Regarding KNM's MD Disposal Of Shares For A Cool RM64 Million

Flashback:

Friday, October 24, 2008 KNM Comments About BTimes Article

• "We are examining the announcements made by the company (KNM) on Bursa Malaysia. If there are any indications of wrongdoing or breaches of securities laws, then appropriate regulatory action will be taken," an SC spokesperson told Business Times. The company was queried on October 15, following a sharp decrease in price and high volume of its shares. In its reply then, KNM said it was unaware of the cause for the unusual market activity.

And more importanly, during the selldown of KNM on high volume.

• And did you see the point 2? Disposal of 72,271,600 shares - sold down by financier which is now resolved.
  And more interestingly, the company DID a share buyback during this same period! Notice of Shares Buy Back by a Company pursuant to Form 28A

Monday, October 27, 2008 Regarding KNM's Sell Down!

• Mr. Lee has gone massive length in attempting to made a point over the size of EPF's shareholding stake and the PE yardstick but as pointed out by Naruto..
  1. What about the massive 'disposal of shares sold down by financer' on Inter Merger Sdn Bhd the other day?
  2. How's this resolved?
  3. Why did the sell down happened?
  4. And that share buyback.. the timing of the buybacks and the selldown simply arouses suspicion, yes?
  5. Shouldn't Mr. Lee directly address these issues, instead?

Wednesday, November 26, 2008 KNM Q3 Earnings

Forward to 2009. On March 17th 2009, Management buyout of KNM hinges on funds

Massive privatisation talks via a MBO is been prmoted by the MD.

• A management buyout (MBO) will be considered for KNM Group Bhd but funding must be available, said managing director Lee Swee Eng.
  
  “In the current environment, it will be very difficult to raise funds,” Lee told StarBiz in reference to a Bloomberg report on the possible privatisation of the company.
  
  A Bloomberg report yesterday quoted Lee as saying he would consider leading an MBO as long as banks will the funds.
  
  “We are very undervalued. The opportunity for privatisation is a good opportunity but it’s the source of funding. There is no offer on the table,” he was quoted as saying.

Straight from the horse mouth. KNM is very much undervalued.

Wednesday, 10 June 2009, the Edge Financial Daily publishes the following. KNM’s MD sells 63.65m shares

• KUALA LUMPUR: KNM Group Bhd managing director Lee Swee Eng’s selling of a 1.6% stake recently has raised eyebrows and concerns about whether he would continue to pare his interest in the oil and gas player.
  
  Replying to queries by The Edge Financial Daily via SMS yesterday, he said the selling of the shares was a strategic placement. “The proceeds from it will be used to degear and clear up all the margin taken up during the rights issue,” he said, but mum on whether he would be selling more shares.
  
  According to a Bursa Malaysia filing on Monday, Lee sold a total of 63.65 million shares representing a 1.6% stake in KNM between June 1 and 4 at prices ranging from 97.5 sen to RM1.02 apiece.
  
  Lee still holds a 23.74% stake in KNM as at June 8, via direct and indirect interests. While there were no new filings on Bursa regarding substantial shareholding changes in KNM yesterday, the company did see a block of 10 million shares change hands off-market yesterday in a block deal, at RM1.03 per share.
  
  The stock had hit a six-month high of RM1.06 last Friday. It was the most actively traded stock yesterday with 82.64 million shares done, closing one sen lower at RM1.03.
  
  “We believe that the share sale may help to raise funds to redeem part of Lee’s holdings under a share margin account,” said HwangDBS Vickers Research in a report yesterday.
  
  The research firm pointed out that in October last year, Lee had been forced to sell a portion of his KNM shares by CIMB Bank. It was the fear of margin calls that had caused the company’s share price to drop during that period.
  
  “We understand that the shares (the block sold in October 2008) was under share margin financing. This time around, the share sale is not under forced selling but Lee has raised around RM64 million and this could be used to redeem his holdings,” said HwangDBS.
  
  The recent rally in oil prices has spurred interest in stocks such as KNM. However, analysts are still mixed on the company’s prospects going forward.
  
  In its May 29 report, Maybank Investment Bank downgraded its recommendation on the company to sell, citing earnings weakness ahead.
  
  “While KNM’s 1QFY2009 core net profit of RM98.4 million was in line with our and market expectations, the sequential fall in sales and Ebit (earnings before interest and tax) has reflected a slowdown in orders,” said Maybank, which noted that KNM’s order book contracted by 9% quarter-on-quarter.
  
  AmResearch still has KNM under review as at May 29 but noted that the group was currently tendering for RM18 billion worth of jobs worldwide.
  
  “Unless the award of contracts improves significantly over the next two quarters, the existing order book could drop by RM1 billion by the end of FY2009,” said AmResearch.
  
  HwangDBS is more optimistic on the company. It maintains a buy recommendation with a target price of RM1.15.
  
  “The earnings recovery for KNM has improved following the recovery in crude oil price. We expect new orders to flow from the third quarter, on the back of sustainable oil price and improving economic conditions,” it said.

The HwangDBS statement was interesting, ya?

• “We understand that the shares (the block sold in October 2008) was under share margin financing. This time around, the share sale is not under forced selling but Lee has raised around RM64 million and this could be used to redeem his holdings,” said HwangDBS.

So let's see if my understanding is not flawed.

Accordingly the initial sell down was because of Lee's share margin financing.

He was forced to sell by his financiers.

And KNM the stock got hit big time!


Poor minority shareholders who had to suffer the selldown just because the MD's shares were sold down!

Come March, the MD starts to promote his shares stating KNM were very much undervalued.

So cheap that he wanted to do a privatisation via a MBO.

Then the markets rallied worldwide.

And KNM shares soared too.

Everyone was happy.

The MD Lee was even more happy and KNM did not seem undervalue no more, as he disposed a chunk of his shares and according to HwangDBS his disposal of shares helped rake in a tidy rm64 million ringgit.

Cool!

ps: Did you help him raking in this tidy sum?

ps/ps: How come MD Lee no say tenkiu eh?

ps/ps/ps: squeaky bum too now for KNM the stock! :p

Life is great!

Share markets is even greater!

:D