20 January 2023, Kuala Lumpur, Malaysia: Rapid Synergy Bhd, KLSE: RAPID (7765) Snubs Malaysia Security Commission in a cover-up. YU KUAN CHON, Executive Director and Chairman of Rapid Synergy deceived the Security Commission by failing to reveal that CHAN WENG FUI is a related party and Employee of YU KUAN CHON.
CHAN WENG FUI is and has been a long-time poser for YU KUAN CHON and is employed as IR Director at YNH Property for many years. There is no question that he is a related party and connected person under the Security Commission regulations.
The last 4 (2018 – 2021) Annual Reports of Rapid Synergy’s top 30 Shareholder list show that CHAN WENG FUI has been a long-term holder of Rapid Synergy Bhd ranging from 2% to 14% of the outstanding shares of the company making him a Substantial Shareholder of the company alongside his boss YU KUAN CHON, combined they own at least 40% of the company. If you include the other “official” related parties, this may well bring the group to over 50% of the outstanding shares of Rapid Synergy Bhd.
This is well above the mandatory 33% requirement for YU KUAN CHON and his related parties such as his brother and co-director YU KUAN HUAT to tender a Mandatory Takeover offer to the remaining non-controlling shareholders.
YU KUAN CHON and his inner circle were recently reprimanded and fined by the Securities Commission Malaysia for “Breach of Section 218 (2) of the Capital Markets and Services Act 2007 and Paragraph 4.01(a) of the Rules on Take-overs, Mergers, and Compulsory Acquisitions” by “failure to undertake a mandatory takeover offer on Rapid Synergy Berhad pursuant to the Group increasing their collective shareholdings to above 33% on 29 April 2019.”
In addition to the uncured and ongoing Breach of the Capital Markets Service Act of 2007, YU KUAN CHON deceived investigators when he failed to reveal that CHAN WENG FUI is his Employee, related party, and Person Connected.
Rapid Synergy Bhd should no longer be a listed company. It should be immediately suspended from trading and privatized. It is a front company for the YU Syndicate and exists to serve the YU Syndicate leaving shareholders duped. The shares are mostly traded between related parties, offshore companies of the YU Syndicate, and those under the control of YU KUAN CHON.
The YU Syndicate has pumped the share price up so high that the company now has a P/E ratio of more than 550. That means it will take 550 years to obtain the earnings needed to support the existing value. At times in the recent past, the company’s P/E Ratio has gone beyond 1000. Unheard of in the global marketplace for such a peanut-sized company
Why do they do this you ask? Well, the market cap of Rapid Synergy is a whopping RM 1.7 Billion. These shares are used by the YU Syndicate as collateral for loans and credit lines from unsuspecting banks and financial institutions that are stupid enough to allow shares with a P/E ratio above 100 as collateral.
The Net Tangible Assets (NTA) per share represent the true value of the shares. The 2021 Annual Report shows an NTA of RM1.48. This less the cost of liquidating the assets brings its true value to less than RM 1.00. The share is trading as of 19 January 2023 at a ridiculous RM 16.23. This is on a company with average earnings over the past 4 years of only RM 0.0332/share. That means that the stock is overpriced by more than RM 15/share. If you have this share, it is time to get out and let the YU Syndicate buy it back.
If you are a financial institution and are providing hard assets like cash in return for Rapid Synergy Bhd shares that are 95% hot air, you need to quickly cover your risk and reduce your exposure to below the NTA/Share value. Otherwise, you are going to be left holding an empty bag.
Kenanga Investors Bhd, one of the top security trading firms in Malaysia got wise early. Rapid Synergy Shares held in an unreported trust account for YU KUAN CHON along with share pledge accounts of CHAN WENG FUI were reported terminated in early 2021. YU KUAN CHON transferred more than 10 million shares representing nearly 10% of the company into both the name of CHAN WENG FUI and 2 new proxy pledged accounts at both CIMB Bank and OSK Capital in the name of his trusty IR Manager CHAN WENG FUI.
CIMB Bank and OSK Capital hold 7.8 million shares as of 31 March 2022. At today’s over-inflated share prices, that is valued at RM 126 Million in worthless collateral. Let’s hope that these banks have less exposure than RM 11 million less a healthy margin for protection. If it is more, these loans have no collateral when they default.
This is all in an effort by the YU KUAN CHON to fool the authorities and avoid a mandatory takeover offer. Who would want to buy all the shares of a company trading at RM 16.23 when it is only worth less than RM 1.00? You can safely assume that the YU KUAN CHON would not do something so stupid. Once the company is taken over, the fake RM 1.7 billion in used as bogus collateral for hard cash will disappear. All that is left is a company that makes RM 0.0332/share.
So why does YU KUAN CHON keep buying these shares and going over 33%? It is because no legitimate banker or investor worth a salt would ever touch a share with a P/E ratio of 500 and almost no profits. Most investors would not gamble on any stock with a P/E ratio over 30 unless they were blue chip stocks with great long-term profits and regular dividends.
It is likely that through related parties, those close to YU KUAN CHON that are not declared as related parties, friends, and his proxy undeclared holders control more than 90% of the shares of Rapid Synergy. Maybe even more.
The Malaysian Security Commission is not blind, but yet somehow this has been happening right under the noses of authorities for a long time. Banks have been lending against shares of Rapid Synergy blindly and need to wake up and take a hard look at this collateral before it is too late.
In a search of all announcements both on Bursa Malaysia and on the company’s website. There is no mandatory notice of CHAN WENG FUI becoming a substantial shareholder of Rapid Synergy. How can it be possible that he becomes a significant shareholder without an announcement on public record?
According to Section 136 of the Companies Act 2016, a substantial shareholder is defined as:
A person who has an interest in one or more voting shares in a company and the number or the aggregate number of such shares is not less than 5% of the total number of all the voting shares included in the company;
or Being a company the share capital of which is divided into two or more classes of the shares, if the person has an interest in one or more voting shares included in one of those classes and the number or the aggregate number of such shares is not less than 5% of the aggregate number of the total number of all the voting shares included in that class of shares.
On the occasion of a transaction that changes a shareholder’s status or interest as a substantial shareholder as defined in Sections 137-139 of the Companies Act 2016, the shareholder must use the appropriate form to notify the subject company (in the original) as follows:
- In the case of a company whose shares are quoted on a stock exchange, within three days after the person becomes a substantial shareholder (notwithstanding that the person has ceased to be a substantial shareholder before the expiration of the notice period), acquires or disposes of voting shares, ceases to be a substantial shareholder in the company (Form 29-A); or
- In any other case, within five days after the person becomes a substantial shareholder, acquires or disposes of voting shares, ceases to be a substantial shareholder (Form 29-A);
sending copies of the notification, in each case, to the CCM, per Section 141 of the Companies Act.
While the holder continues to own 5% or more of the voting shares before entering upon a new transaction, reporting is required for each change or cessation of substantial shareholdings within the time frame described above.
All shareholders above 5% are required to make announcements. Simple as that. There are no announcements for CHAN WENG FUI becoming a Substantial Shareholder for existing shareholders to see. Ever.
Directors have a different set of duties in addition to the above duties as Substantial Shareholders should it apply:
The Malaysian Companies Act 2016 imposes a duty on a director to disclose his interest to the board of directors. The provisions are, among others:
Section 219 of the Companies Act 2016, which imposes a general duty on directors to make disclosure of, among others, particulars relating to the shares, debentures, participatory interest, rights, options, and contracts to the company.
Section 221 of the Companies Act 2016, which imposes a duty on a director to disclose his interest to the board of directors (whether directly or indirectly) in a contract or proposed contract as soon as practicable after it comes to the director’s knowledge.
Section 317 of the Capital Markets and Services Act 2007 also imposes the duty of disclosure on the chief executive and director. Unless exempted by the Securities Commission, this section requires the chief executive and director of a listed company who have an interest in the securities to notify the company in writing of their interest and the extent of their interest in the securities.
The purpose of “disclosure” serves to ensure that:
- the board of directors takes note if there is a conflict of interest and/or potential conflict of interest,
- the board of directors is aware of its member’s interest in the matter being discussed during the board meeting and that the decision arrived at is not influenced by views given by the interested director;
- the decision made by the board of directors is in the interest of the company;
- there is transparency in the dealings by the management of the company and moral integrity of those helming the administration of the company; and
- shareholders are fully informed of the actual position of the company.
YU KUAN CHON is a director and substantial shareholder, yet has failed to report any of his trades or that of his many related parties since 18 October 2019. The Annual reports published show clearly that he has traded regularly and repeatedly between the top 30 shareholders and Directors of the company.
After 20+ years of manipulating the markets in order to accumulate unfathomable wealth, the YU Syndicate led by YU KUAN CHON are so brazen as to not even try and hide it anymore.
Public records clearly show that YU KUAN CHON and CHAN WENG FUI are fully connected persons and therefore related parties. Both are substantial shareholders with combined direct shareholding in excess of 33% for a very long time.
In fact, a review of the Annual Reports of Rapid Synergy just over the past 4 years shows significant trading between the Directors and Substantial Shareholders of the company. But somehow, YU KUAN CHON has decided to suspend reporting of trades as required by the Capital Markets and Services Act 2007. How is it he can get away with such an obvious abuse of power?
It is time for action. Those in authority who monitor and police the actions of those in trust of public money must step up and take action. The Minority Shareholder Watchdog needs to protect the shareholders of Rapid Synergy from the YU Syndicate. The Malaysia Security Commission needs to open a formal investigation both on the prior Breach of Section 218 (2) of the Capital Markets and Services Act 2007 and review the submissions for fraudulent misrepresentation and deal with the ongoing breach that remains uncured.
People and organizations that do not act in the best interest of the public should not be allowed to participate in public companies. That is why we have rules to protect minority shareholders. It is time to use those rules and take enforcement actions and protect the financial security of Malaysia and further the interest of the Minority Shareholders of Rapid Synergy.
Information used in this story has been obtained primarily from public and corporate records and inside confidential sources close to the matter. This investigation is ongoing, and the facts and data will lead us to the truth. Stay tuned for more to come in the following weeks.
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