JAS chief gets benefit of the doubt, again

Sit down with anyone investing in the stock market or who has some knowledge about the capital markets and one of the biggest questions that comes up is what’s happening with Jasmine International Plc (JAS).

JAS, a penny stock just a few years ago, today has a market capitalisation of close to 53 billion baht, depending on the stock price which is swinging like a pendulum — mostly on the upside.

The latest swing came after JAS surprised the market with an offer announced by its major shareholder, Pete Bodharamik, to buy all the shares he does not own at 7.25 baht a piece. The offer, if successful, would mean that Mr Pete would have to fork out close to 40 billion baht to finance the takeover.

To facilitate this, one of the country’s largest commercial banks, Siam Commercial Bank (SCB), has offered a credit facility of 45 billion baht. The bank said Mr. Pete’s pledged assets include his shares in the company which are worth 15.6 billion baht at the market price as of yesterday.

It surprises me that a bank such as SCB would come out to play with a person such as Mr Pete.

Mr Pete, although a very smart businessman, has a chequered history. Take the case of the 4G auction in mid-March this year. This same company, JAS, bid up the prices of the 4G auction prompting the auction to close at 75.64 billion baht. The 10MHz bandwidth of the 900MHz spectrum was later acquired by Advanced Info Service Plc in a backroom deal that many investors later questioned.

The paper tiger — the National Broadcasting and Telecommunications Commission (NBTC) — later fined JAS Mobile Broadband, a subsidiary of JAS, a mere 199.43 million baht for its failure to meet the basic obligation of paying 8.04 billion baht as a first instalment for winning a licence in the auction.

Meanwhile, the financier of the deal, SCB, the country’s largest bank with a market capitalisation of just over 516 billion baht, has been gaining trust from investors and depositors.

But the bank has also had its fair share of problems. SCB has taken serious risks over the past few years, especially with Sahaviriya Steel Industries Plc (SSI).

It was one of the largest creditors to the steel maker, and invested close to 49 billion baht to acquire an ailing steel mill in the United Kingdom that later created problems for the company and prompted it to undergo rehabilitation in 2015.

This action was severe enough for the management of the company to be fired, but from discussions I have had with many of the company’s board members, the reason for not going through with the sacking was that “the management had added more value to the company than the losses from the SSI case”.

All this is fine but one tends to forget history, which invariably teaches us many good lessons.

If we turn back the clock to the so called 1997 Tom Yam Kung financial crisis to see how SCB was doing then, a simple search would show that at the time the Bank of Thailand’s Financial Institutions Development Fund had to rescue SCB from insolvency after it had racked up large amounts of non-performing loans.

But that’s all history now. Checks and balances were put in place to solve the bank’s financial woes.

The bank’s market capitalisation is now 14.4% higher than its closest competitor, which is testament to the fact that investors have faith in the bank’s management and operations.

What makes me wonder here though is why the bank is why willing to roll out the red carpet for Mr Pete’s acquisition after all of JAS’s previous shenanigans.

If one takes a look at its track record, JAS was trading at 1.14 baht a share exactly five years ago. That is a 549% rise in its share price over a period of five years compared to a rise in the composite SET Index of just 56.58% over the same period.

There appears to be a lack of information being provided by the company, the creditor and surprisingly the regulators.

I do not know why the regulators at the Stock Exchange of Thailand (SET) and the Securities and Exchange Commission (SEC) are so quiet on this issue.

Is it not the job of these regulators to try to figure out what is happening and how a company, which has been able to push up its share price, firstly by talking up the 4G bid, and now tendering an offer for a possible merger, is allowed to trade without any penalties or warnings?

It surprises me that SCB would come out to play with a person such as Mr Pete.