EPF Forgot Sime Darby’s Lesson in UMBC

EPF Forgot Sime Darby’s Lesson in UMBC
Richard Teo

The pension fund, EPF must surely think that money grows on trees when they decided to take-over RHB at a cost of $10 billion.

They have still not recovered from their early foray into Bank Islam and Bank Pertanian where they suffered massive losses.

Bank Islam alone in its audited profit of two years suffered losses of $2.3 billion.Either they are so naiive about business nvestment in the banking sector or they must be sadist looking for more punishment.

If there is any parallel investment failure in the banking sector we need not go too far for examples. Remember Sime Darby’s adventure with UMBC?Yes its brief foray caused them to lose more than $250 million in a short span of time.

Luckily in quick time UMBC was disposed off lock, stock and barrel and that was the first and last time Sime comtemplated venturing into the banking sector deemed ‘a profitable business which could bring long -term benefit’ by its CEO Mr. Azlan Zainol.

If it was profitable why did Sime’s investment in UMBC resulted in such a massive loss?

By his own admission Mr Azlan Zainol said they have no experience in Banking but they were going to engage professionals to run the bank.

Does this imply that UMBC was not run by experts in the banking field?

Surely not, because we would assume that Sime would have carefully selected a team of banking experts and yet they came up with a loss.

With the benefit of such banking failure one would have thought EPF would have been more cautious and prudent in their choice of Banking as an investment.

What really boggles the mind is that RHB is a debt-laden banking group and the bottom line is that if it was so profitable as claimed by its CEO then why is it heavily in debt?

One simple test why it is a poor investment is to ask yourself why RHB owners are selling? Try asking owners of Hong Leong Bank or Public Bank to sell and see their response.

The recent forage into risky investments which yielded considerable losses in many of its portfolios reflects bad management.

For too long the govt has regarded EPF as one of its GLC and like all GLC’s poor management by key personnel has resulted in huge losses. And like all GLCs they are run by political cronies and supporters rather then for their expertise and experience.

If the pension fund is to recoup some of its earlier losses especially in MBSB (Malaysia Building society) where its losses are more than a billion dollars then some sanity must prevail.

The money collected from employees are sacrosanct and not meant to be indulged in risky speculative ventures nor should it be used to bail out UMNO cronies in failed busineses.

  1. #1 by undergrad2 on Sunday, 11 March 2007 - 8:19 am

    This is old wine…

  2. #2 by Jong on Sunday, 11 March 2007 - 9:00 am

    So soon RHB will be renamed, “EPF Mountebank” ?

  3. #3 by Tai Lo Chin on Sunday, 11 March 2007 - 10:23 am

    “Upstairs” direct EPF’s Azlan Zainol to do it, and BN to endorse it. That’s Malaysia, don’t know meh?

    Come on, who is Azlan to say EPF expects 6 – 7% return on capital over 1 or 2 years, and beyond that 8 to 10% ? Who doesn’t know how to do forecast? If prospects so good why does Utama Banking Group (UBG) now want to sell? Why did UBG direct RHB Capital & RHB Securities Sdn Bhd and RHB Equities Sdn Bhd to sue Rashid Hussain, 5 others for RM1.4b ?

    How does Azlan know that in a year or 2 the Non Performing Loans will not explode over 20%?

    Azlan should disclose all banks in last 10 years in which EPF has invested directly or indirecly that did not make loss and require a bailout.

    Azlan says that EPF would like professionals to manage with no interference from it as majority shareholders.

    What a joke, it is nothing to do with shareholders interference or professionals. It has everything to do with integrity of shareholders and professionals and whether they run the banks ala NEP style and culture without financial discipline.

    Why do you think Hong Leong Bank or Public Bank has never failed requiring bailout? Think hard what are the differences. You think Tan Sri The Hong Piow is not hands-on? He sits in the credit committee meetings twice a week and takes conservative approach. Here shareholder interference is to ensure prudence of its executives and not to abuse the bank for shareholder’s personal interest as we know in other banks where shareholder himself tells executives to whom loans and business of banks be given.

    The market knows. There are many people who broker loans for a commission shared with bank executives, loans that otherwise do not get approved through normal channels. Think we do not know which banks?

    The ‘upstairs’ should tell the truth why it does not favour EON to take over and prefer EPF to underwrite the risks.

    EPF’s taking over the bank benefits RHB Bank because EPF has deep pockets to cover its NPL holes if needed but it does not benefit EPF.

    Banking is no good business. as I have earlier said, one huge bad loan unrecovered will wipe out profit from many smaller retail loans. It is also subject to external cyclical factors beyond management control. If property and stock markets plunge, NPLs will soar and banks lose money. In last collapse of property market, even a conservative bank like OCBC got hit and Tan Chin Tuan had to warehouse the properties charged and nursed them over a long period until market recovered. If appointed professionals and managers take on NEP culture that the bank is vehicle to facilitate political socio-economic objectives of redistribution of wealth, habis lah bank, a matter of time.

    EPF is managing trust monies. They should be invested in safe investments – not banking industry that in Malaysia has a very bad record of failures. In this country, there is no notion whatsoever on the responsibilities of what it means to be a trustee. All that is known is that a certain target segment is always the beneficiaries.

  4. #4 by mandela on Sunday, 11 March 2007 - 10:26 am

    The way the decision was made by EPF to take over RHB sucks!

    Who will be responsible it? No one!
    Where is the accountability? None!

    Never mind, it is only rakyat money, plenty of it! One of two failures wun bankrupt EPF!

  5. #5 by madmix on Sunday, 11 March 2007 - 10:28 am

    Kit, do not be so pessimistic of RHB’s prospects. Banks have learnt their lesson since the 1998 fiasco. The quality of their borrowers have imoroved tremendously. NPLs are low and they are targetting small borrowers where growth is greatest. There was a time when they lend based on inflated asset valuations; heavy lending on shares. If you look at the profits of local banks, they are increasing by leaps and bounds year after year. BIMB got hit because some stupid or greedy manager in Labuan lent big money to some Africans. Bank Bumi is no more and became part of CIMB which I would rate highly today. If EPF can find a good stategic partner, I would rate the prospects for RHB as a strong buy. Give them a chance before you condemn them.
    They have made some very bad investments before, perhaps based on political pressure from Tun m, but this time I think this is a good move.

  6. #6 by Cinapek on Sunday, 11 March 2007 - 12:08 pm

    If you want a glass of milk, why buy a cow? The excuse given by EPF that the investment in RHB was to safeguard their investments is as good as saying using a pound to chase after a bad penny.

    There is more than meets the eye here. EPF’s charter is to prudently safeguard the depositors’ funds – not go risking them with grandiose acquisions. As everyone (including their own defensive statements) have pointed out, they have no expertise in banking so why risk RM10b of the depositors’ money? I smelled a rat here. Like the old Makuwasa scandal which YB KiT is well familiar with.

    EPF’s ability to even safeguard the depositors’ money is questionable. I have met some of the fund managers whom EPF had park their funds with for investments and frankly, I was not one bit impressed by some of the selections.

    RM10b is a lot of depositors’ money and the depositors should demand a more detailed financial explanation together with a clear explanation from EPF how and who they will appoint to run RHB after they have acquired it. After, it is the depositors money and they have every right to ask the EPF board how their money is invested.

  7. #7 by Jong on Sunday, 11 March 2007 - 12:09 pm

    Perhaps, perhaps but, the EPF money belongs to the rakyat, savings from decades of sweat and commitment, to ensure they are responsibly invested to see them through their twilight years.

    Such a major decision, who decides and who is responsible for the take-over of RHB? Were the rakyat consulted?

  8. #8 by Jeffrey on Sunday, 11 March 2007 - 1:03 pm

    EPF Board as trustee of EPF Funds is bound to invest them in only “approved companies” within meaning of section 26 of Employees Provident Fund Act 1991 (“EPF ACT”).

    “Approved companies” are companies with a minimum paid up of RM5 million and have a record of having “paid a divident at rate of not less than 5% upon ordinary shares during each of the last three years prior to the time of investment, and where the approved company is a company which has acquired the assets and liabilities of another approved company, payment of dividend by that other company during each of the last three years prior to the time of such acquisition shall be treated as payment by the approved company…”

    Subject to Bank Negara’s approval EPF has proposed to buy all the shares, loan stocks (ICULS) and warrants in Rashid Hussain Bhd (RHB) owned by Utama Banking Group Bhd (UBG). Details are reported by The Star here http://biz.thestar.com.my/news/story.asp?file=/2007/3/7/business/17064408&sec=business

    Does any one know as matter of public record with Bursa Malaysia the last 3 year dividend record of RHB and its subsidiary RHB Capital that owns controlling state in RHB Bank and whether it conforms to parameters of section 26 of the EPF Act??
    If the proposed acquisition does not conform to the requirements of section 26 with regards to “approved companies”, then the deal cannot proceed for being ultra vires the EPF Act, and hence illegal. :)

  9. #9 by ahkok1982 on Sunday, 11 March 2007 - 1:15 pm

    Wow, Jeffrey, u r as impressive as always. did not know tt there was such a rule for EPF to acquire invest in companies. Uncle Kit, seems like u hav something to start looking into this stinking acquirement. Jeffrey, is it possible to post this observation to all newspapers? at least this bit of information will be known throughout by everyone and many who oppose this take over will hav another stronger reason to voice out against it.
    it is also good to know which newspaper would publish this observation n which doesnt. then uncle kit can also condemn these newspapers publically for not acting on the people’s interest.

  10. #10 by Jeffrey on Sunday, 11 March 2007 - 1:48 pm

    Sure EPF’s investments are subject to guidelines laid down by its founding charter, EPF Act, outside the parameters of which, the investment panel cannot lawfully act. But I don’t know the facts, and have had not the time to research yet on the financial data of the company to be acquired (RHB holdings) and whether or not it has satisfied the prerequisites of an ‘approved company’. One has got to get the facts right. Maybe Godfather can look into the financials and Undergrad2 can interpret the definition of “approved company” in section 26 as I set it out.

    I think it is so basic that legal and financial advisors of EPF are very unlikely to overlook but then again slip can happen if it is a political decision to buy in.

    Here’s the catch : EPF was already for some time a small time shareholder of RHB. Could it be that then, when EPF invested in RHB, it was an approved company with 3 year dividend of more than 5% yield but not now?

    It must be remembered that RHB became a distress corporate in wake of Asian Currency Crisis of 1997. It had to restructure its loans with its bankers. It dividend record since then must have deteriorated. The question is whether after such deterioration, it has recovered sufficiently in the last three years to provide a record of the required yield required for hurdle of section 26 to be passed. One cannot use the record yield 20 years ago as a benchmark if the yield in intervening period has deteriorated. That’s what I think.

  11. #11 by pwcheng on Sunday, 11 March 2007 - 1:50 pm

    I can see that such moves by the EPf are more politically than commercially motivated. After so many bad experiences of massive losses they seem never to learn. As in my earlier blog I too had mentioned about their fiasco on MBSB and Sime on UMBC. Is there other more prevalent reasons for them to undertake this risk of good money chasing after bad money.

    They will always say that what they do is the best but more often than not turns out to be the worst, so much so they have to shortchange the depositors of a few hundred ringgit in dividend, probably to make up for their massive losses.

  12. #12 by shortie kiasu on Sunday, 11 March 2007 - 1:56 pm

    What ever there may be, EPF should remain as portfolio investor and NOT delve into businesses per se.

    There is no justification whatsoever for EPF to get involved in the taking over of RHB Group.

    The price per share that EPF offered to bail out UMG, which is in financial mire, and which belongs to the Mahmud Taib, CM of Sarawak & his family, is unbelievable and unjustifiable compared to the real commercial concerns of KFH anD EON Group. EPF paid DOUBLE the amount offered by other bidders. It just does not make any economic or investment sense for EPF to pour AWAY contributors’ cash into such irresponsible bail-out of UMG.

    Knowing full well of its past failures into similar misadventures, EPF never learns, and is again adventuring by pouring contributors good money to save its failed investment in RHB. The debt of RHB is monumental!

    It is common knowledge, and with due respect, that government appointed Malay CEOs, like Azlan Zainol, is never in a position to read wisely and accurately the economic developments of the country & the world, and to manage the risks fiduciarily, in order to maximise the returns on investments. Talk by these CEOs is of no practical uses, the past performances and records only pointed to mediocrity and failures.

    It is a real pity that the Malays have yet to face up to the reality and be humble, not trying to blame others, not trying to rob others, just because of their failures and greeds. They could never be at peace to see others perform better. By hook or by crook, they must pull them back from behind, and impede the others with whatever obstructions that they can muster, either legally or illegally, or by enacting unfair legislations and policies to create hindrance to other races.

    EPF contributors can only watch in horror now, and with their hands tied, because the laws protect the wrongs and the mediocres.

    Again this only happens in the current government under the current PM who public endorsed the squandering in this RHB fiasco. The conclusion can be drawn effortlessly.

    You look at PNB porfolio investments and compared to EPF. EPF has so very large fund in cash compared to PNB, but PNB can provide returns of over 8% per annum consistently for the past many decades to its shareholders or unit trusts owners.

    And yet EPF is struggling, with all sorts excuses, to give a dividends of about slightly over 4% per annum, less thanhalf of what PNB is giving to its unitholders.

    What has gone wrong in EPF? Typical “government servants mentality” permeates the working culture of EPF. You walk into any EPF Office you can witness this culture at work. Start work half an hour after the offcial opening hour, then tea times in between, close counters half an hour before lunch time for their lunch, come back half an hour after lunch hour, and pack up the counter or the table half an hour before official closing time.

    How to progress into an excellent service culture? God forsaken.

  13. #13 by Jong on Sunday, 11 March 2007 - 2:24 pm

    Thank you Jeffrey, appreciate the info and for bringing our attention to section 26 of the EPF Act 1991.

    YB Lim, something to munch in tomorrow’s media?

    And as Jeffrey continued:
    “I think it is so basic that legal and financial advisors of EPF are very unlikely to overlook but then again slip can happen if it is a political decision to buy in.”

    Never know, anything can happen, when politics take centre stage!

  14. #14 by firstMalaysian on Sunday, 11 March 2007 - 3:09 pm

    EPF cannot even solve their service issues pertaining to those withdrawal cases for education etc. Many have not even received their monies despite being approved one month ago. Their hotline is not functioning. E-mail to them is useless as no response will ever come from them.
    They cannot even solve their basic operational issues and yet focus on buying RHB. What a laughing stock? Their backyard has to be ‘cleaned’ first and ensure contributors get the maximum returns and improve their own efficiency.
    Going to another backyard and achieve a miracle require world class management team. I have my doubts.

  15. #15 by Winston on Sunday, 11 March 2007 - 3:51 pm

    At the end of the day, what can anyone do about it?

  16. #16 by pwcheng on Sunday, 11 March 2007 - 4:21 pm

    The absolute power is in their hand and they can do anything they like. Just like the butcher who can chop anywhere he likes as the meat cleaver is in his hand. That is the legacy of today’s Malaysian politics where the people’s right had been totally mutilated.
    The irony is that when a small group of people who share the same wavelength with them makes noise they will not hesitate to take immediate action like the Article 11 forum in Penang ( where mob rule has the upper hand) and also on certain films which are.

    GOTO http://www.youtube.com/results?search_query=the+last+communist&search=Search
    for a preview of what the political leaders said about the film.

  17. #17 by pwcheng on Sunday, 11 March 2007 - 4:23 pm

    ” which are banned”

  18. #18 by ahkok1982 on Sunday, 11 March 2007 - 7:21 pm

    with the heavy debts that RHB is laden with and the numerous complaints i doubt they will be doing well right now else the lie to use EPF to bail them out would not have been used. But then there is always the possibility of artificially inflating the figures. However, it would also seem unlikely that the corrupt clowns would be aware of such a rule and did not care to do their homework to know about this rule. just hope that RHB does not fall in the “approved company” category

  19. #19 by raven77 on Sunday, 11 March 2007 - 7:44 pm

    It is Azlan’s neck and credibility on the line…don’t know why he wants his tombstone to read “I BURIED EPF”……

  20. #20 by pwcheng on Sunday, 11 March 2007 - 7:55 pm

    Dear Jeffry you have got the point there after highlighting a section of the Employees Provident Fund act. However political might can over ride or change any of those acts which are deemed as obstacles to their “lucrative business dealings”.

    Already it is clearly written on their wall that “Might is Right”. The two set of laws are already clearly displayed on the many recent events that has happened in this country. You and me have to obey the laws but not them.

  21. #21 by Loh on Sunday, 11 March 2007 - 8:07 pm

    ///The money collected from employees are sacrosanct and not meant to be indulged in risky speculative ventures nor should it be used to bail out UMNO cronies in failed busineses.///

    The EPF members are required by law to make deposits to EPF so that they can withdraw them in old age. EPF should be legally and morally required to ensure that the money held in trust for the depositors are safe and secure. Yes, EPF is responsible to use the savings deposited by members to make investments where there are solid basis to believe that the risks are minimal, based on past records, and the return could be low. The criterion for fund management is to have sure and safe earnings, and not risky investments with possibility of high retruns, as in the case of direct involvement in business activities, such as taking over RHB. When EPF takes over RHB, it cannot honestly say that the investment was based on the track record of EPF running a bank. It has not that experience, and EPF is not established to run a commercail business.

    The EPF has failed in the trust placed in it by the members. It is morally wrong, if not legally forbidden to require EPF members to deposit their money for EPF to be engaged in business and run the risks for the members. The members do not have the liberty to chose not to be involved in the risks which the EPF management undertakes on their behalf.

    Does the BN government believe in rule of law?

  22. #22 by greenacre on Sunday, 11 March 2007 - 11:09 pm

    Last time EPF played the tin trade with public money and got their fingers burnt…never mind after all it is statutory savers money; sime Darby played with UMBC bank and got their buttocks burnt….never mind it was shareholders money. Now they wanna play bank to get fingers and buttocks burnt with millions of members who are required by a mandatory law to deduct their salary and remit to EPF. fASCINATING

  23. #23 by Jeffrey on Sunday, 11 March 2007 - 11:33 pm

    “However political might can over ride or change any of those acts which are deemed as obstacles to their “lucrative business dealings” – pwcheng.

    What you say is true but it will take time to amend an Act in parliament.

    The question is whether at the time of acquisition, the charter of EPF – the EPF Act – empowers and authorises the EPF Investment board to make such an investment. If it does not, then the acquisition transaction is tainted with illegality for exceeding the powers of what it could do.

    If the acquisition really contravenes the EPF Act, such question impinging on legality cannot be so easily ignored – not when RM2.2 billion is at stake. The government may be determined but it cannot override existing law that it is required to uphold.

    EPF cannot afford to pay RM2 billion Utama Banking Group (UBG) and subsequently face a risk of the entire transaction being impugned and vitiated by some disgruntled EPF contributor or some disgruntled minority shareholder of RHB applying to court to nullify the transaction on grounds of illegality.

    Especially in a takeover of a financial institution in which some existing employees of the company acquired may, as is usual, be subsequently asked to go by the new management as part of cost cutting and making way for the new team. Imagine some of these who are asked to go would bring an action in court asking for a declaration that the entire acquisition transaction is void at the outset for contravening the EPF Act. By that time EPF would have already brought in new management team and professionals, signed all kinds of costly contracts of service with the professionals for which it would be most difficult to reverse, if their purchase into RHB were thrown in question as to legality!

    Those interested to challenge the transaction should really consult and engage some high powered corporate lawyer to look into this aspect about section 26 of the EPF Act relating to what constitutes approved companies for EPF’s investment.

    EPF is already the second largest shareholder in RHB with a 32% equity stake. Much depends on when EPF acquired its existing 32% equity stake in RHB. I don’t know the facts on this. If it were acquired long time ago when RHB was making money and paying good dividends, then the earlier acquisition was OK.

    This does not automatically translate to his present acquisition being OK as well if in the intervening period, RHB made losses and has no dividend record for past 3 years paying more than 5% dividend yield. I have no knowledge about RHB’s last 3 years record but I know as a fact that after the Asian Currency Crisis RHB was in distress having to restructure and reschedule all its loans from bankers.

    Presently RHB controls RHB Capital which in turn controls jewel RHB Bank. Now RHB Bank may be showing profit but I am not too sure that by virtue of that alone RHB Capital and its holding company RHB Bhd are making sufficient money to pay dividend of at least 5% for the last 3 years as required by section 26 of EPF Act.

    Based on news report, EPF is buying into RHB and/or RHB Capital and not exactly direct into RHB Bank, so there is a technical issue whether RHB and RHB Capital each qualifies as an approved company in which EPGF is authorised to invest!

    There is something else inconsistent in EPF’s position. EPF is justifying its present bid for UBG’s 33% equity stake on grounds of protecting its existing 32% equity stake. If there were a need for cash rich EPF to pump another RM2.2 billion to protect its existing 32% equity stake in RHB, it simply implies all is not well in RHB that requires bail out. A trust company like EPF cannot afford the luxury of using trust monies to bail out without contravening its fiduciary duties to contributors. The fact that its bid is higher than competitor EON Capital suggests that EPF might well be paying much more than what the intrinsic value of RHB justifies.

    Buying UBG would mean EPF will have existing 32% plus UBG’s 33% making a total of 65% equity stake. In addition EPF has to make a mandatory general offer after crossing threshold off 33.3% under our Takeover Code for the remaining 35% and even if ½ of that 35% take the offer, EPF would end with 82% equity stake and paying for it.

    This is unprecedented : whence has EPF bought as much as 80% in a listed company to run its business? Normally you would need only 51%, and in some cases of many small shareholders, even the existing 32% would suffice to exert management control.

    All these aspects show the features of a bail out, which a trust company like EPF, especially having no experience in running a bank business, should not venture into, let alone the fact that the venture is arguably contrary to the spirit of EPF Act setting out the parameters of prudent investment.

  24. #24 by sheriff singh on Sunday, 11 March 2007 - 11:38 pm

    Sime Darby lost RM 1.5 billion and none of their executives were held accountable. In fact they just brushed it off as a big learning lesson and swore to stay away from the business.

    When they bought UMBC, they were very confident of making it big in the financial services industry targeting a 25% contribution from the investment. The investment turned into a disaster despite the fact that the top brass of Sime Darby were sitting on Sime Bank’s board. How did things go wrong?

    The CEO Ismail Zakaria was given a free hand and soon things began to go wrong. Questionable loans were granted and defautled soon enough. Huge loans turned sour and there was a severe drain on the bank’s liquidity.

    The bank went into problems big time and the Asian financial crisis made many banks almost insolvent but Sime Bank went bust. Sime Darby called in investigators to look into alot of irregularities including fraud. Bank Negara’s investigators came in too. Datuk Ismail Zakaria was charged in court and his cases went into trial.

    But soon, everything was forgotten. No further news. All hushed up. RM 1.5 billion gone. No one was ever held responsible or brought to account. Sime Darby’s executives got away scott free, to enjoy life.

    Rashid Hussein, the man, had always wanted to buy UMBC (Sime Bank) but was thwarted every time. But with the bank now insolvent, Rashid Hussein, with his inside contact in Bank Negara, managed to convince the authorities to let him buy (‘rescue’) Sime Bank. This was achieved with the assistance of Murad Khalid, then an Adviser (Assistant Governor) at the central bank.

    In the wake of the Asian financial crisis, Anwar Ibrahim, Murad’s protector, was sacked from the government. Murad then left the central bank and joined the merged RHB Bank (his reward) as an Executive Director under Rashid Hussein.

    A short time later, you will all recall, Encik Murad Khalid was himself arrested with about RM 22 million ringgit in his accounts, and was charged. He later said the money belonged to Anwar.

    What has become of Murad’s case, does anybody know? How come everything’s been hushed up? Where’s Murad now? Enjoying fruits of life?

    Rashid Hussein, the man, sold his Group to Utama Group for a huge sum of money. But he himself, together with 5 or 6 of his former directors, are now defending legal suits in court totalling about RM 1.5 billion, for irregularities. Where the cases will lead to is anybody’s guess.

    Will anybody be ever brought to justice and held accountable?

  25. #25 by sean on Monday, 12 March 2007 - 1:28 am

    Bolehand is a great country for super crooks with half a brain.All they need to do is buddy buddy with high or low ranking officials from the govt.Afterall most “crooks ” are still at larged and semuanya ok.Its a haven for them.So……..businessmen with ideas to fund terrorism may find bolheland a “boleh land” to do whatever they like.Who knows…..they may already be doing that already yesterday on our own backyard.

  26. #26 by ahkok1982 on Monday, 12 March 2007 - 7:50 am

    Dear jeffrey, from what you said:
    “There is something else inconsistent in EPF’s position. EPF is justifying its present bid for UBG’s 33% equity stake on grounds of protecting its existing 32% equity stake. If there were a need for cash rich EPF to pump another RM2.2 billion to protect its existing 32% equity stake in RHB, it simply implies all is not well in RHB that requires bail out.”

    “The fact that its bid is higher than competitor EON Capital suggests that EPF might well be paying much more than what the intrinsic value of RHB justifies”

    This means that firstly, RHB requires a bail-out. common sense will tell that which company will want to sell such a large portion of their shares if their company is really doing so well. in fact, EPF has already admitted that the company is not doing well by the statement that the bid is to protect its existing 32% equity stake.

    Secondly, if all that they want to do is to protect its existing equity stake, then it will not be any different from having EON capital win the stake or having EPF winning. Either way RHB will have sold their stake to more “capable” hands. However, EPF paying more means that it is using much more money to protect the comparitively small sum of money it has already invested in RHB (and turns out to be a flop since it requires bailing so what assurance can they give to show that this investment wont turn out the same).

    Uncle kit: Please do question them till kingdom come as the people’s money meant for their old age is at stake. I myself have not contributed anything to CPF since i dont work in bodoh-land but it is still very wrong to play with people’s retirement funds. One do not need to be a rocket scientist to know that most people’s CPF savings is not enough to support them for a very long time after retirement and yet e damn gov wants to flush all their money away into their own pockets.

  27. #27 by Bigjoe on Monday, 12 March 2007 - 8:18 am

    As someone who has been involved in bank business development and turnarounds, I will tell you its not an easy task no matter how someone people make it seem. Even if you have a good plan, execution is terrible difficult especially for a retail bank. Its not so easy just to hire someone and then let him run it. I have seen it attempted by many government even in Singapore and the result is not good.

    The only good thing going for RHB is that interest rate is expected not to go up at least not much. It should fall maybe as soon as end of year. This will help margins but it will have nothing to do with better management.

    This means that EPF is not likely to lose money unless they do something stupid but will it give a good return? Not so easy. What does it mean if it does not? It means that sooner or later EPF will sell it to another bank. If its smart it will be a good bank and that will be the end of it. The danger is that it will merge it with someone like Affin and be disastrous.

    So what is so bad about it? It means delaying the inevitable, the main disease of this country. In the meantime, the market share will continue to be lost especially given the promised liberalization of the industry under AFTA and WTO. At the end of it, we will have a weak financial industry that is unprepared for competition and globalization.

  28. #28 by APKINGS on Monday, 12 March 2007 - 10:41 am

    Actually, I don’t care of how EPF will or not takes over any business including RHB as long as they can SHOW and proof to us how it will be benefited to EPF’s owners by Published documents, Its should be fine. But then, if they failed to do so I don’t think we will agreed upon it.

    Political and Business should not be LINKED!!


  29. #29 by Loh on Monday, 12 March 2007 - 11:19 am

    ///EPF is justifying its present bid for UBG’s 33% equity stake on grounds of protecting its existing 32% equity stake.///–Jeffrey.

    It shows that EPF was wrong in the first instance to have taken up one-third of the equity capital of a company, since with that sizable equity ownership EPF was actually running the business together with other major shareholders. EPF has violated the requirement to invest prudently based on the past performance of the companies. In all investments, EPF should be able to withdraw easily from the companies without causing ‘earthquake’ to the companies it has invested or to the economy of the country. Now EPF has to throw in more money, good money to protect the bad, and eventually it has to make the company a wholly owned EPF company. So, EPF is GLC.

    The CEO of EPF indicated that EPF would hire competent professionals to run the bank, ‘independent’ of EPF. EPF members were asked to trust EPF with their money with the assurance that the money would be properly invested with minimal risks. The CEO of EPF gives assurance to the members now that the professionals hired by EPF will be independent of EPF. That implies that EPF members are aware that EPF management board cannot be trusted with running the bank. But with the same breath the EPF CEO tell the members that they should have confident in the professionals hired by EPF to run the business like they owned tham. So billions rinngit of EPF funds are free for the professionals to manage as their won. These professionals would enjoy playing with billions of ringgit in business, and EPF members are running the risks. This runs counter to the promise that the money deposited with EPF will be managed properly by the of EPF board.

    The government might soon promise the shareholders that EPF funds are guaranteed. Non-members would like then to know why should national resources be diverted to serve a section of the population.

  30. #30 by dawsheng on Monday, 12 March 2007 - 12:20 pm

    The next time anyone vote, please make sure you don’t give 91% mandate to a government. This is what happened, they roll your money, and you are worry because you fear you may not get them back. I think you should be…

  31. #31 by Godfather on Monday, 12 March 2007 - 5:35 pm

    EPF is protecting its 32 pct investment….another way of saying that it is prepared to throw good money after bad money.

  32. #32 by ENDANGERED HORNBILL on Monday, 12 March 2007 - 7:07 pm

    “The revised offer from EPF involving all the securities held by UBG in RHB lies in the pricing of RHB ICULS-A and ICULS-B to RM1.94 (from RM1.88). If the deal goes through, EPF will also extend a MGO for all ordinary shares of RHB Cap it does not own (35%) at RM4.80 per share.”

    What irks me is that RHB ICULS ‘A’ and ICULS ‘B’ had a 52-week low of RM0.52 and RM0.65 ( right or not?). Why didn’t EPF buy RHB ICULS when it was at the year’s low instead of 3X the price and at the highest price for the 52 weeks at present levels! Someone who is in the know is laughing all the way to the bank!!! Check for Insider Trading!!! Was any party accumulating RHB shares on behalf of third parties??? so that EPF could but at highjest price!!! If there is Insider Trading, such high prices can be easil;y pulled off. Then EPF contributors will be suckers whilst someone (UMNO cronies??) will be laughing all the way to the Bank (maybe some other bank!)

    Also, why pay for RHB CAp at RM4.80 when its 52-week low was a mere RM2.31!!!????

    Do we smell something funny?? Suggest those of you who are eligible to cash out your money from EPF to consider doing it in the light of their ‘highly sophisticated’ investment strategies!!! BUY HIGH. BUY HIGHEST! Then, once it is taken private or de-listed, nobody will be able to see or read about the skeletons much.

    Elsewhere, Smeagroo said: “Who will come to our aid to bail us out when we are in a shit hole?”

    This is EPF’s idea of scatological humour. The thing about shit is you only get to smell it if you are close enough. The other thing about shit is you may not bother about it unless it is dropped in your own garden!

    Well, to all EPF contributors – we should all be up, fired and furious, because we can smell the shit that EPF is stirring up with our money. AND WE ARE MIGHTY BOTHERED BECAUSE THE SHIT IS BEING DROPPED IN OUR RETIREMENT GARDEN!

    We can’t REMOVE or sack EPF’s investment clowns. BUt we can begin by sacking the BN clowns who put them there to shift the BN shit into the public domain.

    So, please, EPF contributors, the millions of us. Let’s get the BN shit out of our sight.

    Care for another bad joke:

    “Abdullah Receives Global Leadership Award
    PUTRAJAYA, March 12 (Bernama) — Prime Minister Datuk Seri Abdullah Ahmad Badawi Monday became the first recipient of the Napoleon Hill Foundation Global Leadership Award in recognition of his outstanding global leadership. ”

    To put it bluntly, if AAB deserves a Leadership Award, then Mohd Isa, Zakaria Deros and Jasin MP all deserve an ‘Integrity Award’ each!

  33. #33 by pwcheng on Monday, 12 March 2007 - 9:51 pm

    Funny but it is true. Those highly paid officers of the EPF told me that it is difficult to formulate the calculation of the current year dividend when the result is not out. So they just use the previous years dividend and said that is their best.
    I think the problem is this bolehland only employs people with hare brains. I am definitely prepared to teach them how to do it and do it professionally. Obviously they do not know how to grow the plant but only pluck the fruits. How are they going to take care of a multi million dollar bank when they do not even have the brain for so such simple problem.

  34. #34 by pwcheng on Monday, 12 March 2007 - 9:52 pm

    “multi million should read as multi billion”

  35. #35 by japankiller on Monday, 12 March 2007 - 10:25 pm

    Is that mean Malaysian are stupid, there no any expertise eligible to manage the banking fund?OR
    It trying to mean that the staff who work in UMBC or RHB are dumb?OR
    Anything just behind the scence we do not know?
    Uncle Kit, please tell us the hidden story.

  36. #36 by Loh on Tuesday, 13 March 2007 - 12:53 pm

    When Bank Utama took over a-third of RHB equity, it was able to get the KLSE to waive the requirement for Bank Utama to make a general public offer for the remaining of the shares it did not own. Of course, Bank Utama used private funds, and KLSE took the authority to waive the rule for the reasons it did not explain. Now public funds are involved, it will be interesting to see if KLSE handle the issue of waiver.

  37. #37 by Loh on Tuesday, 13 March 2007 - 7:34 pm

    If EPF thinks that it could run RHB better than its competitor, it might make sense that it fought to win control of RHB, though it is not for EPF to be involved in commercial activities. But the CEO of EPF said that EPF would hire professionals to run RHB. So, EPF will pay close to 8 billion ringgit to gamble on its ability to get the right professionals who are expected to do better than EONCAP(?), EPF’s competitor for RHB, in running RHB, to salvage the earlier investment of 32% in RHB. Who would spend that sort of money trying to prove a point, if it was not funds which the CEO of EPF felt could be dealt with nonchalantly? Was EPF under pressure to serve ulterior motives of politicians?

  38. #38 by Ipoh Guy on Wednesday, 14 March 2007 - 9:22 am

    This is very interesting.

    If EPF can keep their nose out of RHB day to day matters, and just provide key goals to the management, we might see some surprises here – like RHD eventually making huge profits.

    I am not for nor against this matter (probably cause I am not qualified to make judgement). I have read both sides of arguments and both looks pretty convincing.

    But then again the track record of most GLC or BN-gov led institutions are poor.

  39. #39 by APKINGS on Thursday, 15 March 2007 - 12:18 pm

    Who are those so-called PROFESSIONALs came from? EPF Department? Outsider? From Oversea?

    From The G? Don’t lie to us …..LIAR!

  40. #40 by mug on Tuesday, 20 March 2007 - 6:11 pm

    Hi Richard,

    My question to you is that do they care about investing our money wisely? Kuwait Finance House with billions of FDI can be utilised to spill the money in our market. Now , wouldn’t that have made a lot of “investment” sense? EPF is always there to bail someone out. If RHB is in foreign hands, the next time when you have his old chum like MAS, PROTON, government linked agencies asking for dosh, do you think the foreign owned bank would say yes?

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