CapitalA: Follow up email on “increase effective stake from 40% to 100% in Philippine Air Asia”

Sslee

Publish date: Sat, 09 Sep 2023, 05:32 PM

Send 11 Sept 2023, 07:43

Dear Bursa,

Without a CORPORATE GOVERNANCE CHECKLIST FOR COMPANY IR AND IBs ANALYST on how to respond to investor enquiry, investors are at their mercy whether the Company IR and IBs Analyst will respond to investor enquiry.

A week has passed and neither TA Analyst nor CapitalA IR responded to my email. Hence I was forced to do some study on 2Q2023 - increase effective stake to 100% in Philippine Air Asia

https://en.wikipedia.org/wiki/Philippines_AirAsia#Fleet

The airline is a joint venture between three Filipino businessmen and AirAsia. 60% of the airline is owned by Filipino investors Antonio O. Cojuangco, Jr., former owner of Associated Broadcasting Company and owner of Dream Satellite TV, Michael L. Romero, a real estate developer and port operator, and Marianne Hontiveros, a former music industry executive and TV host.^[25] The remaining 40% is owned by AirAsia Investments Ltd. (later AirAsia Aviation Limited) of Malaysia.^[7] The Public Service Act of the Philippines, prior to its amendment in 2022, only allowed a foreign direct investment of up to 40% in Philippine-registered airlines.^[26]

In June 2019, Romero's F&S Holdings bought the shares owned by Alfredo Yao and Hontiveros, thus becoming the new majority shareholder in the company. Four months later, Romero acquired Cojuangco's shares, becoming the sole local owner (and parent company) of the airline.^[4] In June 2023, F&S Holdings sold all of its shares to AA Com Travel Philippines for an undisclosed amount.

From CapitalA Annual Report 2022

Page: 299 to 300

Proportion of equity interest held by non-controlling interests

Name of entity: Country of incorporation: Group’s effective equity interest FY2022 %

Philippines Airasia Inc. (“PAA”): Philippines: 40.00

Accumulated balances of material non-controlling interests:

2022: RM ‘000

PAA: (2,226,942)

Total comprehensive loss attributable to NCI income for the financial year

2022: RM ‘000

PAA (349,719)

PAA: Balance sheet:
2022 RM ’000

Non-current assets: 709,801

Current assets: 357,236

Non-current liabilities: (1,021,560)

Current liabilities: (3,100,251)

Net liabilities: (3,054,775)

From CapitalA: Second quarter report ended 30 June 2023:

Page 4:

As at 30/6/2023: As at 31/12/2022

RM ‘000: RM’000
Capital and reserves:
Share capital: 8,659,652: 8,654,977
Merger deficit: (5,507,594): (5,507,594)
Other reserves: 266,894: 204,020
Foreign exchange reserve: (1,657,962): (153,308)
Accumulated losses: (10,151,810): (8,923,188)
Equity:
Shareholders’ equity: (8,390,820): (5,725,093)
Non-controlling interest: (1,813,867): (3,791,865)
Total equity: (10,204,687): (9,516,958)

My question to Bursa how can a deal involve undisclosed sum to “increase effective stake from 40% to 100% in Philippine Air Asia” that transfers about negative equity of RM 2 billion from Non-controlling interest to Shareholders’ equity and about RM 1 billion addition accumulated losses be allowed and how the deal can help shareholders’ equity to uplift CapitalA from PN17?

Criteria that trigger Practice Note 17:
(a) the shareholders' equity of the listed issuer on a consolidated basis is 25% or less of the issued and paid-up capital (excluding treasury shares) of the listed issuer and such shareholders' equity is less than RM40 million;

More importantly referring to Bursa rules: PART D – ACQUISITIONS AND DISPOSALS

https://www.bursamalaysia.com/sites/5bb54be15f36ca0af339077a/content_entry5ce3b50239fba2627b2864be/5ce3b5c439fba264f32eb401/files/MAIN_Chap10_COI_Ors__26May2023_.pdf?1685095256

10.05 Requirements for transactions with percentage ratio below 5%

(1) Subject to paragraph 10.08(1), where all the percentage ratios of a transaction are less than 5% and the consideration is satisfied in cash or unquoted securities, no announcement of the transaction to the Exchange is required.

(2) If the listed issuer wishes to voluntarily announce the transaction to the Exchange, the listed issuer must include –

(a) the details of the consideration;

(b) the particulars of the transaction; and

(c) a statement that the directors, major shareholders or person connected with them have no interest, direct or indirect, in the transaction.

(3) Where the consideration for the transaction is satisfied wholly or partly in securities for which listing is being sought, the listed issuer must immediately announce the transaction in accordance with paragraph 10.06.

10.06 Requirements for transactions with percentage ratio of 5% or more

(1) Where any one of the percentage ratios of a transaction is 5%, or more, the listed issuer must announce the transaction to the Exchange as soon as possible after terms of the transaction have been agreed. The listed issuer must include the information set out in Appendix 10A in the announcement.

(2) The listed issuer must also furnish the Exchange, in a separate letter, the percentage ratios applicable to such transaction.

(3) Subparagraphs (1) and (2) do not apply to a transaction where the value of the consideration of the transaction is less than RM500,000.

10.07 Requirements for transactions with percentage ratio of 25% or more

(1) Where any one of the percentage ratios of a transaction is 25% or more, in addition to the requirements of paragraph 10.06, the listed issuer must -

(a) issue a circular which includes the information set out in Appendix 10B to its shareholders; and

(b) seek shareholder approval of the transaction in a general meeting.

(2) The listed issuer must submit the draft circular to the Exchange together with a checklist showing compliance with Appendix 10B.

(3) Subparagraphs (1) and (2) do not apply to a transaction where the value of the consideration of the transaction is less than RM500,000

10.08 Related party transactions

(1) Where any one of the percentage ratios of a related party transaction is 0.25% or more, a listed issuer must announce the related party transaction to the Exchange as soon as possible after terms of the transaction have been agreed, unless -

(a) the value of the consideration of the transaction is less than RM500,000; or

(b) it is a Recurrent Related Party Transaction.

The listed issuer must include the information set out in Appendices 10A and 10C in the announcement.

2) Subject to subparagraphs (9) and (10) below, where any one of the percentage ratios of a related party transaction is 5% or more, in addition to subparagraph (1), a listed issuer must -

(a) send a circular which includes the information set out in Appendix 10B and Appendix 10D to the shareholders. The draft circular must be submitted to the Exchange together with a checklist showing compliance with Appendices 10B and 10D;

(b) obtain its shareholder approval of the transaction in general meeting; and

(c) appoint an independent adviser who is permitted to carry on the regulated activity of advising on corporate finance under the CMSA, before the terms of the transaction are agreed upon

(3) The independent adviser must, in relation to the transaction -

(a) comment as to -

(i) whether the transaction is fair and reasonable so far as the shareholders are concerned; and

(ii) whether the transaction is to the detriment of minority shareholders, and such opinion must set out the reasons for, the key assumptions made and the factors taken into consideration in forming that opinion;

(b) advise minority shareholders on whether they should vote in favour of the transaction; and

(c) take all reasonable steps to satisfy itself that it has a reasonable basis to make the comments and advice in subparagraphs (a) and (b) above.

Bursa enforcement should be very familiar with Bursa’ rules and regulations covering ACQUISITIONS AND DISPOSALS.

I would like to ask Bursa Enforcement, why no questions asked nor action taken against CapitalA for flouting Bursa’ rules and regulations on ACQUISITIONS AND DISPOSALS?

Thank you

Dear Datuk Muhamad Umar Swift,

Bursa Malaysia CEO

You have my full support and sympathy in trying very hard to make Bursa an efficient, vibrant, fair and orderly market. But unfortunately if Bursa solely or too depends on corporate voluntary disclosure and less on Corporate Surveillance, Governance and Enforcement then I afraid I can’t help but agree with the feeling and frustration expressed by i3investor commentator:

hulwan These kinds of shenanigans, and then they wonder why our Bursa is in the doldrums

There are too many corporate shenanigans happening in Bursa listed companies and Bursa is in the doldrums.

Bursa can never be an efficient, vibrant, fair and orderly market as Datuk Muhamad Umar Swift’ envision it to be, unless all the stakeholders of the capital market come together to do something positive.

Note: Presented with same set of financial figure/data most likely than not Company IR/Management and IBs Analyst will interpret the figure/data not by their professional unbiased opinion to tell the truth but by their biased view bending the truth to accommodate company or IBs vested interest narrative as fact

This is why there is this saying “Figure don’t lie, but liars figure” I can’t blame the Company IR/ Management or IBs analyst as they get their salary and bonus from their employers. Hence it is important to make IBs analyst and Company IR/Management accountable and answerable to investors’ enquiry

Thank you

Have a good day

Best Regards

Lee Soon Sheng

CAPITALA (5099)

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