Since 29 July 2021, Raffles Education Corporation ("REC") has plunged by more than 62% from S$1.60 per share to S$0.061 per share as at 18th October 2021. For its financial statements ending 30 June 2021, its auditor BDO LLP has also recently expressed concern on whether Raffles Education can carry on its business as its current liabilities is now more than its current assets. Internally, Raffles Education also faced intense infighting between its 2 majors shareholders. In the latest fiasco, Mr Oei Hong Leong has raised a letter to the Board of Directors expressing his concern over a number of adult family members of Mr Chew Hua Seng working in REC and drawing high salaries. Share prices seems to have dropped further after the circularization of the letter in public.
1. Shocking super late disclosure of material news only months later on 29th July 2021
Mr Oei has also previously dropped a letter to ask Mr Chew on why material disclosure relating to a default of the Malaysian Affin bank loan of S$131Mil (RM$410Mil) was not made known to shareholders earlier.
Apparently, writs and statements of claims has been filed in the High Court of Malaysia by Bank Affin on 27th May 2021 and this amount is more than half the market capitalisation of S$220Mil at that juncture but was never disclosed until 29th July 2021.
2. This is not the first time Mr Oei Hong Leong went after Mr Chew Hua Seng
It was reported that Mr Oei and Mr Chew used to be good friends for about a decade, and went on holiday together with their wives on more than one occasion. However, their relationship soon soured and they became eternal rivals instead.
It was reported that Mr Oei and Mr Chew used to be good friends for about a decade, and went on holiday together with their wives on more than one occasion. However, their relationship soon soured and they became eternal rivals instead.
The discord had already started in 2017 when Mr Oei claimed that Mr Chew had agreed to find a buyer to buy-out his stakes in REC. This led to a lawsuit by Mr Oei against Mr Chew. Mr Oei eventually lost the suit in Feb 2020. Subsequently, there were various attempts by Mr Oei to oust Mr Chew out of REC.
3. REC forced to sell off office and college campus at 51 Merchant Road to raise S$200Mil to boost current liquidity
In a bid to raise funds, REC has announced on 16th August 2021 that it intends to sell its current campus for S$200Mil and if possible arrange for a sales and leaseback. All potential buyers will be aware of the tight deadline that REC requires to raise cash to pay off short term debts which are due within a year. Not sure on whether it can get a good price considering the weak bargaining power REC has at this particular point in time. Well, I am not very optimistic on REC getting a good deal.
In a bid to raise funds, REC has announced on 16th August 2021 that it intends to sell its current campus for S$200Mil and if possible arrange for a sales and leaseback. All potential buyers will be aware of the tight deadline that REC requires to raise cash to pay off short term debts which are due within a year. Not sure on whether it can get a good price considering the weak bargaining power REC has at this particular point in time. Well, I am not very optimistic on REC getting a good deal.
Parting thoughts- "calculated risk" to buy into REC?
I have a friend who has decided to spend S$5K to buy into REC. He termed this as raiding the stocks for a speculative trade for quick profits and has invited me to join in additional purchases. For me, I will stay far far away from REC to wait for the dust to settle between the warring factions.
Updates as at 20 Oct 2021 3pm:
On 19th Oct 2021 just after my posting, the CEO of REC requested for a trading halt pending release of an announcement. Currently, REC is still being suspended. It also turned out that Mr Oei had started selling off a significant chunk of his REC shares. Hopefully, trading suspension will be lifted soon else recent investors who invested have their funds stuck.
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