The Smoking Gun

Lii Hen made its first disclosure to its public shareholdings spread to Bursa Malaysia on August 30, 2004 that it has a shortfall of 1.786%. In another word, 1,071,600 shares of the 15,000,000 shares which ought to be in the hands of public are now construed as in the hands of 'vested parties'. Paragraph 8.02 (1) Part B Continuing Listing Criteria of the Main Market Consolidated Listing Obligations of Bursa Malaysia which now supersedes Paragraph 8.15 of the Listing Requirements of Bursa Malaysia in the year 2004 when the announcement was made by Lii Hen states that a listed issuer such as Lii Hen must ensures that at least 25% of its total listed shares (which is 60,000,000 shares in the year 2004) are in the hands of public shareholders. 

However, the Continuing Listing Criteria made no inference as to what constituted a public shareholder. General perception will put it that anyone or any entity who is not a key management staff, director or the ultimate shareholding entity to be a public shareholder in this sense. The opposite would then be the vested parties.

In its Annual Report 2004, Lii Hen deemed that Assets Muar Sdn Bhd is its ultimate shareholding entity. Assets Muar Sdn Bhd has a 42.31% direct stake in Lii Hen Industries Berhad or 25,386,170 shares as reported. Other significant substantial shareholders listed in the same annual report are company directors Mohd Qari Bin Ahmad 5,200,000 shares (direct interest of 1,031,500 shares and indirect interest of 4,168,500 shares held through Tirai Gemerlapan Sdn Bhd), Chua Lee Seng 25,722,272 shares (direct interest of 336,102 shares and indirect interest of 25,386,170 shares held through Assets Muar Sdn Bhd) and Tok Heng Leong 25,536,213 shares (direct interest of 150,043 shares and indirect interest of 25,386,170 shares held through Assets Muar Sdn Bhd). Together, these vested parties held at least 31,072,315 shares or a 51.79% stake in Lii Hen.

A novice by the name of Siow Chung Peng emerged as a substantial shareholder with 5,327,500 shares or a 8.88% stake. He has not surfaced anywhere else in Lii Hen prior years annual reports and only became a shareholder in the year 2004. It is uncertain what is his relationship with Lii Hen and or its directors or Assets Muar Sdn Bhd.

If we sum up all of the above shareholdings, it would be 36,399,815 shares or 60.67%. The following mathematic will reveal something very interesting. But we must first make two important assumptions. Firstly, that Siow Chung Peng is deemed as a public shareholder as we have deduced above. Secondly, that Siow Chung Peng is NOT deemed as a public shareholder.

For the board of directors of Lii Hen to disclosed to Bursa Malaysia on August 30, 2004 that its public shareholdings spread is only 23.214% (or 13,928,400 shares) which fell short of the 25% (or 15,000,000 shares) requirement as stipulated in the Continuing Listing Criteria, it is undeniable that by so doing, members of the board had confirmed each and every identity of the shareholders. And thus  they are able to draw a line between a public shareholder and vested party from the shareholders roll.

Now taking our first assumption to the acid test, if Siow Chung Peng is deemed as a public shareholder, that would mean his entire shareholding of 5,327,500 shares is already included in the 13,928,400 shares. In another word, 46,071,600 shares (60,000,000 shares less 13,928,400 shares) are deemed held in the hand of the vested parties. But the annual report stated that the vested parties held a total of 31,072,315 shares. So where do this difference of 14,999,285 shares (46,071,600 shares less 31,072,315 shares) come from? The smoking gun is with the board of directors. Definitely they have a hand in these 14,999,285 shares or a mind boggling 24.99% stake that compelled them to disclosed as not within the public shareholdings. Did they disclose these interests to Bursa Malaysia? Nay.

Lets look at our second assumption, if Siow Chung Peng is deemed not a public shareholder which would mean he is with the vested parties. Therefore, the vested parties can still be alleged to have a hand in these undisclosed 9,671,785 shares (14,999,285 shares less 5,327,500 shares) or a 16.12% stake. Again these interests are not disclosed to Bursa Malaysia either.

The board of Lii Hen is putting themselves in a very precarious situation now. In either of the above scenarios, they are exposing their back for firing from Bursa Malaysia or the Securities Commission. They are either caught announcing yet another faux and misleading information like the one that is alleged by the remisier. Or it may be that they are willing to create this second lie (faux and misleading information) to cover another bigger lie.

What is the bigger lie then? As of now we do know that there are subsequent lies as yet another public shareholdings spread announcement was made to Bursa Malaysia on October 18, 2004 and another on November 22, 2004. Surely the board of Lii Hen is aware of the consequences of cheating or defrauding the public but why are they risking themselves to continue doing what they just did? No sane carpenter will do this repeatedly. All we can say for now is there are dark clouds precipitating over the skyline of Muar. And it is looming larger rapidly.

Get ready with your raincoat.