Stock Manipulation On Axis Inc: Dealer Charged

Here's an interesting news update to the posting SC Warns On Destroyed Documents, Axis Inc Lodges Police Report! and Update on Axis Inc.

On the Edge Financial Daily Dealer’s rep sanctioned for false trading, market manipulation

• Dealer’s rep sanctioned for false trading, market manipulation
  Written by Loong Tse Min
  Friday, 09 July 2010 11:06
  
  KUALA LUMPUR: Bursa Malaysia Securities Bhd has publicly reprimanded and fined a commissioned dealer’s representative (CDR) of Kenanga Investment Bank Bhd RM100,000 for false trading and market manipulation in the trading of Axis Incorporated Bhd shares.
  
  In a statement yesterday, Bursa Securities said it ordered that Lee Beng Huat be struck off the register, if he was still a registered person of the exchange.
  
  The exchange said Lee had carried out false trading and market manipulation involving about 41 million Axis shares, out of the market turnover of 104 million Axis shares, for 87 trading days in 2006 and 2007.
  
  It said during that period, Lee had dealt in Axis shares mainly through the accounts of 10 clients.
  
  “He had entered buy and sell orders which were manipulative in nature and which had led to false or misleading appearance of active trading in, or market for, Axis shares and tantamount to stock market manipulations,” Bursa Securities said, adding that Lee had breached trading rules.
  
  It said the dealing in Axis shares by Lee via the 10 accounts, which were the top buyers and sellers during the period, had several characteristics:
  
  1. Entry of orders which were several bids lower than the last done price with no real intention to have the buy orders matched.
  
  2. Lee also engaged in order splitting, entering a series of buy orders in succession through any one of the 10 accounts with the same price. These buy orders gave rise to and created an impression of continuous demand for Axis shares which led to false or misleading appearance of active demand/market for Axis shares.
  
  3. The buy and sell orders executed in the 10 accounts:
  
  • had cross-trades which were matched among each other for about 12 million units of Axis shares involving Lee as their common CDR;
  • resulted in the buy and sell transactions of Axis shares in the 10 accounts without any change to the beneficial ownership of Axis shares (NCBO trades) and during the relevant period, there were 65 NCBO trades involving 385,800 units of Axis shares;
  • were frequently matched with the corresponding orders keyed in by another CDR from another broker which indicated that there were some form of pre-arrangements for these trades to be matched;
  • resulted in trades which were rolled over periodically with the same or almost the same block of Axis shares which gave rise to the manipulative trading activities; and
  • had trades which were subsequently amended to other clients’ accounts resulting in a change of the original party to the contract which is not permitted.
  
  Bursa Securities said Lee, by engaging in the manipulations, managed to sell about 72% of the sell orders (40.98 million out of 56.67 million units of sell orders entered for the 10 accounts) and bought about 55% of the buy orders (41.6 million out of 76.14 million units of the 10 accounts’ buy orders).
  
  It said the higher volume and percentage of the buy orders, which were subsequently cancelled and/or lapsed due to the orders being lower than the last done price resulting in lower percentage of buy orders matched, gave an impression of and created an inflated demand for Axis shares.
  
  This, it said, led to a misleading appearance of an active market for Axis shares.
  
  Bursa Securities said Lee had failed to take heed of the concerns raised by the exchange on his irregular trading activities in Axis shares in the 10 accounts but had continued to trade in the irregular and manipulative manner.
  
  This article appeared in The Edge Financial Daily, July 9, 2010.

Hmm... as stated in the article "Lee had carried out false trading and market manipulation involving about 41 million Axis shares, out of the market turnover of 104 million Axis shares, for 87 trading days in 2006 and 2007. ".

Here is the chart of Axis between 2006 and 2007... yeah... I can see the massive volume...

And what's interesting is what happened after 2008... here's the chart from 1 Jan 2008 to May 2009.

I wonder who were the big sellers were when the shares plunged in 2008. :P

Ok it's not very clear (LOL! yeah.. what's new! :P ) ... anyway, remember the posting Axis Inc Lodges Police Report!? I had an Axis chart posted?

Let me post an ammended chart now. :P ( I have now crossed out 2007 stock bumper year and changed it to 2007 Stock Manipulation time! :P )

Now see the bottom arrow on the volume...

Can you see what it suggests? Can you? *whistle*

Anyway.... I am glad that the dealer was caught but... I am wondering... is the dealer the chief 'tukang masak'?

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SC Warns On Destroyed Documents

On Business Times

• SC warns firms not to destroy documents
  
  Published: 2010/06/16
  
  THE Securities Commission Malaysia (SC) yesterday issued a stern reminder to directors and principal officers of public-listed companies (PLCs) of the severe consequences of destroying or causing loss of company documents.
  
  Under the Capital Markets and Services Act 2007, it is an offence to destroy, conceal, mutilate or alter any record or account with the intent to defraud any person, or to prevent, delay or obstruct investigations, the SC said yesterday.
  
  Upon conviction, offenders are liable to a fine of up to RM10 million or imprisonment for up to 10 years or both, it said in a statement.
  
  According to SC chairman Tan Sri Zarinah Anwar, it is completely unacceptable that a company that is under investigation suddenly turns around and claims that documents are lost or stolen.
  
  "I am reminding directors of PLCs that they are ultimately responsible for the safe custody of company documents and can be held liable for the loss of such documents," Zarinah said.
  "Someone who assists another person to destroy documents also commits a wrong. So I am sending a strong warning to company employees and others who act on the instructions of those further up the corporate chain," she said.
  
  Zarinah warned that the SC would not not hesitate to take action against anyone responsible for the destruction, loss or removal of any company records.
  
  The SC said it was extremely concerned that in some of the cases under investigation, documents central to the investigations had been reported lost, destroyed or even stolen.
  
  "While recognising that there could be genuine cases of loss, there appears to be losses which seem to have occurred under extremely questionable circumstances," it said.
  
  The commission called for heightened vigilance on the part of company directors, auditors and key company officials with regard to the safeguarding of all company documents.
  
  The SC also reminded auditors that they have a duty to report any breaches of securities laws or rules of the stock exchange or any matters which may adversely affect the financial situation of a PLC to the authorities.
  
  "This is a critical role of auditors who are expected to bring a level of independence and professionalism to the process of financial disclosures," it said. - Bernama

I believe that article should be addressed to Axis Inc.

Axis Inc Lodges Police Report!

All I want to repeat say is that in 2007, Axis Inc the stock had a bumper year.

Stock soared on the basis that the company's business had reported fantastic growth. With the fantastic growth came incredible surge in trade receivables.

So the stock soared in 2007.

In 2008..

• Axis Inc Bhd may have to write off RM161 million in its 2008 accounts as its auditor could not find enough evidence to show that the company could recover the amount. ..... One is an amount of RM105 million due from contract manufacturers, which is part of other receivables as at March 31 2008. ( see Update on Axis Inc )

Yup... all hell broke loose in 2008.

Now Axis said.. cannot find.. missing... so it lodged a police report.

Think about it... record sales drove the stock up in 2007... in 2008.. records cannot verify those sales and receivables..... 2010.. those records now missing!

Yup.. completely unacceptable!

Read more...

Axis Inc Lodges Police Report!

Oh no!!!!

Just when I thought I could have a nice weekend enjoying the World Cup, I noticed this news clip on the Edge Financial Daily: Axis Inc directors lodge police report over missing records

• KUALA LUMPUR: AXIS INCORPORATION BHD 's board of directors has lodged a police report over several official documents and records belonging to Axis and its units which have gone missing.
  
  It said on Friday, June 11 that it had on Wednesday lodged the report over the missing records of the company and its units Asiapin Sdn Bhd, Chongee Enterprises Sdn Bhd and GBC Marketing Pte Ltd from 2004 to 2008 at the offices in Johor Baru, Tangkak and in Singapore.
  
  The missing records included documents in relation to the purchase of machinery sent to contract manufacturers in Cambodia and/or Vietnam; bank statements and cheque butts; payment vouchers and supporting documents for payments made to the contract manufacturers in Cambodia.
  
  Also missing were documents, letters, e-mails and correspondences between Axis group and the contract manufacturers; documents in relation to the orders placed with the contract manufacturers by buyers; documents of raw materials bought for the contract manufacturers (ncluding purchase orders and delivery orders).
  
  The report also claimed that documents on the account of monies received from the Bumiputera issue in 2004 and the sale of Ganad assets in 2007-2008 were missing.
  
  "As a result of the above missing records, Axis Group of companies in 2009 had to write off substantial amount of its assets and receivables due to the lack of documentary support of these assets and receivables," it said.
  
  The company said the present Axis Board was unable to answer certain queries posed by Bursa Malaysia Securities Bhd.

Dear lord!!!

Let me get this correct.

Axis Inc is blaming that because of these missing documents, Axis Inc had to write off substantial amount of these assets and receivables!

• .. lodged the report over the missing records of the company and its units Asiapin Sdn Bhd, Chongee Enterprises Sdn Bhd and GBC Marketing Pte Ltd from 2004 to 2008 at the offices in Johor Baru, Tangkak and in Singapore.

Gee how nice!

Now I had written on Axis before. Aug 2008, I wrote A Deeper Look At Axis Inc.

Let me reproduce one of the compiled tables here again.

Clearly visible and questionable was the 2006 fiscal year earnings, in which its earnings slumped big time from 14 mil to 8 million but the massive sudden increase in loans from 85 million to 184 million stood out sorely. Receivables jumped insanely from 82 million to 166 million!

The next fiscal year 2007, Axis had a bumper year! Axis Inc the stock had a bumper year too!

Bumper year means good stock, yes? Apparently, the market liked what it saw when Axis net earnings jumped from 8 million to 25 million!

But sadly, the market discounted the incredible balance sheet weakness! (see the above compiled table again). Loans soared to an incredible 240 million and trade receivables stood out sorely at 200 million!

Today, Axis is saying "As a result of the above missing records, Axis Group of companies in 2009 had to write off substantial amount of its assets and receivables due to the lack of documentary support of these assets and receivables,"

Consider the fact that record profits helped drove up the stock in 2007.
Consider the fact that the record profits came with the insane jump in receivables!

Now all the records and documents are all missing! Would anyone be able to examine the debt aging reports? Will anyone understand why the receivables jumped? And without these records, how could anyone determine the validity of the profits made in 2007, since the documents are all missing?!!

WOW!

Like this also can!

What a wonderful world we live in!

Are we all Ah Bengs and Ah Lians???

First we have the Kenmark CEO saga. Now apparently Axis wants its throne back!

----------------

ps:

I wrote on Axis back on 31st July 2008: Regarding The Plunge Of Axis!!

This was followed by A Deeper Look At Axis Inc and then by More On Axis Inc and Update on Axis Inc.

In the posting More On Axis Inc

• The external auditor, Messrs Horwath are unable to obtain sufficient appropriate audit evidence and explanations to ascertain the following:- (b) the recoverability of the outstanding balances due from the Contract Manufacturers (net of the settlement subsequent to 31 March 2008) in relation to the trade receivables and advances)

Axis since then saw the company being hit by huge provision of bad debts and then served with writ of summons by its banker, Maybank and later saw its auditors, BDO Consulting Sdn Bhd, alleging that 'some serious discrepancies with regard to transactions that had led to earlier write-offs from the company’s books'.

Do see this brilliant article on Star Businessweek: Once rescuer Axis now needs rescue

Read more...

Update on Axis Inc

Blogged on Friday, A Deeper Look At Axis Inc

Yesterday, Business Times carried an article on Axis, Axis may write off RM161m in 2008 accounts

• The garment and textile maker told Bursa that it may write off the money owed by suppliers to the company in its 2008 accounts as it may not be recoverable
  
  GARMENT and textile maker Axis Inc Bhd may have to write off RM161 million in its 2008 accounts as its auditor could not find enough evidence to show that the company could recover the amount.
  
  The money is owed to the company by its contract manufacturers and other suppliers, the company said in a statement to Bursa Malaysia on July 31.
  
  Axis was responding to Bursa Malaysia's instruction to explain accounting issues that have delayed the submission of its 2008 audited accounts.
  
  The company said its external auditor, Messrs Horwath, was not able to obtain sufficient evidence and explanation to verify three issues.
  
  One is an amount of RM105 million due from contract manufacturers, which is part of other receivables as at March 31 2008.
  
  This is a big jump from RM11 million in the previous financial year. Subsequent to the balance sheet date, RM20 million has been settled by the contract manufacturers.
  
  Secondly, the contract manufacturers also owed the group RM28 million for sales of fabrics by the group to the contract manufacturers.
  
  Finally, prepayments of RM32 million were made to certain suppliers for the supply of embroidery services, purchase of fabrics and accessories, from which only RM11 million of these services and goods were received by the group.
  
  The balance (of goods and services) is expected to be settled by the end of September 2008.
  
  The contract manufacturers are LA (Cambodia) Garment Pte Ltd, Vivatino Design (Cambodia) Pte Ltd and United Garment (Vietnam) Co Ltd.
  
  These manufacturers are in a strategic alliance agreement with a subsidiary of Axis, where the manufacturers receive a 25 per cent advance payment of the value of a confirmed order for the cutting and sewing of the garments.
  
  Since Messrs Horwath was unable to form an audit opinion, Axis intends to carry out a special audit. It told Bursa Malaysia on Thursday that the company can only say how long it needs to settle the audit issues once the board appoints an independent auditor for the special audit.
  
  No further details on the special audit were provided.
  
  Trading in Axis shares, which was suspended on Thursday, resumed at 2.30pm yesterday but the stock fell by four sen to 31 sen.
  

May write off as such as rm 161 million!

Holy cow!

This is utterly shambolic!

And this reminded me of the comments made earlier by elizabeth, who said...

• Other receivables also have gone up alot. These apparently were advances paid to suppliers (for raw mat) and contractors in order to secure stocks at lower prices.... Considering this amount is more than the SH equity, it's pretty scarry...

Let's see how scary. Look at the most recent quarterly earnings: Quarterly rpt on consolidated results for the financial period ended 31/3/2008

Well if Axis were to write off some 161 million from the above, can you imagine the damage??

How?

Read more...

More On Axis Inc

I just realised that Axis had made an announcement late last night.

This was the answer from Axis Inc posted on Bursa website.

• Reference is made to your letter of even date via fax to us this afternoon, the Board of Directors is pleased to reply the queries as follows:-
  
  1. Full detail of the material unresolved issues and the amount involved, if any, as raised by your external auditor, Messrs Horwath
  
  The external auditors, Messrs. Horwath have disclosed the following in the draft financial statements:-
  
  (i) Included in other receivables as at 31 March 2008 are amounts due from the Contract Manufacturers of approximately RM105 million. The amounts outstanding as at 31 March 2008 showed a significant increase compared to the amounts outstanding of approximately RM11 million in the previous financial year. Subsequent to the balance sheet date, approximately RM20 million have been settled by the Contract Manufacturers.*
  
  (ii) The Contract Manufacturers also owed the Group a total of approximately RM28 million as at 31 March 2008 for sales of fabrics by the Group to the Contract Manufacturers. This amount is included under Trade Receivables in the financial statements.*
  
  (iii) As at 31 March 2008, included in other receivables are prepayments of approximately RM32 million made to certain suppliers for the supply of embroidery services, purchase of fabrics and accessories. Subsequent to the balance sheet date, approximately RM11 million of these services and goods were received by the Group. As represented by management, the balance of approximately RM20 million are expected to be settled by the end of September 2008 through further delivery of services and goods.*
  
  * Note: All the numerical figures as stated above are mere estimates taken from the draft Audited Financial Statements and they are not the final figures agreed upon by the Audit Committee and the Board of Directors.
  
  The external auditor, Messrs Horwath are unable to obtain sufficient appropriate audit evidence and explanations to ascertain the following:-
  
  (a) the basis of the advances made to the Contract Manufacturers, and whether the advances and settlement thereof are in compliance with the strategic alliance agreement with the Contract Manufacturers;
  
  (b) the recoverability of the outstanding balances due from the Contract Manufacturers (net of the settlement subsequent to 31 March 2008) in relation to the trade receivables and advances;
  
  (c) the recoverability of the net balance of the prepayments made to suppliers as stated in (iii) above.
  
  In view of the significance of the matters set out above, Messrs. Horwath are unable to complete the audit and form an audit opinion, pending the receipt of information and explanations on the above matters.
  
  2. Expected timeframe required by your Company to resolve the issues mentioned above
  
  The expected timeframe required by the Company to resolve the issues affecting the financial statements as at 31 March 2008 will be known once the appointment of the auditors for the special audit is determined by the Board and Bursa Malaysia Securities Berhad (“Bursa Securities”) will be advised accordingly.
  
  3. Information on the Special Audit:-
  
  (a) Name of auditor
  
  The name of the auditor will be advised when it is determined by the Board.
  
  (b) Appointment date
  
  The appointment of the independent auditors will be with immediate effect once the Board of Directors made its decision.
  
  (c) Timeframe required to conduct the special audit
  
  The time frame required to conduct the special audit will be determined once the Board approves the appointment of the independent auditor and the Company will advise Burse Securities in due course.
  
  (d) Scope of the special audit
  
  The scope of the special audit has not been finalised as of now. However, the Board of Directors will ensure that the scope of the special audit will cover detailed investigations on all the issues raised by the external auditors, Horwath.
  
  4. The impact of material unresolved issues on your Company’s financial statement for the financial year ended 31 March 2008
  
  The Board is committed to resolve the material unresolved issues raised by Horwath. However, the full impact will only be known upon the outcome of the Special Audit.
  
  In the event that the figures under paragraph 1 (i), (ii) and (iii) above are confirmed, the Management will have to take steps to recover the said amounts totalling approximately RM161 million in full, failing which, they may result in the write-off of those amounts uncollected in the Audited Financial Statements for the financial year ended 31 March 2008.
  
  
  5. Relationship with Contract Manufacturers
  
  The Contract Manufacturers are LA. (Cambodia) Garment Pte. Ltd., Vivatino Design (Cambodia) Pte. Ltd. and United Garment (Vietnam) Co. Ltd. and have been the Contract Manufacturers for Chongee Enterprise Sdn Bhd ("Chongee"), a subsidiary of Axis for a number of years and have formalised their relationship through a Strategic Alliance Agreement entered between the parties on 5 May 2008. Under that Strategic Alliance Agreement, the strategic partners are entitled to be paid a 25% advance payment of the value of a confirmed order for the cutting and sewing of the garments. In return, the strategic partners are obligated to handle local licensing requirements and to always keep their factory and workplace in full compliance with USA and European environmental and human rights standards.
  
  We will continuously furnish to Bursa Securities all information that we have on the issues as and when available and shall cooperate fully with Bursa to resolve the issues.
  
  
  This announcement is dated 31st day of July 2008

The sentence highlighted in red is rather very significant.

• The external auditor, Messrs Horwath are unable to obtain sufficient appropriate audit evidence and explanations to ascertain the following:- (b) the recoverability of the outstanding balances due from the Contract Manufacturers (net of the settlement subsequent to 31 March 2008) in relation to the trade receivables and advances)

How would you interpret the above statement?

If the outstanding balances cannot be recovered then how? Write down?

As it is the total amount receivables is far too huge and the possibility is there for Axis Inc being asked to write down these debts.

I could be wrong but once the receivables it's written down, I would imagine that the impact should be rather severe.

And Axis Inc would be resuming trading this afternoon.

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A Deeper Look At Axis Inc

So it now appears that Axis Inc has crashed and burned. ( See Regarding The Plunge Of Axis!! and The Plunge Of Axis)

This morning I would like to take a simple and quick look at Axis and examine if there was any justifications to invest in Axis Inc or not.

Axis Inc was listed on April 2004 via taking over the listing of the failed Ganad.

The first fiscal year for Axis was announced on May 2005. Quarterly rpt on consolidated results for the financial period ended 31/3/2005.

Axis announced a net earnings of 14.394 million for the fiscal year. Margins were low at 5.18% and company was carrying net debts of over 77.845 million. And Axis is in the garments industry.

For the next fiscal year 2006, Axis earnings were rather shockingly poor. Quarterly rpt on consolidated results for the financial period ended 31/3/2006

Net earnings dropped to 8.154 million despite a sharp increase in sales revenue. Net margins slumped to a mere 2.33%. Net debts soared to 172 million! Any justifications?

The next fiscal year 2007, Axis had a bumper year! Quarterly rpt on consolidated results for the financial period ended 31/3/2007

Sales soared to 492 million from 350 million the previous fiscal year and net earnings soared to 25.167 million. Margins too improved to 5.11%. And an investor who just focus on earnings growth and earnings per share would be seduced, yes?

However, the fundamental weakness of the company was rather crystal clear.

I have compiled a table from all the links above and this is what I would have been looking at.

Shocking is the word. Despite all the incredible revenue and earnings growth, the fundamental deterioration was crystal clear! Total loans soared and the company is now in a net debt position of 224 million! Loans were just 85 million back in 2005. And look at the receivables. Receivables soared from 82 million to 200.9 million!

Others D&R stands for other deposits, receivables and prepayments - this figure would be interesting the next fiscal year!

So where there any justifications to invest in Axis Inc?

And this was Axis latest earnings report made on May 2008. Quarterly rpt on consolidated results for the financial period ended 31/3/2008

Take a look at the compiled figures in the new table below.

Earnings slumped to 16.105 million. Margins dropped.

Total debts is now at 325.701 million, which means the company is now in a net debt of 308.47 million! (Consider this, with a net earnings of around 16 million, it would take this company 20 years just to repay its total loans of 325 million!)

Others D&R, which stands for other deposits, receivables and prepayments soared to 151.559 million! Receivables improved slightly to 197.393 million!

(Sorry for the insinuation - I could be wrong here - but in my simple opinion - which may be flawed - this is simply looking so much like Megan Media!. The low margins, the increase in debts and receivables!)

How?

Was there any justifications to invest in Axis Inc?

Or don't you think Axis Inc simply looked like an accident waiting to happen?

Read more...

Regarding The Plunge Of Axis!!

Posted on Mootaktrade: The Plunge Of Axis

The plunge was incredible.

This stock was trading around 2.00 on 11th July 2008.

It closed yesterday at 0.35!

And what's most worrying is the following announcement on Bursa website. AXIS INCORPORATION BERHAD (“Axis” or the “Company”) - Submission of the Audited Financial Statements for the financial year ended 31 March 2008 (hereinafter referred to as “AFS”)

• The Board of Directors of Axis (“Board”) wishes to announce that at the Board of Directors’ meeting held on 30 July 2008 at 6.40 p.m., the Board has unanimously resolved that the Company would not be able to submit its AFS by the deadline on 31 July 2008 as a result of material unresolved issues raised by our external auditors, Messrs Horwath during the Audit Committee meeting held at 3.35 p.m. on 30 July 2008. The Management of Axis requires time to resolve these issues.
  
  The Audit Committee has proposed and the Board has approved the need to appoint an independent firm of auditors to carry out a special audit immediately to address these issues.
  
  The Company will make necessary announcements upon the outcome of the special audit.
  
  This announcement is dated 30 July 2008.

Accounting problems??????

And what's even more worrying was their answer to Bursa regarding the plunge of the stock. AXIS INCORPORATION BERHAD (“the Company”) - Unusual Market Activity

• We refer to Bursa Malaysia Securities Berhad (“Bursa Securities”) letter dated 30 July 2008 in relation to the unusual market activity of the Company’s shares.
  
  Pursuant to Paragraph 9.11 of the Listing Requirements of Bursa Securities, the Board of Directors of the Company wishes to announce that to the best of their knowledge, they are not aware of any of the following that may have contributed to the unusual market activity:
  
  1) Any material corporate development relating to the Group’s business and affairs not previously announced;
  
  2) Any rumours or report concerning the business and affairs of the Group; and
  
  2) Any other reasons to account for the unusual market activity.
  
  The Company will make the necessary announcement to Bursa Securities of any material information should it falls under the Listing Requirements of Bursa Securities in particular Paragraph 9.03 on disclosure of material information.
  
  This announcement is dated 30 July 2008.

How can they be not aware????????

Here is the link to their most recent quarterly earnings report: Quarterly rpt on consolidated results for the financial period ended 31/3/2008

Check out the rather godzilla sized trade receivables!

Incredible!

Read more...