Azmi Arshad: A proper CFO answers Rafizi's latest attack on Tabung Haji

Azmi Arshad completely rebuts Rafizi Ramli's claim yesterday that "Rafizi: Tabung Haji pulling wool over depositors’ eyes with payout announcement" where Rafizi accuses Tabung Haji of actually losing as much as RM3.1 billion in the year 2015 instead of making RM3.5 billion.

Azmi is a bona-fide Chief Financial Officer of a public listed company. His last job was the CFO of SapuraCrest Bhd for 8 years. His biography and work experience is here.

Azmi Arshad, a Malaysian aged 50, is the CFO of our Company. He graduated with a degree in accountancy from the University of East Anglia, Norwich, UK in 1986 and passed the professional examinations of the Institute of Chartered Accountants in England and Wales (ICAEW) in 1990.

In 2003, he joined SapuraCrest Petroleum Berhad (“SapuraCrest”), a company principally engaged in oil and gas services, as the CFO. During his eight years of service, he played a key role in numerous acquisitions, joint ventures and equity and debt fundraisings. These include the acquisition of Sapura Energy Sdn Bhd and the cross border acquisition of Total Marine Technology Pte Ltd, Australia. He was also involved in the joint venture arrangements with foreign partners for offshore installation and construction activities which include the construction of offshore support vessels and rigs for a combined value of over USD600 million. 

He was the chairman of the due diligence working group for equity and debt fundraising and other corporate exercises of SapuraCrest with aggregate funds raised of more than RM3 billion. During his tenure, he also oversaw the transfer listing of SapuraCrest from the Second Board to the Main Board of Bursa Securities (now known as Main Market of Bursa Securities). 

From 2011 to 2013, he was the Chief Operating Officer of Sapura Resources Berhad (“Sapura Resources”) and was responsible for its investments and businesses comprising property investment, facilities management, education, manufacturing, project management and aviation services. In addition, he oversaw the set-up of the aviation services business of Sapura Resources where he managed the corporate acquisition and joint ventures of the company with foreign companies.

Who do you trust more in financial analysis? Him or Rafizi?

Azmi Arshad writes:

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ANSWERING RAFIZI’S ANAL-YSIS ON TABUNG HAJI

Rafizi has clearly made himself out to be an enemy of the ummah by persistently attacking, with lies and spins, Tabung Haji that exists to help Malaysian Muslims fulfill the fifth Pillar of Islam by growing their savings/deposits and subsidising further their haj pilgrimage cost. I hope people understand the message I am stressing here i.e. why I regard him as an enemy of the ummah.

Bila ramai orang soal Rafizi berkenaan kenyataan-kenyataan beliau memburukkan Tabung Haji, dia hanya menjawab, "Saya bukan mahu layan sangat pencinta Najib Razak yang meroyan mengenai bonus Tabung Haji, tetapi demi memastikan orang ramai boleh fokus kepada isu sebenar dan tidak disibukkan dengan mereka…”. His inability and refusal to answer questions and requests for clarification compelled him to block many people on Facebook including Lim Sian See and myself.

Yesterday he published a half-baked financial analysis to support his attack against Tabung Haji. The analysis makes him appear diligent but is yet another attempt to pull the wool over our eyes.

(By the way, those with audit experience will spot in the first page of the paper that Rafizi used the term “analytical review” out of context. AR is a method using calculations and ratios etc to verify that accounting figures make sense (reality check) and intended also to reduce substantive testing (or vouching) in an audit but comically Rafizi says he used “analytical review” as the method for his forecast numbers.

Never mind, not relevant anyway. It’s just him trying to impress with jargon. Not wrong linguistically but it shows his silliness).

His analysis is divided into three sections: (1) Kaedah Unjuran (2) Analisa Penyata Pendapatan (3) Analisa Rizab dan Keupayaan Tabung Haji Membayar Balik Pendeposit. There are also five attachments of numbers intended to impress. Any layman might be in awe but there is guess work in the numbers premised on his own assumptions. His numerical analysis is supposed to support the three claims and conclusions he listed down on his FB status and in the summary of the paper but they do nothing to prove his case.

Rafizi is intent on fooling depositors that their guaranteed savings are at risk while he keeps enjoying the dividends from the very institution that he is condemning. Rafizi’s savings in TH is more than 70 times the average savings. Many people have foregone dividend/bonus and lost their place in the queue because of this penghasut dan perosak umat.

Rafizi claims that TH is insolvent, then tells you to leave your money there (after many have already withdrawn their money) "because TH does not belong to Najib Razak or Azeez", then tells us again that TH is insolvent. 

That is truly stupid and contradictory logic.

He literally does not put his money where his mouth is and tells you to not trust the place where he puts his money.

His insincere “advice” comes too late for many people including the ones interviewed in this video:

https://www.facebook.com/mynationmalaysia/videos/1706107936271771/?permPage=1


Let’s answer Rafizi's four claims / conclusions:
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1. RAFIZI: Kedudukan rizab Tabung Haji diunjurkan terus negatif bagi tahun kewangan berakhir 31 Disember 2015 iaitu dua tahun berturut-turut rizab Tabung Haji mengalami defisit. Ini selaras dengan peringatan yang diberikan oleh Bank Negara Malaysia. Defisit rizab Tabung Haji bagi tahun kewangan 2015 diunjurkan boleh mencecah sehingga RM3.195 bilion. Rizab yang negatif bermakna Tabung Haji tidak berkeupayaan memulangkan semua simpanan pendeposit Tabung Haji jika ia dituntut serentak oleh pendeposit.-----------------------------------------------------------------------------------------

Rafizi is recycling his misunderstanding on the negative reserves and its relation to deposits. Saya telah ulas berkenaan rizab yang negatif tetapi Rafizi masih tak faham atau buat tak faham. Saya tidak dapat komen di page dan Twitter Rafizi sebab telah di block.

Rafizi tidak tahu bezakan antara Rizab Boleh Agih (distributable resrves) dan Rizab Tidak Boleh Di Ageh (non-distributable reserves). RBA adalah POSITIF, bukan negatif. Selain itu, saya juga telah ulas bahawa rizab (samada positif atau negatif) tidak berkait dengan keupayaan memulangkan semua simpanan pendeposit Tabung Haji. Saya tak tahu samada Rafizi bodoh, jahil bidang perakaunan (pelik kalau benar) atau sengaja ingin mengelirukan dan menghasut orang awam.

Saya telah ulas berkenaan rizab di sini.

I had said before: Very briefly, he wants to stupidly assume a scenario where all depositors decide not to go for haji hence the 100% withdrawal. Try getting a haji visa on your own instead of through Tabung Haji.

Secondly, reserves have nothing to do with cashflow. Thirdly, he has not taken into account the fair value of TH’s portfolio of assets where not all may have been revalued and/or reflected in the accounts. Furthermore TH has already given assurance of the safety of the deposits. They are not only backed by assets but government guarantee so bakal jemaah haji need not worry.
https://www.facebook.com/azmi929/posts/921248484662622

Kenyataan Tabung Haji:

"Untuk makluman pendeposit, nilai aset TH mestilah mengambil kira keseluruhan nilai saksama potfolio pelaburan TH. Ini adalah kerana nilai aset yang dinyatakan tidak mengambil kira potfolio pelaburan seperti saham anak-anak syarikat atau syarikat bersekutu, serta aset perladangan dan hartanah yang diduduki TH. Sepanjang tahun kewangan 2014 dan 2015, nilai keseluruhan aset TH adalah lebih tinggi daripada nilai liabiliti TH, dimana ia mengambil kira kesemua nilai saksama potfolio pelaburan TH."

"Prestasi kewangan TH berada dalam keadaan baik disokong oleh aset-asetnya yang kukuh termasuk peratusan mudah tunai yang tinggi. Contohnya, aset tunai sahaja pada 31 Disember 2015 adalah sebanyak RM10.7 bilion. Di samping itu, pendeposit tidak perlu risau kerana simpanan mereka di TH dijamin oleh Kerajaan, sebagaimana yang termaktub dalam Akta Tabung Haji. TH juga tidak pernah lari dari tujuan asal penubuhannya dalam membantu umat Islam di Malaysia menunaikan Rukun Islam ke-5."

His analysis (Bahagian 3: Analisa Rizab dan Keupayaan Tabung Haji Membayar Balik Pendeposit) is talking all about negative reserves without realising that it is not reserves but fair value of assets that is a financial indicator of whether TH will be able to meet its financial obligations. He has gone totally off tangent and merely recycled his earlier error.
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2. RAFIZI: Keuntungan RM3.53 bilion yang diumumkan oleh Datuk Seri Jamil Khir pada 4 Februari 2016 lalu tidak mengambil kira kerugian akibat kejatuhan harga saham dan sekuriti yang dipegang Tabung Haji sebagai pelaburan. Memandangkan prestasi Bursa Kuala Lumpur jatuh mendadak sepanjang tahun 2015, kerugian akibat kejatuhan harga saham dan sekuriti diunjurkan boleh mencecah sehingga RM3.14 bilion. Jika kerugian akibat kejatuhan harga saham mencecah paras tersebut, ia boleh menghapuskan keuntungan yang diumumkan oleh Datuk Seri Jamil Khir.-----------------------------------------------------------------------------------------

Lim Sian See (yang juga di block oleh Rafizi) menyekolahkan Rafizi sekali lagi berkenaan unjuran Rafizi kerugian boleh mencecah sehingga RM3.14 bilion:

"Today I am convinced that Rafizi is an amateur in financial analysis. Today, Rafizi claims that Tabung Haji may have lost up to RM3b if Bursa Malaysia dropped by 10% in 2015 and the reserves are negative. How utterly simplistic this Rafizi is!! Having pages of analysis and tables is of no use if your basic assumptions are already all wrong!"

https://www.facebook.com/lim.siansee/posts/1764561373762649

Lim Sian See's earlier analysis on the same subject was also published here under the title "Rafizi's sotong economics" - a headline title given by Malaysia-Today.
Dari perspektif accounting pula, Rafizi sekali lagi menunjukkan beliau jahil berkenaan accounting treatment, kerana kerugian akibat kejatuhan harga saham dan sekuriti tidak memberi kesan pada distributable reserves / RBA (Rizab Boleh Agih, bukan Red Bean Army). Begitu juga keuntungan pun tidak memberi kesan pada RBA. Profit or loss will be realised only upon disposal of the investments and in this respect Tabung Haji is in a position to hold its investments until the value recovers if not offset by gains in other assets in its investment portfolio. Furthermore the selling price or value of shares in associated companies and subsidiaries are usually much higher than their book value because valuations of going concerns are based on discounted cashflow projections (DCF) and not the balance sheet.

The 2015 financial statements have not yet been published but for argument’s sake let’s say the group reserves turns negative as a result of stock market performance (which is beyond anybody's control) as predicted by Rafizi. Still this would not affect distributable reserves nor liquidity because (i) the investments are for the long term, (ii) it is not a cashflow movement and (iii) Tabung Haji has the staying power. Therefore assets will never disposed of at forced sale value.

Rafizi then tries another trick in his analysis (Bahagian 2: Analisa Penyata Pendapatan) whereby he claims that losses in the value of equities (referred to as ‘Changes in the fair value of securities available-for-sale’) should be booked as losses in the Income Statement instead of the Statement of Comprehensive Income. The loss (RM2.4 billion) in the Comprehensive Income Statement is also reflected as a loss under non-distributable reserves in the Statement of Changes in Fund (or reserves).

If Tabung Haji's CFO, the Auditor-General and Malaysian Accounting Standards Board were as stupid and ignorant as Rafizi, then the effect would be to reduce earnings, even if unrealised and not a cashflow movement. Rafizi ignores the fact that in the past, gains in equity invesments were also not taken as earnings/profit for the same reason i.e. the investments are held for the long term and is a non-cashflow movement. Rafizi again shows his ignorance in accounting standards (revenue item vs capital item and revenue reserves vs capital reserves) and accounting concepts (consistency concept).

I find it incredible that Rafizi actually wants capital (paper) losses to offset earnings and reduce distributable reserves so that depositors will get less dividend. Why? How does that benefit anyone? Just to make TH and the government look bad? This insistence can only be attributed to Rafizi having hati yang busuk. Nonetheless his opinion is utterly worthless because he can’t change international accounting standards and the Companies Act according to his whim and fancy. Rafizi may also not realise that many ordinary companies would be having a party declaring unrealised profits as dividends and eventually go bust if his ignorant opinion was adopted as an accounting standard.
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3. RAFIZI: Tabung Haji bernasib baik kerana jumlah simpanan baru setiap tahun mengatasi jumlah pengeluaran deposit. Malah, jumlah bersih simpanan (simpanan baru tolak pengeluaran) adalah secara puratanya dua kali ganda lebih tinggi dari keuntungan yang dijana oleh Tabung Haji lalu memberi banyak ruang kepadanya menguruskan pelaburan dengan lebih selesa.-----------------------------------------------------------------------------------------

I shall repeat what Rafizi has said:

“… banyak ruang kepadanya menguruskan pelaburan dengan lebih SELESA."

That shows that, apart from the fact that deposits are backed by assets and government guarantee, even Rafizi acknowledges that Tabung Haji has no liquidity issue. If there is no negative reserves problem, no liquidity problem, no dividend payout problem then what’s the problem?

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4. RAFIZI: Tabung Haji membayar bonus melebihi keuntungan yang dijana pada tahun-tahun 2012 dan 2014. Bonus bagi tahun kewangan berakhir 31 Disember 2012 (yang dibayar pada awal 2013) besar kemungkinan bermotifkan pilihanraya. Bonus bagi tahun kewangan berakhir 31 Disember 2014 (yang dibayar pada awal 2015) disyaki berlatar belakangkan krisis 1MDB bila mana pihak berkuasa perlu meyakinkan rakyat bahawa masalah kewangan 1MDB tidak mempunyai kesan kepada pasaran kewangan tempatan.

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This is scraping the barrel and a mischievous remark by Rafizi. Rafizi nampaknya terdesak sangat ingin mencari kesalahan Tabung Haji sehingga terpaksa mendakwa bonus “kemungkinan bermotifkan pilihanraya” dan “disyaki berlatar belakangkan krisis 1MDB”. Benefit for more than 8 million of the rakyat is poison for the Opposition.

Tahun 2012: RBA telah meningkat dari RM327 juta pada tahun 2006 ke RM895 million pada tahun 2011. Sekiranya bonus tidak melebihi keuntungan, RBA akan meningkat ke sekurang-kurangnya RM1.2 billion bagi tahun 2012. Bilangan pendeposit pula telah meningkat dari 5.6 juta pada tahun 2010 ke 7 juta (25.3%) pada tahun 2011 dan 8.2 juta (20.3%) pada tahun 2012. Maka tidak munasabah dan tidak masuk akal jika RBA hanya dibiarkan meningkat tanpa diagihkan bila tidak ada kemelesetan ekonomi berbanding bayar dividend kepada ramai orang Islam. Kita tidak perlu ambil tahu atau mempertikai samada ada kaitan dengan pilihanraya. Kalau ya pun, so what? Furthermore, the dividend RATE is nothing exceptional.

Tahun 2014: It looks to me that Tabung Haji’s policy is to keep dividend rates pretty stable whether during good or bad times. Otherwise it would be unfair for depositors whose money is with TH only during the bad times through no fault of theirs. Therefore whether bonus is higher or lower than profit is incidental. What matters is that depositors do get bonus because the purpose of the savings is primarily for haj, at least for 80%-85% of the depositors. It is mischievous of Rafizi to try to connect this to 1MDB. And as had been explained before, TH took a prudent approach to declare a lower dividend for 2015 in view of the economic outlook and after considering BNM’s advice hence the increase in distributable reserves.

This fourth claim is a desperate and pathetic attempt based on an afterthought by Rafizi to cast negative suspicion upon Tabung Haji.

I know this won’t be the last from Rafizi.

I hope everyone will whack him on his page to tell him to stop his fear-mongering at the expense of the ummah. I can’t because I have been blocked. Of course be prepared to receive responses such as these.
https://www.facebook.com/mynationmalaysia/photos/a.1618532251696007.1073741828.1604060349809864/1707283376154227/?type=3&theater

Semoga Allah SWT gagalkan rancangan jahat Rafizi Ramli memburukkan institusi Islam dan merosakkan ummah.
- AA -

Distributable reserves = rizab boleh agih (RBA) = revenue reserves (e.g retained earnings)

Non-distributable reserves - rizab tidak boleh agih (RTBA)= capital reserves (e.g. revaluation reserve, share premium account (for companies))

Rafizi’s FB post: https://www.facebook.com/rafiziramli.keadilan/posts/1100910239943482:0

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Further to our dismantling of Rafizi's accusations, Rafizi then came out with with two very bizarre points:

1. He finally admitted that he still has money in Tabung Haji and did not take out any money despite him frequently attacking Tabung Haji. He claims he does not know the actual balance as he seldom checks his balance (jarang semak). We have calculated that he has at least RM520,000 in Tabung Haji based on his earlier declarations.

2. Despite multiple attacks and all sorts of accusations on Tabung Haji over the past year, he finally advises depositors not to withdraw their money from Tabung Haji - a piece of advice that came one year late.

Recently, due to Rafizi's many failed accusations in the past, a growing number of people on social media have started showing their disgust at Rafizi and started calling him with the unkind name of Sotong with all sorts of trolls on him now.
Personally I want to avoid such name-calling, but I do believe we should not simply trust cuttle-fish.

I offer this generic advice which is not directly targeting or insinuating anyone in particular.