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Random Thoughts: BDMS/BA

So what’s happened?

And so its been all over the news since last Friday (18/01)

And finally it hit the English news over the weekend and yesterday:

That the owner of Bangkok Airways Plc (BA) and Bangkok Dusit Medical Services Plc (BDMS) has been caught with his hand in the cookie jar. The people involved are:

  • Dr Prasert Prasartong-osoth
  • His daughter: Poramaporn Prasarttong-osoth
  • The Executive Secretary to the CEO of BA: Narumon Chainaknan.

What did they do?

Apparently bought and sold shares amongst one another during the period of November 2015 to January 2016

So they “may” have pushed the share price, or contributed to moving the share price or provided investors with the idea that the share price of BA would increase within a short period of time.

During this period the share price went from ~19 to ~25 / share, doesn’t sound like much…however its an increase of ~+25% and in market capitalisation terms, of THB 12.4 bn and they benefited by an increase of THB 1.55 bn of value for their shareholdings.

How much do they own in the companies?

Dr. Prasert officially has 18.4% in BDMS and 6% in BA

Poramaporn has 6.49% in BA

Note that BA also owns 5.86% of BDMS 

What’s happened to the share price of both firms?

Ouch!

Yes, but its ~ -10% for both, thus it should be painful for the founders but perhaps more so to the minority investors…

How much were they fined?

Ohhhhhhhh this time it’s a decent amount, if you remember when the management of CPALL Plc decided to be idiots and frontrun acquisition news re MAKRO and were caught in 4Q15, they were only fined THB 33 million. Why? Well here’s the news announcement from the SEC. 

https://www.sec.or.th/en/Pages/News/Detail_News.aspx?tg=NEWS&lg=en&news_no=131&news_yy=2015

And this law firm had a good write up on it after the fact.

https://www.tilleke.com/resources/insider-trading-time-reform-and-tougher-penalties

But now they’ve changed the law related to insider trading and boom the SEC has power to act and Dr. Prasert + 2 are the first to feel the full power of it. So a total fine THB 500 mn.

https://www.bangkokpost.com/business/news/1613770

Does it matter for the business of BA or BDMS?

Frankly, no, but it does speak to the culture…perhaps its not a bad thing that the government is looking into possibly capping the medical prices (though I still have my doubts on them being able to be effective…see Random Thought: Hospitals)

So what is the stock price down so much?

Well the usual cycle, several funds have corporate governance requirements and this IS A MASSIVE BREACH of Corporate Governance therefore they have to sell their holdings in BA and to an extent, although legally it could be grey here because the shares involved are BA and not BDMS, so do Funds have to sell BDMS due to the relationship?

What else happened to these three?

They have all resigned from their posts as they are banned from being management or directors of any public company.

BDMS: https://www.set.or.th/set/newsdetails.do?newsId=15480278455460&language=en&country=US

BA: https://www.set.or.th/set/newsdetails.do?newsId=15480278456940&language=en&country=US

So should I buy them?

Well….the precedents you may refer to is CPALL and perhaps to an extent GLOBAL (another group of cheeky management/owners caught – https://www.sec.or.th/en/Pages/News/Detail_News.aspx?tg=NEWS&lg=en&news_no=22&news_yy=2016)

CPALL dropped –20% during this news, GLOBAL dropped slightly.

Here are the charts:

But then as you can see CPALL basically went up 2-3x from that low, granted this is also occurred during a period when the entire SET was down, plus CPALL was (is?) a compounding expanding machine at the time AND it was trading at ~20x PE at the low.

GLOBAL’S share price had already taken a beating by the market during the same period when the SEC announced the fines against the founders and management

BDMS on the other hand is still at a PE ~35x even after this drop, EV/EBITDA ~20x which aren’t the cheapest relative valuations in town, plus there’s still a potential overhang re the medical price cap, so yes I’m leaning towards no, but who knows I may be wrong and this isn’t a recommendation piece. But then again…BDMS isn’t legally at fault here in the same way that CPALL, GLOBAL, BA are, the founder is a related party but the issue didn’t occur with BDMS shares.

Although in the near future (3 months or … weeks or …. days?) I’m fairly certain people will have forgotten about this. If the shares are priced relatively attractive and the medical price cap doesn’t impact BDMS negatively it would probably recover back to its lofty levels. Plus they’ll just do what CPALL did, announce several corporate governance measures and then all investment committees can cheer and add BA and BDMS to their holdings…

As for BA? Well the company is currently executing a share buyback and you’re getting the airline effectively for free at these levels…

BTW how do they do this?

Simple, the old fashioned way which is buying and selling shares amongst several accounts to create the illusion of volume and positive price activity

And…how did the SEC find out?

From what I learnt 4-5 years ago, even if you’re trading on your phone using someone else’s account, the SET (not the SEC) will have that data and can find out if you’re playing a fool.

Company Data:

Links:

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