Oppstar soars 225% on ACE Market debut, makes sterling debut on ACE Market

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From left: Oppstar chief financial officer Chin Fung Wei, independent non-executive director Datuk Mohd Sofi Osman, independent non-executive chairman Datuk Siti Hamisah Tapsir, executive director and CEO Ng Meng Thai, executive director and chief technology officer Cheah Hun Wah, chief operating officer Tan Chun Chiat, independent non-executive director Datuk Margaret Yeo and independent non-executive director Foong Pak Chee 

Oppstar soars 225% on ACE Market debut

 

KUALA LUMPUR: Oppstar Bhd made its debut on the ACE Market of Bursa Malaysia at RM2.05 a share, a 225.4% premium over the issue price of 63 sen a share.

The stock was the most actively traded with 19.26 million shares exchanging hands.

The integrated circuit design service provider successfully raised RM104.25mil from the initial public offering exercise via the issuance of 165.48 million new ordinary shares.

Oppstar will utilise RM50mil to expand its workforce and RM25.00mil for the establishment of new offices both locally and regionally.

Meanwhile, another RM12mil will go towards research and development expenditure along with RM12.65mil for working capital.

The remaining RM4.6mil will be allocated for its listing related expenses.

“Our vision for the company is simple and clear and it is to show the global players that Malaysia is not only known for its back-end semiconductor value chain, but also has the capability to go into front-end semiconductor IC design.

"I am proud to say that we now serve clients in countries such as China, Malaysia, Japan, Singapore, as well as the USA.

"As we gradually progress, we continually ask ourselves what we can do to expand our business and continue to build up Malaysia’s profile in the front-end semiconductor space. This was where the rationale to go for a listing came about leading up to this today," said Oppstar executive director and CEO Ng Meng Thai said in a statement. 

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Oppstar makes sterling debut on ACE Market

 

PETALING JAYA: Oppstar Bhd will focus on building its human resource capital post-listing, as the technology sector is set to grow from the opportunities presented by 5G, artificial intelligence and the Internet of Things.

The integrated circuit design service provider’s chief executive officer Ng Meng Thai said the bulk of the proceeds raised from Oppstar’s listing on the ACE Market of Bursa Malaysia yesterday would be used for the workforce expansion.

“At the moment we have 220 engineers and we have plans to increase that number to 500 in the next three years. With an enlarged workforce, we also hope to grow our revenue and profitability accordingly,” he said after the company’s listing yesterday.

The group is collaborating with various universities in the country to secure future design engineers.

“We started a programme in 2020 where we hire third-year university students for three months. They work part time for 20 hours a week and are paid RM1,500 a month. Upon graduating, they are required to work for us for a year. This is how we build our talent pool.

“When it comes to business, the multinational corporations (MNCs) are our customers. However these MNCs become our competitors when it comes to hiring. This is why other than fundraising, our objective in carrying out the listing exercise is also about hiring and retention,” said Ng.

Oppstar raised RM104.3mil from the public issue of 165.48 million new shares. The company made its debut in the market opening at RM2.05 per share, or a RM1.42 premium above the offer price of 63 sen per share.

The stock closed its maiden trading day up 285.7% or RM1.80 higher at RM2.43 a share. The share price hit a high of RM2.95 and a low of RM2 in intraday trade. Oppstar’s listing did not have an offer for sale of shares from its shareholders.

Oppstar chief financial officer Chin Fung Wei said the group intends to implement a long-term incentive plan of up to 15% of the total number of issued shares of the company for its employees.

“Prior to our initial public offering (IPO), we already had more than 20 shareholders. In fact, every one of our employees, except for those that came on board after the IPO’s closing date, is a shareholder of the company. This is one of our remuneration methods for our employees, apart from their monthly salary,” he said.

Ng added the group’s listing showed Malaysia was not only known for its back-end semiconductor value chain, but also had the capabilities to go into front-end semiconductor integrated circuit design.

“We serve clients in countries such as China, Malaysia, Japan, Singapore, as well as the US. Our expansion plans will enable us to groom future talent and grow our geographical presence which will progressively help strengthen Malaysia’s front-end semiconductor ecosystem in line with our vision,” he said.

The group plans to payout at least 25% of its annual earnings as dividends. AmInvestment Research said the US-China trade war bodes well for Oppstar because China is compelled to develop its own semiconductor capabilities. 

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Tailwinds and headwinds into 2018

  
2017 was a year of smooth tailwinds, even though everyone was mesmerized by the Trump reality show. Heading into 2018, one issue on everyone’s minds is whether headwinds will finally catch up when the tide goes out.

ALL markets function on a heady mix between greed and fear. When the markets are bullish, the investors know no fear and regulators think they walk on water. When fear grips the markets, and everyone is staring at the abyss, all eyes are on the central banks whether they will come and rescue the markets.

Last year was one of smooth tailwinds, even though everyone was mesmerised by the Trump reality show.

Heading into 2018, one issue on everyone’s minds is whether headwinds will finally catch up when the tide goes out.

Last week at a Tokyo conference, Fed vice chairman Randy Quarles was visibly confident about the US economy. Real gross domestic product (GDP) growth through the final three quarters of 2017 averaged almost 3%, faster than the 2% average annual pace recorded over the previous eight years.

The European recovery, barring Brexit, looked just as rosy. Eurozone growth has stepped up to 2.7% in 2017, with inflation at around 1.2% and unemployment down to 8.7%, the lowest level recorded in the eurozone since January 2009.

In Asia, 2017 Chinese GDP grew by 6.9% to 59.7 trillion yuan or US$9.4 trillion, just under half the size of the United States. With per capita GDP reaching US$8,836, China is expected to reach advanced country status by 2022.

Meanwhile, the Indian economy has recovered from its stumble last year and may overtake China in growth speed in 2018, with an estimated rate of 7.4%.

The tailwinds behind the growth recovery seem so strong that the IMF’s January world economic outlook for 2018 sees growth firming up across the board. The IMF’s headline outlook is “brighter prospects, optimistic markets and challenges ahead.”

Expressing official prudence, “risks to the global growth forecast appear broadly balanced in the near term, but remain skewed to the downside over the medium term.”

Having climbed almost without pause in most of 2017 to January 2018, the financial markets skidded in the first week of February. On Feb 5, the Dow plunged 1,175 points, the biggest point drop in history. The boom in 2017 was too good to be true and fear came back with the re-appearance of volatility.

Amazingly, the drop of around 11% from the Dow peak of 26,616 on Jan 26 to 23,600 on Feb 12 was followed by a rebound of 9% in the last fortnight.

Global stock market indices became highly co-related as losses in Wall Street resulted in profit taking in other markets which then also reacted in the same direction.

Will headwinds disrupt the market this year or will there be tailwinds like the economic forecasts are suggesting?

What makes the reading for 2018 difficult is that the current buoyant stock market (and weak bond market) is driven less by the real economy, but by the current loose monetary policy of the leading central banks.

With clearer signs of firming real recovery, central banks are beginning to hint at removing their decade long stimulus by cutting back their balance sheet expansion and suggesting that interest rate hikes are in the books.

The projected three hikes for Fed interest rates in 2018 augur negatively on stock markets and worse on bond markets.

The broad central bank readout is as follows.

The Bank of England and the Fed are leaning on the hawkish side, the European Central Bank (ECB) is divided and the Bank of Japan will still be on the quantitative easing stance.

In his first testimony to Congress, the new Fed chairman Jay Powell was interpreted as hawkish. In his words, “In gauging the appropriate path for monetary policy over the next few years, the FOMC will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2% on a sustained basis. In the FOMC’s view, further gradual increases in the federal funds rate will best promote attainment of both of our objectives.”

What is more interesting is the divided stance facing the ECB. In his latest statement to the European Parliament, ECB president Mario Draghi reaffirmed that the eurozone economy is expanding robustly. Because inflation appears subdued, although wage growth has picked up, he argued that “patience and persistence with respect to monetary policy is still needed for inflation to sustainably return to levels of below, or close to, 2%.”

In an unusually critical and almost unprecedented article published last month by Project Syndicate, the former ECB Board member and deputy president of the Bundesbank Jurgen Stark called the ECB “irresponsible”, suggesting that its refusal to normalise policy faster is drastically increasing the risks to financial stability. In short, the bigger partners in Europe think tightening is the right way to go.

If both central banks begin to reverse their loose monetary policy and unwind their balance sheets, liquidity will become tighter and interest rates will rise.

Financial markets have therefore good reason to be nervous on central bank policy risks.

There is ample experience of mishandling of policy reversals.

After the taper tantrum of 2014, when markets fell on the fear of the Fed unwinding too early and too fast, central bankers are particularly aware that they are walking a delicate tightrope.

If they reverse too fast, markets will fall and they will be blamed. If they reverse too slow, the economy could overheat and inflation will return with a vengeance, subjecting them to more blame.

In the meantime, trillions of liquid funds are waiting in the sidelines itching to bet on market recovery at the next market dip. But this time around, it is not the market’s invisible hand, but visible central bank policies that may pull the trigger.

Man-made policies will always be subject to fickle politics. The raw fear is that once the market drops, it won’t stop unless the central banks bail everyone out again. This means that central bankers are still caught in their own liquidity trap. Blamed if you do tighten, and damned by inflation if you don’t.

There are no clear tailwinds or headwinds in 2018 – only lots of uncertain turbulence and murky central bank tea leaves. Fear and greed will dominate the markets in the days ahead.

 
Andrew Sheng is distinguished fellow, Asia Global Institute at the University of Hong Kong.



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Corporate Malaysia history needs Muck

OPTIMISTICALLY CAUTIOUS By ERROL OH

Here are some important reminders of our business history

IT'S clear of late that Malaysia has an awkward relationship with its past. Controversy after controversy have shown that it's hard for us to agree on the facts and interpretation that form a widely accepted version of our history, or indeed, on what separates historical facts from mere stories.

This is troubling. George Santayana was a philosopher, essayist, poet and novelist, but if he is to be universally noted for just one thing, it should perhaps be for the fact that he wrote this: “Those who cannot remember the past are condemned to repeat it.”

Try arguing against that.

What's more worrying is that there's no collective effort by corporate Malaysia to enrich what we know about the pivotal developments in the country's business landscape. Key documents, publications and other forms of information from companies should be aggregated, organised and presented to a broad audience.

In other words, we should have a Museum of Corporate Knowledge. As a bonus, it has an easy-to-remember acronym Muck.

Of course, it ought to have features you would find in any other top-notch museum, such as objects of great significance, dioramas, interactive displays, and narratives.

Considering that corporate Malaysia is well over a century old the Companies Commission of Malaysia's origins go back to the late 19th century a major challenge is to select the people and events that deserve to be showcased in Muck.

And after that task has been completed, there's the equally difficult job of designing exhibits that best tell the story behind each choice. Some suggestions:

The power of no power

The story: Lightning struck a transmission facility on Sept 29, 1992, causing a blackout throughout Peninsular Malaysia. It took 48 hours to fully restore electricity supply. The incident prompted the Government to allow others to enter the business of generating power, until then the monopoly of Tenaga Nasional Bhd (TNB).

This paved the way for the birth of the independent power producers (IPPs).

Six months after the blackout, TNB signed a 21-year power purchase agreement (PPAs) with YTL Corp Bhd. Four more PPAs were inked in 1993. These early PPAs are highly lucrative, to the point that they were regarded as lopsided in favour of the IPPs.

The terms of subsequent PPAs were less generous, but the structure of the IPP programme has proven to be less than ideal because of the strain on TNB. Attempts to renegotiate the first-generation PPAs have failed.

The exhibit: The TNB equipment damaged by the September 1992 lightning strike. This serves to remind us of how an act of God can have far-reaching consequences.



AirAsia's transformation

The story: On Sept 5, 2001, DRB-Hicom Bhd agreed to sell its 99.25% stake in AirAsia Sdn Bhd to Tune Air Sdn Bhd for RM1 cash and the assumption of half of AirAsia's liabilities. Back then, AirAsia was making losses and was weighed downs by debts. The transaction was completed three months later.

Founded by Tan Sri Tony Fernandes, Datuk Kamarudin Meranun, Datuk Aziz Bakar and Datuk Pahamin Ab Rajab, Tune Air relaunched AirAsia as a low-fare carrier. Now listed on Bursa Malaysia, the airline has famously changed the region's aviation and travel industries.

The exhibit: If Tune Air had paid for the acquisition with a RM1 banknote, let's hope somebody has kept it as a souvenir and is willing to donate it to Muck. Framed and displayed prominently, it makes a great symbol of entrepreneurial vision and drive.

Kenmark scandal

The story: Furniture manufacturer Kenmark Industrial Co (M) Bhd announced on May 31, 2010, that its quarterly results were delayed because, among other things, managing director James Hwang had gone missing. At the same time, the company was classified a PN17 stock because of loan default by a subsidiary.

The next day, businessman Datuk Ishak Ismail emerged as a substantial shareholder, and new directors of Kenmark were appointed. It was also around that time that the company released a letter and a press statement purportedly from Hwang, explaining his absence (supposedly due to illness) and promising that he would return to Malaysia. The share price rebounded strongly.

A week later, Ishak started selling his shares and soon ceased to be a substantial shareholder. The stock plunged again and this time, there was no reversal.

Kenmark was delisted on Dec 31, 2010. It appears that Hwang has not come back to Malaysia until today. The Securities Commission (SC) has initiated civil action against Ishak for insider trading and for making false or misleading statements.

The exhibit: Hwang's letter and press statement dated June 2, 2010, that were emailed to Kenmark's independent directors. These were instrumental in convincing people that it wouldn't be long before the company's woes were over.

Transmile fraud

The story: When Transmile Group Bhd was delisted in May last year, it marked the conclusion to a spectacular corporate flop. The air cargo company was once considered a top stock pick, mainly because it was part of Robert Kuok's empire and was poised to grow rapidly in tandem with Asia's trade boom.

The first sign of trouble surfaced in April 2007, when it missed the deadline for submitting its audited 2006 accounts. A special audit commissioned by the board of directors uncovered shocking irregularities. The company's revenue from 2004 to 2006 was overstated by hundreds of millions of ringgit. The audited shareholders' fund as at December 2006 was 55% less than the unaudited figure announced earlier.

Transmile took too long to get out of PN17 status and was booted out by the stock exchange.

In July 2007, the SC charged three Transmile senior executives, including CEO Gan Boon Aun, for abetting the company in making misleading statements. I

n November the same year, two former independent directors and audit committee members were charged for authorising the furnishing of a misleading statement to Bursa Malaysia.

The two ex-independent directors were found guilty in October last year and were jailed and fined. Gan's trial is ongoing.

The exhibit: Altimeter from one of the Transmile planes. The instrument for measuring altitude is a great representation of the ups and downs in the stock market. At its height, the Transmile share price reached RM14.40. It had been trading at less than 10 sen before its suspension and subsequent delisting.

Executive editor Errol Oh believes that when we know our follies may be put on public display, we're likely to be more careful and responsible.

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Lawsuits with Tajudin Ramli, Is it time to settle?

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Is it time to settle?

OPTIMISTICALLY CAUTIOUS By ERROL OH

IT was only this week that most of us found out about the efforts to settle all lawsuits between Tan Sri Tajudin Ramli and several government-linked companies (GLCs), including a few listed entities. According to Minister in the Prime Minister's Department Datuk Seri Nazri Abdul Aziz the Government had been mulling over the out-of-court settlement for the past six months. It was reported that Nazri sent a letter to the GLCs this month, informing them that the Government and the Finance Ministry had agreed to settle all civil claims against Tajudin.

However, it appears that the possibility of a “global settlement” of the suits have been floating around for longer than half a year.

Last December, the now delisted DFZ Capital Bhd uploaded on the Bursa Malaysia website a circular by Singapore-listed Esmart Holdings Ltd, which was acquiring a 75% stake in DFZ. In discussing the material litigation of Atlan Holdings Bhd (the vendor in this transaction), Esmart touched on the developments in a particular case and said: “In view of the global settlement in respect of all suits concerning Tan Sri Dato' Tajudin Ramli (TSDTR), the said matter is now fixed for mention on Jan 12, 2011.”

A similar reference “the global settlement in respect of all suits involving TSDTR” popped up in the notes to Atlan's quarterly report for the period ended November last year.

Atlan's legal entanglement with Tajudin is a legacy issue arising from its 2004 purchase of a 32% block of shares in Naluri Corp Bhd from Pengurusan Danaharta Nasional Bhd. Tajudin lost control of Naluri following the Asian financial crisis.



A more interesting bit of information surfaced in Axiata Group Bhd's quarterly report for the period ended Dec 31 last year. In providing an update on its material litigation, the company said: “The Court has requested the parties to mediate and TSTDR has proposed a global settlement for all the cases involving TSTDR. The parties have since agreed to mediate the pending disputes.”

Axiata appears to be one of the GLCs whose lawsuits with Tajudin are likely to be withdrawn following the Government's agreement with Tajudin. Khazanah Nasional Bhd is a 39% shareholder of Axiata, whose subsidiary Celcom Axiata Bhd was once among Tajudin's prime businesses.

Malaysia Airlines (MAS) is another former Tajudin asset that's now a part of the Khazanah stable. Not surprisingly, the national carrier too has legal disputes with him. However, to date, MAS has yet to say anything about the change in status of its suits involving Tajudin.

Neither has Telekom Malaysia Bhd (TM), which (along with subsidiary Telekom Enterprise Sdn Bhd and 22 others, including Danaharta and Celcom) is a defendant in a counterclaim by Tajudin, who is seeking RM13.4bil, among other things.

So why haven't Atlan, Axiata, MAS and TM made any announcements about the global settlement? Atlan and Axiata have disclosed the development in the notes to their financial statements and quarterly reports, but this is still a step away from highlighting the information.

It has been established that these companies' lawsuits involving Tajudin are indeed material litigation, and Bursa Malaysia's listing requirements include “the commencement of or the involvement in litigation and any material development arising from such litigation” among the examples of events that may require immediate disclosure.

Of course, there's room to argue that the global settlement is very much work in progress, with many details yet to be worked out. However, shouldn't the investing public be alerted when there's a proposed global settlement on the table and it may result in the conclusion of several suits with billions of ringgit at stake?

Nazri was quoted as saying there was no special deal between Tajudin, the Government and the GLCs for the parties to agree to the settlement of the suits. He added that it was up to the parties involved to decide what to do next. “It is their right if they want to proceed with their court case,” he said.

As listed companies, they are obliged to take into account the interests of minority shareholders as well. It's impossible to please every shareholder, for sure, but whatever the decision of each company, the board and the management need to be transparent and consistent, and their rationale ought to be persuasive. If a company decides to drop a lawsuit it has filed, particularly one that seeks to address big losses, it owes shareholders an explanation.

For example, an Axiata subsidiary, Rego Multi-Trades Sdn Bhd, commenced proceedings in 2005 against Aras Capital Sdn Bhd and Tajudin for amounts due to Rego pursuant to an investment agreement with Aras Capital and an indemnity letter given by Tajudin. In turn, Tajudin filed his defence and instituted a counterclaim to void and rescind the indemnity letter and claim damages. Said Axiata in annual report 2010: “The board of directors, based on legal advice received, are of the view that it has good prospects of succeeding on the claim and successfully defending the counterclaim if the same were to proceed to trial.”

Similarly, both TM and Axiata have expressed confidence that they can put up a winning defence against Tajudin's RM13.4bil counterclaim.

Perhaps it's good for everybody or at least, for most people if the Tajudin-related suits are settled out of court. If that's so, the listed companies should have no problems presenting that case to their shareholders.

Executive editor Errol Oh has just realised that we often overlook the listed companies' disclosures on material litigation.