Feb 04, 2019

CSE questions share price hike of MTD Walkers Featured

The share value of debt-ridden MTD Walkers has been climbing since mid-January, prompting the Colombo Stock Exchange (CSE) to question its management on whether it has engaged in undisclosed price sensitive business activities or transactions causing the change.

The share traded around the Rs 10 range early last month but rose to Rs 16.8 as at close on January 17, when the CSE directed its query at the management. It ended at Rs 18.8 on Friday after hitting an intra-day high of Rs 19.6.

MTD Walkers replied to the CSE on January 17, saying that the company had “not engaged in any undisclosed price sensitive business activities or transactions to escalate the share price and does not have any knowledge of the reasons for such an increase in the rice of the share and the volume of the shares traded, as intimated by the Colombo Stock Exchange”.

But just one day later, on January 18, MTD Walkers released a corporate disclosure on a related party transaction that had taken place on January 11– six days before the company claimed to the CSE that nothing had been going on.  The disclosure revealed that it had transferred 100 percent of the shares held by MTD Walkers in Walkers Shipyards Ltd, Northern Power Company (Pvt) Ltd and Colombo Fort Heritage Company (Pvt) Ltd to MTD Capital Berhad–its parent company–for US$ 19,098,710.83 (more than Rs 3.3bn).

The rationale for entering into the transaction was given as restructuring of the MTD Walkers Group for the purpose of facilitating MTD Walkers PLC to settle an outstanding loan amounting to US$ 19,098,710.83 payable by its subsidiary, CML-MTD Joint Venture Ltd, to the Exim Bank of Malaysia Berhad under a facility agreement dated November 2015.

In other words, certain businesses and subsidiaries of MTD were transferred to its parent company for US$ 19mn to enable another subsidiary to settle its loans.  MTD Walkers has been in the news lately with the induction of two new directors. By the end of September 30 last year, the company had Rs 4.2bn in long-term debt and Rs 23.6 billion in short-term borrowings. Around Rs 22bn is due from trade and other receivables. It has to receive Rs 6bn from the Urban Development Authority alone, for three completed housing development projects.

Both new directors are linked with Supreme Global Holdings, which is chaired by R M Manivannan. Malaysia’s MTD Capital Bhd holds a 90.78 percent stake in MTD Walkers PLC.