How Soh Chee Wen planned his come back

After rumours of Soh Chee Wen involved in 3 designated stock in SGX. Blumont Group Ltd, Asiasons Capital Ltd and LionGold Corp Ltd.

There is a lot of traffic come to this blog via search of keyword "Soh Chee Wen". While Soh might be familiar figure in Malaysia. It might not be same for reader in Singapore.  We decided to blog about Soh Chee Wen today.

In 1979, Soh Chee Wen admitted to Universiti Malaya. However, he drop out of University after two weeks as he find passion in direct selling company ( MLM company ). He earn his first millionafter two years.

Dogged by bad publicity after the collapse of his Direct Selling company ( MLM Company ),WW Wings, he decided that getting money to pay off his massive debts would be his number one proiority.

The Batu Pahat born lost everything in 1984 after the recession wiped out of his earlier success and plunged him into debt totalling about RM6million, he remain opitimistic. "My friend Duta Yap have more than 600million debt yet survived. What is 6million" he said.

In a way , he had to because there was nothing else for him to cling to. After dimissing the fact that even a high-paying job would not solve his financial woes, he planned his comeback through other option.

Given that  there were many ailing companies in the wake of the recession, he and his associates decided to use their experience to try to revive them. Soh offered to sort out their troubles and placed classified advertisements in the newspaper with this tempting line - " Is your company in trouble?"

"We had thousands of replies, including from a few public listed companies. Almost everybody was in trouble in those days. that gave a new direction and purpose" he said.

This seemd ironic since Soh too was hit by the recession. He said :" Of course, we didn't highlight our problems. I guess there were some people who were too desperate and believed that we were sincere and committed enough to do it. the point was that they had nothing to lose.

Soh's offer to people in finacial trouble was simple. In return for taking over their financial losses, their fee was charged as contra equity in the ailing companies. this mean meeting head on with bankers, creditors and bill collectors.

In those days, accoding to Soh. there were even people who would give their companies up for free.

Soh said " So, we took over a lot of companies that way. At least,the owners had a good noght's sleep. many of these companies were small operations such as mini markets, pharmacies and services companies.

"Our basic formula was a simple one which we have refined over the years into an art form. we would offer 10 sen to the ringgit. they ( Creditors ) would be very thankful for that.

"Most creditors are fairly reasonable and basically, "They want to know what your plans are. They want to know that you are not running away. A lot of creditors usually do not say that that you have to pay 100 per cent right now. They just want an assurance that you have enough courage to face them and not run away."

After taking over, how did Soh turn around and ailing company? He said : once we reduced the debt, for example, from a million to RM100,000, we would look for ways to reduce the debt further. we would look for ways for things that are core and non-core to the business.

" We then decide waht to sell. for example, in a mini market operation we look for things that were not inuse such as spare freezers and shelves, and we would sell them.

"When this is done, you will have a clear business and next thing is you will have to work like hell to make it work. that formula never fails."
Some of the revitalised companies were sold to pay off his debts, some were kept. those which were kepr were companies with land banks or contracts with government which Soh and company could build on when the recession was over.

For instance, the Lake-view Club in subang Jaya was taken over for just RM5,000.00 (Cash portion)in 1988.

His big break came in the same year when he took over a company known as Posti bena construction Sdn Bhd which had a contract from the Royal malaysian air Force to build an 18-hole golf course and a clubhouse in Kg Subang near the air port.

With a name like Pasti Bena which literally means "sure to build," it placed Soh back on the corporate trail after successfully completing the contract for RM20million.

Soh described the contract as radical as at that time it was one of the government's first Build, Operate and Transfer (BOT) contracts.

He said: "In return for the contruction, we were given 4,000 club memberships to sell within three years. If we could do so. the money was ours to keep. Even if we had sold just two memberships, that would be the final payment. We sold the memberships for RM5,000 each. It was not easy to sell in those days but we managed to sell all.

Soh and his associates made some profit from the contract. He said : "We used the money to pay off some of our debts."

"I have sweated blood. I have gone up, down and up since 1979. the fact of the matter is that I have my second wind from 1984. Nobody can do it overnight"

Born in Petaling Jaya on Boxing Day in 1959, Soh carved out a name for himself in the corporate world here and across the causeway when in 1995, he emerged as the largest shareholder and director in Singapore-listed Inno-Pacific Holdings Ltd.

By mid-1996, he controlled no less than seven listed companies on both sides of the Causeway and another four overseas
His stable then comprised Kuantan Flour Mills Bhd (KFM), Autoways Holdings Bhd, Kelanamas Industries Bhd and Perstima Bhd, Promet.

In Singapore, he controlled Inno-Pacific Holdings Ltd and through Promet, Ipco International

Promet also controlled four listed entities in other countries, Wah Nam Ltd (Hong Kong), Prophill (Philippines), and DCI International and IAL Ltd (both Australia)

But all came to nought when he used a scheme to defraud Omega Securities Sdn Bhd. In April 1999 a warrant of arrest for Soh was issued but could not be executed because he had fled the country

After being a fugitive for nearly four years, he returned to Malaysia in May 2002, when he was immediately arrested by the Securities Commission at the Kuala Lumpur International Airport and charged in the Shah Alam Sessions Court on two charges

He pleaded guilty to two alternatives charges of abetting former TA Securities boss Tiah Thee Kian in submitting false information to the KLSE

He paid the maximum fine of RM6 million.

Soh also made headlines when he filed multi-million ringgit suits against then Transport Minister Datuk Seri (now Tun) Dr Ling Liong Sik, his son Hee Leong, Hee Leong's wife Carol Ong Lee Choo and Linksun Avenue Sdn Bhd.

1995 : Promet

Dato' Soh and his associates appeared on the scene in Sep 1995, when they acquired 111.1 mln shares representing a 21% interest in Promet and became the dominant substantial shareholders. The acquisition price was not disclosed, but the mass media reported the purchases at around RM250 mln, or RM2.25 per share. Promet's market price at that time was RM3.10. The old board of directors of Promet left within 2 years after the new management came in. The new management team engaged Promet in 3 activities that had detrimental effects on its viability: [1]. Increased its interest in Ipco to 75%; [2]. Began share trading using margin accounts and [3]. Bought shares in other companies. Let us examine how these activities led to Promet's downfall:

[1]. Acquisition of Ipco shares

In Nov 1996, Promet increased its interest in Ipco to 75% at a cost of RM106.6 mln cash. This was to focus on the group's core activities of marine engineering, infrastructure and construction sectors with more emphasis in the Southeast Asian & African markets. The group had around RM410 mln worth of contracts in mid-1996. However, the difficult economic conditions and currency depreciation in the region adversely affected Ipco's operations. In 1998, Ipco made an operating loss of RM75.6 mln, due to additional costs in a Nigerian project, provision for doubtful debts and deferment & cancellation of projects in Asia. In Nov 1998, Promet's interest in Ipco dropped to 25.5% due to financial institutions in Singapore selling Ipco shares that Promet had pledged as collateral for loans. Table 1 shows the major exceptional losses from 1997-1999, partly contributed by Ipco.

Table 1: Exceptional losses (RM mln)

[2]. Share trading using margin accounts

During the financial year ended 31 Apr 1997, Promet purchased shares in certain listed companies, as shown in Table 2, in which Dato' Soh had an interest in. The purchase of these shares partly contributed to the losses suffered in share trading, as shown in Table 1. In addition, in late 1999, Promet defaulted in payments of around RM478 mln, of which RM147.5 mln was attributable to share margin & trading accounts. Of this amount, RM60.4 mln was extended by Omega Securities S/B, a company associated with Dato' Soh - see last week's special selection.

Table 2: Promet�s purchases in companies related to Dato� Soh    

[3]. Purchase of shares in companies

Promet entered into an agreement to buy a 32.9% interest in Westmont Industries Bhd (WIB) for RM498.4 mln cash in late 1996. In Apr 1997, Promet arranged to sell its entire 32.9% interest in WIB to Swascojuta S/B for the same amount plus costs incurred in the share transactions, thus resulting in no loss to Promet. However, an amount of RM96 mln was deemed uncollectable from Swascojuta S/B and was written off in 1999. In addition, the Group acquired a 41% interest in Nina Investment Holdings Pte Ltd in Feb 1996 for RM105.0 mln, of which RM98.4 mln was paid. The acquisition was subsequently aborted but Promet deemed the amount paid as irrecoverable and wrote off the entire RM98.4 mln in 1999.

In totality, within 4 short years, from 1997 to 2002, Promet suffered heavy losses under the new management, incurring losses attributable to shareholders of a mind-boggling RM1.01 bln. This undid all the efforts made in the early Nineties to put Promet on a sound footing.

Exit Via Rekapacific ?

On 27 Dec 1996, Dato' Soh sold 100 mln shares in Promet to Rekapacific Bhd for RM350 mln cash. Assuming he bought his earlier shareholdings at RM2.25 per share, that would have translated to a gain of RM125 mln. Subsequently, Dato' Soh resigned from the board on 30 June 1999.

Public Reprimand And Fined

On 27 July 1998, Promet obtained a restraining order from the High Court for Promet and 3 subsidiaries to restrain any actions or proceedings taken against them by creditors. The group proposed a restructuring scheme on 31 July 1999 that involved a reverse takeover by Safuan Group Bhd but the scheme was aborted on 23 Feb 2001. On 21 July 2000, the KLSE issued a public reprimand and a RM50,000 fine on Promet for failing to issue a circular to shareholders and to obtain prior approval in a general meeting in relation to two share transactions carried out by the company in 1997 which involved the interest of past directors and substantial shareholders of the company.

Come back 2nd time?

Sources said that Soh chee Wen started invest in Innopac、IPCO International Ltd and Annica in 2000。And he only invested in Magnus Energy Group Ltd in 2003 and 2004。

IPCO International Ltd is one of the substantial shareholders of Innopac.