Among the institutional funds that have cut their stakes in the Sarawak conglomerate are Norway’s Government Pension Fund Global (GPFG), one of the world’s largest funds, and Malaysia’s Employees Provident Fund (EPF).
GPFG’s investment in CMSB is through Norges Bank, which first emerged as a substantial shareholder after acquiring a 5.03% stake, or 50.05 million shares, in September 2023. Norges Bank is the Norwegian central bank.
GPFG, which was established in 1990 after Norway discovered oil in the North Sea, is managed by Norges Bank.
Citing the bank’s website CMSB noted that Norges Bank’s investments on behalf of GPFG had a value equivalent to US$1.42 trillion (RM6.29 trillion) as of June 30, 2023, making it the single largest investor in the world’s stock markets.
In January 2024, CMSB announced in a bourse filing that Norges Bank had ceased to be a substantial shareholder, sending the company’s share price tumbling.
The filing said as of Dec 6, 2023, Norges Bank held a 4.98% interest, dipping below the 5% threshhold for substantial shareholders.
A check with Norges Bank’s website recently revealed the fund’s interest in CMSB has been pared further down to 3.86% as of Dec 31, 2024, with its investment valued at US$11.14 million (RM49.37 million).
Likewise, the EPF has also been steadily reducing its equity in CMSB over the past several years.
In 2018, EPF had a 10.69% stake but by September 2021 had ceased to be a substantial shareholder when its stake fell below 5%. Its stake was subsequently whittled down to 3.61% by March 2024.
According to CMSB’s latest annual report (2023), EPF and Norges Bank were its sixth and seventh largest shareholders.
A group of minority shareholders want answers from the board on why these major institutional funds are paring down their stakes in CMSB.
“When big institutional funds start reducing their stake in a company, it is often a red flag and an indication that the confidence of the fund managers has been shaken,” they told FMT.
They said the board needed to identify the reasons for this and tackle the underlying issues so that the trend can be reversed.
Divestment a last resort
While institutional fund managers are unlikely to say why they are paring down their stakes, there are some obvious reasons.
A fund manager said apart from poor financial performance, a combination of governance issues, boardroom tussles, poor management, and legal battles can affect the confidence of institutional investors.
In the case of CMSB, it has had its fair share of controversies that may have dented investor confidence over the years.
In this day and age where environmental, social and governance (ESG) requirements loom large, CMSB’s predicament may be a concern for big institutional funds, said the fund manager, who spoke on condition of anonymity.
On its website, Norges Bank spelled out clearly what it expects of the 11,000 investments valued at US$1.74 trillion that it has made globally on behalf of GPFG.
“We express clear expectations of the companies and markets we invest in. Companies must be run properly, and our rights as a shareholder must be protected,” it said, explaining its “responsible investment” policy.
“We may divest from a company if we assess that its long-term market valuation may be adversely affected by its mismanagement of social and environmental issues,” it added.
The bank said divestments are “a last resort” and it always tries to steer the company in a sustainable and profitable direction through active ownership, that is, through dialogue and voting.
“If this work does not make any progress, we may then decide to divest,” said Norges Bank, adding it divested from 49 companies in 2024, but it had withheld the names of the companies.
Red flags
Some minority shareholders previously flagged various financial and legal issues plaguing its phosphate plant project in Samalaju undertaken by its subsidiary Cahya Mata Phosphates Industries Sdn Bhd (CMPI).
A key concern has been the ongoing dispute over the power purchase agreement (PPA) between CMPI and state utility firm Syarikat Sesco Bhd (Sesco) that was inked in 2019.
CMPI has since been hit with a RM342.25 million counterclaim by Sesco over electricity charges billed to the former. Sesco also cut power supply to the plant in July 2023, delaying its commercial operation.
The minority shareholders have claimed the phosphate division under CMPI is a “financial blackhole” for the group. The division suffered a cumulative loss before tax (LBT) of RM253.5 million for FY2023-FY2024.
The minority shareholders also questioned why the group has not appointed a new head of internal audit after the previous head vacated the position in 2022, almost three years ago.
They argued that internal auditors play a crucial role by assessing risks, ensuring compliance, and promoting ethical behaviour within the organisation.
Brewing boardroom tussle?
A number of lawsuits involving the group have raised the spectre of a brewing boardroom tussle.
Earlier this month, CMSB initiated legal action against its deputy chairman Mahmud Abu Bekir Taib and six others, amid allegations of a supposed “boardroom coup”.
In the lawsuit, the company claimed that in the implementation of a project under Cahya Mata’s digital transformation, various requirements were breached.
“I am confident of striking out this frivolous lawsuit and emboldened in my quest to set things right at Cahya Mata Sarawak,” Mahmud told FMT Business.
The suit came on the heels of an affidavit filed by group managing director Sulaiman Abdul Rahman Taib to oppose an earlier proceeding brought by elder brother Mahmud seeking access to the accounting records and other documents of CMSB and five wholly owned subsidiaries.
Mahmud, 61, and Sulaiman, 55, are sons of the late Abdul Taib Mahmud, Sarawak’s longtime chief minister and governor.
CMSB’s shares have been on a downward trajectory, and year to date has fallen almost 24% to 91.5 sen as of yesterday, valuing the group at RM984 million.