in Apex Equity — Apex Equity announced that managing director Datuk Choong Chee Meng, who controls ACE Group, had resigned due to "personal commitment". Formerly Apex Equity's non-executive director, he was made MD in June.

Sulu heirs seize Petronas assets

It began with the seizure of two Luxembourg-registered subsidiaries of Petroliam Nasional Bhd (Petronas) in July by bailiffs acting for eight individuals claiming to be the heirs of the late Sulu Sultanate to enforce an arbitration ruling obtained in February that ordered Malaysia to pay the heirs US$14.9 billion, which the Malaysian government refused to recognise.

The units — Petronas Azerbaijan (Shah Deniz) Sàrl and Petronas South Caucasus Sàrl — were seized to satisfy the award handed out by Spanish arbitrator Gonzalo Stampa, following arbitration proceedings initiated by the eight claimants in 2018. Stampa found that Malaysia had reneged on a 144-year-old agreement signed in 1878 by the then Sulu Sultan that granted sovereign rights to parts of Sabah today, in return for an annual token payment of RM5,300.

Malaysia, which had been paying the sum, halted it in 2013 during Datuk Seri Najib Razak’s administration following the armed incursion of Lahad Datu by more than 200 militants believed to be linked to the Sulu Sultanate. It claimed the invasion caused a breach of the 1878 agreement, which the heirs disputed.

Though Malaysia offered in September 2019 to resume paying the annual token, and to pay the outstanding sums for 2013 to 2019 along with a 10% interest, this was rejected by the lawyers of the Sulu claimants, who pointed to Sabah’s much higher current value now due to its oil and gas resources.

The Luxembourg units belonging to Petronas that were seized, meanwhile, had already disposed of their assets, which were in Azerbaijan, with the proceeds repatriated. Petronas viewed the actions taken against it as “baseless”, and said it would vigorously defend its legal position in the matter.

In late September, the heirs again tried to seize Petronas assets — this time involving those registered in the Netherlands. Petronas, via Dutch units such as Petronas Carigali Canada BV, Petronas International Power Corporation BV and PLI (Netherlands) BV, has extensive assets in Canada, India and Indonesia, among others.

The Sulu heirs asked a Dutch court for permission to seize the assets, which Petronas and the Malaysian government are contesting. Malaysia also obtained a stay of the Stampa’s arbitration award in France, pending an appeal, though the Sulu claimants’ lawyers insisted that the arbitration award remains enforceable outside France.

It should be noted that Malaysia previously secured court orders from both Malaysian and Madrid courts in 2020 and 2021 to stop the Spanish arbitration but Stampa proceeded to hear the case online in February 2021 amid the Covid-19 pandemic and closed the arbitration proceedings in March. He later shifted the proceedings to France and despite Malaysia’s arguments that the arbitration was illegitimate, continued with it and delivered his final award in February 2022.

Malaysia has filed criminal proceedings against Stampa in the Madrid courts for alleged contempt of court, and formed a special task force to study and formulate an appropriate action to tackle the Sulu claim.

The passing of Public Bank founder Teh Hong Piow

Tan Sri Teh Hong Piow, who set up Public Bank Bhd in 1966 with the vision of growing it into "a bank for the public", passed away on Dec 12, aged 92, leaving behind a giant legacy in the local banking industry, in which Public Bank ranks the third largest by assets.

His passing also marked the start of the end of the "grandfather rule" era that exempted individuals like him, who already had an interest in a bank exceeding the 5% limit — or as much as 10% if given special permission by Bank Negara Malaysia — when the Financial Services Act came into effect in 2013, from having to comply with the shareholding caps set out under the law.

So all eyes are now trained on how Teh’s 23.4% block in Public Bank, worth about RM20 billion at the current price, would be passed on or distributed. What happens next would provide clues as to how Tan Sri Quek Leng Chan of the Hong Leong Financial Group (HLFG) and Tan Sri Azman Hashim of AmBank Group — two other individuals owning more than 10% in a bank — could pass on their respective shareholdings. Quek holds 62% in HLFG, while Azman owns 11.83% in AmBank.

Teh left behind four children — Diana Teh Li Shing, William Teh Lee Pang, Lillian Teh Li Ming and Dr Lillyn Teh Li Hua — none of whom is in the business. All are also reportedly not interested in taking over the business. Teh’s wife, Puan Sri Tay Sock Noy, passed away in August.

BNM announces five digital bank licence winners

In end-April, Bank Negara Malaysia announced the list of five successful winners for the country's first digital banking licences, which attracted 29 applications from a mix of foreign and domestic companies.

Three of the winners secured conventional digital bank licences, namely a consortium of Boost Holdings Sdn Bhd and RHB Bank Bhd, a consortium led by GXS Bank Pte Ltd and Kuok Brothers Sdn Bhd, and a consortium led by Sea Ltd and YTL Digital Capital Sdn Bhd.

The remaining two won Islamic digital bank licences. They are a consortium comprising AEON Financial Service Co Ltd, AEON Credit Service (M) Bhd and MoneyLion Inc, and a consortium led by KAF Investment Bank Sdn Bhd.

According to BNM's announcement, which came a month later than expected, the applicants were assessed on their character and integrity; nature and sufficiency of financial resources; soundness and feasibility of business and technology plans; and ability to meaningfully address financial inclusion gaps.

The successful applicants will undergo a period of operational readiness that will be validated by BNM through an audit before they can commence operations. This may take between 12 and 24 months.

The central bank has said it has no plans to issue any more licences other than the five announced after considering the size of the country's banking system, and that its immediate focus is to ensure these digital banks can begin operations without delay.

ALR takes over highway concessions from Gamuda and others for RM4.48 billion cash

Gamuda Bhd has finally concluded the sale of its four highway concessions. The four concessions were sold to Amanat Lebuhraya Rakyat (ALR) in October 2022 for an aggregate sum of RM4.48 billion, with Gamuda’s portion amounting to RM2.35 billion.

ALR is a private not-for-profit company that is undertaking the restructuring of certain toll highway concessions on behalf of the government.

Gamuda held a 70% stake in Kesas Sdn Bhd (operator of the Kesas Expressway), 51.3% in Sistem Penyuraian Trafik KL Barat Sdn Bhd (operator of the Sprint Expressway), 42.6% in Lingkaran Trans Kota Sdn Bhd (operator of the Damansara-Puchong Expressway or LDP) and 50% in Syarikat Mengurus Air Banjir & Terowong Sdn Bhd (operator of Smart Tunnel).

After the divestment, Gamuda received roughly RM1.05 billion dividend or RM4.57 per share from Lingkaran Trans Kota Holdings Bhd (Litrak), in which it owns a 42.6% stake.

Of the RM2.35 billion sale proceeds, Gamuda said RM900 million would be used to repay borrowings, which is expected to generate funding costs savings of RM43.3 million per annum. Another RM1 billion was earmarked for capital management activities, including rewarding its shareholders with special dividends. It also intends to use RM438.6 million for working capital.

On Dec 23, Gamuda’s shareholders were paid a special dividend of 38 sen per share from the proceeds of the disposals.

Bank Pembangunan’s lawsuits over alleged fraud, bribery

Bank Pembangunan Malaysia Bhd (BPMB) filed lawsuits against 27 defendants, including its former president and group managing director (MD) Datuk Mohd Zafer Hashim, over a RM400 million loan granted to Aries Telecoms (M) Bhd — a company that had a RM1.3 billion project to lay  fibre optic network around peninsular Malaysia.

Aries Telecoms took the RM400 million loan to finance the project in May 2012. However, it defaulted on the loan five years later. BPMB then found that the fibre-optic network was never fully constructed, raising the question of what the RM400 million cash Aries borrowed was used for.

BPMB alleged that the money, which was meant for the fibre optic project, was misused. It also claimed that the loan was disbursed to Aries without fulfilling necessary conditions, and accused Zafer of taking bribes to disburse the loans.

In the court filing, BPMB alleged that the whopping sum was “siphoned and/or unjustifiably transferred” to other entities, including Paneagle Holdings Bhd, BVS Trinity Sdn Bhd, VCB Malaysia Bhd, Orient Telecoms Sdn Bhd, and/or Primawin Ltd — all of which have been named as defendants in the suit. Paneagle Holdings owns a 9% stake in Aries.

BPMB, which is seeking RM564.99 million in losses and damages as a result of the acts by the defendants, has made a further claim for exemplary damages, given what BPMB claimed were calculated acts on the part of the defendants to make a profit for themselves, which BPMB said "might well exceed any compensation payable".

But in an unexpected twist, Zafer Mohd Hashim passed away in London on July 22, about a month after the legal action was taken.

MACC chief in share trading controversy cleared by SC

Malaysian Anti-Corruption Commission (MACC) chief commissioner Tan Sri Azam Baki hogged the limelight in January over a share trading controversy.

There were allegations that Azam owned shares in several public-listed companies. He was reported to have owned 1.93 million shares in Gets Global as of April 30, 2015, which was trimmed to 1.03 million shares by March 31, 2016. Azam was also said to be the owner of 2.16 million warrants in Excel Force as of March 21, 2016.

Azam explained that his share trading account had been used by his younger brother Nasir Baki to buy shares in 2015. He denied any wrongdoing and said the stocks purchased had later been transferred to Nasir’s account.

The Securities Commission Malaysia (SC) then examined the accusation against Azam for allowing his brother to operate his share-trading account. It was also summoned to appear before a parliamentary select committee to explain the issue.

Subsequently, the SC announced on Jan 18 that it could not “conclusively establish” if there was any breach of Section 25(4) of the Securities Industry (Central Depositories) Act 1991, which stipulates that a trading account must be opened in the name of the beneficial owner or authorised nominee.

That remark raised even more eyebrows.

A day later, the SC clarified that Azam operated the account that he had opened, in that he had given instruction to buy, sell and transfer securities from the account. 

Affin Bank sells 63% stake in Affin-Hwang Asset Management for RM1.42b cash

The sale of 63% stake in Affin Hwang Asset Management Bhd (Affin Hwang AM) brought in fresh capital to strengthen Affin Bank Bhd’s financials as well as enabled the latter to reward shareholders with generous dividends.

CVC Capital Partners (CCP) paid RM1.42 billion for the stake in Affin Hwang AM, now known as AHAM Asset Management Bhd, valuing the company at a multiple of 19.7 times on a price-earnings ratio (PER) basis, compared with the past average of 15.2 times.
The divestment enabled Affin Bank to recognise a net gain of RM1.063 billion. The bulk of the RM1.42 bil proceeds will be used to fund its core banking activities and for working capital.

The banking group’s common Equity Tier-1 ratio increased to 16.3% as at end-September from 13.4% in June — putting the group ahead of the banking industry’s 15.1% level. On top of that, its loan loss coverage ratio improved to 112.25% from 80% during the same period, making it more in line with the industry.

Following the deal, Affin Bank declared a special dividend of 18.09 sen per share, or RM400.2 million in total.

In anticipation of the bumper dividend, Affin Bank's adjusted share price shot up to RM2.25 on Nov 29, a day before the special dividend’s ex-date, which falls on Nov 30. On Thursday (Dec 29), the stock closed at RM2.03, giving the group a market capitalisation of RM4.49 billion. Year-to-date, it has gained 17.3% from RM1.73 on Jan 3.

Among seven analysts who tracked Affin Bank, four had it on “buy” with RHB Research giving the highest target price of RM2.80. The remaining three rated it “hold”, Bloomberg data showed.

The curious Caely case

Caely Holdings Bhd, which manufactures lingeries in Perak and now known as Classita Holdings Bhd, had plenty of opportunities to grab the headlines in 2022, given the slew of lawsuits it was involved in and the rapid changes in its boardroom.

In the space of 12 months, its executive chairman was changed three times, while 17 directors joined its board and nine resigned.

In the midst of that, Classita sued its founder Datin Fong Nyok Yoon and her husband Datuk Chuah Chin Lai, who was the group’s managing director from October 2002 to April 2021, for allegedly misappropriating RM30.55 million. Classita also sued 10 others of allegedly conspiring with the couple to cover up the misappropriation and breach of fiduciary duty. Some of the defendants denied the allegations and counter-sued.

Prior to that, its bank accounts were frozen by the Malaysian Anti-Corruption Commission (MACC), while Fong sued the company and six board members to stop a share placement.

Those weren’t the only events that cast the limelight on Classita.

Boardroom tussles broke out between three factions in the company, which resulted in EGMs being called to remove board members, while new shareholders emerged, such as businessman Datuk Seri Tee Yam @ Koo Tee Yam. Four former police officers were also appointed to its board.

Tee and former executive vice chairman Datin Seri Jessie Wong Siaw Puie also filed a lawsuit to recover a sum of RM3.96 million allegedly advanced by them to the company for day-to-day operations and management costs.

On Dec 7, MACC lifted the freeze order on the company’s bank accounts without bringing any charges against the company.

Along the way, Fong stepped down from the board of the company she founded. She and her husband, who held more than 10% in the company previously, trimmed their stake. She now has 5.62%, while Chuah holds 4.31%.