Benalec made an announcement on Bursa yesterday night (14 Mar 2014) with regards to the heads of agreement (HoA)t that the brothers signed in early January to settle their issues.

Salient points on the agreement:
1. The return of the land that was sold by Benalec to the private companies (that hidden links to the two brothers who quit Benalec - i.e. what caused all these problems in the first place) has been completed. Land titles returned to Benalec as at 19 Feb 2014.

Land in question is 93,126 m3. Benalec refunded the sale amount of RM28,067,190.77.

2. In the same announcement, Benalec stated that they are disposing the said land to another company (Teobros Development Sdn Bhd) for RM48,115,196.16.

To put it in perspective, when Benalec first sold the land for RM28.06m, the company made a profit of RM9.26m from that sale.

3. I was wondering when they rescinded the land sale how long it would take them to sell it again to another (independent) party. If not this would have reversed the company's P&L for the next quarter by RM9.26m until this was done. (potentially causing Benalec to show another quarterly loss ala Q32013.

I think it's fantastic that they've signed another land sale so quickly with an additional RM20m (pre-tax) profit on top of it.

4. The sale is expected to be completed by Q32014 barring unforeseen circumstances.

5. An EGM will be called for shareholders to ratify the HoA. Might be interesting to attend and ask management questions about this as well as query them on how the Tanjung Piai situation is going.

I think it's pointless for me to keep posting onto this board.

I like to give as many good fundamental answers (or as fundamental as can be) when someone asks a question. But pointless suppositions and the like just irritate me.

I'll no longer be answering any comments/statements/questions on this board. Good luck to all of you, hopefully we all make money in the end.

subramaniam: if you dislike how the company is being run or who is running it, why don't you write in to the board to voice your concerns.

Specifically to the chairman of the board (asking that either one or both EDs be removed) as well as the chairmen of both the nomination (to see out a replacement for one or both EDs) and remuneration committees (asking the salaries be cut).

You could have also either taken the effort to attend the AGM (or sent a proxy) to voice your displeasure/concerns.


And on to having a major shareholder running the firm, that's a mere supposition on your part. Yes it's nice and wonderful to have one running the firm but let me state a very clear fact.

There are _NO_ (none, zero, does not exist, nil) major shareholders in the company holding a minimum of 5% in the company.

Who then do you suggest in running the company?

Or are you demanding that the EDs _must_ buy and hold a major stake in the company to continue holding their positions. (This is so laughably illogical that I'm not even going to waste my time and putting for and against arguments)


For someone to use the valuation of a person's shareholding to be equitable to their executive position on the company (and salary) is illogical.

Perhaps you have it in your mind that the EDs in the company are shaking legs, the type who go into the office at 10am (or 11am), break for a 3 hour lunch at 12pm, and be home by 3pm just in time for a spot of afternoon tea with scones.

The reality I believe is very far different than your assumptions.


Perhaps you should write in to nominate the largest shareholder (minimum of 7.75m shares) to take over as MD. Surely that will make you more comfortable no?

Just FYI, he used to be an executive of Fountain View Developments Bhd.

No doubt he'd make an excellent candidate to take over the company (by your logic of having a large stake).

sunrise: No one. There's no hidden/vested interests behind the board. Independent directors are just that, independent (usually).

Of the two EDs, Kua is a legacy ED from the days when Green Ocean used to be known as Online One.

The other ED, Mckin came in to basically turn around the company into Green Ocean. Right now he's a professional manager who whilst not having a direct stake, seems to have a lot of friendly parties (i.e. Pronob) who believe in his vision.

Note that the friendly parties are not major shareholders, but there are a fair number of them.

So no, there doesn't seem to be any "hidden hands" guiding the board.

subramaniam: I completely disagree with your statements. You're implying that the only person allowed to be an ED of the company is one who not only owns shares, but has to be a major shareholder at that. No professional managers allowed. If you sell down your stake, you must resign.

By your logic whoever has the biggest stake at the moment should become the boss of the company. Never mind what the board nomination committee says.

And the biggest irony of it all is that I'm looking at the shareholders register for the 26th. The person with the biggest stake (family wise) has at least 7.75m shares. If he became the MD, half of you would probably shit bricks.

Why is that? Because whilst his name is not very well known, he was an executive of a company that went kaput on bursa in one hell of a blaze of glory.

Not going to keep repeating my answers to the same questions. Feel free to scroll up and look at my previous comments.

Of course if anyone cares to interject with an answer, carry on.

Heshbon has sold down about a month back as per bursa announcements.

Friend has showed me the shareholder register as of September 26.

There were 1630 shareholders as at July 31.

There were 1735 as August 29.

There were 2075 as at September 26.

For those of you wondering who bought up Ng's shareholding, there you go. It's not by one person, it's by quite a number of them.

As at that date, Ng no longer owns one single share in the company. Heshbon also does not own a single share in the company. Lee Yen Sin's stake remained unchanged.


I was shown the highlights of who the new (bigger) shareholders of the company are, but even the biggest owns less than 5 million shares (individually) or less than 8 million (if family).

The amounts aren't big enough on their own to make a dent on the share price.

My friend requests that I don't state out the names of the bigger shareholders here simply because he feels it's very open to misinterpretation. There seem to be a lot of people who get excited when a big name owns a million shares in the company (it's a sign of takeover mah!) when it could be nothing more than an investment.

He states though that there are no changes big enough in the list (and I agree after looking at it) to worry/encourage anyone. The whole things remains at status quo as far as we are concerned.

subramaniam: Didn't know that. As the end of August, Lee Yen Sin was one of the 10 largest shareholders with a stake of 3.1m shares. Hardly think that a stake of that size would affect the price that much.

subramaniam: Haven't heard anything. Which Korean are you talking about?

gtlam: Still nothing as my friend's still waiting. He pointed out that under the companies act, the registrar has 21 days to send the members listing when requested. Am hoping that it won't take until October 21 to get a copy.

And of course the RM8.4m fee is only incurred upon all approvals of the notes program and its issuance. You don't get charged before it happens.

gtlam: One of the possible clauses for breaching GN3 is where shareholder funds are below 25% of paid up capital. There are other clauses as well, including the one I listed above which is probably the highest "at risk" clause of being breached.

My reply to the second part of your statement, not exactly. There's an equity portion to the notes (it's not all listed as RM100m liabilities in the balance sheet) as per notes announcement from bursa - 26 August 2013, page 19. Proforma 1, RM19.123m.

If you look at that page, under Section 5.3, look under Notes: 1)

"Being the estimated equity component of the Notes after deducting the fair value of the liability component of RM78.8m and the estimated expenses of RM8.4m in relation to the Proposals which have been apportioned to the equity component of the Notes amounting to RM1.8m."

And accumulated losses increases to RM16.408m, where the same section Notes 2) states:

"After deducting the estimated expenses of RM8.4m in relation to the Proposals which have apportioned to the liability component of the Notes amounting to RM6.6m."


If you look at the same page, under Proforma I, upon issuance of the Notes, total equity increases to RM26.458m versus a paid up capital of RM20.26m.

So no, nowhere near the 25% GN3 mark.

Hong2: I relooked at the company's financials again to see how close it is to breaching GN3 (the Ace Market equivalent of PN17 - which is for main board companies).

Looking at the criteria, the only clause the company is at risk of breaching is 2.1.g. (the auditors have expressed a modified opinion with emphasis on the listed corporation's going concern in the listed corporation's latest audited financial statements and the shareholders' equity of the listed corporation is 50% or less of the issued and paid-up capital and the listed corporation;)

As the end of 2013. Audited shareholders equity is RM13.98m against a paid up of RM20.26m. That's about 69%,. To hit the 50% mark, the company would have to post a loss of at least RM3.85m for 2014.

At the same time, auditor's have to say the company is no longer a going concern (you're not doing any business/no revenue).

How likely is this to happen and when?

First, the annual audited accounts for 2014 will only be issued at the end of July, 2014. So the earliest you can see the auditor making a modified opinion is at that time.

Will the company post at least RM3.85m in losses for the year? That's difficult to say. 1Q2014, losses were high at RM1.3m. That means the company has wiggle room of RM2.55m for the next 3 quarters. Not much right?

So yes, if everything else fails, no notes program, it's likely that the company will head for GN3. But that's after July 2014.

And let's face it, if the auditor shows concern since you've got no business, the company is doomed anyway.

If the notes program works out though, upon the issuance of the notes (assuming the company draws down all RM100 million), company's total equity goes to RM26.458m (see Notes announcement form bursa - 26 August 2013, page 19. Proforma 1, estimated equity component of the notes - RM19.123m).

RM26.458m (total equity after notes)/ RM20.26m (paid up capital) is 130% making GN3 a very very far thing at that point in time.


So how likely will the company hit GN3? Personally, I don't think it's that likely. The company's got some wiggle room and time to get the notes program in place. Once in, we're set.

Any one who screams at you, "company going to die next month, lousy stock, sure pn17 in November etc etc" is the type of person who's spewing crap out of his ass.

As always, fair warning, I'm not a professional investor so it's a good idea to ask your broker whether I'm right or wrong in my reading of GN3.

If your broker is the old school type (heh) who doesn't read bursa guidelines too, try calling your brokerage and ask to speak to someone in research or even compliance (they usually understand the regulations better).

gtlam: Due diligence by Kenanga takes at least one month (this is from the date of announcement on the 26th of August). Once that is done, the company will make announcement on bursa. At that point (I'm following the process as Censof did it), they submit to SC & Bursa for approval and at the same time to Bank Negara (since the note holders are a foreign entity). Approval should take another month or so.

Earliest everything should be done is some time in November. But my friend says it's more likely that it'll only be completed sometime in mid-December. November is the optimistic view that everything is approved in the shortest period of time with no back and forth between all the different parties.

gtlam: Nothing yet. My friend says he's still waiting to get the latest listing of shareholders for the company. He says he'll let me know the moment he gets it. Will update here when he does.

gtlam: It does seem that way. Too bad he's actually interpreting disclosure laws to 7 trading days rather than 7 days. :P

Amend the above to read "Richard Lee's (the newest independent director) wife"

From bursa announcements. Richard Lee's (the newest independent director) bought 500,000 shares @ 17.5 sen on the 19th of September. Total stake up to 4.724 million.

Interpret this on your own. I make no judgement calls.

gtlam: No clue. One thing the MD did say is that the number of shareholders has grown by 200 since the last time they received the shareholders register. (This implies that a lot of new buyers probably picked up the bulk of Ng's shares) My friend says that this (the register) is updated to the company on a monthly basis and he'll try to get a copy of the register after the end of the month and let me know what the big changes are.


subramaniam: This was a question that my friend asked before the AGM and here's his answer (email quote as follows):

"Asked why palm kernel crushing margins are dropping resulting in them doing very little of the business at the moment (which is why revenue dropped to less than RM7m last quarter). As he explains it, in the past GOcean actually purchases the palm kernels from plantations. They then crush it, extract the oil and sell it (and the husks) for a profit. However palm oil prices are very choppy at the moment, and the company just does not have the financial capacity to maintain holding power.

This makes it very risky for them to continue doing in business in that manner. So in the interim they've become a contract manufacturer to plantation firms to crush and extract the oil using their kernels whilst charging them a fee.

Unfortunately such jobs are few and far in between. Major plantation firms have their own kernel crushing mills and don't use GOcean's services. The contract margins for such jobs are extremely low (3% is not unheard of)"


Prior to this I thought that GOcean was acting only as a contractor in doing palm kernel crushing/refining. The answer does make sense though. The larger plantation firms have their own mills, so you're relying on smaller plantation holders to use your services. At the end of the day, the industry is very low-technology and it's just impossible to act as a contractor and survive. So in the past GOcean acted as a palm trader directly. Now that's a very difficult thing to do when you look at the company's financials.


allblacks87: I still believe that the share price was pushed up to the 20 sen level because someone (probably on the existing board/management's side) was buying up all the shares in case a coup attempt was made during the AGM. The fact that so many of the big shareholders showed up at the AGM (all of whom are believed to be friendly to the MD) implies that.

Since the AGM went smoothly there's no reason to keep soaking up the shares and now it's up to market forces.

Personally I think the price will probably drift fairly close to the 15-16 sen level and stay there. It's been shown that someone (again, friendly parties I guess) had supported the price strongly when it hit the 13.5-14 sen level.

Will it go back to the 20 sen level in the near term? Personally doubt it. But I don't see the friendly parties allowing the share to drift below the 13.5-14 sen level since everyone's still banking on the notes program succeeding.

My personal advice if you have the holding power, and you like the logic of the notes argument even with the company's bad financials. Sit and ride it out to the end of the year.

No holding power, you're better off cutting your losses if not in whole at least partially. Reinvest in the company only when the notes program is a go.

Also, I'm fully expecting the quarterly results for Jul-Sep 2013 to be even worse than April-Jun 2013. You can probably expect the price to go down when it's released (at the end of November).

FYI, this is all my personal sentiments. I'm sure as heck not a professional trader. If you have a chance to seek professional/more experienced advice do so.

And just to clarify, I have a relatively sizeable stake in the company (500K+) that is without a doubt, out of the money right now. :(

subramaniam,

All the directors were at the AGM. Shareholder questions were answered at the end of the AGM. By the time that subject came up, Kua had left the room to go outside.

Err, don't understand the off market deal. Whether you sell as per usual via your broker, or whether you arrange it with a specific buyer, you're still disposing your shares. Your point is moot.

No idea about Voon's sales. Don't know if anyone asked about it.

Ooi is an independent director with a very small shareholding. I don't really consider his sale to be anything major.

Well crap somehow my comment got removed. Bleh retyping it.

I didn't attend the AGM but my friend did. This is what he asked / overheard management answering to shareholder questions.

1. Sime Darby agreement - according to the MD, when they first signed the agreement with SD, they dealt with one division of SD that worked well with them and was gung ho for Novelin. Midway through, someone senior reassigned another division to take over instead. That division didn't work well with GOcean.

This is the reason why no purchase orders have been forthcoming from SD. However since then, SD has reassigned the original division to work with GOcean. So the MD was optimistic that orders should be forthcoming.


2. Director selling (referring to Kua specifically). MD said that Kua's selling down wasn't a vote of no confidence for the company or an attempt at arbitrage but due to the fact that he had certain financial circumstances that caused him to do so. No elaboration from Kua since he wasn't there by that time the question was answered.


3. Coup attempt obviously didn't happen (which is unfortunate for us shareholders, since if there were the share price would probably have spiked thereafter). What my friend did find amusing was the number of major shareholders (in terms of the top 30 list) who showed up or sent their proxies. Looks like this was for a "just in case" situation, heh.


4. Notes program. The MD revealed that another company (Censof) had earlier applied for a similar notes program (RM100 million) from the same firm that's doing GOcean's (Advance Capital Partners of Singapore) and that they have received most approvals for it. (From my friend's checking, he says Bank Negara has approved of it although they seem to still be waiting Bursa/SC's approval).

The difference between the notes program is the type b share conversion discount is 12% for Censof (versus 15% for Gocean) and the note funds can only be used for acquisition purposes by Censof (versus plant expansion and/or working capital for Gocean).

He was optimistic that since Censof looks likely to have it in the bag, the prospects for GOcean there are pretty good too. He stressed that approval for the notes program is not dependant on the profitability of the company, which makes sense.

Timeline for the notes to be listed, he's hoping for mid to end December.


Sorry I can't elaborate further on this. My friend is a bit annoyed that he didn't get a chance to ask that many questions from management before he left.

For the above: Make that "with respect to note 5", typo. Meh.

Subramaniam: You have valid points there. To clarify a few things though:

(Note all this again was explained to me by a friend who knows more than I do. I'm just going to repeat what he said, but using my words)

1. Heshbon selling down - They're a listed company on the Korean stock exchange. The reason they sold down their stake is well, because they're performing as badly as GOcean in their industry (they manufacture elevators). If you have the inclination, search for them online and take a look at their financials.

2. Valid points on Voon, Kua and Ooi selling down.

3. Ng selling down, see my previous posting on that possible scenario. Also, of interest, from what I was told he had requested for a board seat. The fact that the nomination committee appointed Richard Lee as an independent director (and definitely not Ng's appointee) no doubt pissed him off as no additional appointment his way was forthcoming.

An alternative scenario for Ng's selldown is that he wanted to punish/hurt the company as much as he could. Not very logical though since at the end of the day, all he did was to burn himself badly. Ng's average purchase price is supposed to be around the 30 sen range. So he took 35-45% loss.

4. Novelin is a well thought off product. Just the fact that it's not being sold is the problem. Take this factor into account, the retail price of Novelin is expected to be in the USD7-8 range per litre. The profit margins if there's a take up is huge. Note though, this profit will be experienced by shareholders only from the expansion of the plant (through the notes program). Their current agreement with Sime Darby merely makes them a contract manufacturer earning a small profit for each litre produced.

5. I don't think the RCN is a smoke screen. _If_ it happens it'd be amazing for the company as a lifeline. The difficulty here is getting all regulatory approvals to be passed. Think about it, what downside does the company have to it? Getting an up to RM100 million loan for a company with a paid up of RM20 million (and NTA of RM12-13 million) plus the fact that you most likely don't have to repay the loan (assuming all notes are converted) is a huge plus plus point.


However, with respect to note 4, if you're not invested in the company at the moment, you're better off waiting UNTIL the notes are approved by Bursa/SC. Then it'd be worth buying in (if you're the type who likes to trade on speculative stocks).

Until then, caveat emptor. Buying into GOcean is extremely high risk.

4. Notes program being approved. Earliest this can happen by my calculations is sometime in late October. The big risk here is that the share price is very close to 10 sen (par value). One of the clauses for default for the notes program is if the share price goes below par value for 3 consecutive trading days. Now if the share price should touch 10 sen or below, I believe Bursa/SC will automatically reject the notes program. I.e. why issue the notes program when it can almost immediately go into default?"


Here are some comments from him on the notes program:

"The notes program is interesting from the perspective of the shares being goreng-ed/played up. The interest rate for the notes program is 2% which is obviously not something that the notes holder is after. (heh, 2% a year for 3 years. He makes RM6 million from a RM100 million loan? XD)

There are two methods for converting the notes to shares. I'm going to ignore conversion method A (look it up if you want) as it's unlikely the notes holder will use that.

Conversion method B is that they hand in notes in exchange for shares at a discount of 15% to the lowest average market price for 3 consecutive trading days in the last 45 days.

I.e. if the lowest average price for the last 45 days that occurred for 3 straight days is 20 sen. That means the shares are issued at 17 sen.

Let's take a hypothetical scenario. Assuming Gocean's share price stands at 20 sen, and is static at 20 sen for three whole years (the entire duration of the notes program).

The GROSS profit the notes holder makes is 3 sen a share. 15% profit margin. So out of RM100 million, he makes RM15 million profit. For 3 years!

That works out to less than 5% per year, compounded. And this is gross, before management fees that he charges his clients etc.

No private equity investor into the guy's fund would be satisfied. XD

In other words he needs the share price to have a high beta, the bigger the spread the better for him to make money.

Also, the notes program has an agreement that he cannot own more than 15% of the paid up capital of the company at one time.

Meaning everytime he converts he has to dispose off the shares, and he has to do it fairly fast too (since his total timeline is three years to convert).

I.e. at 20 sen average price, conversion price of 17 sen, that comes to 588 million shares. Gocean's paid up capital is about 203 million shares. Meaning he can't hold more than 30 million shares at one time. He has to dispose it and fairly fast to convert more. If he does an Ng (selldown like mad), he'll be shooting himself in his own foot and end up selling at a loss.

So yes, if the notes program is a go, expect some goreng-ing to occur.

But the notes program if approved will only be active sometime at the end of the year, earliest.

For now, I'd lump GOcean into an extremely high risk/low fundamentals category. You guys wanna invest, go ahead but don't go in heavy or you can really get caught. If the notes program gets rejected, the company will likely be kaput."


Anyway those are the words from someone who knows the situation better than me.

gtlam: I won't make any buy/sell recommendations.

What I can tell you are the risks. This is as what was told to me by someone who knows a lot more about the company. I produce here an email from him to me that I received from a week back. (September 17)

"GOcean's unaudited net tangible asset (NTA) is 6.25 sen as of 30 June of this year. The company's main business of palm kernel crushing/refining has come to an almost complete halt due to very low margins and the company's lack of financial muscle to buy, crush/refine and hold/sell. (holding power is essential in case the price goes down)

The other hopeful business is their Novelin palm oil. Unfortunately, ever since signing an agreement to supply to a subsidiary of Sime Darby (for sale of Novelin in Korea) late last year, there have been no orders from Sime Darby. Sime Darby is not the quickest and most agile of firms, but this lack of momentum on their part has caused GOcean to fall into dire straits.

So in other words, the company at this time is not really generating any revenue whilst having to meet its expenses (payroll, utilities etc).

Here are the things that might cause an improvement in company's fortunes/share price.

1. Takeover attempt. This is totally unconfirmed and has to be taken into context with what has happened in the past month (as per previous mails). Why did Ng sell down his stake so viciously over one month? He could have gotten a better price (and lowered his losses) by doing an off-market transaction or by paring down his holdings more slowly. The rumours/suspicion here is that he's farming out his stake to proxies who can act on his behalf when/if an EGM is called to appoint a new board of directors. Forcing the price down also causes a lot of margin calls to come up, giving better opportunities to flush out allies of the existing board.

2. An order finally comes from Sime Darby. This would be the light at the end of the tunnel since it'd finally mean some (not much) revenue for the company.

3. Breaking off their agreement with Sime Darby and partnering with someone else. This is what I personally feel they should do. However I think the sentiment that GOcean's management has is that "the order from Sime Darby could come any day now! What if we cancel just before the order comes."

Ameera: AGM (not EGM) is on the 26th of September
ZBZ: The notes proposal is in the process of due diligence with the investment banker (Kenanga). From what I was told, the process is supposed to be complete by the end of this month or early next month. Once completed, it'll be submitted to Bursa/SC for approval.

Once/If all regulatory approvals, then and only then will an EGM be called for shareholders to vote on the notes program.

For those monitoring the day trading of the counter, someone seems to be accumulating a decent amount of shares. Today was T+3 from last Thursday (when the volume was 39 million) however today's volume was 8.6 million meaning there weren't that many contra players for that level of volume.

Also there were a number of large bulk purchasers off the open market over the past week (i.e. today after 3pm, one single buyer bought out about 1.4 million shares in queue at 20 cents, and minutes later another buyer (probably the same one) bought out almost 1 million shares in queue at 20.5 cents.) This trend has been repeated over and over for the past several days, although it occurs irregularly at best.

To see whether it's really an accumulation, watch out for trading tomorrow. T+3 from last Friday (volume at 20 million). If there's no sell off it should be firm that someone's accumulating. Sadly, any notification of interest in substantial shareholding (if any) will probably only be shown only on Thursday evening (26 September) which is 7 days after the big volume spike on last Thursday (19 September - 39 million). Meaning we'll only find out after the AGM is over.



There is a suspicion (this is wholly _unconfirmed_, take this with a pinch of salt) that there's going to be a proxy fight of sorts at the AGM come this Thursday (take a look at which director is up for reelection to understand :p). If the fight does occur, obviously the share price will likely spike up as both sides try to gain control of as many available shares as they can afford (for an EGM to confirm/replace the existing board of directors).

Note again, that this part is wholly unconfirmed. However if you're a shareholder (as of September 20) and are able, do attend the AGM as it might prove interesting.