A SPATE of corporate news surrounding the Armed Forces Fund Board (LTAT) and its flagship vehicle, Boustead Holdings Bhd (BH), has burst onto the scene in recent weeks.

What is offered for public consumption is intriguing. Beneath the surface of the news, however, is aggressive power play by well-connected groups to prey on easy pickings. The adage, “buy the rumour, sell the news”, certainly applies.

To separate the wheat from the chaff, one has to understand that BH is an asset-rich conglomerate beset with a problematic RM7.9 billion debt and tight cash flow.

LTAT owns 59.45% of BH, which has four public-listed companies – Boustead Plantation Bhd, Pharmaniaga Bhd, Boustead Heavy Industries Corp Bhd (BHIC) and Affin Holdings Bhd.

BH also has a host of unlisted and diversified assets. In properties, it has the Royale Chulan Hotel chains, Menara Affin, Menara Boustead, The Curve and eCurve malls, Boustead Petroleum Marketing Sdn Bhd, and prime land in Jalan Cochrane and Mutiara Damansara. In trading, it has a 42% stake in Boustead Petroleum Marketing that operates 386 petrol stations and marts nationwide.

Prior to LTAT’s announcement in May that it is mulling over a move to take BH private, there were unseen hands battering down BHIC shares price. Watchful eyes at Bursa trading screen would have noticed Buy-Q (bid prices and quantities) at higher prices were being countered with Sell-Q (offer prices and quantities) at lower prices.

That was the trend for days and months, especially during the last 15 minutes before the closing bell. It defied logic, except that BHIC, a small-cap priced-jewel of LTAT and BH, has certain monopoly in the defence industry and with secured long-term MRO (maintain, repair and overhaul) contracts, which makes it a target for hostile takeover.    

When the shares of BHIC were battered down, one would expect the management of LTAT, BH and BHIC to do something, to defend, and make appropriate corporate statements to appease shareholders and the public. Instead, they just watched like bystanders.

There was also no logic for Urusharta Jamaah, a special-purpose vehicle wholly owned by the Finance Ministry, to dispose of BHIC shares during the depressed market, unless there were hands pulling strings. Urusharta stopped in its tracks only after Persatuan Patriot Kebangsaan (Patriot) issued a series of critical statements. 

Recent reports had focused on the delay in delivery of the six littoral combat ships (LCS), a RM9 billion project awarded by the Defence Ministry (Mindef) to Boustead Naval Shipyard (BNS) Sdn Bhd. BNS is owned by BHIC, BH and LTAT, while the Finance Ministry has one Golden Share.

Mindef’s indecisiveness contributed to the delay. Nearly four years after commencement, the navy insisted on three major variation orders (VOs), which had caused the stalling of work to allow for redesigning, engineering recalculation, and worse still, the re-procurements after materials-take-off. Mindef had procrastinated on BNS’s request for extension of time (EOT) and the VOs claim.

The delay was attributed by Mindef to cost overrun. To BNS and BHIC, Mindef had to first recognise and affirm the VOs. A VO has an implication of budget overrun exceeding the RM9 billion allocated. Whereas cost overrun implies the contractor’s inefficiency, on which Mindef constantly puts blame.

Mindef’s three options consideration after mulling over the troubled LCS project is as disturbing for it gives the impression that the project was botched, necessitating internal troubleshooting. Its internal team, however, cannot solve an endemic problem.

An announcement was made by Mindef, but it is left to be seen if it would follow through to claim the RM116.45 million liquidated damages as suggested in the just released 2019 Auditor-General’s Report. In recommending imposition of liquidated damages, even the auditor-general appears to not look beyond the surface.

BH’s announcement of the £6.4 million (RM35.37 million) suit against its former chairman and five other board members for alleged breach of fiduciary duties is a clever act to shift blame. So far, no writs of summon has been served and no statement of claims in the suit filing. 

The Star article, “LTAT’s Dilemma” on August 29 spilled the beans of hidden hands. It reported that LTAT had received “an offer from a group with strong links which is seeking to acquire a 20% stake in Boustead with the intention of restructuring the ailing conglomerate”. It is inconceivable for a listed company to make an impromptu announcement of such significance without prior meticulous ironing out of the details.

BH’s Total Shares Issue amounts to 2,026,988,571 shares. A 20% stake amounts to 405,397,714 shares. Assuming that the group generously offers RM1 for each share, a 25% premium over the privatisation offer price of 80 sen, it has to come out with a modest investment of only RM405,397,714. For that, it gets the key to BH’s treasure trove. After privatisation and delisting, BH’s decisions and transactions will be opaque to public scrutiny and oversight.

The ultimate prize is the golden opportunity to ride onto the four BH-listed vehicles in the casino of stock market juggling.

Such are the poker hands that have steered the innocent towards buying or selling the news so they could go for the kill and easy pickings. Unfortunately, the hundreds of thousands of innocent stakeholders, i.e. the military personnel, will be sorry losers. – September 3, 2020.

* Captain Dr Wong Ang Peng is a researcher with an interest in economics, politics, and health issues. He has a burning desire to do anything within his means to promote national harmony. Captain Wong is also a member of the National Patriots Association.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.