By Mak Yuen Teen
I had previously written several articles where I made reference to the track record of Low Beng Tin, the chairman of Datapulse Technology, who is one of the directors proposed for removal by requisitioning shareholders at the EGM on April 20. I had explained why I support the removal of Mr Low as director and chairman (and the removal of the other directors).
For example, Mr Low made wrong disclosures about regulatory actions by SGX and MAS against China Yongsheng, where he was the lead independent director, when he was appointed to the boards of Datapulse, Fuji Offset Manufacturing and Lian Beng. He also provided the wrong answer to the question as to whether there had been a petition for winding-up against any company he had been a director of, for the relevant period covered in the announcement template, when he was appointed to the boards of Datapulse and Fuji Offset (it did not apply in the case of Lian Beng because he joined that board before the winding-up petition was filed).
Whether Mr Low himself made the incorrect disclosures or he relied on others to complete the appointment template for him is, in my view, irrelevant because as a director, he is ultimately responsible. This was made clear by SGX in the case involving Singapore Post (SingPost).
In that case, SingPost had made an incorrect disclosure that no director had an interest in a transaction. After it discovered the mistake, the company, with advice from an external lawyer, decided that no announcement to correct the error was necessary. This was not surfaced to the board. The company only issued the “clarification announcement”, attributing it to an “administrative oversight”, after I had pointed out the incorrect disclosure. SGX did not accept the explanation and reprimanded the company.
SGX said the following: “The board of a company is ultimately responsible for the announcements made by the company and must not abdicate its responsibility to any professionals especially where matters under consideration are not subjective but factual in nature…A company and its board must exercise due care in drafting, reviewing and approving SGXNET announcements. Any error must be promptly escalated to the board’s attention for its deliberation and decision.”
In this case, the incorrect disclosures relate to matters which are factual in nature. The responsibility for the incorrect disclosures, which relate to Mr Low personally, and not to the company, must rest with Mr Low. It would not be reasonable to expect the companies to do the kind of checking that I was doing about disclosures made by directors. The incorrect disclosures remained uncorrected for periods of up to more than two years. Further, when Mr Low was appointed to the Datapulse board, the board said that it was of the view that “Mr Low, being an independent director of several other listed companies, is well versed with listing compliance and corporate governance matters and will be able to contribute to the Board in his role”. With such experience, he should have known the requirement to make accurate disclosures.
Given the reprimand meted out by SGX in the case of SingPost, one would expect that the multiple incorrect disclosures made by Mr Low would likewise attract sanction.
In my earlier articles, I also urged shareholders to consider Mr Low’s track record as a director in the companies that he had been associated with. Other than Datapulse, the SGX-listed companies where he is currently a director are Cosmosteel, Lian Beng and Fuji Offset (he has resigned from China Yongsheng which had attracted the regulatory sanctions). Mr Low was also the founder of OEL Holdings, previously called Oakwell Engineering. Let me reiterate and expand on what has happened in these companies.
In the case of Cosmosteel, Mr Low has been a director since November 2005 and is its independent chairman. Cosmosteel entered the SGX watchlist in June 2017 due to the MTP criteria. In December 2017, it announced that it has made three consecutive years’ of losses. Therefore, it is facing a potential mandatory delisting.
Mr Low joined Lian Beng’s board as an independent director in July 2015, after two independent directors had resigned in a very public dispute with management/controlling shareholders over the remuneration of the executive directors. I published a commentary on the issues relating to the dispute (“Performance bonus may just be the tip of the iceberg,” Business Times, August 25, 2015). Mr Low chairs the nominating and audit committees and is a member of the remuneration committee.
After Mr Low and another new independent director replaced the directors who resigned, Lian Beng’s remuneration continued to be questioned by the Securities Investors Association (Singapore) (SIAS) in its Q&A on annual reports, which also asked questions on other areas. In the area of remuneration, in September 2016, SIAS asked why the remuneration of the directors had increased by 21 percent, from $9.78 million in 2015 to $11.86 million in 2016, even though the group’s net profit had fallen by 20 percent and its profit attributable to shareholders had dropped by 5 percent. The disconnect between profit and remuneration needed explanation because bonus/profit-sharing constitutes a significant part of the remuneration of the executive directors. In September 2017, SIAS again asked several questions. On remuneration, this time it asked why the remuneration of the top eight key executives (excluding the CEO and directors) had only dropped by 1.3 percent when revenues and profit attributable to shareholders had dropped by 37 percent and 48 percent respectively. A number of family members of Lian Beng’s controlling shareholder are among the eight key executives.
What was Lian Beng’s responses to those questions? Nothing. It did not respond at all. Lian Beng is no paragon of corporate governance and communication with shareholders, and remuneration of its executive directors and key management remains a concern, after Mr Low joined as an independent director.
In the case of Fuji Offset, Mr Low joined the board on May 3, 2017, replacing another independent director who had resigned for “health reasons” that day. The controlling shareholder and chairman of Fuji Offset was listed as one of the top 20 shareholders in Datapulse’s 2016 annual report, owning just over 1 percent of Datapulse’s shares. In the 2017 annual report, his stake had increased to about 1.4 percent as of October 9, 2017. It is unclear if he was one of those who sold his shares to Ms Ng Siew Hong.
Fuji’s latest unaudited full year results for the year ended December 31, 2017 shows a loss from continuing operations of $1.08 million, down from a profit of $69,000 in the previous year, while the loss including discontinued operations was $1.23 million, down from a profit of $29,000 the previous year. Tough times may be ahead there it seems. Since Mr Low only joined the board on May 3, 2017, it remains to be seen whether Mr Low would be able to help create shareholder value there.
However, perhaps the company that is most relevant in assessing Mr Low’s performance track record is OEL Holdings. OEL, previously called Oakwell Engineering, is listed on Catalist. Mr Low was founder and director of OEL from September 1984 and became chairman and managing director in July 1992. He relinquished his chairman and managing director role in March 2016, became an executive director, before resigning from the board in October 2016.
I was only able to access the annual reports of Oakwell/OEL online from FY2011 onwards. Based on these, it appears that performance had a turn for the worse from FY2011, when its profit fell by nearly half from $3.7 million in FY2010 to $1.9 million in FY2011 and its cash flows from operating activities went from positive $34 million to negative $34 million. In FY2012, Oakwell reported a net loss of $29 million, although cash flows from operating activities returned to positive territory of $3 million.
In October 2013, Oakwell held an EGM to dispose of its distribution business and renamed itself as OEL Holdings. The distribution business that it sold made up the bulk of its business – the net asset value of the assets disposed was equal to 92.4 percent of the total net asset value of the group. The base consideration was $70 million.
What did OEL do after the disposal of the bulk of its business? In its 2014 annual report, it said “the Group continued seeking strategic opportunities to inject a new business that could generate and enhance long-term shareholder value.” It attempted to diversify into the oil and gas business. Things went further downhill. The cash balance for the group fell from $24.5 million to $6.2 million between FY2013 and FY2014, then to $1.5 million in FY2015 and down to just $245,000 for FY2016. Between FY2014 and FY2016, the external auditor included an emphasis of matter highlighting material uncertainties that may cast doubt on the company’s and group’s ability to continue as a going concern, although it did not modify its opinion. In other words, rather than enhancing shareholder value, OEL was fighting for survival. On March 23, 2018, OEL announced that the auditor has now included a qualified opinion and a material uncertainty relating to going concern in its report for FY2017.
Therefore, Mr Low was chairman and managing director at OEL as its performance deteriorated markedly. At the same time, he was serving on several other boards as an independent director, most of which have corporate governance or performance issues.
Datapulse shareholders should reflect on the following: Do they have any confidence that Mr Low would be able to lead the Datapulse board in improving its corporate governance and increasing shareholder value, given his track record? The other three directors of Datapulse, including two independent directors, all with no prior experience as listed company directors and no background in the new business that Datapulse is diversifying into, will now be led by him as the company embarks on its diversification into new businesses. I would much rather have a different, more experienced and proven board leading Datapulse in any diversification strategy.
The current board has questioned the suitability of some of the proposed directors. It is rather ironic given the experience and track record of the current board, and with a chairman who could not even make the correct disclosures as required by the listing rules. Having said that, I had previously written that few directors would put themselves forward in the situation that Datapulse finds itself in, where requisitioning shareholders are trying to remove the existing directors and appoint new ones. It is too confrontational for most directors. Therefore, the proposed slate of directors may also not necessarily be what is best for the company going forward. But between the current board and the proposed slate, there is no comparison.
I believe if the requisitioning shareholders are successful in removing the current directors and appointing the proposed directors, the new directors should review the board composition to ensure that they have the best people possible to take the company forward. This may mean some of these newly appointed directors relinquishing their positions rather quickly to make way for a fully functional and effective board. They would then be truly acting in the best interest of the company and all shareholders.
