Another short selling victim

From Star biz 30 August 2015:

SELF-MADE bil­lion­aire Goh Peng Ooi was in the news in the past week for the wrong rea­sons. Goh and his Sin­ga­pore Stock Ex­change-listed soft­ware so­lu­tions com­pany, Sil­ver­lake Axis Ltd, were ac­cused of shady deals that in­flated the lat­ter’s earn­ings in a re­port that was re­leased on the night of Aug 20.

By mid­day of the fol­low­ing day, the report, titled “The Unbelievable Financial Alchemy of Silverlake Axis”, had done its damage. According to the Singapore Business Times, the report had made the rounds of the broking houses and caused the company’s share price to fall as much as 27% in intraday trade on Aug 21. It prompted the stock exchange to query the company over the unusual share price movement.

Silverlake Axis then asked for a halt on trading of its shares. Last Tues­day, fol­low­ing the lifting of the two day trading halt, its share price tumbled further and closed at the lowest since late February 2013. Although the share price has since recovered, it closed at 56 Singapore cents yesterday, still below the 63.5 Sin­ga­pore cents it was trading at on Aug 21 prior to the halt.

The 42-page report, authored by “razor99”, brazenly admits that it “may have short positions in Silverlake Axis” and could realise gains in the event that the share price decreases. It did not help that the company took some time to respond to the report’s allegations, with a statement from group managing director Kwong Yong Sin available only at midnight of Aug 25.

Goh, 61, the founder and executive chairman of Silverlake Axis, has learned a lesson from this episode. He is taking the criticism in his stride and soldiering on, in research, where his passion and interest lies.

“My character is more academic and I don’t care what others think about me. But I do take people’s criticism as an education process,” he says.

And it looks like the market is giving him the benefit of the doubt. On Aug 27, RHB Research upgraded the stock to a “buy” from “neutral” previously, with a target price of 58 Singapore cents. UOB Kay Hian maintained a “hold” call, with a target price of 66 Singapore cents. For the record, the razor99 report has a 29 Singapore cent target price on the stock.

Goh pointed out that the lines of responsibility are clear within the company as the board has control over its running while he concentrates on research. He feels that it is his responsibility as a supplier and majority shareholder to develop software.

Meeting him earlier in the year, one can understand his interest in research, especially in game theory. The well-read Goh, who has a penchant for spewing a bewildering array of mathematical formulae in a conversation, is convinced that the future lies in game theory and its use to predict changes.

He jokes often about how his lieutenants prefer for him not to meet clients or fund managers, for a conversation with him can be “torturous”, as he told StarBiz Week back in April. Goh says game theory can be used to predict the changes that can affect businesses.

His preoccupation with research has resulted in a theory which he calls the Goh Mathematical Intelligence game theory or Goh-MI for short. It is not out of hubris that the self deprecating lad from a kampung that is now part of Butterworth names the theory after himself. He says that this theory goes beyond the Nash Equilbrium, a theory that itself goes beyond the zero-sum game of game theory. A lot of other top mathematicians are working on the idea.

For the man until recently, was largely unknown to the public, as he does not appear in the society pages. But Goh himself notes that after Forbes named him as the ninth richest Malaysian this year with a net worth of US$1.6bil (RM6.7bil), the media started to knock on his door to ask for interviews. He owns 66.56% stake in Silverlake Axis through Intelligentsia Holding Ltd and is known as Malaysia’s first tech billionaire.

Still, Goh says the company will hire a third-party consultant and engage with Singaporean stock exchange regulators to explain the company’s side of the story. To assuage the concerns of shareholders, the company has appointed Deloitte Singapore on Aug 25 to undertake an independent review of the allegations made by “razor99”. The findings and conclusions will be published in due course.

Goh says “everything is in order” despite the extensive related-party transactions that the report accuses him, through private companies known collectively as the Silverlake group, and Silverlake Axis of conducting, which lacked clarity. The report says there are numerous red flags and ample evidence suggesting that Goh has used these related-party transactions to inflate Silverlake Axis’ reported results.

However, Goh has refuted the allegations by saying that while the structure of the private companies was complex, due to the nature of its business and the history behind it, all rules and regulations have been followed and that the listed Silverlake Axis has made proper disclosure in the corporate exercises it undertakes.

He adds that as a MSC status company, Silverlake Axis has to
ensure that its accounts are proper and in order as failure to do so will incur a big penalty such as the loss of tax breaks as a MSC status company.

Goh says most of the profit is paid out as dividend. He says if the company posts just a paper or inflated profit, it will not be able to pay out such a quantum of dividends in cash.

On Monday, the company released its fourth quarter ended June 30 and full year earnings. Compared to the previous corresponding quarter, net profit was flat while revenue for the quarter slipped owing to lower contributions from software licensing, the sale of software and hardware products, and credit and cards processing.

True value pre­vails in the longer term

Finally the truth value prevailed for another victim of the SGX market...


"The com­pany which sup­plies food and in­dus­trial raw ma­te­ri­als to over 13,800 cus­tomers glob­ally was tar­geted by Muddy Waters Re­search which had al­leged ac­count­ing mis­con­duct in the firm via a 133-page re­port back in Novem­ber 2012."

"Muddy Waters, set up by prom­i­nent US short seller Car­son Block, who found fame from his al­le­ga­tions of fraud­u­lent ac­count­ing prac­tices at Chi­nese firms, had said in the re­port that Olam could po­ten­tially fail as a re­sult of its mis­con­duct but Olam had fought back say­ing that it will clear its name and hold Muddy Waters ac­count­able for its al­le­ga­tions."

"Look­ing at how Olam has per­formed, the only way to counter the short sell­ers is to see that true value pre­vails in the longer term."

Excerpt from Star Biz.

Victim of his meteoric rise

Focus Malaysia issue 143, 29 August 2015

ALMOST everyone in the local information technology (IT) circle speaks highly of Goh Peng Ooi, the founder and group executive chairman of Silverlake Axis Ltd. In fact, he is regarded as a torchbearer 

for the local IT industry where the number of homegrown software firms which have become successful internationally can be counted on the fingers of one hand. 

Goh is considered by many as Malaysia’s first tech billionaire, having started his career at IBM in the 1980s. Industry estimates Silverlake Axis provides financial software to about half the banks in South-

east Asia. Educated in Tokyo, he started off studying nuclear physics but later switched to electrical engineering.

Goh, 61, is listed in the Forbes Malaysia rich list with an estimated net worth of US$1.55 bil (RM6.5 bil). As of September last year, his wholly-owned company Intelligentsia Holding Ltd owned a 66.4% 

stake in Silverlake. Coupled with his immense wealth, some industry players say the release of the anonymous report “The Unbelievable Financial Alchemy of Silverlake Axis” may in fact be a personal attack on Goh. 

“Goh, being the poster boy of the industry, may be a victim of his success unfortunately,” says an IT official....

Silver opportunity – upgrade to BUY

RHB Research report published on 27 Aug 2015 recommended a BUY:

FY15 was disappointing and we lower our FY16F earnings by 6.7%, to
account for higher administration expenses and lower licensing and
project sales; management is also refuting all allegations and is hiring
Deloitte to undertake an independent review on Silverlake and related
private entities. Sentiments aside and solely based on valuations we
think the current price levels look attractive and upgrade to BUY based
on a conservative 14x FY16F P/E TP of SGD0.58.

* Disappointing FY15 (Jun). FY15 revenue and NPAT grew by 3% and
14% YoY to MYR337m and MYR282.7m respectively. Revenue growth
was lower mainly due to the smaller hardware sales as compared to
FY14. However, mainly due an increase in administrative expense and a
MYR19.2m accounting gain on dilution of interest in an associate in
China following its IPO, recurring NPAT only grew by 7% YoY.

* Engaging Deloitte to undertake an independent review. Management
has refuted all adverse allegations in a short-seller’s report, stating that
the claims were baseless and without merit. Silverlake Axis (Silverlake)
also reinforced the fact that these related party acquisitions have
benefited the company with net profit, cash flow, DPS and market cap
growth. Management is also engaging Deloitte Singapore to undertake
an independent review of the allegations concerning the related party
transactions and Silverlake-related private entities as well as the
associated profit margins referred in the report.

* Silver opportunity – upgrade to BUY. The share price has collapsed
by >50% in the last few weeks and we think that – solely based on
fundamentals with sentiments aside – this is an opportunity to
accumulate Silverlake’s shares at an attractive level. We have already
conservatively cut our FY16/FY17 licensing and project services sales to
MYR220m due to a lack of new contracts, resulting in our recurring
NPAT to only grow by 5.2% in FY16. However, at the current price
levels, the stock is only trading at 11.1x FY16 P/E coupled with a
potential >8% yield. Silverlake’s core banking solutions offerings can be
verified as they are currently being used by first-tier Singaporean,
Malaysian and Indonesian banks. As such, we upgrade our call to BUY
based on a conservative 14x FY16F P/E which results in a TP of
SGD0.58.

Noble saga = Silverlake saga?

A comment from http://www.sharejunction.com/

"It was previously posted that Noble saga = Silverlake saga. Just like to note that Noble is shorted by Muddywaters (an esteem short seller). Silverlake is shorted by razer99 who is a ? what / who / he   /she / dog / mouse / cat? Absolutely no idea.

Also shows how easy to create an id with the same name. And the impact of anonymous  report on a sell down market.

By the way, I am not disputing the claims and evidence shown in the report but at least have some accountability on the author' s part.

Even Amos Yee went to jail for posting his views and is still doing so to express his dis interest. By the way again, not supporting Amos but there is some truth to his insights."

Post from http://www.sharejunction.com/sharejunction/listMessage.htm?topicId=12627

Sil­ver­lake Seek­ing Le­gal Ad­vice On Libelous "Investing" Report

The Star, 27 Aug 2015

PETALING JAYA: Shares in Sin­ga­pore-listed Sil­ver­lake Axis Ltd tum­bled 17.5 Sin­ga­pore cents to 46 Sin­ga­pore cents, the com­pany’s low­est since Fe­bru­ary 2013, af­ter a two-day trad­ing halt as in­vestors re­mained con­cerned over al­le­ga­tions made by an anony­mous re­port re­leased last Thurs­day.

The soft­ware so­lu­tions provider noted that its share price had ex­pe­ri­enced a sig­nif­i­cant fluc­tu­a­tion on Aug 21, lead­ing to a query from the Sin­ga­pore Stock Ex­change and to the com­pany re­quest­ing a halt in the trad­ing of its shares. The pur­pose of the halt was to al­low the com­pany time to in­ves­ti­gate the mat­ter and pre­pare a re­sponse.

“The com­pany be­lieves this fluc­tu­a­tion is linked to a re­port en­ti­tled ‘ The Un­be­liev­able Fi­nan­cial Alchemy of Sil­ver­lake Axis’, which was dis­sem­i­nated on­line, on or about Aug 20, and which was sub­se­quently also picked up by and re­ported on in var­i­ous lo­cal news­pa­pers,” Sil­ver­lake group man­ag­ing di­rec­tor Kwong Yong Sin said in a state­ment dated Aug 25.

The com­pany as­sured its cus­tomers and busi­ness part­ners that the com­pany had, since its list­ingin 2003, “al­ways op­er­ated its busi­ness in a trans­par­ent man­ner andin full com­pli­ance with all ap­pli­ca­ble statu­tory and list­ing re­quire­ments”.

In the state­ment, Sil­ver­lake said that the thrust of the re­port con­cerned past re­lated-party trans­ac­tions en­tered into be­tween the group and pri­vate com­pa­nies (Sil­ver­lake Pri­vate En­ti­ties), con­trolled by the com­pany’s con­trol­ling share­holder, Goh Peng Ooi, in par­tic­u­lar, the group’s ac­qui­si­tion of Sil­ver lake Adap­tive Ap­pli­ca­tions & Con­tin­u­ous Im­prove­ment Ser­vices Ltd, go­ing as far back as 2006, as well as its ac­qui­si­tion of the struc­tured ser­vices busi­ness and the QR Group, in 2010, and goes on to al­lude to some al­leged im­pro­pri­ety or wrong­do­ing on the part of the com­pany and or Goh in con­nec­tion with these trans­ac­tions.

The com­pany opined that the au­thors of the re­port may have short po­si­tions in Sil­ver­lake and stood to re­alise gains in the event that the price of the stock de­creases.

“The board of di­rec­tors of the com­pany firstly note that the au­thor(s) of the re­port have cho­sen to con­ceal their iden­tity, whilsthav­ing no qualms about openlyre­veal­ing their real mo­ti­va­tion inis­su­ing the re­port, ie, by ex­presslyad­mit­ting that they ‘may haveshort po­si­tions in Sil­ver­lake AxisLtd and stand to re­alise gains in the event that the price of the stock de­creases’,” Kwong said.

He said Sil­ver­lake’s board, in­clud­ing its in­de­pen­dent di­rec­tors, was unan­i­mously of the view that the ad­verse al­le­ga­tions in the re­port were com­pletely “base­less and with­out merit”.

“The board would also like to re­it­er­ate that, since its list­ing, the com­pany’s fi­nan­cial state­ments and ac­count­ing poli­cies have strictly fol­lowed and ad­hered to the Sin­ga­pore Fi­nan­cial Re­port­ing Stan­dards up to and in­clud­ing the year ended June 30, 2011, and sub­se­quently to the In­ter­na­tional 2 Fi­nan­cial Re­port­ing Stan­dards, and have been sub­ject to an­nual au­dits by rep­utable in­de­pen­dent au­di­tors, whose re­ports have been is­sued with­out any qual­i­fi­ca­tion,” it pointed out.

Con­cur­rently, Sil­ver­lake said it was seek­ing le­gal ad­vice and viewed the mat­ter se­ri­ously. It would be in­ves­ti­gat­ing the source of the re­port and take ac­tions nec­es­sary to pro­tect and de­fend its in­ter­ests.

The com­pany will pro­vide up­dates on this when ap­pro­pri­ate.

Foolish Investing Reports Aimed to Destruct Value Company

Excerpt from Motley Fool website: 

"Over the past few years, it seems that companies in Singapore’s stock market have been an attractive target for market participants who publish negative investing reports..."

"...Silverlake Axis, whose technological products, systems, and solutions serve many major financial institutions in the Southeast Asia region, is one of the most successful software companies that Malaysia has produced.... From the fiscal year ended 30 June 2005 (FY2005) to FY2015, Silverlake Axis has seen its revenue and profit jump five- and four-fold respectively. "

"...an investing report was published on 20 August 2015 in which the writer, who “may” be short Silverlake Axis’s shares (when you’re short, you’re betting that the price of a stock will fall), has likened Silverlake Axis to high-profile fraud cases in the past involving software companies like Longtop Financial from China and Satyam Computer Services from India. It’s a serious accusation..."

"...it will be surprising if Silverlake Axis does not take action against the writer and others who may be involved with the report. In a statement filed with bourse operator and regulator Singapore Exchange yesterday, Silverlake Axis mentioned that it’s currently seeking legal advice on the matter."

"...The company also commented in the same filing that it “will be engaging Deloitte Singapore to undertake an independent review of the allegations… referred to in the Report and to provide its finding and conclusions as to their veracity, which [Silverlake Axis] will publish in due course.”

Full Report here https://www.fool.sg/2015/08/26/making-sense-of-the-recent-short-attack-against-silverlake-axis-ltd/

The report from razor99 is completely baseless and without merit.

Statement from Silverlake Axis:

Silverlake Axis Ltd’s (“Company”, together with its subsidiaries, “Group”) share price experienced a significant fluctuation on 21 August 2015, leading to a query from the Singapore Exchange as to the reasons for this fluctuation and to the Company requesting a halt on the trading of its shares on 21 August 2015. The purpose of the halt was to allow the Company time to investigate the matter and prepare its response.

The Company believes this fluctuation was linked to a report entitled “The Unbelievable Financial Alchemy of Silverlake Axis” (“Report”), which was disseminated online, on or about 20 August 2015, and which was subsequently also picked up by and reported on in various local newspapers. 

The thrust of the Report concerns past related party transactions entered into between the Group and private companies (“Silverlake Private Entities”), controlled by the Company’s controlling shareholder, Mr Goh Peng Ooi (“GPO”), in particular, the Group’s acquisition of Silverlake Adaptive Applications & Continuous Improvement Services Ltd (“SAACIS”), going as far back as 2006, as well as its acquisition of the structured services business (“SSB”) and the QR Group, going as far back as 2010, and goes on to allude to some alleged impropriety or wrongdoing on the part of the Company and/or GPO in connection with these transactions. 

As announced by the Company, on the Singapore Exchange today, the Board of Directors of the Company (“Board”) firstly notes that the author(s) of the Report have chosen to conceal their identity, whilst having no qualms in openly revealing their real motivation in issuing the Report, i.e. by expressly admitting that they “may have short positions in Silverlake Axis Ltd and stand to realize gains in the event that the price of the stock decreases”. 

At its core, the Report purports to suggest that the Group’s whole business model is a sham and merely being buoyed up by fictitious or contrived related party transactions. Having reviewed the adverse allegations in the Report, the Board, including its Independent Directors, are unanimously of the view that these adverse allegations are completely baseless and without merit. 

The Board wishes to assure the Customers and Business Partners of the Company that the Company has, since its listing in 2003, always operated its business in a transparent manner and in full compliance with all applicable statutory and listing requirements. 

In particular, careful attention has been given throughout the years to ensuring that all related party transactions entered into between the Company and the Silverlake Private Entities are either subject to specific prior Shareholders’ approval or are undertaken strictly in line with the parameters of the previously approved Shareholders’ mandates for recurring interested person transactions. For related party acquisitions, they are supported in each case by a report from an independent financial adviser and further subject to the approval of the minority Shareholders of the Company, i.e. all as prescribed by the Singapore Exchange Listing Rules.

The Board would also like to reiterate that, since its listing, the Company’s financial statements and accounting policies have strictly followed and adhered to the Singapore Financial Reporting Standards up to and including the year ended 30 June 2011 and subsequently to the International Financial Reporting Standards and have been subject to annual audits by reputable independent auditors, whose reports have been issued without any qualification.

As highlighted in the Company’s announcement today, the Board is confident that the results of the Company’s performance over the years speak for themselves as to the baselessness of the adverse allegations in the Report. 

What is patently evident from these results is that the related party transactions involving the acquisition of SAACIS, SSB and the QR Group, together with the Group’s other acquisitions, have all served to synergistically broaden and deepen the Group’s available suite of software and services and have led to significant improvements in the Group’s overall financial performance and cash flow. 

Having considered the matter, including the author(s)’ declared motivation in issuing the Report, the Board has decided not to dignify the Report by preparing its own point-by-point rebuttal. Notwithstanding, to provide additional comfort to Shareholders of the Company, the Company will be engaging Deloitte Singapore, as an independent third party, to undertake an independent review of the allegations concerning the related party transactions entered into between the Company and the Silverlake Private Entities and the associated profit margins as referred to in the Report and to provide its findings and conclusions as to their veracity, which the Company will publish in due course.

Concurrently, the Company is seeking legal advice and wishes to highlight that it views this matter most seriously and will be strenuously investigating the source of the Report and taking all such action as may be necessary to fully protect and defend its interests. The Company will provide further updates on this, when appropriate. 

In the meantime, the Company wishes to assure all of its Customers and Business Partners that its business operations and customer engagements are proceeding as per normal, with no impact to the Group’s customer service delivery, and that it will continue to focus its efforts on growing its business and increasing value for its Shareholders. The Company will provide an update on further developments in the matter as applicable.

Com­pany’s cash­flow proves profit is real

Goh: ‘Every­thing is in or­der. The com­pany has been grow­ing since the as­sets were in­jected.’

The Star Biz, 26 Aug 2015

KUALA LUMPUR: Malaysian bil­lion­aire Goh Peng Ooi said the board of Sil­ver­lake Axis Ltd has de­lib­er­ated over the is­sues raised in an anony­mous blog and found no is­sue with the tech com­pany’s ac­counts.

He said Sil­ver­lake has en­gaged the Sin­ga­pore Stock Ex­change (SGX) to ex­plain its side of the story and will hire a third-party con­sul­tant to go through the data again.

“Every­thing is in or­der. Thecom­pany has been grow­ing sincethe as­sets were in­jected,” he toldStarBiz yes­ter­day. Goh, with a 67%stake in Sil­ver­lake, is the founder and group ex­ec­u­tive chair­man ofthe com­pany. Sil­ver­lake shares, listed on SGX, tum­bled 24% on Fri­day to 63.5 cents af­ter a 42-page re­port en­ti­tled “The Un­be­liev­able Fi­nan­cial Alchemy of Sil­ver­lake Axis” and au­thored by “ra­zor99” was re­leased on Thurs­day night. Sil­ver­lake’s stock has been vol­un­tar­ily sus­pended from trad­ing as of yes­ter­day.

The re­port placed a 29-cent tar­get on Sil­ver­lake shares, as it al­leges that Goh op­er­ated a large group of com­pa­nies, col­lec­tively known as the Sil­ver­lake group, which en­com­passed a com­plex web of murky, pri­vate com­pa­nies con­nected to the listed en­tity. It said the listed com­pany en­gaged in ex­ten­sive re­lated-party trans­ac­tions with Goh through these pri­vate com­pa­nies, while dis­clo­sure of these trans­ac­tions lacked clar­ity.

The re­port added that therewere nu­mer­ous red flags and am­ple ev­i­dence sug­gest­ing that Gohhas used these re­lated-party trans­ac­tions to in­flate Sil­ver­lake’s re­ported re­sults.
It said the listed com­pany also has loss-mak­ing re­lated par­ties, which em­ploy a large num­ber of Sil­ver­lake group em­ploy­ees.

“Th­ese hid­den en­ti­ties are undis­closed con­tin­gent li­a­bil­i­ties to the listed com­pany.” The re­port said there were large re­lated-party Sil­ver­lake-group pri­vate com­pa­nies that were loss-mak­ing with neg­a­tive share­holder eq­uity. Th­ese com­pa­nies only con­tinue to op­er­ate with an ex­plicit guar­an­tee of fi­nan­cial sup­port from Goh. The re­port noted that these en­ti­ties were known to have on­go­ing re­lated-party trans­ac­tions with the listed com­pany and they have a com­bined cost base al­most as large as the listed com­pany, with al­most as many em­ploy­ees.

The re­port noted that these en­ti­ties were be­ing used to flat­ter the listed com­pany’s prof­itabil­ity, whereas in re­al­ity, they were con­tin­gent li­a­bil­i­ties that should be dis­closed in the an­nual re­port.
Goh dis­puted the al­le­ga­tions and said the struc­ture of Sil­ver­lake group was com­plex, ow­ing to the na­ture of its busi­ness and the his­tory of the com­pany.

He said rules and reg­u­la­tions were fol­lowed and that the group has made proper dis­clo­sure in the cor­po­rate ex­er­cises it un­der­takes. He said that as a MSC-sta­tuscom­pany, Sil­ver­lake had to en­sure that its ac­counts were proper andin or­der. Fail­ure to do so would have meant a big penalty be­ing levied on the com­pany, as it ben­e­fits from tax breaks as a MSC-sta­tus com­pany.

“If you want the tax ex­emp­tion, you must have good ac­count­ing,” he said.

Sil­ver­lake re­leased its full-year fi­nan­cial re­sults on Mon­day.

In its lat­est fi­nan­cial year ended June 30, 2015, Sil­ver­lake posted a net profit of RM 282.7mil.
Goh pointed out that for the year, Sil­ver­lake recorded an op­er­at­ing cash­flow of RM 305.5mil, out of which it paid RM 285.8mil as div­i­dends.

He said if Sil­ver­lake had posted just a pa­per or in­flated profit, the com­pany would not be able to pay out such a quan­tum of div­i­dends in cash.

“We div­i­dend out most of our prof­its,” he said.

Goh said he took the crit­i­cism in his stride, as the lines of re­spon­si­bil­ity were clear within the com­pany.

He said the board of di­rec­tors had con­trol over the run­ning of the com­pany and his pas­sion and in­ter­est were skewed to­wards re­search.

“My char­ac­ter is more aca­demic and I don’t care what oth­ers think about me. But I do take peo­ple’s crit­i­cism as an ed­u­ca­tion process,” he said.

“It’s my re­spon­si­bil­ity as a sup­plier and ma­jor­ity share­holder tode­velop soft­ware. The list­ing sideof the busi­ness is left to theboard.”

Pe­nang-born Goh, 61, made it to the Forbes Malaysia rich list at num­ber nine this year, with an es­ti­mated net worth of US $1.6bil (RM 6.7bil). Although listed on the Main Board of the SGX, Sil­ver­lake is head­quar­tered in Pe­tal­ing Jaya.