|  Major Reasons For Companies/Firms to Fail Extracted from Bursa Saham Malaysia,the total PN 17 companies/firms: (List updated as at 13 July 2010) - ARK RESOURCES BHD 1
- AKN TECHNOLOGY BERHAD 2
- AXIS INCORPORATED BERHAD 2
- EVERMASTER GROUP BERHAD 2
- FOUNTAIN VIEW DEVELOPMENT BERHAD 3
- HAISAN RESOURCES BERHAD 3
- HO HUP CONSTRUCTION BERHAD 2
- HOCK SIN LEONG GROUP BERHAD 3
- GULA PERAK BHD 3
- IBRACO BERHAD 3
- JPK HOLDINGS BERHAD 3
- KENMARK INDUSTRIAL CO. (M) BERHAD 3
- LCL CORPORATION BHD 3
- LIMAHSOON BERHAD 3
- LINEAR CORPORATION BERHAD 3
- LUSTER INDUSTRIES BHD 2
- MALAYSIAN MERCHANT MARINE BERHAD 3
- NAM FATT CORPORATION BERHAD 3
- NGIU KEE CORPORATION (M) BERHAD 3
- NIKKO ELECTRONICS BHD 2
- OCI BERHAD 2
- OILCORP BERHAD 3
- RAMUNIA HOLDINGS BERHAD 3
- RHYTHM CONSOLIDATED BERHAD 2
- SATANG HOLDINGS BERHAD 2
- SELOGA HOLDINGS BERHAD 2
- STAMFORD COLLEGE BERHAD 2
- SYARIKAT KAYU WANGI BERHAD 2
- THE AYER MOLEK RUBBER COMPANY BERHAD 3
- TRACOMA HOLDINGS BERHAD 3
- TRANSMILE GROUP BERHAD 3
- TRIPLC BHD 2
- VTI VINTAGE BERHAD 3
- WWE HOLDINGS BERHAD 2
1 Companies that triggered any of the criteria pursuant to Practice Note 17/2005 of the Listing Requirements of Bursa Malaysia Securities Berhad which came into effect on 3 January 2005 2 Companies that triggered any of the criteria pursuant to Amended Practice Note 17/2005 of the Listing Requirements of Bursa Malaysia Securities Berhad which came into effect on 5 May 2006. 3 Companies that triggered any of the criteria pursuant to Practice Note 17 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad which came into effect on 3 August 2009. Some of the major reasons for firms or companies falling into PN17 categories in Bursa Saham Malaysia includes the following: - Companies’shareholders’funds are less than 25% of their total paid up capital;
- Winding up of some of their subsidiaries and associated companies;
- Default in loan interest and principal repayments;
- Companies have suspended or ceased their operations;
- Companies do not have any significant business or operations;
- Receivers have been appointed to take control of the companies’assets;
- Auditors have expressed adverse opinions on the companies
Interestingly,the above are just the outcomes when the companies turned into PN17 companies,the basic underlying reason is that companies are not properly managed –refer to my other articles on what are the mains reasons for companies to fail Zhulian Corp Bhd,a public listed direct selling company has proposed: • A one-for-three bonus issue of 115 million shares of 50 cents each • As at 30 th April 2010,Zhulian’s issued and paid-up capital stood at Rm172.5mil comprising 345 million shares and with the proposed bonus issue enlarging the issued and paid-up capital to Rm230mil • The proposed bonus issue would be wholly capitalized from the company’s retained profit accounts So as a public investor,is there way(s) or likely symptoms/telling tales to understand whether a company intends to have bonus issue –read my article on how to check for companies who might propose bonus issue.  Accounting fraud in malaysia:DIS Technology Holding Bhd DIS Techology Holding Bhd (DIST)(0063) which is listed on Bursa Malaysia’s ACE Market,intend to reinstate its financial results in the past few quarters due to an alleged sales fraud in Hong Kong. The fraud is pertaining to billing to an external customer Starlight Marketing Ltd located in Hong Kong. Append below the HEAVILY overestimated figures on sales and profit before tax(extracted from Bursa Saham):-  Potential Financial Impact to Sales &PBT Due to Misstatement  DIS Working Capital BEFORE HEAVILY OVERSTATING TRADE RECEIVABLES As this is an artificial non cash transaction,the double entry is to reverse the group sales and trade receivables leaving an adjusted NET CURRENT LIABILITIES where the group will not able to service its bankers,creditors and other lenders. According to its group managing director Dustin Cheah of the RM131.33 million,the balance still owed to it as of end-December 2009 stood at RM82.07 million. Imagine what is DIS group sales for year ended 31 st December 2009 and 2008 -RM181 million RM139 million,hence this mistatement/fraud has tremendous financial impact to its company financial performance. A little bit of history of DIS Technology Holding Bhd: - DIS Technology Holdings Berhad (“DIST”),an MSC status company( achieved MSC status in 2002)
- Listed in MESDAQ or now called ACE in year 2004
- A leading electronic device innovator and trendsetter in Malaysia.
- Located in Penang – the Silicon Valley of Malaysia
- DIST comprises of seven wholly owned subsidiaries – Digital Integrated System Sdn. Bhd. (“DIS”),Dis Technology (HK) Limited,Modern Solution Sdn. Bhd. (“MSSB”) and Zeon Computer (M) Sdn. Bhd,Home Touch Solution (North) Sdn. Bhd.,DIS B2B Int’l (HK) Limited and Unieksoft Solutions Sdn. Bhd.
- Achieved numerous prestigious awards like the Asia Pacific International Honesty Enterprise-Keris Award 2004,Business of the Year Award 2004,Asia Pacific e-Entrepreneur Excellence Brand Award 2005,PIKOM – Computimes ICT Award 2005,PIKOM –Finalist Award in 2006,Asia Pacific Super Excellent Brand 2006 / 2007,5th Asia Pacific International Honesty Enterprise Keris Award 2006,Platinum Recognition for Malaysia’s Top 50 Enterprise Award and Malaysia Independence Award 2009 being the latest accolade.
My two cents worth: If these fraudulent figures are reinstated,both the income statement and balance sheet will turn very ugly. With this ugly side revealed,investors can then see clearly that DIS group will not be able to services it debts providers/other lenders and if no further fresh capital injection might turn to a PN17 company. However,the question ultimately lies with whats really has happened. In the listing requirement at least one third of the board belongs to non-independent directors but yet this MASSIVE reinstatement happens. We are not talking about kacang puteh figures. Its really quite scary to think of it! BTW -would you want to be CFO in that group –I bet you will be having nightmares!  Conventional FD vs Placing into Tax Exempt Fund to increase interest yield One of the way we can increase the net interest yield of our company’s surplus cash fund is to place them under a tax exempt fund of a professional run investment management company. The logic is simple as the tax exempt fund is fully exempted from the normal corporate tax rate of 25% –in more technical jargon the company is getting “tax shield” by placing such cash into the such tax exempt fund compared to placing into the conventional fixed deposits. To be even on a safer end,you can place the company’s cash into tax exempt fund account which has its entire net underlying assets 100% fixed deposits. If you feel that your managment are less risk adverse then do place them into a tax exempt fund with underlying assets with the different types of money market instruments like bonds and commercial papers. Below are some of the benefits/advantages by placing funds into tax exempt fund: - Able to enjoy tax exempted income
- Enhanced returns comparing to fixed deposits,repo and current account ( reason being the tax exempt fund has the financial muscle to get better interest rate than individual)
- Do not have to worry about late placement of funds
- Portfolio diversification
- Relieve treasurer the time to place funds into conventional fixed deposits ( calling and placing with various financial institutions)
- Able to withdraw easily re:some tax exempt funds provide easy withdrawl within the next day
- No front end charges or exit fees
- Managed by experienced fund managers.
 Group treasurer job and job description Normally a group treasurer job includes some of the following: - Ensure existing treasury procedures comply with group Head Office
- Cash flow management:cash forecast or projections
- Placement and investment policy
- Foreign exchange management:mitigation FX risk
- Minimize borrowings cost and ensure availability of correct quantum and cheap fund
- Maintaining close relationship with bankers and lenders of the group
- Close liason with CFO,tax agent
- Reporting on treasury performances
Below tabulate in details the group treasurer job description:- Borrowings/Sources of Financing: External Financing: - Ensure the Group has long term external funding in place,ensuring appropriate amount,maturity,currency,
- interest rate,tax and counterparty risks
- Manage the interest rate risk profile
- Service the debt on regular basis
- Maintain relationships with providers of debt capital
- Monitor compliance to debt facilities
- Measure and understand the WACC rate
Internal Financing: - Ensure the internal financing framework is in place and understood
- Manage the internal funding balances
- Control the limits and foreign exchange exposures
Liquidity Management: - Ensure the Group always has sufficient short term liquidity to service the debt and operation
- Manage cash forecasting
Cash and Bank Management: - Manage group`s cash at bank
- Manage repatriation of overseas cash aligned with tax objectives
- Manage control environment
- Manage the group`s global banking relationships
Foreign Exchange &Risk Minimization - Manage group`s foreign exchange exposures in local and central books
- Balance external borrowings to Net Asset foreign exchange exposure
- Balance group foreign exchange exposures to minimise tax risk
- Report on foreign exchange impact on results
- Understand market forecasts
Close Liason with CFO,Tax and other senior level of management: Besides bankers and lenders,the group treasurer should work very closely with the head of finance/CFO,tax agents and other level of management so as to: - Ensure no conflict with tax objectives
- Work with CFO to ensure compliance with Accounting standards,internal control and risk requirements.
Management Reporting: - Collate reports for weekly Investment Committee meetings,including portfolio performance and FX exposure writing. Responsible for the validation and presentation on Interest and FX numbers in Group financial statements. Manage FX,Money Market,investment &other dealing activity and develop and implement strategies for management of foreign exchange exposure.
- Produce full reports detailing the Group’s exposure to foreign exchange risk on anticipated cash flows and balance sheet values. Provide input into and review of long-term cash flow forecast. Play a key role in implementing,as required,Treasury workstations and/or management systems. Develop and write Treasury procedures and maintain records of compliance.
| About Me FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four,Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.Also author to another very popular free educational accounting cum finance blog:http://basiccollegeaccounting.com under the branding of College Accounting Coach. |
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