Goldman Sachs’ apology to the people of Malaysia comes too late in the day to save the colossal damage inflicted on the investment bank for its role in diverting funds due to the scandal-ridden 1Malaysia Development Bhd (1MDB).

While it is good that Goldman’s chief executive, David Soloman, acknowledges that the US-based investment bank had taken its eye off the deals that were structured by its senior employee Tim Leissner and his colleague Roger Ng, it should not be tantamount to the investment bank getting off the hook.

The Malaysian government is seeking US$7.5bil from Goldman for its role in the 1MDB scandal. As stated by Finance Minister Lim Guan Eng, an apology is insufficient and Goldman should just repay the amount due.

Malaysia is unlikely to get the money that it is seeking from Goldman. However, the investment bank has set aside US$516mil in litigation cost, which many believe is due to 1MDB.

Goldman was the principal investment bank for 1MDB in three US-dollar denominated bond issuances where the fund raised a total of US$6.5bil in 2012 and 2013.

Leissner, who was previously the regional managing director of Goldman, is due to be sentenced in June this year after he pleaded guilty to playing a role in diverting a substantial portion of the money raised to individuals outside 1MDB.

Soloman had said that apart from Leissner, there were individuals holding high positions in the government that were involved in the diversion of the funds that was used as bribes and kickbacks.

While Goldman has said sorry to the people of Malaysia, what about the others who were involved in the 1MDB scandal?

There are several former high-ranking Malaysian officials who had played a role in the 1MDB fiasco. And there are dozens more who knew what was happening in 1MDB but chose to turn a blind eye on the “robbery”.

These individuals still go about their lives as if nothing has happened and even have the audacity to try and pin the 1MDB fiasco on Goldman and a supposedly “system failure”.

The system did not fail. It was blinking red light all the time. The only problem is that the former Prime Minister Datuk Seri Najib Tun Razak, amongst others, refused to see it.

Goldman has said sorry. What about the rest?

Upping the ante in healthcare

Malaysia has numerous private hospitals and more are springing up, but affordable quality healthcare for the lower-income groups remains unattainable. Public hospitals are generally not up to par and the waiting time to see specialists, for example, is way too long. We lack doctors and hospitals. In total, Malaysia has a ratio of 1.9 beds per 1,000 population, significantly below Singapore (2.5), the US (2.8), South Korea (12) and Japan (14.3).

An interesting solution is being promoted by a company called Sinmah Amegajaya Healthcare that intends to build hospitals with both private and public wings. The public wings will have, sans the luxury, trimmings such as private rooms but will have the same specialists and medical staff catering to them. The company is in talks with insurers to sell cheap medical cards to be made available to residents in the locale of its first hospital, namely, Nilai. The idea is to also look for a sponsor of those medical cards, possibly a government agency or corporations looking to do some form of social responsibility. The concept is not new. University Malaya Specialist Centre is the private arm of the University Malaya Medical Centre in Malaysia. But that whole operation is still government-led, whereas Amegajaya’s plan is entirely private sector-driven.

The key will be the ability to execute well. Singapore’s public-private-partnership model for healthcare comes to mind, where the government hospitals are structured to operate as private limited companies to compete with the private sector on service and quality. The old system of building, running and owning public hospitals in Malaysia ought to be reassessed. It would be better to facilitate private-sector players to build and run hospitals catering to the lower-income groups. The government could step in to cover the medical fees of those in the lower-income brackets, either directly or through commercially available insurance schemes.

Building new government hospitals the old way is costly. Furthermore, some government-funded hospital projects were unnecessarily expensive and not made in the best design.

Who to believe?

How different people see different scenarios is apparent in the investing world. There have always been buy calls and sell calls side-by-side for the same stock, with analysts having a different perspective as to what is the fair value of a company.

The difference in opinion is what makes for the jarring divide in terms of valuing the prospects of a company. While buy-side analysts, those who analyse a company before making a decision to buy, and sell-side analysts, those who pitch the virtues to an ambiguous group of investors, often see things differently, sometimes the gap in terms of target price can be startling.

Take Bumi Armada Bhd, for example. There is one report that says the stock, which has been battered blue and black over the past few months, is worth a meagre 10 sen. There is another which says the fair value is 70 sen a share.

The crux of the matter is whether banks will be lenient to the company when it comes to a debt repayment of US$380mil. Bumi Armada is said to have the debt secured against an FPSO vessel and cashflow ringfenced, which makes the chances of a default low.

Furthermore, there are legal actions by the company to secure nearly US$300mil in what the company feels is owed to it.

The question many investors will ask is what and who to believe? Bumi Armada has had a tough going of late, with its share price tanking hard over the past few months as the outlook on its business and the predicament the company is in weighs down heavily on its prospects.

If there is any silver lining of late, it was the price movement in the company’s share price yesterday. Bumi Armada’s share price closed up six sen to 22 sen, a near 38% rise in a single day. The Employees Provident Fund has been a big seller of the stock of late, but the single-day price move by the company suggests that maybe, just maybe, it will be able to fend off doubters who think the stock is worth less than what it is trading at. 

https://www.thestar.com.my/business/business-news/2019/01/19/goldman-says-sorry-what-about-the-rest/