Dear Bursa Malaysia CEO Datuk Muhamad Umar Swift, Bursa and SC, 

 

Please allow me to give my views and objections on JRB revised Rights Issue.

I cannot recall in Bursa history where a proposed RI was revised two times and with each revision causing value destruction (Market price drop) and result in untold misery and pain to the minority shareholders watching JRB price:

January 2020: 1.480-1.180

February 2020: 1.540-1.240

March 2020: 1.290-0.675

April 2020: 1.050-0.790

May 2020: 1.140-0.875

June 2020: 1.000-0.860

July 2020: 0.975-0.770

August 2020: 0.810-0.750

 

JRB Board can make up story but cannot denial the facts and figures as below:

Since the proposed cash call RI announcement on 22 May 2020;

5-day VWAMP of JRB deteriorated from RM 1.0706 to RM 0.9443 to RM 0.76

Revise Rights shares increase from 402,277,057 to 1,287,286,584 to 2,413,662,345 without any thought and care on dilutive effect

Revise Free warrants sweetener increase from 201,138,528 to 643,643,292 to 1,206,831,172 with up to 151,906,604 Additional Warrants B

Revise Issue price reduced from RM 0.40 to RM0.225 to RM 0.12

Revise TERP of JRB diluted from RM 0.85 to RM 0.50 to RM 0.28

 

Proposed Rights Issue with Warrants dated 22 May 2020

Proposed Rights Issue with Warrants may entail an issuance of up to 402,277,057 Rights Shares together with 201,138,528 Warrants based on the abovementioned enlarged number of 804,554,115 Shares in issue, an illustrative entitlement basis of 2 Rights Shares together with 1 Warrant for every 4 JRB Shares held and an illustrative issue price of RM0.40 per Rights Share.  For illustrative purposes only, the issue price of the Rights Shares is assumed at RM0.40 per Rights Share throughout this announcement, which represents a discount of RM0.40 or approximately 52.94% to the TERP of JRB Shares of RM0.85, calculated based on the 5-day VWAMP of JRB Shares up to and including 19 May 2020, being the latest practicable date prior to the date of this announcement (“LPD”) of RM1.0706. The exercise price of the Warrants is assumed at RM0.85 per JRB Share throughout this announcement, which represents the TERP of JRB Shares of RM0.85.

 

Revise dated 13 July 2020.

Proposed Rights Issue with Warrants may now entail an issuance of up to 1,287,286,584 Rights Shares together with 643,643,292 Warrants based on the above mentioned enlarged number of 804,554,115 Shares in issue, a revised illustrative entitlement basis of 8 Rights Shares together with 4 Warrants for every 5 JRB Shares held and a revised illustrative issue price of RM0.225 per Rights Share. For illustrative purposes only, the issue price of the Rights Shares is now assumed at RM0.225 per Rights. For illustrative purposes only, the exercise price of the Warrants is now assumed at RM0.50 per JRB Share throughout this announcement, which represents the TERP of JRB Shares of RM0.50 calculated based on the 5-day VWAMP of JRB Shares up to and including the LPD of RM0.9443.

 

This Circular is dated 9 September 2020

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3086741

Proposed Rights Issue with Warrants may entail an issuance of up to 2,413,662,345 Rights Shares together with 1,206,831,172 Warrants based on the abovementioned enlarged number of 804,554,115 Shares in issue, an illustrative entitlement basis of 3 Rights Shares for every 1 JRB Share held, together with 1Warrant for every 2 Rights Shares subscribed for and an illustrative issue price of RM0.12 per Rights Share. For illustrative purposes only, the exercise price of the Warrants is assumed at RM0.28 per JRB Share throughout this Circular, which represents the TERP of JRB Shares of RM0.28, calculated based on the 5-day VWAMP of JRB Shares up to and including the LPD of RM0.76

 

I cannot believe my eye reading the circular that the Board has the audacity to claim the improved equity market conditions (without giving any supporting evidence or data) subsequent to the announcement in relation to the Original Proposed Rights Issue with Warrants made on 22 May 2020 to make revision with RATIONALE FOR THE PROPOSED RIGHTS ISSUE WITH WARRANTS is an appropriate option as:-

i. it will enable the Company to raise funds without incurring interest expense as compared to bank borrowings;

ii. it will involve the issuance of new JRB Shares without diluting the existing shareholders’ percentage shareholdings provided that all the Entitled Shareholders subscribe in full for their respective entitlements pursuant to the Proposed Rights Issue with Warrants; and

iii. it will provide the Entitled Shareholders with an opportunity to increase their equity participation in the Company from the subscription of the Rights Shares and by exercising the Warrants into new JRB Shares. 

 

So please allow me to rebut JRB Board so called rationale:

i) The tale of two stocks with thermal power plant Vs hydro power plant: JRB VS MFCB

JAKS Hai Duong thermal power 2 x 600 MW cost USD 1,870 million, concession period 25 years, operation 2020/21, 30% own by JRB with option of increasing to 40%

JRB Annual report 31th Dec 2019:

Equity attributable to owners of the parent: RM 977,949,070

Long term Bank borrowings: RM 306,000,000

Short term bank borrowings: RM 115,454,452

Deposits placed with licensed banks RM: 49,233,523

Cash and bank balances: RM 102,253,349

Total Number of Issued Shares: 651,118,445 shares and 94,428,430 Warrants

52 Weeks Market Price Range: RM 0.62 – 1.57

4 Weeks Market Price Range: RM 0.745 – 0.965

 

MFCB Don Sahong Hydropower 260 MW cost USD 500million, concession period 25 years, operation 2020, 80% own by MFCB

MFCB Annual report 31th Dec 2019

Equity attributable to owners of the parent: RM 1,535,246,000

Long term Bank borrowings: RM 27,929,000

Short term bank borrowings: RM 718,211,000

Bank Balances and Deposits: RM 91,031

Total Number of Issued Shares: 473,380,591 shares (Excludes 20,497,300 treasury shares)

52 Weeks Market Price Range: RM 3.10 - 7.83

4 Weeks Market Price Range: RM 6.69 - 7.83

MFCB Management borrows short term borrowing of RM 718,211,000 and makes sure every borrowed cent was used to generate productive income greater than the borrowing cost. And sadly JRB management keep repeat cash call until PublicInvest ceasing coverage after repeat warning, “All told, we are still wary over the various dilutive equity fund raisings done so far to meet its liquidity demands and the poor execution especially on its property business”

 

ii) “The issuance of new JRB Shares without diluting the existing shareholders’ percentage shareholdings provided that all the Entitled Shareholders subscribe in full for their respective entitlements”

The 6-months moratorium on bank loan repayments due to Covid-19 MCO will expire at the end of September. The very purpose for this moratorium is to ease the financial strains on individuals and companies during this unprecedented time. It is fairly reasonable to assume that some of the JRB minority shareholders too are financially stressed and do not have financial means to subscribe in full their respective entitlement.

Did the Board spare any thought or care for non-subscribing shareholders who will see the 5-day VWAMP of JRB RM0.76 fall to TERP of JRB RM0.28?

Can underwriter guarantee non-subscribing shareholders a minimum price of (0.76-0.28)/3= 0.16 + X (for the value of free warrants) per JRB-OR in 1 week window from date for commencement of trading of the rights (JRB-OR) to date for cessation of trading of the rights (JRB-OR) to compensate for the 5-day VWAMP JRB RM0.76 fall to TERP of JRB of RM0.28?

 

iii) It will provide the Entitled Shareholders with an opportunity to increase their equity participation in the Company.

The board is definitely distorting the facts on the RI to suit their narrative that the RI provides the Entitled Shareholders with an opportunity to increase their equity participation in the Company without addressing or make comparison the dilution effect of the RI on projected EPS with RI and without RI but with bank loans

Financial market should operate on free will and free choice hence I had bought JRB shares to increase my equity participant from open market on my free will and free choice at the beginning of year in anticipation that JAKS Hai Duong Power Plant will bring in profit or free cash-flow of RM 150-250 million to JRB. But alas a badly thought of severely diluting RI had ruined my investment as I was forced to cut losses and now only held 10,000 units to qualify myself as a shareholder to make my objections and continue my fight for justices and fairness.

To me the unreasonable diluting RI violated my rights of free will and choice and holding me as minority shareholders hostage where minority shareholders either force to borrow money to subscribe for RI as not subscribing mean seeing their initial investment go down the drain or force to cut loss and curse the uncaring and thoughtless JRB Board.

 

Dear Bursa,

Refer circular page 39:

g) To incorporate Bursa Securities’ comments in respect of the draft circular to shareholders – Complied.

May I know what Bursa Securities’ comments are? And in what way did circular comply to incorporate Bursa Securities’ comments in respect of the draft circular to shareholders?

 

Dear Bursa Malaysia CEO Datuk Muhamad Umar Swift,

I do not understand why Bursa approved JRB revise RI with increasing Rights Shares to the tune of unbelievable 2,413,662,345 Rights Shares without addressing the diluting effect and heavy losses going to suffer by the non-subscribing RI minority shareholders due to financial woes at this difficult time. Moreover I think the replies by JRB to Bursa on my complaints/objections are falling short of a reasonable acceptable level.

 

Pardon me for saying, Bursa Malaysia is mandated to operate the stock exchange as a commercially driven, public-listed entity. It is also mandated by the Listing/Regulation/Disclosure Act as the front-line market regulator policing public-listed companies and market intermediaries. Perhaps these two mandates clash and give rise to conflict of interest as many of Bursa’s decisions on approval, suspension, delisting and waive seem indulging in excessive corporate abuse for the benefits of controlling shareholders.

 

For far too long, public-listed companies raised money from the market, but did not really take care of returns to shareholders. How many listed companies have provided decent dividends, if at all declared any dividend to shareholders? Many of these companies with listed status are nothing more than “conduit” for controlling shareholders to print money. They exist mainly for the sole benefits of those who are in control of the companies. The management and the controlling shareholders are being lavishly rewarded while shareholders who provided the funding are given pittance or nothing.

It is about time, the authorities must monitor the listed companies to prevent controlling shareholders from indulging excessive corporate abuse for their own benefits. Bursa and SC should focus on making the market more efficient and transparent and to ensure a high level of trust and integrity among the public-listed companies by going after those controlling shareholders who abuse their power and break the rules with the full force of the law.

 

Thank you, have a good day.

 

Yours sincerely,

Lee Soon Sheng

PS: I may have lost this battle but I will persist with hope that I shall someday win the war I’m fighting for minority shareholders rights, justices and fairness. I appeal to Bursa and SC to make the requirement of not more than 10% discount for the issue price applicable to both Private Placement and Rights Issue exercise pursuant to general mandate under Section 75 and 76 of the Companies Act 2016. And sweetener free warrants distribute to the non RI subscribing shareholders and subscribers of Rights Shares. And please ensure all listed companies must have a formal Dividend Policy