December 20, 2012, 12:12 am
Filed under: Airlines, Corporate Governance, Rakyat's concerns | Tags: , , ,

It was certainly amusing to see the Singapore authorities scrambling to contain the “Olam” fall-out arising from the ‘Muddy Waters’ attack on Olam’s perceived strong financial standing.

That’s because Temasek (the Singaporean equivalent to Malaysia’s Khazanah), the Singaporean government investment arm, has a significant stake in Olam, a commodity supply chain entitiy listed on the Singapore Stock Exchange, SGX.

To scramble means there must be credence in the view taken by Myddy Waters’ head, Carson Block…..that the manner Olam accounts for its profits and strong financial position…..tantamounts to what Carson Block describes as ‘legalised fraud’!

Of course the more polite ones would call it overly aggressive accounting.

Whatever one would call it, the profits aren’t real…..i.e. the money’s not in the pocket….although the company’s financial statements call it profits!!!

Hey, has the sub-prime mortgage loan fiasco, which precipitated the economic crisis in the US an Europe, been forgotten?

It certainly was interesting when Bloomberg quoted Carson Block (of Muddy Waters) about companies recognising the future profits of an asset (just acquired) in the current financial year…..causing these companies to perpetually buy such assets, if they can!

Well, Air Asia, for one, CAN!

Notice their recent announcement of acquiring another 100 planes…..leading to close to 500 planes in the pipeline!

Click HERE for MA Wind’s excellent coverage of the Olam matter in his CGMalaysia blog-site.

Is it no wonder that the Hongkong Stock Exchange has dis-allowed the inclusion of such unrealised profits in the computation of “profits” in order to qualify for listing?

Shouldn’t the same principle be applied in the valuation of a company’s share in the computation of ‘Earnings per Share’ and correspondingly, the ‘Price Earnings Multiple’?

Reading a set of financial statement of a public listed company is certainly NOT like what it used to be!



It was not really surprising when MAS announced its second quarter results with another loss in the region of RM350m.

It’s still bleeding and there is no sign of it stopping in the foreseeable future.

One of the main reason is the fixed overheads including maintaining over 20,000 employees without corresponding returns in terms of revenue generated or value add provided to the organisation.

It therefore begs the question as to what kind of returns MAS’ management expects in the following year or so……with the RM2.5 billion worth of ‘perpetual bonds’ it has issued or plans to issue.

To date RM1.0 billion has been issued based on its second quarter results.

The worry (I’ll tell you later why  we should worry) is that the monies raised from the bonds will only be used to keep the company afloat i.e. without investing it to generate profits for MAS.

Hey, don’t try to kid us with the A380 super jumbo jets which MAS had taken delivery of……as the saviour for MAS!

They were ordered years ago premised on projections based on a wish and a hope…..and may find utilisation of these planes scarce compared to its more efficient competitors!

Which brings me back to the point of the bonds – if the proceeds are just to pay for its abnormally high overheads (in order to evade the political repercussions of not paying!), it may explain why the bonds have features that do not oblige MAS to pay interest on the bonds NOR to repay the principal!!

What kind of bond is this, you may ask?

Well, as long MAS gets the money, who cares?

The one who cares will be the one coming out with the money!

And who are they?

The country’ pension funds!

The bonds’ special features of not being obliged to pay interests or principal may also explain why the bonds are NOT deemed borrowings in MAS’ books.

It may also ‘justify’ the bonds not requiring any rating!

They are effectively deemed to be share capital in  nature.

Why the obsession not to have the bond classified as borrowings?

Well, there is this indicator used by financial analysts the world over called “Gearing Ratio” which effectively measures the level of borrowings compared to your shareholders funds.

The higher the ratio, the higher the risk to the company.

Therefore, what is supposed to be part of the numerator (read: borrowings) now becomes part of the denominator (read: share capital)!

That way, the gearing ratio of MAS looks better than it really is…….through this window dressing exercise vide the use of fancy words in the Terms of Reference when issuing this bond.

Which comes to why we should worry about this whole exercise.

Granted, this kind of bond has been issued in other countries…….but the companies that issue them are financially strong and investors queue up to invest in their shares and financial instruments.

This is inspite of the remote risk of these ‘blue chips’ not paying interest or repaying principal … the investors are prepared to take that risk to enable these companies to add a few more brownie points to their existing AAA status!

Not so for MAS, our dear old Malaysian Airlines!

Many have claimed that MAS is technically insolvent……and it’s financials seem to support such an assertion.

So the question is why would anyone want to invest in the kind of bonds that a struggling company like MAS has issued……knowing full well that MAS is not obliged to pay interests nor are they obliged to repay the principal?

That’s because the common factor here is the government which effectively controls MAS and also the pension funds!

The government is using the retirement savings of the people to keep afloat a company that is struggling to compete with its foreign competitors (note: the local market has been lost to Air Asia).

And the decision to do so appear purely political……i.e. to enhance standing of UMNO…..the costs of which are borne by the people’s savings in the pension funds!

Is this acceptable?

Shouldn’t the bonds issued by MAS be subscribed by Tajuddin Ramli and his cohorts, under the same terms…..that no interest is to be paid nor principal to be re-paid?

June 14, 2012, 6:44 am
Filed under: Airlines, Rakyat's concerns | Tags: , , ,

It was quite inevitable that the country’s pension funds (read: people’s savings) are being utilised to keep a company on ‘life support’.

I am of course referring to Malaysian Airlines’ (MAS) recent announcement that their RM9.0billion bond issue has been substantially subscribed by KWAP, the pension fund for civil servants. Click HERE

The other subscriber has not been announced but is understood to be the Employees’ Provident Fund (EPF), the pension fund essentially for private sector employees.

Bonds issued by a company…..whose current condition had been caused by woeful management practices by politically appointed individuals then….and who were subsequently bailed out by the government.

And during that time, the bail out was using taxpayers’ monies….in the form of taxes paid to the government!

But the situation has gone serious now with the utilisation of the portion of taxpayers’ monies set aside for their retirement.

Meaning that these monies should not actually be put to undue risk!

The fact that this is still being done can only point to the precarious financial position the country is already in.

I hope it is not at the precipice!

Just looking at the utilisation of EPF’s massive RM450billion cash horde can only make one shudder with utter concern……Govt papers (around 33%), Shares (around 28%) and Bonds & Loans (around 30%).

With EPF reported as the ‘biggest player’ in the Malaysian stock market may explain how its index has been able to sustain itself at current levels!

As for the Bonds & Loans, need we say more about how the Bond market has grown so enormous……thanks to ‘subscribers’ like the EPF!

It is inevitable that the returns to these investments will have to be accounted for……and maybe, just maybe…..this may explain why the General Elections have to take place soon……lest the ghastly results of some of these ‘investments’ become widely known to the public at large!!


Times are never the same. You can kid people some of the time………but technology does not allow you to do that all the time.

Tony Fernandes, The Snake in Suit a.k.a. Snake Charmer, can charm the westerners with his put-on Queen’s English accent…….but it surely ‘cuts no ice ‘ with those used to his rhetoric and false ‘can-do’ attitude.

His bullying approach in calling his F-1 team Lotus when it was already owned by someone else……and having the temerity to go court and drag the matter, highlights a character of high-handed cockiness bound to be exposed!

As far as his F-1 exploits are concerned, it is drawing to a close with his now pathetically named Caterham F-1 team reduced to having wild celebrations when both their cars manage to finish a race!!

It obviously points to the fact that he had no blinking right to use the name ‘Lotus’ in the first place.

His collaboration with Khazanah by swapping his AirAsia shares for Malaysian Airlines (MAS) shares has caused a furore……not so much because of his ‘arranged’ awards and achievements, but more to do with the fact that he will spare no effort to fudge whatever that needs to be fudged… order to meet his objectives.

This has caused immense fear amongst the career MAS staff for their jobs….with Tony perceived as the hatchet man to do the bidding of the Government in ‘rationalizing (read: down-size) it’s work-force……after having the likes of Tajuddin Ramli and co allegedly depleting  whatever useful assets and resources that MAS had then!

Tony F has certainly stirred a hornets’ nest…….resulting in many coming up in arms to expose these cretins for what they really are!

One such act is this ‘alternative’ AirAsia web-site highlighting the airfares of AirAsia compared to other airlines including those full-fare airlines.

The result?

AirAsia is put to shame – a seemingly budget airline charging more than a full-fare airline.

Isn’t there some authority or commission that we can refer these twisted cretins to?

Click HERE for the airfare comparisons.


It is quite unbelievable that a paper like the Singapore Business Times could support the Malaysia Airlines-Air Asia share swap and the proposed restructuring without fully knowing how the collaboration plans are to be implemented in substance. 

It is also quite unfair to villify the unions representing the 20,000 or more people working in Malaysia Airlines (MAS).

Yes, it is inevitable that MAS requires restructuring ….. structural and financial …… as it is close to the precipice where falling over would mean a journey downwards of ‘no return’!

However, one can really empathise with the ‘feelings’ of the people who have worked and sacrificed so much for the airline since its split back in the 1960s with Singapore under MSA i.e. Malaysia Singapore Airlines.

Why should MAS employees feel aggrieved?

Well, to start with, there is this person, Tajuddin Ramli who was given control of MAS ……. apparently to make it more profitable by ‘instilling professionalism’ into MAS.

Instead, and ably assisted by the likes of Lim Kheng Yew and Malik, the outcome was totally the opposite …… in the most negative of sense!

And did they pay for it?

No ……. instead the government bought back the MAS stake from Tajuddin Ramli at the same price that he bought it for ……. although the market price was way below it!

And when all the damage had already been done …….. you will recall the resulting suit brought by Danaharta (and others) against Tajuddin Ramli …… and quite rightly receiving judgement recently to recover close to RM589 million from him.

However, lo and behold, the government decided to ‘settle the matter out of court’ with Tajuddin …… details of which have not been revealed.

And after the Tajuddin era, we had another set of management put in place ….. that is, after having implemented the WOW scheme (or was it WAU?) …… the brain-child of those thinkers at BINA FIKIR ……. whereby the ownership of and borrowings for MAS’ planes were taken over by the government and MAS, the company, only having to operate the airline!

And even then, MAS could not make money ……. as the alleged plundering continued e.g. the lucrative catering business was outsourced to an individual who was related to a past Prime Minister …… you know, that kind of nonsense.

Now with all (these nonsense) that had taken place, can you understand why MAS employees become livid when they are told of the need to undertake a cost cutting exercise (read: lay-offs) in order ‘to save MAS’?

They are screaming blue murder …….. “you politicians screw up a company in which  we have been earning a decent living so that we can put food on the table for our family  …… and now this UMNO led government has the audacity to even think about taking away our rice bowl (or periuk nasi in Malay)”.

Blue Murder, it sure is!!

I wouldn’t want to vote in such a government at the next General Elections!


We have been reading recently that, as political appeasement to some portion of the Malaysian electorate, the share swap between Khazanah and Tune Air of 20% in MAS and 10% in Air Asia may be unravelled.

MAS chairman, Md Nor Yusof has now been quoted as saying that irrespective of whether or not the share swap is to be unravelled …….. “the special collaboration between the airlines would continue”!

If collaboration was the over-riding consideration, why was the share swap concocted and made part of the deal in the first place?

Not only that, the run up in Air Asia’s share price was unbelievably steep and closed at its historical high of RM3.95 when the swap was priced in!

At the same time, MAS’s share price had fallen to a low of RM1.60.

And lo and behold, at those prices, 10% of Air Asia’s market capitalization  conveniently equated to 20% of MAS’ market capitalization ….. when the swap was made!!

Many are questioning as to why individuals have not been hauled up for the widely perceived fiddling and manipulation of the share prices of the two stocks.


OK, let’s assume that the share swap is now reversed by the government and both shareholders of MAS & Air Asia ….. i.e. Khazanah and Tune Air, are returned to status quo.

It sure doesn’t seem as though there is any effect or improvement to the scheme of things

What’s the catch then?

Well the catch is that ………. the horse has already bolted!!

When Air Asia’s share price was somehow stratospherically (relatively speaking) surging towards its high of RM3.95 ……. it allowed our dear’ol Tony Fernandes to cash out!! 

Do you recall the June 2011 report that a 2% block of Air Asia shares was sold by Tony’s private company, Tune Air that netted him about RM150m ….  that’s RM2.85 per share? Click HERE

The MAS-AirAsia share swap was announced in August 2011.

Interestingly, the Malaysian pension fund, EPF had increased its stake in Air Asia by about 2.85% in 2011!

Now, we all know many major shareholders of Malaysian PLCs have additional stakes in their respective PLCs via nominee companies.

Is Tony Fernandes any different?

Of course not!

Looking at the volume of shares traded during 2011, Tony F could have netted a much larger sum than the RM150m ……. vide the selling of Air Asia shares held by  his nominee companies to other ‘interested parties’ in portions of less than 2% (of Air Asia’s paid up capital) …… such that those ‘interested parties’ do not need to identify themselves through  filings to Bursa Malaysia.

As an illustration, if Tony F had privately through nominees, flogged off an additional 10% of AirAsia i.e. 285m shares  at an average of RM3.50, it would have netted him a cool RM1.0 billion!


And who are these ‘interested parties’ that Tony F had sold to?


Bottom line is that the shares were pushed up to justify Tony F’s ‘exit’ at those high prices paid for by ‘institutions’ that are not in their interests. 

Bottom line is that it may explain how Tony F (even after paying ‘expenses’ to his ‘comrades-in-arms’) could afford to take over an English Premier League football team, QPR, and finance the acquisition of players like Shaun Wright Philips, Bobby Zamora, Djibril Cisse and Joey Barton to name a few!

Maybe, just maybe, the share swap between Khazanah and Tune Air was just a smoke screen of sorts ……. to be reversed at the appropriate time!


Maybe the real losers (and suckers) are EPF, the manager of the Rakyat’s (people’s) retirement funds and those ‘interested parties’ that CIMB can shed light on!

Maybe that’s why there are so many angry people in Malaysia when it comes to the MAS-AirAsia share swap deal …… except for those who concocted it ……. possibly for their own self-interests!



In my mind, there has been too much ‘hot air’ and over-speculation about the acquisition by Government Linked Companies (GLCs) of public listed companies owned, in particular, by Malaysian Chinese entrepreneurs:

  1. It all started with UEM Land taking over listed Sunrise Berhad from Tong Kooi Ong, who had made a name for himself in Malaysia (Allied Bank, properties and securities) and Canada.

  2. Then there was the widely believed takeover of Air Asia Bhd by government agencies …. that explains the share price support up to RM3.95 …… and culminated in Tony Fernandes’ “rescue” of Malaysia Airlines (MAS).

  3. This was followed by the controversial takeover by Sime Darby of boutique developer E&O Berhad from major shareholders led by Terry Tham.

  4. And finally, PNB’s apparent ‘hostile’ takeover of SP Setia led by Liew Kee Sin.

First and foremost, I think this is part and parcel of the government’s plan to pare down its holdings in GLCs.


Because the government requires cash and Foreign Direct Investments are only trickling in …… and even then, it’s going to opposition controlled Penang and Selangor!

The monies will be needed for the government to stimulate and prop up the economy since it cannot export its way out of recession as it did in the late 1990s downturn …. the economies the world over are in trouble!

At the same time, the government realises that they cannot just arrange for cronies to buy these ‘significant’ stakes and run the companies profitably …… they will generally run them down; if not seek government ‘help’ in meeting their skewed KPIs.

Therefore, the government buys up these Malaysian owned, well run, profitable listed companies …. (I’m not too sure about Air Asia though!)

This is with the proviso that the previous controlling shareholders (Tong Kooi Ong, Tony Fernandes, Terry Tham and Liew Kee Sin) help run the bigger entity (UEM Land, MAS, Sime Darby and PNB respectively).

Effectively, the GLCs have the ‘bullets’ but they need these ‘marksmen’!

As a result, we now see Tong Kooi Ong is already in the Exco of UEM Land.

Same in the case of Tony Fernandes who sits on MAS’s Board and Exco.

As for Terry Tham (who worked for Wan Azmi in Land & General Berhad then), the collaboration agreement is not revealed in detail but it was mentioned he would still be there for E&O for the next three years.

As for Liew Kee Sin, he was effectively working for UMNO (read: Rashid Manaf) by building up the SP Setia group for his political master. The arrangement does not seem to change ….. as long as it enriches him.

Of course, this will face the brunt of the fury of right wingers in UMNO and condescending racists ….. but that’s how Malaysia works!

At the same time, it is assumed that these ‘successful entrepreneurs’ will act in the best interest of the larger government owned entity.

Well, most of us live on a wish and a hope!

This is at best, the start of the Malaysian meritocracy regime ……. in its own convoluted way!