Published May 25, 2009

Well-governed S-chips urged to speak up for themselves

They will benefit as investors gain confidence to buy into their stocks

By LYNETTE KHOO

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WELL-GOVERNED S-chips should stand up and speak up, say participants of a roundtable last Friday.

For one, there could be negative assurance of pledged shares, said Associate Professor Mak Yuen Teen, co-director at NUS Corporate Governance & Financial Reporting Centre (CGFRC).

'If they have no pledged shares or loan covenant linked to a change of control, they should tell the market,' he said.

Assoc Prof Mak was addressing participants at the roundtable discussion 'Will the well-governed S-chips please stand up?' last Friday, jointly organised by CGFRC and The Business Times.

Some S-chips have run into trouble and the negative fallout has spread to other Chinese listings as investors spurn the whole cluster.

To help investors separate the good from the bad, companies should 'step up, show and tell' instead of lying low, said Elaine Lim, managing director of Citigate Dewe Rogerson I.MAGE.

Some S-chips are trying to do just that. Yangzijiang Shipbuilding chief financial officer Liu Hua told BT that the group has started conducting quarterly results briefing since the third quarter of last year, with the China-based management coming to Singapore to meet with investors and analysts.

The experience was positive - media and analyst coverage on the group increased as a result, which in turn boosted its share price performance.

Yangzijiang also recently participated in the QDII Funds Conference co-organised by Financial PR and Taifook Securities in Hong Kong.

Ms Liu added that driving home the message of how good governance can benefit companies is more effective than further regulatory tightening, which may not deter a management bent on doing wrong.

As the Chinese saying goes, shang you zheng ce, xia you dui ce, which means that for every measure from the top, there will be a counter-measure at the bottom, said the bilingual CFO.

'We should be educating the Chinese companies on how good corporate governance could benefit them.'

'This would give investors confidence to buy into their stocks, so that would actually benefit controlling shareholders as they are holding most of the shares, and their wealth can be increased accordingly,' she said.

'This would make the controlling shareholder who is also the CEO or chairman of the company more proactive in managing it (corporate governance) instead of just fulfilling the legal obligations.' she added.

Yangzijiang has sought to be more transparent and timely in its disclosures.

Last week, it announced the delivery of 11 vessels year-to-date, in line with its vessel delivery schedule.

The group, with Ren Yuanlin as executive chairman and controlling shareholder with a 29.23 per cent stake, is also trying to regain the status of a Straits Times Index stock.

China Sunsine chief financial officer Koh Choon Kong told BT after the roundtable discussion that he took home some pointers on how to enhance investor relations.

'We have already been proactive on the investor relations front,' he said.

Being a Singaporean and based locally, Mr Koh conducts quarterly results briefings and meet with analysts regularly.

The group may look deeper into the Governance and Transparency Index launched by The Business Times and CGFRC and consider how it could improve its ranking, he added.

It is currently in the 140th place among 676 listed companies.

Mr Koh said he is still waiting for the Chinese version of the Audit Committee guidebook published last October by regulators here so that he could brief the group's largely Mandarin-speaking board and management.