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Tuesday, April 22, 2014

The Clueless PM And 1MDB's Nenek Tua Business Model

Do you folks recall Najib Razak launching Syed Mokhtar Bukhary's RM4.0 Billion Burau Bay project on 30 March, 2014? Here is the New Straits Times :


LANGKAWI'S place on the world tourism map is set to strengthen, with an investment from Tradewinds Corporation Bhd (TCB).   The Perdana Quay project, which spans a period of 10 years, will see the emergence of tourism products, such as hotels and property development tagged at a whopping RM4 billion. It was launched by Prime Minister Datuk Seri Najib Razak yesterday.

Well some Arabs are claiming that the Burau Bay project is theirs. The way they are playing it, Syed Mokhtar and Najib are working for them. Here be the news from Arabian Business :


By Andy Sambidge,  Wednesday, 9 April 2014 

Tradewinds Corporation, chaired by Emaar chief Mohamed Alabbar, on Wednesday unveiled the masterplan of its flagship $1.2 billion project Perdana Quay in Langkawi.

Malaysian Prime Minister Najib Razak unveiled the masterplan ..in the presence of Dr Mahathir, Mukhriz Mahathir and Alabbar.

                                                       Mohamed Alabbar

Here is another foreign newspaper (benchmarkdaily.com) writing in the same fashion :
Tradewinds Corporation, the premier leisure and hospitality owner-operator in Malaysia chaired by Mohamed Alabbar and backed by The Albukhary Group, has unveiled the masterplan of its flagship project Perdana Quay, with a gross development value of AED 4.5 billion ($1.2 billion), in Langkawi.

So is Tradewinds an Alabbar company now? And the Burau Bay project is also theirs? The Malaysians are just sidekicks?  Pasal apalah hangpa semua bodoh macam ini? From previous experiences strange things happen when Arabs are involved.

Anyway 1MDB is hitting the headlines for all the wrong reasons again. I have been highlighting 1MDB for five years now - ever since 1MDB was set up under dubious circumstances. It looks like things are getting worse.


For this post, just bear in mind that today's USD / RM exchange rate = RM3.2529 (RM3.25 lah) derived from the Net. 

There are strange and inexplicable things going on at 1MDB.  Firstly 1MDB has changed their auditors three times in FIVE years since 2009.  The latest auditor onboard is Deloitte. The previous auditor KPMG was replaced because according to 1MDB :  "...KPMG could not conclude the accounts".

What the hell does that mean? Why couldnt KPMG 'conclude the accounts'?

Despite not doing any real business 1MDB has also posted profits of hundreds of millions of Ringgit. They achieved this by revaluing their land holdings. Here is The Star :
  
  • 1MDB has revalued its investment properties for three years in a row
  • netting RM2.7bil in revaluation gains 
  • revalue investment property portfolio annually 
  • common for property developers to do so once 3 or 5 years
  • 2013, 1MDB posted huge revaluation gain of RM2.7bil, RM569.9mil in previous year.
This is the nenek tua business model. How can 1MDB enjoy such a high revaluation of their land? Simple. It was obviously sold to them at very cheap rates. If it was sold at full market value, there is no way they can revalue their land every year.
And this is a paper profit. Leopards can never gain stripes. Neither can they lose their spots. There are folks in 1MDB who know about paper profits and paper losses. They have used these tricks before. Malaysians have such short memories. 

The following are very confusing, very poorly written and very poorly edited stories written by The Star. I have tried to decipher them again :

The Management of 1MDB (and their Board of Directors of course) has "invested" US$2.3 Billion in the Cayman Islands. 

Now the Directors of 1MDB say this : "The directors have decided to classify the US$2.3bil (RM7.5 Billion) placed in the Cayman Islands as an “asset for sale” after concluding thatthey were unable to exercise control or significant influence over the SPC managing the money"

Folks, the Board of Directors of 1MDB say they have lost control over RM7.5 Billion of taxpayer guaranteed money. Who the hell are these SPCs that they do not listen to the owners of the funds? 

Shouldnt the BOD of 1MDB resign? You have lost control of RM7.5 Billion of taxpayer guaranteed funds? 

They make an easy statement as if nothing has happened : "they were unable to exercise control or significant influence over the SPC managing the money.."

There is more to this story. Above the Board of Directors sits a Board of Advisors which comprises among others our very own clueless PM and dodos who have caused billions of losses before. Plus a bunch of Arabs. Pasal apa pula selalu bawa masuk pak arab jadi partner? From previous experiences strange things happen when Arabs are involved.

So who calls the shots at 1MDB? The Board of Advisors, the Board of Directors, the Management? Who? And here is the soalan cepu mas, when things go wrong who is answerable? Who ends up carrying the baby?

If 1MDB has placed RM12.0 Billion overseas in the money laundering capital of the Carribean, why still call it 1 Malaysia Development Bhd? Why not rename the company the 'Carribean Investment Blackhole Associates' or Ciba*.  If you want to include the Arabs then it can be Al Ciba*.

Here be The Star's poor reporting on the matter :

  • new auditors of 1MDB highlighted several critical areas in accounts 
  • US$1.58bil (RM4.9bil) meant for TRX placed with overseas investment institutions
  • amount adds to controversial US$2.3bil in Cayman Islands on Sept 12, 2012.
  • total amount 1MDB placed overseas US$3.8bil (RM12bil).
  • board of 1MDB concluded they were not in control of Cayman Islands SPC 
  • decided to put the investments there up for sale. 
  • US$3bil debt issued by 1MDB’s subsidiary, 1MDB Global Investments Ltd (1MGIL) 
  • supported by a letter of comfort from Government of Malaysia.
  • to be used for development of TRX by Abu Dhabi Malaysia Investment Co Ltd 
  • ADMIC is a 50:50 joint venture between 1MGIL and Aabar Investments PJS.
  • Abu Dhabi fund best known for peculiar entry into RHB Capital Bhd in 2011 
  • entry of Aabar group thwarted the efforts of Maybank and CIMB to take over RHB 
  • funds placed while blueprint of the TRX project was being finalised 
  • Deloitte was not engaged to look into 1MDB’s books for 2011 and 2012.
  • Deloitte appointed in December 2013, third accounting firm since inception in 2009
  • first Ernst & Young followed by KPMG 
  • 1MDB appointed Deloitte after contending KPMG could not conclude accounts
Here is other news about 1MDB:

  • 1MDB has placed US$3.8bil (RM12.5bil) in the hands of overseas fund managers
  • first placed US$2.318bil in Cayman Islands on Sept 12, 2012.
  • parked US$1.58bil (RM4.9bil) through an overseas financial institution.
  • part of US$3bil (RM9.9bil) raised, thanks to a ‘letter of comfort’ by the Government.
  • 1MGIL had raised US$3bil as seed capital for Tun Razak Exchange.
  • in the accounts for 2012 the US$2.3bil (RM7.5 b) was classified as an investment.
  • In the latest accounts, it has been classified as an asset ‘available for sale’ with a fair value of RM7.18bil (this is RM270 million short of the RM7.45 Billion that was placed out)1.
  • administrator of the fund had engaged independent third party data providersto determine the value of the underlying assets of the SPC before arriving at its net asset value.
Who is the administrator of the fund? Are Fei Low Associates involved? What in the world is a 'third party data provider'? 

If they cannot determine the value of the RM7.5 Billion investment, does it mean that it is no more worth RM7.5 Billion? 

So what is it worth? RM5.0 Billion? RM3.5 Billion? What is the worth of the RM7.5 Billion investments?

What were these investments? Amanah Saham Nasional? US Govt T Bills? Malaysian Govt Securities? Arab Malaysian Bank Childrens Savings account? Financial Derivatives?  Where was the money invested?

Folks, I think that RM7.5 Billion has gone into somebody's black hole. Some people have become very rich. Maybe they will make another Wall Street movie 'The Wolves of Jalan Melayu'.

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