REFORM NLFCS: May 2008

Thursday, May 29, 2008

Premium Nutrients 2007 annual accounts - Dividends

Well the profits for 2007 was 7.2m ringgit but Premium is going to pay out 4.3m ringgit as dividends. The focus really should be to reduce debt. The net profit operating margins are pretty dire. I am not including 2003 because of the one-off 32m cost of listing.

In 2004, at the group level sales was 403m and net profit was 6m. That is an net operating margin of 1.5%.

In 2007, sales were 716m, but the net profit was just 7m. That is a net operating margin of 1%!

The focus should be to pay down debt and rebuild its working capital (current liabilities - borrowing is 123m) and ability to invest. Right now it continues to borrow heavily to invest and for working capital purposes (13m was paid out in interest in 2007), so just going thought the annual reports since 2003, you realise the company has been operating rather precariously. Paying out dividends on 1% margins is not the smart long-term decision to build up the company and improve its share price and future ability to pay better dividends. It is a short term short-sighted decision that is all too familiar to Premium.

As at the end of December, the co had 4m in the Bank, yet is paying out 4.3m in dividends.

Conflict of interest

NLFCS owns 32.13% of Premium and the Chairman of NLFCS owns 12.78%. The issue here is the obvious conflict of interest. The Chairman of NLFCS is the chairman of Premium. But is he the chairman of Premium as the 2nd largest shareholder or as a representative of NLFCS? These 2 positions are completely separate. He should sit on the Board to represent his personal interest, but NLFCS should nominate someone completely independent as Chairman of Premium to protect their own interest. Say in this case when the board of Premium are voting on its dividends. To NLFCS as an entity, getting dividends would not be a priority. Rehabilitating the company and improving its share price and getting it to a point where the potential for greater amounts of dividends down the line would be far more important, since they are long term investors. For an individual investor, well he has seen the share price tank and all he cares about is getting his dividends/money, he might need the money, etc. So 2 different interest. So on what basis does the Chairman of NLFCS base his voting decision on as the Chairman of Premium Nutrients? NLFCS may have other directors in Premium but the reality and practice is the chairman is effectively block voting on the combined 12.78% he owns and NLFCS's 32.13%.

Firstly he really should not have the same interest as NLFCS so that these kind of conflicts do not have the opportunity to occur and secondly it raises the question whether he gained his interest at the expense of NLFCS.

So short-term or long-term? The Chairman's personal interest or NLFCS's long term interest? On what basis are paying out dividends on a 1% margin made?

Wednesday, May 28, 2008

This blog has been viewed 1,000 times

Well, this blog has been visited approximately 1,000 times. 750 have been direct visits and about 250 have been via proxy (through info I have posted in various forums). A lot could be repeat visits, so unique visitors are probably less.

Thursday, May 22, 2008

More Goodies from the Premium Nutrients 2003 Annual accounts on Sevem (M) Management

Since the end of 1992, he served as an Executive Director of Seven (M) Management Service Sdn Bhd (.SMSB.), a management company which managed various manufacturing units such as PVO, MSSB (a division of PVO then), Minsawi Industries (KK) Sdn Bhd, Status Point Sdn Bhd and Natlead (M) Sdn Bhd. The company is also engaged in cross country investment promotion in Egypt and Switzerland. He joined PVO as Managing Director on 1 January 1999.

The above is an extract from the Premium Nutrients 2003 annual report. So Seven M has basically been managing all the non plantation based assets of NLFCS. This is a busy guy.. Was Seven M doing anything for these businesses in the first place?
What was the value added?

This is classic rent seeking. Putting a structure on top of assets collective owned by NLFCS members and getting a fee to "manage" it.

How could this ever be allowed?

Those who are responsible must take responsibility.

Don't forget we are talking about tens of millions of ringgit since 1992.

Premium Nutrients Annual Accounts 2003

I am going through the Premium Nutrients accounts. I intend to do this systematically, year by year. So first I will highlight some interesting facts from Premium Nutrients first ever annual report as a public listed company in 2003. All this is available at the KLSE website

62m shares were issued to Bridgecon creditors during the reverse takeover. Were this the shares that NLFCS churned through as mentioned in my previous post? See extract below :-

The restructuring scheme of the Company involved the following:

2) As part settlement of the amount owing by BHB to its creditors, the Company issued 62,000,000 new ordinary shares of RM0.50 each to BHB to be held by the creditors’ agent, for and on behalf of the creditors.

Premium Vegetable Oils alone (excluding Malim Sawit, Arani Agro Oil Industries etc) was worth RM136.5m. Now Premium Nutrients (as of yesterday including Malim Sawit and Arani Agro) is worth RM64m (337m shares x 0.19sen). See below for the extract

3) Acquisition of the entire issued and paid-up capital of Premium Vegetable Oils Sdn. Bhd. (.PVO.) (formerly known as Premium Vegetable Oils Berhad) for a purchase consideration of RM136,500,000 satisfied by the issuance of 273,000,000 ordinary shares of RM0.50 each.

I mentioned that the management fee to Seven M was paid by borrowing money from NLFCS? Well that is probably the 8m loan from NLFCS below but I could be wrong.

Balances

Loan from Tan Sri Dato. Dr K R Somasundram 1,594,152
Loan from NLFCS 7,992,776
Loan from Sunworth Corporation Sdn. Bhd. 3,082,849
Loan from Minsawi Industries (Kuala Kangsar)Sdn. Bhd. 1,696,410

Sunworth Corporations Sdn Bhd, Seven M Management Services Sdn Bhd and the Chairman Of NLFCS

The below is an extract from a document

Information on Sunworth Corporation Sdn Bhd (“SCSB”)
SCSB was incorporated in Malaysia under the Act on 24 November 1993. The principal
activity of SCSB is that of an investment holding company.
The Board of Directors of SCSB comprises Mr Agarwal Pares Nath, En. Abdul Rahim
bin Mohd Zain and Ms Serjit Kaur. The substantial shareholders of SCSB as at 31 July
2002 are Y.Bhg. Tan Sri Dato’ Dr K. R. Somasundram and Seven M Management
Services Sdn Bhd.

The document can be viewed here

http://bankrupt.com/misc/TCRAP_Bridge0821.pdf

And the extract above is on page 7, right at the top.

The extract below is from the Financial Statements of Premium Nutrients for the year ended 31 December 2003. This document is available at the KLSE website.

Company in which a Director, Mr. Agarwal
Pares Nath has substantial financial interest

Sunworth Corporation Sdn. Bhd.

-Loan received 3,000,000 3,000,000 .
-Interest on loan received 82,849.

So 2 things can be determined here. The chairman of NLFCS, the only other shareholder in Sunworth knows or has linkages to Seven M Management (after all would you be a shareholder in a company without knowing the only other shareholder?).
And Mr. Agarwal is linked to Seven M as the above extract says he has a substantial interest in Sunworth whose only other shareholder other than the chairman is Seven M Management.

Questions for the Board.

1. Did they know of the chairman's linkages to Seven M, when they awarded it contracts to manage NLFCS assets?

2. On what basis where these contracts awarded?

3. Where other companies considered?

4. Why was there a need for a management contract in the first place, that was so destructive to the interest of NLFCS members ( I will talk about this again soon)?

5. Could the board of NLFCS explain of what benefit or value to NLFCS members where these management contracts?

6. What was the rationale in awarding a management contract that would be paid on gross profit, regardless of the net profit figure?

7. How where awarding of this management contracts related to their duty to look after the interest of NLFCS members?

And as I have showed and explained before in previous postings and will show again, we are talking about millions of ringgit of value being stripped from NLFCS and transferred elsewhere.

Somebody has to take responsibility.

Wednesday, May 21, 2008

An analysis of NLFCS share purchases in Premium Nutrients

Sorry for the long space between post but I have been busy and this post took a long time to do. I have to do a lot of calculations and double check the figures and I had to rework this a few times, to get it right and it took some time to gather the information needed. You can jump straight to the conclusion section to get a summary.

I am going to break this year by year, so yearly comparison's can be made. Unfortunately from 2006 many of the notifications have no detail of what price the shares were acquired at. In those instances I will use the closing price of the day of purchase. These notifications are all publicly available at the KLSE website.

2003

6,182,300 shares were bought for a total consideration of RM2,837,810 ringgit. Shares in Premium were bought at 34 separate instances. The average price of these purchases was 0.46 sen.

6,500,000 shares were sold for a consideration of 3,884,000 ringgit at an average price of 0.598. Shares were sold in 2 separate instances.

As is the proper way to calculate this, the shares sold will be against the shares already held (In this case the 62,863,195 shares they hold where I will use the IPO price of 0.50sen). This is the FIFO (First In First Out) method and is how share trading profit is calculated.

So the 6.5m shares were sold at a profit of 637,000 ringgit.

The share price closed at 0.47 sen on the 31/12/03 so the profit on the 6.2m shares was 61,823 ringgit on a mark to market basis which is how it is usually done.

So that is a total profit of 698,823 in 2003.

2004

In 2004, 78,785,693 shares were bought in 61 separate instances (someone's been very busy!) for a total consideration of 36,550,323 ringgit. The largest chunk , 13,994,207 was bought from a director of Premium Nutrients at 0.45sen. The total average price of these purchases were 0.46en.

The above includes 13,355,700 shares whose notifications did not include any price details. In these case I used the closing price of the shares on the day of purchase as stated on the notifications.

34,825,000 shares were disposed of in 10 separate instances for a total consideration of 16,397,639 ringgit. The average price of the disposal was 0.46sen. Using the method as set out above, this disposal would be set against the shares held during the IPO at 0.50sen. So in this case there was a loss of (-1,393,000) on this disposal.

The 6.2m purchased in 2003 had a year end closing price of 0.46sen. The purhases in 2004 had an average price of 0.46sen . The closing price on the 31/12/04 was 0.38sen. So the total loss on these purchases from 2003 and 2004 using mark to market was (-6,797,439.20 ringgit).

That is a total loss of (-8,190,439.20) for the year

All the share price dealing information can be found on the KLSE website under Premium Nutrients.

One of the Directors, a Mr.X (I am using initials (not actual initials) as I will mention other directors and otherwise it gets confusing) also sold almost his holdings in Premium Nutrients (He sold 13,994,507 shares at 0.45sen to NLFCS leaving him with 49,761 shares on the 28/12/04). He is a director of both Premium Nutrients and NLFCS.

The question I have over this sale is, what is his rationale for selling his shares? If he needed the money why sell the whole lot? If he though Premium Nutrients was not a good investment and wanted to sell, then why continue to be a director till today? It's not normal for a director to sell his entire holding (albeit with a remaining small residual amount) and continue to be a director. Very strange.

Out of the disposal, 10,000,000 shares were sold to Antara Consolidated Sdn Bhd on the 28/12/04 for 0.45 per share.

2005

2005 is much easier, 9,594,800 shares were purchased in 2 separate instances for 4,283,163 ringgit and at an average price of 0.45sen.

12,000,000 shares were disposed at one go for 0.40sen, so for 4.8m

The loss on disposal was (-1,200,000) as we are still taking this from the amount of shares held Pre-Ipo.

The 84,967,996 shares they purchased in 2003 and 2004 had a closing price of 0.38sen. The average price of their purchases of 9,594,800 shares in 2005 was 0.45sen.

The closing price at the end of the year was (Friday the 30/12/05) was 0.185sen.

So the total loss for 2005 was (-19,111,381.22)

9m of the shares acquired this year was from a director (Mr. Y) of Premium Nutrients. The purchase price was 0.45sen. The shares were purchased on the 28/01/05.

12m of the shares sold/disposed were to Antara Consolidated Sdn Bhd on the 27/01/05 for 0.40sen per share.

2006

In 2006, they bought 8,461,100 shares, none of these 14 purchases have prices on their notifications, so I have the closing prices on the day of the purchases. The total consideration in this case was 1,868,458 and the average price was 0.22sen

They disposed of 24,000,000 shares in one instance at 0.3sen for 7.2m.

Out of the original 62,863,195 shares they had at the IPO, they have now only got 9,537,695. So this 24,000,000 that was sold will have to be marked against this 9,537,695 and then against the shares they have purchased since, which had a mark to market of 0.185 at the end of 2005, so some of the disposal has been at a gain.

This reduces the total loss for this sale for this year to (-244,373.93).

The 24m shares they sold, were sold to a Mr. Z (not a director) at 0.30sen per share on the 23/08/06. On the 07/12/06 they bought 6.5m shares from Mr. Z, no price was on the notice but in my calculations above I have used a price of 0.225 as that was the closing price on that day. So from MR. Z they made a profit of 438,750. That is assuming the price I have used is close to the correct one.

The end of year closing price was 0.235sen and the average price of purchase was 0.22sen, so there is a net gain there. The shares they bought last year have also risen in value from 0.185 to 0.235sen.

The complete total gain for the year was 4,326,317.12.

2007

Out of 19,430,924 shares purchased this year only 1,000,000 have a transaction price. The rest I have done as above and used that day's closing price. The purchases were therefore made for a consideration of 4,705,316 and an average price of 0.24sen.

The closing price as at 31/12/07 was 0.195sen so these purchase had a net loss for the year of (-874,391.58).

The 88m shares they had at the close of 2006 have also fallen in value, from 0.235 to 0.195sen which gives a loss of (-3,542,463.64).

So the total loss for the year was (-4,416,855.23)

Out of the 19,430,924 shares they purchased this year, 17.5m was a purchase from Mr.Z on the 27/07/07. No price details were included but I have assumed a price of 0.245. With this Mr. Z's initial 24m he bought from NLFCS in 2006 has gone to zero.

So, the total loss to date was -26,693,535.53. All this as I said are from publicly available information. I have tried to do this by excluding their intial Pre-Ipo holdings to just show the affect of their trading in Premium shares. Including that would increase the losses.

Conclusion(s)

The total number of shares bought) over this period was 122,736,817 and 77,325,500 shares were sold over this period. Shares were bought at 117 separate instances and sold at 14 separate instances.

I have used the IPO price of 0.50sen in my calculations, but say the initial book price was 0.20sen (highly likely since they have been long term share holders in Premium Nutrients and their entry price should have been lower), then the initial disposals would have been at a profit, but what has essentially happened is that the whole initial 62m shares they had, has been replaced by shares bought at higher prices, approximately at 0.47 sen, so what is on the NLFCS books now has been purchased at a higher price and this will have to be marked against the current price of 0.18. So whichever way you look at it, at least-20m has been lost excluding the initial shares it held. Including that would increase the loss to -31m.

If they did not buy any shares, then it would only be a reduction of value on their books, a paper loss, but what has happened here has been a net cash outflow of approximately 18m ringgit. Over the last 4 years, these trades have caused a net cash outflow of 18m ringgit from NLFCS bank accounts . This money could have been used for other purposes. This whole things is unacceptable.

What is the rationale behind this exercise? NLFCS has essentially sold all the 62m shares it had initially and bought a further 45m plus it initial stake back.. Why do that? They have effectively traded through 32% of Premium's stock. Why would any long term shareholder do that? It does not make sense. NLFCS is a cooperative, not an investment bank.

The other thing is that the chairman and occassionally his associated company (Sunworth Corporation where the chairman and Seven M Management are the shareholders) have also traded quite extensively (much more than NLFCS, so more than 117 times if combined) . Having the chairman trade in Premium shares in his own capacity and then having NLFCS also exhibiting similar behaviour would imply a co-ordination of movement. More attention should have been paid to Premium Nutrients rather than trading its shares! Look after the underlying investment!

Just looking at this whole thing, explanations are needed. This is not normal for a company and definitely not normal for a co-operative.

Monday, May 19, 2008

Answering Mr. Thava briefly

I am answering Mr. Thava very briefly by the same points he mentioned. His comments should be read in their entirety below. He has taken this very personally and readers will need to read his comments to get the gist of his feelings I won't be answering as many comments anymore as my time is getting more constrained but I will try to.

1) I actually mentioned my idealism was drained away not that I was an idealist. You answered what you wanted to rather than what I was saying.

2) This is disingenous. There are many things that can be compared. Yield per acreage etc. NLFCS is meant to give its profit to members through various means and of course as a co-operative it would give much more than a commercial organisation, and a company would either give its profits to shareholders as dividends, keep it, or reinvest it> NLFCs would have less to reinvest. This difference can be taken into consideration and the necessary measures adjusted to account for this. If Mr. Thava is suggesting that there should be no comparable measures, why not?

3) As I mentioned before I am talking about the present and the future. I respect your opinion.

the whole article is here

http://www.bmahendran.com/?p=323

If you read it in entirety, is is easy to pick and choose what to highlight and assume that is the whole article. I could for example highlight this from the very same article

"To put it simply, Tun V.T. Sambanthan sacrificed his own wealth to serve the people. Only a

genuine leader with concern for his subjects’ will do that. Today in contrast, we have leaders who only think of enriching themselves by taking a big piece of the pie for themselves before giving the crumbs for the people whom they supposedly represent."

The above is not a comment on anyone but just to highlight the fact that it is easy to pick and choose your facts, the article does praise NLFCS of course, but as I said before I am talking about the here and now .

4) This is a sensitive issue and I have mentioned this only in passing. I have no intention of insulting anyone but only 2 points to raise here.

People have cried foul actually and this is again disingenous, you are comparing the wrong people to the wrong people (I believe, but we can agree to disagree on this) both here and in point 1). On your point 1) you compare me negatively with someone and here you compare someone very positively with various people, this wide swing is is exactly why the right things should be used in order to be better able to compare things.

Qualifications do not automatically qualify someone to run a multi-million dollar co-operative and this is a weak point.

5) What I meant was that whole paragraph was filled with your emotion. There was no way for me to break it up on a point by point basis so therefore I could not comment.

6) I will talk about inter-company transactions in more detail in a later post.

And finally of course Mr. Thava, you have selectively and cleverly highlighted certain things, opinions of mine, certain peripheral things and written your track, but the very specific questions I have raised, the things that are at the core of this blog, not the things at the edges, you have avoided (maybe ?) and not answered.

Again, this is about NLFCs not against anyone. The title of the blog is Reform-NLFCS, not anti so and so.

Regards

Saturday, May 17, 2008

Answering more comments

I have received more comments which I will respond to. I won't be responding to all comments only what I believe need to be answered, but I value all of them and they keep me motivated. So please continue!

If I do not highlight any comments please do not think I do not value it. It is simply because I agree with it or the point has already been mentioned or the comment is a repeat of another. Other people also read your comments! Don't forget! I hope this blog will become a collective effort between me and those who comment.

To everyone, every single comment is worth reading, so please read them.

Also attacks of a personal nature against anyone will not get a response. This is not about personalities. What is wrong is wrong and what is right is right, the personality discharging that duty is immaterial. Everyone in those positions has the same duty and responsibility, with the ultimate authority in the chairman. That duty and responsibility comes with the position (and some pay!). If there are other people as board members and not the current members, they would have exactly the same duties and responsibilities. These duties and responsibilities should not defer/ be any less based on who the person is. Why should it?

Please also note you can safely leave your comments annoymously if you wish or under an assumed persona. Your annoymity is assured.

Ok, on to the comments,

First one up, from a Mr. Sivam, as again the comments will be in bold and black and my response this time will be in blue and italics.

Thava and Gunasegaran
Please stick to facts. Should this blog be a platform for open discussion or defence? One question is whether NLFCS progress is optimal or just so. You need more info than you have now to justify the assertion which you make. Please check on the assets , the ROI and the monies spent on bad investment which could have been better utilised. Please check on how the estates are actually managed, the ones left. Please check on the sale of prime assets. Please compare the growth of other plantation companies started about the same time as NLFCS.

PLease check on the early days of the reginal meetings and also on how people who seemed to be against TSS were treated. Please check on how NLFCS companies managed by 7M ran. Please check how much 7M were paid.Please find out wheu=ther Premium paid for Board members to be flown to India for a board meeting which happened to be at the same time as the MD's daughter's wedding.

For those who do not know what ROI is, it is Return on Investment. To put it simply, if you had money in the bank and the interest rate was 4%, then your ROI at the end of the year would be 4% against that initial deposit. It is the profit (percentage return) made on the initial and additional capital put into an investment.

The first paragraph is exactly the kind of information needed to make an accurate assessment of performance. Of course since NLFCs is also in property, has a healthcare arm etc, each of those will have to be measured separately. I do not disparaged NLFCS's performance but only say that only a proper benchmark can provide an accurate measure and it appears in all cases it could have done much better.

As an example, if I invested in an oil company and Oil has gone up 100% but I only received a 10% return, then 10% in itself is a good return but measured against the fact that Oil has gone up 100%, it is not. This kind of performance indicators are missing I believe. If this kind of comparison indicators are not there then performance cannot be measured.

And as to what this blog should be. It is a completely open platform so of course there should be some defence as well. All opinion in agreement or disagreement is welcomed. But more importantly is, more information is welcomed. Information is something that can be highlighted, verified and discussed. Everything else is opinion which people can agree or disagree with.

On the 2nd paragraph, I can't offer any comments. It is what it is. I have already mentioned about 7 m.

Thank you for your thoughtful and reasoned contribution Mr. Sivam, it is appreciated.

Again there are are other comments that should be read. I am not highlighting all of them here but they all deserve consideration.

The below is a comment from a Mr. Ian which I have broken up into paragraphs, answering each point separately.

I believe your idea is that now that Makkal Sakthi was able to bring down a strong political party why dont use the same steam to hit NLFCS.
Well I just dont believe you guys. So what happens next bring down all Indian Organisation doesnt matter if we kill ourself in the process.
We have started to blame others for our downfall but what we fail to see is that it is we who choose to stand in the same circle.Why not compare NLFCS with other organisation of Indian Communities interest like some Holding company or cooperatives.

Before I comment on this whole paragraph, "We have started to blame others for our downfall but what we fail to see is that it is we who choose to stand in the same circle" I don't understand this particular sentence so I won't be commenting on it.

I believe your idea is that now that Makkal Sakthi was able to bring down a strong political party why dont use the same steam to hit NLFCS.

What you believe is my idea is your opinion. Right now I am simply highlighting things that are not quite right. Do you believe the things I have mentioned are responsible and ethical and to the best benefit of the members of NLFCS? This is what should be established first before anything else.

The fact is in an ideal world this blog should not exist. Everything would be run well and to the best standards and no one would have anything to say. But I have come across people with a lot to say. Why is this? I myself felt strongly enough to start start this blog, why? Instead of doing something else, I am in front of a computer. Why? Why am I spending time and effort on this? Because I believe there is something wrong that at least should be highlighted to the members of NLFCS and possibility corrected. Please do not be afraid of information and truth. Why should you?

On the point of Makkal Sakthi, it is something I wanted to touch later on but since it is mentioned here, I must acknowledge that. Makkal Sakthi has made a difference. That is a debt I owe. When people used to came across wrong-doing by the powers that be, they simply put up with as "this is the way things are". There was a cost to challenge wrong-doing, you could lose your job, a lot of things could happen to you, and of course a lot of the times, nothing really changed, so you didn't. People believed they were powerless. Well Makkal Sakthi showed that that there was no reason to accept this anymore, to accept that "this is the way things are" and just shrug in despair, instead we (all malaysians) have realised our power both as individuals as well as our collective power to change things to "things as they should be". This is something I am happy to acknowledge and again it is a debt I owe.

Well I just dont believe you guys. So what happens next bring down all Indian Organisation doesnt matter if we kill ourself in the process.

This is about specifics instances of things that appear to be highly unethical and things that appear to be irresponsible in NLFCS and someone must answer for this.

This is not about bringing down anything. It is not possible to bring down NLFCS. It is an organisation with ongoing concerns. employees etc so I am not sure what this bringing down you mention is about (unless mismanagement leads to a situation where the organisation has to be liquidated).

The ultimate authority in NLFCS is the board and its chairman. The question is, have they managed their stewardship of NLFCS's assets in the best possible manner? Have all their decisions been above board and ONLY FOR THE INTEREST OF NLFCS MEMBERS (their decisions should not have any other interest, right?!)?

With all that I have highlighted, all that other people know from their own experiences, are the chairman and the directors the best people to continue the stewardship of NLFCS assets? If they are not, replace them with someone else who would be a better steward. There a lot of capable people out there. It really is that simple. Governments, companies, associations change their leaders and board all the time all over the world so what is the big deal? At some point the current board and chairman will also resign and be replaced by other people right?

You, I believe, are associating NLFCS with personalities and people. Are you saying that if certain people leave NLFCS will collapse? That really does not say much for all the people who work at NLFCs and therefore I am sure that is not what you meant right? People come and go after all. On a personal note, if you have ever worked in any of the NLFCS subsidiaries you would have learned very quickly that absolutely no one is irreplacable, absolutely no one that is, except, ironically, those who are the ultimate decision makers. Well the truth is, they too are also replacable.

And please keep things in perspective, this is specifically about the tens of thousands of NLFCS members (Indian and Non-Indian) and whether their best interest have been safeguarded. This is not about the 1m Indians in Malaysia who are not NLFCS members.

I am not sure how we would be killing ourselves by doing this? We would be saving ourselves from slow strangulation really.

Why not compare NLFCS with other organisation of Indian Communities interest like some Holding company or cooperatives.

I have gone through in detail about how things should be compared in another post and above and so has Mr. Sivam in his comments. Why should NLFCS be firstly compared to entities with a different asset base and secondly within such a narrow universe of Malaysian based Indian interest.

Are you saying that if something is run by an Indian it should be judged in a different standard? The same standard and rules should apply to everyone, everywhere.

On how regional meetings were run those days, well i believe Toh Puan was there and also Tun's brother and not forgetting Tun's daughter. Wasn't this family run at that times.

As I have said, I have very little knowledge of the above. Your comment is what it is. I thank you for it and for highlighting this point.

Just because TSS over the 50 years of working life has managed to get some decent savings and investment that went well, you guys are questioning him.

I have no idea about the chairman's savings and investment and do not care, that is his business. What I care about is when he has the same interest as NLFCS, such are his shares in Premium Nutrients, then that should be accounted for properly and how they were acquired explained and the board of NLFCS has to ensure that everything has been done to ensure that NLFCS has/does not lose out in the process. Also he and those associated with him should declare all their related transactions with NLFCS an NLFCS connected entities to the ultimate level.

In relation to that I am most keen to know who the ultimate beneficiaires of Seven M Management are (ultimate beneficaries as in where did the money FINALLY end up at, not who actually on paper owns Seven M).

I believe if he was not in NLFCS he would have been a more sucessfull businessman(much bigger than some of the current richest people in Malaysia).
I suggest like me do some research find out how TSS was before NLFCS especially during his times in Kedah.

That is your opinion about his business acumen. My concern is only for NLFCS. I do not care about what the chairman did 50 years ago or what he did in Kedah. I am concerned with NLFCS and the here and now. If someone else was the chairman I would still be saying the same things. This is about right and wrong, not about who the chairman is.

Also let me give you an analogy since you have also brought up Makkal Sakthi.
If a temple got destroyed and you ask your representative why he did not prevent it and he says to you oh, but I did this and this for you. Well the temple still got destroyed right? Same thing, these things have happened no matter what happened before.

All I can say is don't slay the goose which is laying golden eggs.

Once again, you are confusing personalities with institutions. The Goose is NLFCS not the chairman and the board. Please get this right.

The question is, is the the goose being managed to the best possible effect? If everything was above board all this while would the goose be laying 2 eggs instead of one? Out of the one egg being received is all 100% going to NLFCS members or just 80% and 20% being creatively siphoned off ? (I will talk about creativity in another post).

Below is the last comment I will be answering

This is the problem with those who have joined Premium through recomendations from NLFCS. As soon as one starts working in Premium they start to think that they should be given the senior post, get fast promotions and better salary package, just because NLFCS has controlling shares in Premium. One who doesnt get this becomes disillusioned.
Whats wrong with you guys, why dont work harder, learn and have the fighting spirit. TSS can only recommend you for the job, its up to each individual to work their way up in the company.
I hope you would stop claiming that all of us from NLFCS recomendation to Premium are disillusioned. There are some of us who are still in Premium and doing the best and hope any promotions or better wages are from our performance and not from the fact we are from NLFCS.

As I have mentioned I did not join Premium Nutrients because of the salary. I joined it because it was part of NLFCs which had/has a noble purpose. The reasons I got disillusioned are clearly stated. This is what I said exactly "All the things I have witnessed had seeped it away" It being my idealism. I claim nothing on behalf of anyone else, you are putting words in my mouth.

Your comments do not answer any of the questions I have raised. Please continue to do your best.

Thursday, May 15, 2008

More about myself and answering recent comments

Before answering the recent comments (thank you those who have commented for taking the time to comment, I appreciate all comments). Let me tell you a bit more about myself.

I joined Premium Nutrients as an idealistic person. Here was the flagship company of NLFCS, an organisation with a noble purpose. I felt a part of something greater than myself, that I was not just working for myself or for money but for something pure and noble and great. By the time I left Premium Nutrients all my idealism and innocence had been killed. All the things I have witnessed had seeped it away.

A great many people capable people joined before and after I left. Many have left, a few have stayed. I have only the best things to say about all those who worked and continue to work there. They are my friends, people whose time and company I value. A lot of them knew the chairman personally, they told him what was happening but saw nothing being done. There were sons whose fathers where NLFCS members who came in and had only good things to say about the chairman but by the time they left, they were arguing with their fathers and as disillusionised as me. Here was the one man who had the power (the only one with the power) to do something and nothing was being done. The chairman had/has many sources of information about Premium Nutrients. He knows the senior management himself, there is an auditor from NLFCS who is an independent auditor who should inform him what is going on but with all this information being sent to the chairman and nothing being done, it becomes a soul destroying place to be in. A place you feel helpless. What I know has been eating me, so I though it is time to write about it.

Now to answer the comments :-

Below is the first comment I am going to answer. The comments are in bold and my response is not and are in italics and in red

Well, it seems like you dont' know about NLFCS and the history behind it. It is the only Indian organization that has benefited thousands of indians. Its sad to note that an Indian has to kill or downgrade their own kind. If it was mismanaged it would not have received accolades from the Government and the Prime Minister's Department.

I am asking specific questions about Premiun Nutrients and that should be answered in a specific manner. Yes I do know about the history of NLFCS. But this history is the past, we are talking about the present, what is happening now. You mention it is a pity that an Indian has to kill or downgrade their own kind. If I was living in another country with only one group of people and if I experienced the same thing I would still write about it. This is about right and wrong, nothing to do with my or your ethnicity. Yes NLFCS has won awards but below while responding to another comment I will state specific things that need to be answered. Specific things need specific answers. I sincerely believe that NLFCS could/should have done much much better.

If you know NLFCS, benefits received by their members matches no other cooperative in the country. In the era of NEP, NLFCS has survived without a helping hand from the government and this should be attributed to the management team. I would suggest that you check your facts beforehand. I suggest members who have benefited from the NLFCS to state their comment by setting the record straight. To the blogger, be useful to your community don't waste time spreading rumours. We should be proud that we have an organization such as NLFCS. 'VALGAI KOOTURUVU"

I think NLFCS should have done much better and will cite specific cases of value destruction below. I welcome all comments and will try to answer all of them to the best of my ability. I am not spreading rumours, I am being as objective as possible and will only use facts I recall. If anyone believes what I know is wrong please correct me. But correct the specific thing I am saying please, do not give me generalities because that leaves the question unanswered. Thank you for your comments, I appreciate them.

Now let me answer the second interesting comment I have received from a Mr. Thava, again I will break the comments in parts and answer each part separately, as above, the comments are in bold and my response is in italics :-

I am never a blogger nor do I pay attention to blogs. It is only by shear accident I stumbled on this blog on NLFCS. Normally I would not waste my precious time on commenting on statements which is neither honest nor fair. In fact it is very damaging and insulting to the entire Indian community.

I appreciate the time you took and your comments. Again as I mentioned above, this is not about my or your ethnicity, this is about what is right or wrong.

I am not sure how my postings are insulting to the 1m Indians in Malaysia. Do you speak for every single one of them? Shall we simply keep mum and ignore what I believe to be misdeeds just because someone is Indian?

As a member of NLFCS for the last five years I owe it to the Indian community to defend such irresponsible statements made by the blogger. I will forgive him for he has admitted himself that he “doesn't have much dealings with NLFCS” and his statements are made on what he has heard. Since he has invited comments from people in the know I shall put the facts straight.

You owe it to the Indian community? Let's keep things in perspective. Shall we say you believe you owe it to other NLFCS members?

Please state what you believe is irresponsible and please be specific. Otherwise such a sweeping statement has no value.

Thank you for forgiving me. I value forgiveness and if I do make mistakes I do ask for forgiveness (and corrections).

Thank you for your comments and I shall answer each part of your comments separately.

1) As a member (more importantly as an Indian) it gives me great pleasure to drive pass Wisma Tun Sambanthan with tamil words giving recognition to the founder of NLFCS. I cannot think of any other building 27 storey’s high owned by an Indian organization which is so majestic and so proud of its success. The blogger obviously is not aware of the immense contribution made by all under the leadership of Tan Sri Somasundram.

This is not a fact. These are your feelings so I can't comment on this.

2) The Blogger also stated that challenges are not encouraged and often strong arm tactics are employed in the appointment of NLFCS office bearers. As a member I cannot agree with this statement. I have attended regional elections where the office bearers were elected in an orderly and cordial manner with representatives from the Cooperative dept. present. I am pleased to say no one asked me to vote for anyone in particular and certainly not arm twisted. Brother you are wrong here too!

This is what I have heard and not something I have experienced. I shall separate hearsay from what I personally know more clearly next time. I would like to hear from more people about this. If I am wrong, then I am wrong. Not a problem. I am ready to acknowledge that I made mistakes. This is lesson to me to only use something that is verified, so those who agree or disagree with Mr. Thava about his comment above please do respond.

3) My experience in the last five years of NLFCS membership showed that they are not only a caring cooperative but also a responsible one too. Dividends and bonus shares declared beats all other investments I have. Also NLFCS boasts of scholarship grants, educational loan schemes, senior members assistance scheme, small business loans, assistance for widows etc. etc. It is no surprise to me for NLFCs winning the “ Anugerah Perdana” – for being the best co-operative in Malaysia!!. If my memory is correct, winning awards for excellence is not alien to NLFCS. Hey Brother, when all other races are envious of the work and the team TSS have built at NLFCS………. You chose to discredit him.WHY?????????????? . Be proud man.

Dividends and bonus shares declared beats all other investments I have.

I have no idea what your other investments are. Are you an investment professional? It is critical to use comparable metrics when comparing something. If you are member of 5 plantations based co-operatives and NLFCS has outperformed all of them, then you are comparing like with like and a measurement like that would have value. But you could have invested in 5 shares and lost money on all of them but your membership or "investment" as you call it in NLFCS could be the only thing that made money for you? I could have invested in plantations stocks and say they have gone up 40% then my membership in NLFCS would be my worst performing "investment". So I hope you understand why we need to compare similar things with similar things. Trying to measure NLFCS performance is particulary difficult because it is a unique entity. Do measure it against integrated plantation companies? You can't exactly because it is a co-operative and therefore its impetus would be different but this is the closest possible comparison. It has also diversified and each separate part needs to be measured against something similar i.e Premium Nutrients should be compared to similar companies, Apollo Medical Centre with a similar organisation and then only could you actually come up with a composite performance. By this measure, I state again NLFCS could/should have done much better.

Also NLFCS boasts of scholarship grants, educational loan schemes, senior members assistance scheme, small business loans, assistance for widows etc .

That is what NLFCS should do, it is a co-operative, and yes that is commendable. It has won awards but as I said above I have specific things that I will disclose and I would like them to be specifically answered. Below is a link to NLFCS's awards section to those who are interested

http://www.nlfcs.com.my/nlfcs.html

and one more award from another part of the website

> National Premium Award in 2007

This is not my area of expertise. Receiving any award of course is commendable and praise should be given where it is due. I have to state again that my primary experiences are with Premium Nutrients not NLFCS.

Mr. Thava, you mention that NLFCS is responsible? I have a riposte to that below.

Hey Brother, when all other races are envious of the work and the team TSS have built at NLFCS………. You chose to discredit him.WHY?????????????? . Be proud man.

Again ethnicity is brought in the picture. This is about right and wrong, not whether someone is Indian or not. The above is not an argument Mr. Thava. The only analogy I can think for this was when people in the US were protesting what was happening in Iraq, they were called traitors to the US. So should they not have protested? Were they traitors to the US? Not an good analogy I agree but I can't think of any other at the moment.

I also believe I made an error in how I approached this. I should never have put anyone's name down, just their title/position. This is a critique of people who are in positions of responsibility and the authority/responsibility that flows from that. It is not about any one individual or personalities. It is about anyone who is in positions of responsibility not because that person is so and so. So I will only mention positions and leave names out of any future postings.

4) I do not understand your statement calling for surprise audit by Tun Sambanthan’s daughter. For your information Co-operative bodies are audited not only by a firm of chartered accountants but also by the ministry of Entrepreneur and Co-operative Development. Let me assure you that if there is mismanagement it would be highly unlikely for NLFCS to win the national awards. Furthermore, please do not underestimate or insult the directors who spend considerable time in ensuring the success of NLFCS. Some of the directors are eminent people and leaders in their own area of expertise.

You are commenting on a comment left by someone else like yourself. Anyone is free to comment and your point 4 above should therefore not be attributed to me, so I can't say anything about it.

I would however like to point out that you should separate personalities/people from their responsibilities as directors, they are not the same thing. All directors owe a standard of care irrespective of who they are. That is their duty and the responsibility they have agreed to by accepting the position.

I will talk about chartered accountants and Premium Nutrients in more detail below.

5) The latest accounts of NLFCS s show a growth of approximately 10%. This was achieved despite giving generous payouts to its members. You will be pleased to know that members’ funds stood at a whacking 380 million ringgits as at 31st December 2007. I am sure this does not reflect the true picture of NLFCs assets. I won’t be surprised that with proper valuation the assets, members funds will top 1 billion ringgits! Surely this cannot be by accident. It must be through hard work and dedication and certainly NOT by mismanagement.

380m, hmm, seems a lot doesn't it? As I mentioned above you need to compare like with like. For a plantation based co-operative, with the assets it started out with I think it could have become much bigger.

The latest accounts of NLFCS s show a growth of approximately 10%. This was achieved despite giving generous payouts to its members

You must acknowledge that CPO prices are hitting all time highs so this will positively affect NLFCS's bottom line too but I have no idea to what extend. You need to separate the effect of high commodity prices from management and performance. If say commodity prices have remained static for the last year then what would the performance be? I am just throwing out ideas on how things are made measurable, in response to the above Mr. Thava, because yours was a blanket statement. I would need more information and therefore I can't comment further.

a whacking 380 million ringgit

:) As an aside since we are talking about figures the chairman had a direct stake of 36m shares in Premium Nutrients as at its reverse takeover/IPO (this is public information). At it's IPO price of 0.50sen that was worth 18m ringgit which is about 4.74% of the 380m you mentioned above. Right now the chairman has 43.5m shares and since the price is now 0.18sen they are worth 7.83m ringgit which is about 2.06% of 380m. I have no idea how the chairman came to hold so many shares or at what price he bought them but would like to know.

I am sure this does not reflect the true picture of NLFCs assets. I won’t be surprised that with proper valuation the assets, members funds will top 1 billion ringgits!

I don't know why you think the valuation being done right now is not "proper". Why is it not proper and why do you think a "proper" valuation will potentially increase the asset by 620m? That is a 163% increase over the current asset value! Your statement has no basis I'm afraid.

And valuations are pretty tricky things as I will show below.

6) As a great leader, TSS is conscious of the fact that NLFCS should continue their progress well into the 21st century. He has identified an able person in Dato Sahadevan to lead them in the coming years. Sign of a good leader I would say.

This is your opinion. I disagree, there should be a clear succession plan with second and third line managers ready to take over to, with succession plans in all divisions, so that capable people are always being groomed. Now everything is haphazard and no one knows when anything is going to happen. This is my opinion

Again I reiterate, this is not about personalities. This is about right and wrong and responsibilities, whoever they may be.

7) Brother, You have published words publicly and should be responsible. Your words certainly hurt me. Before I part let me conclude with Thiruvalluvars words.

" Speak only such words as are worth saying; refrain from profitless and worthless words"

I can't understand why my words have hurt you Mr.Thava so I can't offer an apology for something I don't understand. It is clear you have taken this personally and for some reason believe you are speaking on behalf of the 1m Indians in Malaysia. I am not sure how you have made yourself their spokesperson. They have their own voices.

I believe my words are worth saying, that is why I am saying them. You disagree of course and it is good and healthy thing to disagree.

Right, now we come up to the rest of this posting, I mentioned above I will give an example of value destruction, say something about responsibility and mention something about chartered accountants and valuations. Right let me start then with some publicly available information.

Value Destruction and Responsibility

These are simple calculations done with publicly available information

At the time of Premium Nutrients listing, NLFCS had 63m shares which listed at the IPO price of 0.50sen (on 01/08/03), so those shares are valued at 31.5m at that time. Right now the Premium Nutrients share price is 0.18sen. That is a lost to NLFCS, to all members of 20m! That's pretty spectacular.

This is before I take into account all the shares NLFCS has continued to buy and sell in Premium Nutrients. As at the end of Dec 2007, NLFCS has 108m shares in Premium Nutrients and all the while the share price has been going down! I will be making a more detailed study of this later.

The above doesn't even take opportunity cost i.e if that 31.5m was put in a bank or invested in something else.

So at minimum 20m has been lost over a period of 4 years. Should not someone be responsible for this, 20m ringgit gone? Premium Nutrients is doing bady, why? NLFCS as the largest shareholder should and should have taken steps to protect its investment and done so much earlier.

The 2nd question regarding this is who authorised the continued buying of Premium Nutrient shares? Another 45m since listing. What is the rationale behind this? This buying and selling Premium Nutrient shares has been going on since the listing so it is something that has been happening for the last 4 years.

Another example of value destruction again at Premium Nutrients was the management agreement they had with Seven M Management prior to Premium Nutrients listing. Seven M would get a percentage of gross profit for managing Premium Nutrients. Gross profit is just the Sales of the company less the cost of sales. So all other cost is not included in this calculation. So the company could make a net loss and still pay out management fee! I think the percentage was 10% (I can't be sure of the percentage). So Premium Nutrients with a turnover of a few hundred million, that would amount to tens of million in just one year. The management fee was paid yearly. For a cashflow poor/tight company like Premium, how was this tens of million going to be paid?

The below is a recollection so this bit I can't vouch 100%

Well, what I know happened, was that NLFCs put in money into Premium Nutrients either as a loan or via some other mechanism (more shares?) and then this money was paid out to Seven M and also as dividends back to NLFCS. I have no idea whether this was the standard method or a one-off.

This was millions paid yearly from Gross Profit! This money could have gone back to NLFCS as dividends or be reinvested in Premium Nutrients and that company needs that reinvestment.

So some questions raised here are, who agreed to the management fee structure? Why? The normal thing to do if they found someone exceptional to lead the company and had to have him was to pay him/her a high salary and a performance bonus based on the company hitting certain benchmarks. This would have saved millions. Another case of value destruction

The 2nd thing is, who is 7 M Management, who are the ultimate beneficiaries and where did all that millions end up at?

This management structure could not of course survive Premium Nutrients attempt at getting a listing. How could it? So why is something not acceptable for a potential listing acceptable before the listing? There should be the highest standards.

Premium Nutrients attempted to get a Main Board listing but did not meet the requirements was trying for a second board listing and ended up with a reverse takeover. This is the FLAGSHIP company of NLFCS. It was set up as an example/model company for the Indian community. It should have never have come to this. This millions could have gone back to NLFCS as dividends or be reinvested in Premium Nutrients, a company that badly needed investment.

The directors, as stewards of the company are responsible for this.

This is hearsay, but I was informed that the impetus for the listing was that a number of shareholders (Forad Mangement? Picavest?) were looking for a way to cash out of their investments and have been doing so for a while.

So I hope the above covers the value destruction and responsibility bit that I mentioned I would talk about.

Chartered accountants and valuations

The accountants before KPMG at Premium Nutrients were fired. KPMG resigned. Accountants do not simply resign. They are paid fees so it is a lost of income to them. See the announcement below. Why did the audtiors resign? and the Group Financial Controller and senior accounting staff?

Company Name
:
PREMIUM NUTRIENTS BERHAD
Stock Name
:
PREMIUM
Date Announced
:
09/05/2006
Type
:
Announcement
Subject
:
PROPOSED CHANGE OF AUDITORSContents :The Board of Directors of Premium Nutrients Berhad ("the Company") wish to announce to the Exchange that Messrs. KPMG has notified the Company that they desire to resign as Auditors of the Company and its subsidiary and associated companies. Their resignation will only take effect immediately on the appointment of the another firm of Auditors.The Board of Directors nominated appointment of Messrs Raki Thomas & Ramanan, Chartered Accountants, as Auditors of the Company for the financial year ended 31 December 2005 in place of the resigning Auditor, Messrs. KPMG, to hold office until the conclusion of the next Annual General Meeting of the Company at a remuneration to be fixed by the Directors.RATIONALE FOR THE PROPOSED CHANGE OF AUDITORS. The proposed resignation of Messrs. KPMG will create a vacancy in the office of the Auditors of the Company. The proposed appointment of Messrs. Raki Thomas & Ramanan, Chartered Accountants, is to fill the casual vacancy in the office of the Auditors arising from the proposed resignation of Messrs. KPMG.APPROVAL REQUIREDThe proposed Change of Auditors is subject to the following approval being obtained:-Shareholders of the Company for the Proposed Change of Auditors at a forthcoming extraordinary general meeting to be convened.DIRECTORS' AND SUBSTATIAL SHAREHOLDERS' INTERESTSNone of the Directors and substatial shareholders or persons connected to the Directors and/or substatial shareholders of the company has any interest, direct or indirectm in the Proposed Change of Auditors.EXTRAORDINARY GENERAL MEETINGAn Extraordinary General Meeting of the Company to seek shareholders' approval on the Proposed Change of Auditors will be convened later and a Circular to Shareholders will be issued in due course.

And this? The group financial controller and senior accounting staff resign

General Announcement
Reference No PN-060502-57389
Company Name
:
PREMIUM NUTRIENTS BERHAD
Stock Name
:
PREMIUM
Date Announced
:
02/05/2006
Type
:
Announcement
Subject
:
PREMIUM NUTRIENTS BERHAD ("THE COMPANY")- REQUIREMENT OF PARAGRAPH 9.26(3) (B) OF THE BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS ("BURSA SECURITIES LR")Contents :The Company wishes to announce that pursuant to the requirement of Paragraph 9.26 (3)(b) of the Bursa Malaysia LR, the Company has not issued the Annual Audited Accounts for financial period ended 31 December 2005 pursuant to Paragraph 9.23 of the Bursa Securities LR (collectively "Annual Audited Accounts")The delay of the issuance of the Annual Audited Accounts was due to the fact that the Group Financial Controller of the Company resigned in February 2006 and also some of the senior accounting staff in one of the subsidiaries also resigned. The expected date of issuance of the aforesaid Annual Audited Accounts will be latest by 15th June 2006 or earlier. The consequences of non-compliance of the requirement under paragraph 9.23 of the Bursa Securities LR may subject to the enforcement of the action including the possibility the Company being suspended and/or delisted by Bursa Malaysia Securities Berhad pursuant to Paragraph 16.02 and 16.09 of the Bursa Securities LR respectively.
© 2008, Bursa Malaysia Berhad. All Rights Reserved

And then this

Company Name
:
PREMIUM NUTRIENTS BERHAD
Stock Name
:
PREMIUM
Date Announced
:
03/05/2005
Type
:
Announcement
Subject
:
PREMIUM NUTRIENTS BERHAD ("Premium" or "the Company")- Explanation of the Deviation of 10% or more between the Profit After Tax and Minority Interest of the Audited Accounts and the announced Unaudited Results for the financial year ended 31st December 2004 pursuant to Paragraph 9.19(34) of the Listing RequirementsContents :The Board of Directors of Premium wishes to announce that the audited Group profit after tax for the financial year ended 31st December 2004 was RM6.028 million. The audited results was RM2.040 million lower than the unaudited results in the Interim Report for the same financial year announced on 28th February 2005 of RM8.068 million.The deviation stated above was mainly due to the following reasons:(Figures in thousands ('000)

1. During the course of audit the statutory auditors, Messrs KPMG insisted on making provision for doubtful debts amounting to RM608 (the directors were confident of recovering the full amount). They also insisted on writing-off some advances and old outstanding amounting to RM321.

2. An additional provision of RM689 was made for deferred tax.

3. There was a valuation difference of RM422 in the vluation of stocks of our Indian subsidiary. This difference arose due to difference in valuation standard adopted by Statutory Auditors for Indian company and Messrs KPMG, the statutory auditors for the Group. This announcement is dated 3rd May 2005.

Why valuations are tricky things (see above).

A RM2m difference in profit. KPMG insisted on writing off RM608,000 of debt, so instead of a liability, the profit and loss account would have been hit, so a reduction in profit of RM608,000.

Additional provison of RM689,000 for deffered tax.

A difference of RM422,00 in the valuation of stock in the Indian subsidiary. This would decrease the profit of that subsidiary.

That is why I say valuations are tricky things

THIS IS THE FLAGSHIP COMPANY OF NLFCS! THIS SHOULD NOT BE HAPPENING. THE ABOVE IS PUBLIC INFORMATION! FACTS THAT CANNOT BE DISPUTED! WHY IS THIS HAPPENING! AUDITORS, ACCOUNTING STAFF RESIGNING AND THE PROFIT HAVING TO BE RESTATED. WHY WAS NO ACTION TAKEN IMMEDIATELY, WHY DID IT TAKE ANOTHER 2 YEARS (AND AS THE SHARES SLID LOWER) FOR THE BOARD OF PREMIUM NUTRIENTS TO REPLACE (OR REDESIGNATE AS IT SAYS IN THE OFFICIAL ANNOUNCEMENT) THE MANAGING DIRECTOR?

This to me is pretty heart-wrenching stuff for something that has my sweat in it too. I think I understand why Mr. Thava feels hurts now, after writing this. This is the company that was meant to be the model listed company for Indians.

Finally someone else has commented while I have been writing this.

A Mr Gunasegaran

Dear blogger,I would certainly agree with Thava's statement on the success of NLFCs. You should see their success achieved and not to speculate what they could have achieved.As far as I know NLFCS have delivered the goods in championing for indians in a rather quite and passive way. They have built state of art tamil schools with no fuss or fanfare.What return are they expecting when they spent millions on schools? And what more when the plantaion house was about to be auctioned they came to the rescue. THey purchased it and put it into good use and kept the historic building within Indian hands. My friend this require forsight and to keep the wishes of Tun Sambanthan intact.Can you pls join me to wish them well......unless,of course you want to destroy the success just the same way as what happened to the dream of another great leader -Dato Kularajah( MCIS) Be responsible pls.

The things you mention above are commendable things and praise should be given where it is due, but as I said I am stating specific things that need specific answers.

Mr. Thava, Mr. Gunasegaran, we are coming from different perspectives. You are looking from the outside in and saying that everything is perfect in this forest. I am looking from the inside out and noticing that some of these trees are pretty sick. I hope we can meet in the middle.

This has been a rather long post, I apologise for any spelling or grammaritical errors.

God Bless Everyone Everywhere

Tuesday, May 13, 2008

Succession at the NLFCS and its Future

NLFCS was set up as a co-operative. It has helped its members but the point is, it could have and should have done much, much more. It was set up, to pool small holdings together and benefit its members. This was its primary objective. There are still thousands of people working in scattered small and medium holdings especially in Perak, Selangor and Kedah. Why has the NLFCS not used its financial capability to continue buying up these small holdings and helping those still working there? It once had a pure vision and a purpose, what has happened since then? I believe it has 70,000 members. 70,000 members is a drop in the bucket compared to the thousands who continue to live in appalling conditions in small estates throughout the peninsula and whom NLFCS was set up with the express purpose to help.

It has the resources to do, so why has it not done this, its primary and basic function. Millions have been poured into Premium Nutrients and Status Point (Status Point is its other main subsidiary), and its chairman is a multi-millionaire (I have been told confidentially that all that can be done with Status Point is to continue running it as a going concern, but that is hearsay of course, as I have not personally had a chance to look at the operations of this company).

Quite a few people I know who are in NLFCS and Premium Nutrients have been there a long time, people with worries and families. Quite often they come from poor backgrounds and have achieved positions of seniority within middle management on their merits. My personal impression of them is that they don’t have the confidence to move out of whatever position they are in, to other organisations etc, however unhappy they may be. Thus they may criticise, but it is muted, under the breath. They have no intention of rocking the boat and threatening their livelihood (i.e. getting fired, and people have got fired for protesting some of the shenanigans).

The other thing I have noticed is the way people are appointed to positions where they are rivals to each other, so they undercut each other but owe their ultimate loyalty to the chairman. As I said in an earlier post, a very feudal culture. There is only one king after all. No rivals and therefore no one truly capable is allowed.

Datuk Sahadevan has been the groomed/presumed successor for some time (and he has been waiting a long time, ). I don’t know what his plans are once he takes over, (remember members your vote is your power, don’t give it away, know that NLFCS could have done much more!) but he is guilty by association as well and you can bet he will continue to protect TSS’s interest.

They have been converting some of their old plantation lands into housing developments for some time, I have no idea whether there is anything untoward happening there but would not be surprised. Anyone have any details?

The chairman and everyone on the board should declare their assets and explain their wealth and whether it was gained at NLFCS’s expense

I would definitely like to hear from anyone who can shed more light onto the organisation or who agrees and disagrees with me. Have I generalised? Simplified? Anyone think I am plain wrong? Contact me. Write in the comments section or e-mail me from my profile page.

Sunday, May 11, 2008

TSS and the 43.5m shares he owns in Premium Nutrients BHD

Tan Sri Somasundram (TSS) owns 43.5m shares in Premium Nutrients BHD. He is the 2nd largest holder after NLFCS. At the current share price (close of Friday the 08/05/08 it was 0.175 sen), that is worth RM7.6m. The initial IPO (through a reverse takeover of Bridgecon and an offer of shares) was at 0.50 sen. The company had been trying to list for some time and I believe the reverse IPO was the last grasp as I know it failed to be able to list on its own merits. A number of its shareholders have also been looking for at exit for some time and the company shareholder was substantially different within 2 months of its listing.

At the time of the IPO, TSS owned 36m shares which at the IPO price of 0.50 sens would be worth approximately RM18m. He recently purchased 6m shares (on the 26/06/07). The market price at that time was 0.24sen, (so he would have shelved out RM1.4m). Where does a Chairman of a co-operative amass such wealth? Tun Sambanthan when he founded Premium Nutrients had a symbolic 1 share, compare that to TSS's 43,500,000 shares.

I know a lot of NLFCS members are grateful to TSS for some largess he has done a decade ago but that is exactly the mindset that needs to be broken. They are members of a co-operative and the co-operative works for them. They don't need handouts from a chairman they elected in the first place! The fact is NLFCS should have done better and much more. Thinking about where it could have gone breaks my heart. It is simply an organisation without direction. Compared to its competitors, Mewaholeo, Pasir Gudang Edible Oils and even IOI, where is Premium Nutrients and NLFCS?

The boards of both Premium Nutrients and NLFCS as far as I can gauge are a board of yes men dependent on their position on TSS. I remember when board members used to ask questions, the then Managing Director and Chairman would confer in whispers before answering! So much for corporate governance!

The chairman has put people loyal to him (and his family members) in key positions and they in turn depend on his support to maintain their positions. He has been the chairman of NLFCS for more than 2 decades. He is 77 years old.

Like all organisations that have had the same leader for so long, the organisation has become his personal fiefdom. All opposition has been crushed and driven out and an unhealthy feudal culture is dominant. With his family members also in the organisation, the fact is that he can no longer be said to be acting in the interest of NLFCS members but in making sure that any successor is pliant and continues to protect his interest.

This is no longer a co-operative for the benefit of its members, again I reiterate, NLFCS and Premium Nutrients could have been so much more, but till date no one is held accountable for its malaise and a few people have gotten rich.

Premium Nutrients shares has been on a one way slide since it listed and is now less than half its IPO value. This after the KLSE has been rising the last few years. Why is no one held accountable and why are all the same actors still there? Isn't anyone responsible for anything in both the NLFCS and in Premium Nutrients?

The premium seems to be on loyalty rather than performance. As long as you don't oppose the chairman's wishes you can be as incompetent as you want.

The buck has to start with the chairman.....

Wednesday, May 7, 2008

Page 53 - latest annual accounts 31-12-07

Premium Nutrients - Upload a doc

Reform-NLFCS

Well, where do I start with this....

Let's start with what NLFCS (National Land Finance Cooperative Society) is about.

NLFCS was started by the late Tun Sambanthan out of concern for plantation workers working in fragmented plantations that were being sold by the British after Malaysia achieved independence. The idea was to pool capital from plantation workers so that they could buy out these plantations and amalgamate into larger groups. The plantation workers would own shares in the co-operative who would manage these larger holdings and provide benefits (both financial and social) to its members.

If anyone can give a better history of NLFCS please do...

After Tun Sambanthan, the chairman has been Tan Sri Somasundram (can't find dates for this, info on NLFCS is sparse).

I don't have much dealings with NLFCS, just what I hear. This is about my experience of working with Premium Nutrients and what I know. I want to remain anonymous because what I write will undoubtedly hurt people I know. It will be interspersed with things I have heard (but not directly experienced), but at the end of this piece, I hope to summarise the pertinent facts that could be checked.

Firstly to get it out of the way - the things I know about NLFCS and the questions they raise.

Tan Sri Somasundram has been there for decades (2 at least). Everyone who came to Premium Nutrients via NLFCS transformed from being strong supporters of NLFCS to being disillusionised.

As a co-operative, there is meant to be one vote per person, but challengers are not encouraged and I understand strong arm tactics are used. Like MIC, even thought a look at the rules would assume the party is democratic, the actual practice is not. A lot of feudalistic practises and hero worship really with a dash of nepotism.

Tan Sri Somasundram's son has been given a management position thought I have no idea what qualifications or experience he has or what kind of vetting process they have. From my experience in Premium Nutrients, there is no vetting process. All the orders come from the top, as I said a very feudal structure. (this is one fact that can be checked, on what basis did TSS's son get the position?)

Premium Nutrients

I will list things as I remember them and I hope they will form a cogent narrative.

Premium Nutrients was meant to be the flagship company of NLFCS. An example for people of Indian ethnic origin in Malaysia and for the co-operative concept/movement. It operates from an industrial area in Pasir Gudang and is a speciality fats (vegetable) company.

I worked in the accounts department of that company and had access to various documents during my time there.

The company has a very poor reputation. A lot of our raw materials (Palm Kernel etc) are only sold to us on an advance payment basis supply because of our poor reputation for payment (there were bankruptcy proceedings instigated by suppliers on the company when it was called Premium Vegetable Oils - this is another fact that can be checked). On the chemical side (various gases and other material we would need to run the chemical processes that would turn Crude Palm Kernel Oil into the end product) there would be a rotation of suppliers we would use, changing them when they asked for payment. The purchasing manager would promise payment to them when negotiating these supplies and then disappear and be uncontactable and the accounts department would have to deal with the resultant angry phone calls.

Most of the assets of the company of the company have covenants and liens on them and new machinery are acquired on a leasehold basis. I don't believe the company actually hold titles to any of its assets as there are first and second liens on almost everything.

While companies started in the area around the time has speed past and expanded. Premium Nutrients is in pretty much the same state it has since it started other than a minor expansion in the 1980's.

There has not been much thought into the long term future of the company and it has been run as is.

It is sad to see a company which had such potential and had such dedicated and committed personnel in the lower echelons being run into the ground. The ideals of NLFCS that I thought would permeate within the company hit the brick wall of higher management and their self interest

The company is (as far as I know, I can't vouch for the history of the co since it began) on its third set of Auditors, the last 2 having resigned. They had an EGM to vote on the new auditors recently and I am not surprised that nothing seemed to have been raised about this. For auditors to choose to resign, would basically indicate that they can no longer approve the company accounts.

They co used to play a lot of tricks. They would have a tank of sludge (waste material that is a cost since you would have to pay to get rid of it/make it less pollutant) and have a layer of expensive oil on top. So when it came to value the oil in the tank, only the top level of oil would be used for analysis and hey presto, a cost would turn into a 5m dollar asset and this would in turn lower the cost of goods sold (which would affect the management fee, more on that later). I am not sure how this was down. For an analysis, they usually take samples from pretty deep in the tank, so doing the above would usually not be possible but this was what I was informed had happened during the year end audit process and is something I can't personally verify.
The other thing that I personally witnessed that was practised (and many companies do this)
is to push sales on products that fail their quality test. This is to "book" higher sales for the quarter by raising an invoice and then financing on the back of the invoice (bill discounting). The product would inevitably be returned by the customer but in the next quarter (with the associated cost of return borne by the company) but by then the company would have already booked the sale and the management company would get the resulting management fees (I will talk more about the management fees below)

The personal impression I got was that the company was not profitable at all. That the profits were simply paper or accounting profits. The constant cashflow constraints, the pumping in of money from NLFCS every few years, the increasing debt that the company has taken over time would seem to prove my impression, whatever the annual accounts might indicate. A healthy profitable company that is not expanding, not increasing capital expenditure, does not need more debt and more money pumped in simply to run its operations. This would imply a deeper malaise. I am not sure what oversight there is in NLFCS's investment in Premium Nutrients, and how the cash infusions have been approved. Tan Sri Somasundram (TSS) is also a big shareholder in the company (the 2nd largest holder with 43.5m shares – 12.93%, he bought 6.6m more on the 21/06/07 for approximately 1.8m ringgit). Therefore there is a clear conflict of interest in being the Chairman of NLFCS which is the biggest shareholder in the company and his personal shareholdings. If you have shares in a company, would you not as a chairman of its biggest shareholder, pump more money in so it would not fail? irrespective of your primary (and only) duty to NLFCS members.

There are a couple of conflicts of interest between the management of Premium Nutrients when I was there, and Tan Sri Somasundram and NLFCS.

Lets start with the management co. Before its floatation, Premium Nutrients was managed by a management company incorporated (I believe) in Singapore. I have been reliably told that this management company, 7 M (Seven M) Management, has as one of its beneficiary TSS, so another humongous conflict (to those with the know-how, please check to see who 7 M's ultimate beneficiaries are). The management fee (20% (I believe - my memory may not be so good)which is a huge chunk of cash to take before all other expenses are paid) was based on the gross profit. As explained above, the accounting gross profit is easily manipulated, and calculating a management fee based on the gross profit provides absolutely no incentive to keep cost down. As you can see very poor corporate governance. What I witnessed was a company being leveraged to pay dividends and management fee to a few, while money was being pumped in from NLFCS to keep it afloat (my personal opinion, but please check the facts yourself).

The co. obviously has a very high turnover among staff. I understand they had brought new senior management recently.

Let's go through the company announcements, just to see the hanky-panky going on.

Announcement released 03/05/05

The audited and unaudited accounts had a 2.04m ringgit difference! In the unaudited accounts the company posted a 8m ringgit profit and the audited accounts showed a 6m profit!

Announcement released 02/05/06

Group Financial Controller and some of the senior staff have resigned, therefore the annual audited accounts will be delayed

Announcement released 02/06/06

Annual audited accounts could not be completed in time because the auditors resigned! Jeez, auditors want their fees, if they resign, it's basically saying things (accounting-wise) are so bad they would rather forgo their fees than audit the company's accounts and agree with it.

Announcement released 26/06/06

32m listing status cost previously written off, to be reinstated as an asset retrospectively? Why on earth do this?

Announcement released 26/10/07

Sells part of Malim Sawit (its plantation arm and crown jewel) for 22m to Revenue Direction Sdn Bhd. Who is Revenue Direction Sdn Bhd? Who are the ultimate beneficiaries? This could be legitimate of course, but after all the shenanigans I have witnessed, I have to be doubtful.

06/05/08 - Annual accounts.

Have a look at pg 53. That is a page full of conflicts of interest.

Of course everything could be managed for the best now, but with so little oversight in the past and in the present, people tend to take advantage.

I hope something is done so that such blatant abuse of trust and governance is a thing of the past in Malaysia and those who have enriched and continue to enrich themselves on the back of others know they no longer have carte-blanche.

REFORM NLFCS

Thursday, May 29, 2008

Premium Nutrients 2007 annual accounts - Dividends

Wednesday, May 28, 2008

This blog has been viewed 1,000 times

Thursday, May 22, 2008

More Goodies from the Premium Nutrients 2003 Annual accounts on Sevem (M) Management

Premium Nutrients Annual Accounts 2003

Sunworth Corporations Sdn Bhd, Seven M Management Services Sdn Bhd and the Chairman Of NLFCS

Wednesday, May 21, 2008

An analysis of NLFCS share purchases in Premium Nutrients

Monday, May 19, 2008

Answering Mr. Thava briefly

Saturday, May 17, 2008

Answering more comments

More Questions on Seven M Management

Thursday, May 15, 2008

More about myself and answering recent comments

Tuesday, May 13, 2008

Succession at the NLFCS and its Future

Sunday, May 11, 2008

TSS and the 43.5m shares he owns in Premium Nutrients BHD

Wednesday, May 7, 2008

Page 53 - latest annual accounts 31-12-07

Reform-NLFCS

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Thursday, May 29, 2008

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Thursday, May 22, 2008

Wednesday, May 21, 2008

Monday, May 19, 2008

Saturday, May 17, 2008

Thursday, May 15, 2008

Tuesday, May 13, 2008

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Wednesday, May 7, 2008

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