Introducing 1Malaysia Paint (what else) ….

Little-known loss-making commercial paint maker Sersol Bhd appoints Khazanah exco chairman Nor Mohamed Yakcop’s 32-year-old son Mohamed Ridzuan Nor Md as its managing director. Two days later the firm signs an MOU with the Malay Contractors Association to supply 1Malaysia Paint (Cat1Malaysia) to be used by PKMM members – as Sersol’s share price soars.

Incidentally, Mohamed Ridzuan is believed to be one of three brothers involved with fast cars via the ‘Brothers in Racing’ motorsports team. See here, here and here.

Let’s look at the chronology of events.

28 May 2013

Sersol founder and managing director Tan Fie Ping, who has an indirect/deemed interest of 42 per cent or 80.6m shares, is selling off some of his shares. By 13 September, he has just 25 per cent left. (But who is buying these shares?)

1 July 2013

Erwan Mohd Tahir, 36, who among other positions is the Hon Secretary of Persatuan Kontraktor Melayu Malaysia (PKMM), is appointed as an executive director of Sersol. He has been involved in building construction, highways and painting work since 1997. Among his first jobs: painting the PM’s office, the PM’s residence, KLIA, Sepang F1 Circuit and Suria KLCC. In 2006, he was involved in timber and iron ore concessions in Pahang and Kelantan.

23 July 2013

Bursa Malaysia queries Sersol about possible unusual stock market activity surrounding the sharp rise in price in Sersol securities (see share price rise in July in the chart above).

In particular, it asks Sersol to confirm the following:-

1. whether there is any corporate development relating to your Group’s business and affairs that has not been previously announced that may account for the unusual market activity including those in the stage of negotiation/discussion. If yes, kindly provide the details including status of the corporate development to enable investors to make informed investment decision;
2. whether there is any rumour or report concerning the business and affairs of the Group that may account for the unusual market activity and in this respect, you are required to comply with Paragraphs 9.09 and 9.10 of Bursa Securities LR;
3. whether you are aware of any other possible explanation to account for the unusual market activity; and
4. your compliance with the Bursa Securities LR, in particular Paragraph 9.03 of the Bursa Securities LR on immediate disclosure obligations.

That same day, Sersol responds that it is not aware of anything unusual that may have caused the rise in the share price:

The Board of Directors of SerSol wishes to inform that to the best of their knowledge and after making due enquiry with the Directors and major shareholders, seeking the cause of the unusual market activity in the Company’s shares, is not aware of any factor which may have contributed to the unusual market activity, including the following:-

1) Any corporate development in relation to the Group’s business and affairs that has not been previously announced that may account for the unusual market activity including those in the stage of negotiation/ discussion;
2) Any rumour or report concerning the business and affairs that may account for the unusual market activity; and
3) Any other possible explanation to account for the unusual market activity.

The Company will make the necessary announcement to Bursa Securities of any material information in compliance with Rule 9.03 of the Ace Market Listing Requirements of Bursa Securities on immediate disclosure obligations.

Hmm… nothing to account for the unusual activity, eh? Presumably, Bursa is satisfied with this response.

26 August

Sersol announces a loss before tax of RM716000 for the quarter ended 30 June 2013, a worse result than the loss of RM210000 for the corresponding period in the previous year. The share price continues to rise. But why? Ah, all will be revealed…

2 September

Managing director and substantial shareholder Tan Fie Ping, 51 resigns due to “personal reasons”. A news report says his resignation is due to “health reasons”.

Nor Mohamed Yakcop’s son Ridzuan, 32, who has an M.Sc (Finance) from the University of Plymouth, is appointed the new MD. Shares of Sersol jump 8.5 sen to 81 sen by mid-day.

4 September

Sersol announces that the Company has entered into an MOU with PKMM to supply architectural and/or decorative paint coatings under the brand name of Paint Products Cat1Malaysia (C1M) to PKMM and all their registered members.

PKMM is an extensive umbrella organisation that represents Malay contractors in the construction industry and service sector. Under the MOU, PKMM agrees to “encourage” all its members to buy C1M from Sersol “to be used in all building and construction contracts secured or entered into by PKMM members with the government and private sectors for all the building and construction projects…”

Ridzuan denies that Khazanah will be taking a 10 per cent stake in Sersol.

Meanwhile, Sersol founder Tan Fie Ping says he and his brother, Tan Fie Jen, intend to remain as substantial shareholders of Sersol.

15 September

Sersol’s share price continues to soar. Sersol may be the largest largest publicly-traded commercial paint maker in Malaysia but it has less than 2 per cent of the paints industry market. But this could be significantly increased with half a dozen government projects worth over RM100bn expected to lead to soaring demand for paint – projects such as Klang Valley MRT, Menara Warisan PNB, the Tun Razak Exchange, Matrade Centre, the Pudu Jail redevelopment and the RRI land development at  Sungai Buloh.

Does this mean that such government projects will now have to use 1Malaysia Paint, supplied by a private company (Sersol) via PKMM members?

Welcome to the colours of 1Malaysia Paint. Endless possibilities, easy profits?