Tuesday, 23 September 2014

Protasco: Conspiracy & Secret Money?

As a new shareholder in Protasco for less than a month, it is shocking for me to learn that Protasco has filed a legal suit against two of its directors, as well as PT ASU.

Protasco sues PT ASU in order to claim back its deposits paid earlier and damages arising from the collapsed Oil & Gas deal. This means that Protasco has real difficulty in getting back the deposits paid, which is RM50mil (RM71.9mil according to CIMB).

The two directors Tey Por Yee & Ooi Kock Aun are non-executive directors. They are major shareholders in Protasco as well, at 17.7% and 3.74% respectively (from Annual report 2013).

Both are them are alleged to have committed conspiracy to defraud Protasco & making secret money out of it!

So, there is an apparent disharmony within Protasco's board. The failure to settle this issue internally might indicate its severity.

Other than the attractive dividend yield, I bought Protasco because I am optimistic of its property & construction arms. I predict that it can potentially post a surprise jump in profit in the next 1-2 years.

It is hard for outsiders to guess what has actually happened in this aborted O&G deal. The credibility and capability of its directors are put to serious test for sure.

How will this legal suit affect Protasco?

Will Protasco's fundamentals seriously affected? I don't think so.

Will the construction progress of DeCentrum & PPA1M affected? I don't think so.

Will it affect its property take-up rate? I don't think so.

Will it affect the award of new contracts from government? I don't think so.

Will it affect student enrollment at IUKL? I don't think so.

Will it affect its overall revenue in FY14? I don't think so.

Will it affect its net profit? Yes, there will be an impairment loss if it can't claim back the deposit. However, I'm not sure in which quarter this will be registered. The amount of RM50mil (or RM71.6mil) is huge!

Will it affect its current cash flow & balance sheet? I think it won't, as cash has already been paid earlier, and impairment loss registered later should be a non-cash item. Anyway, it's still a loss of cash amounting to 15sen (or 21sen) per share.

Will it affect the dividends payout? I think more or less it will. Investors might still get good dividend but it can be better if 15sen (or 21sen) per share is not lost.

Will it claim back the deposit eventually? I don't know, but I think it should be able to do so, though it may take a long time.

Are the management of Protasco credible? I don't know, but this should be the most important aspect for long term investors. There are comments that this O&G deal was not transparent from the beginning. Either the carelessness or dishonesty of directors is to be blamed. Anyway this company is generous enough to give high dividend payout.

All these are just my personal opinion which might not be true.

So, should investors sell at all cost or accumulate at this rare opportunity? Well, as usual, you make your decision at your own risk.


  1. Really wonder how it will turn out ultimately since the stakes TPY and Ooi in the group are so high.

    Since the oil&gas announcement, I always felt that this venture is quite risky. You can see that there is few SPAC out there are still cannot deliver what they promised to do so. Especially indonesia which the policy and rules changed frequently. And what more the return guarantee is just too good to be true.

    However, I still invest in it because of the RM580mils PP1AM and the better performance from its property development. The earning visibility is just too good. Using my 10 fingers to count also able to know that the growth in its net profit this year is quite good. Furthermore, the contribution from the PP1AM will start to be recognised in this coming quarter result.

    It's really a hard decision to make, sell or hold especially when you see something like this, largest shareholder vs second largest shareholder. No piece among the board members.

    The CEO and co founder made a mistake to let them enter the board and kicked out the other co-founder in 2011-2012 time.

    1. I agree with u, I actually trust the MD & founder. Those 2 are introduced to the board just because of the O&G deal. Now they should leave. Protasco is still a good investment with exciting growth, just worry about this uncertainty and negative "Qi".

  2. Bursa D, Are you still holding prtasco or would you sell it?

    1. Hi Jason, I've sold Protasco, but it's not an easy decision.