Friday, November 25, 2011

All That Glitters Is Not Gold

Olympus fans are worried what the financial shenanigans will do to the 92-year-old optical company which gave us the endoscope (also referred to as a fiberscope) and more recently, the micro four thirds technology for the camera buffs. Michael Woodford, ex-CEO and whistle blower, is calling for a shakeup of the corporate (mis)governance which wiped out 80 percent of the company's market capitalization. Can one gai-jin undo the harm that creative book keeping unleashed? And if that doesn't get your knickers in a knickers in a twist, the accountants seem to be busy here too.

Property experts are asking why K-REIT paid Keppel Land $1.57 billion for a 99-year lease of the OFC Building which has 999-year tenure. In a market that has lost most of its sizzle, and a economy that is buffeted by bad news, domestic and international. Keppel won't be asking awkward questions, it will book a net gain of $492.7 million from the transaction. REITs depend on rental income from properties held in its portfolio. When businesses go broke, as they do in a looming recession, the rent will not be paid. You don't have to be a sophisticated investor to appreciate that. You definitely do not want to just "trust the management to do the right thing." Just ask the long serving workers at Olympus. There's only one clue for the K-REIT mystery: "the payoff is better with acquisitions than getting the existing assets to perform."

Which reminds me of the time a property agent, and a blood relative at that, tried to sell us a piece of pricey real estate. On paper, we could make the down payment, and the rent, presumably from expatriates sponsored by Fortune 500 type companies, will "take care of the loan servicing." For 30+ years, we get to see someone enjoy the premises we possess only on paper. The agent gets his fat commission upfront, and won't be around to make sure there is a tenant to make the numbers match. The relative is no longer on talking terms. Which could explain why, no bank officer tried to sell me a Lehman linked investment instrument.


  1. Try telling that to temasek-owned maple tree who recently in july paid $2.4b to purchase HK Festival Walk, only to find out now property prices has fallen between 14-45%. Smart long term investment huh

  2. There will be many questions when the governance is not accountable and transparent. This is expected lah. What can you do except to vote wisely?

  3. If TH is to end up like Olympus, we're no longer talking about scandal, we're talking about crisis of national proportion. Insider stories circulating in the grapevine are being told like horror stories. For people with weak heart, just stick with ST, the truth out there is not for you.