SIME slumps and PNB bumps

I was actully debating on selling off the rest of my SIME shares acquired during the financial meltdown in 2008, the week before the announcement on its financial losses of nearly 1bil due to its projects' cost overruns in Bakun and Qatar . The share trading was suspended on Thursday 13 May as I was wondering what had happened and later realised that it could be due to the negative news on its financial performance.  I was a bit late as the stock started to slump.

I was quite happy to receive SIME dividend last week only to face with the decline in my share values. But for the life of me, what I do not understand is why it takes so long to find out about this massive overrun? Has someone been hiding it all this while?  Surely the regular financial meeting and the risk department inputs could have detected this debacle earlier and limit the losses. And  wither the auditors?

It is easy to just remove the CEO but what about the officers who are directly looking after those projects? And what has the board been doing before this? As one of the many share holders I am terribly disappointed with the apparent weak governance of this GLC which is overseeing the wealth of the country. It is as if they just got up one morning and found that their money was gone. Where is the monitoring mechanism which is so critical in any organisation or has complacency set in especially if one is on the job for a very long time?

The government has to balance experience and performance in any individual it appoints to head its revenue-generating companies that is why in some cases a person stays too long at the top for his experience and when this happens, there would be a give and take, and give-me- more- time kind of  attitude. What is more disturbing is when they start recruiting only members of their families to the jobs and not the best talent. Well it is happening in one of the largest GLCs and let us hope the people concerned are aware of what they are doing and be responsible for any misfortune befallen them due to this "pally-pally" attitude.

For us the investors who have not gone out on this cost overrun issue, we hope that better corporate governance be practised and that officers be made more forthcoming in their reporting of problems to the management and more transparency between the management and board of directors. Quite often management tends to be rather hostile against their respective  board as they think the board is interfering with their day to day operations. So the tendency is to keep wrongdoings under wrap till they are too big to handle and too late to remedy.

The decline in SIME share value does not seem to be that worrying though I lost quite a substantial amount on paper so far today. I hope the strong fundamentals will keep this stock well afloat. And yet one of the strongest fundamentals is good governance and this must be maintained at all times. I will have to leave SIME  at some point but I do not want to do so now when it is being battered like this.

I am, at this time, thinking of PNB which is the main shareholder of SIME, I hope the dividend of PNB unit trusts' investors would not be affected too badly. ASD, ASM and AS1M's dividends will be declared in June to September and many are expecting a good income. I am also a PNB unit trusts' investor so looks like a double jeopardy for me.