Multi-Chem

[opmi]

"Mr Ker Jian Yan has disclosed to the Board of Directors that the interview covered claims reimbursement relating to vendor personnel"

if Multichem has direct distributorship of software licenses from big guys like crowdstrike, palo alto etc, how can vendor employee claim reimbursement from customer (Multichem)....

just pay license fee+maintenance fee to the software companies eg Crowdstrike...then you pay Crowdstrike consultancy fees for Crowdstrike to install....

So it is like the vendor is the distributor of the license, Multichem is buyer of the license. Like that, the business model is weak and open the company to counterparty risks. In a hypothetical case, the vendor may also need to 'reimburse' further up the chain.

no wonder. I ask them during AGM if they have dsitributors of Palo Alto products. they like avoid questions....

[opmi]

[quote pid="174425" dateline="1790049701"]


Our founder couple had been buying/selling at bits and pieces over the years. At its peak, they had total ~69.2% stake (2022) compared to now at ~68.2% (1% lower than peak). I used to track them a bit but couldn't understand them after a while (u can refer to my post here: https://www.valuebuddies.com/thread-2355...#pid171755)

as they say can sell for any reason under the sun, but if they buy open market usually means they feel that its gonna end up worth more   since they could easily just do buyback and reward the share options to themselves.

it seems like for now selling pressure is gone and shorts (if any) are covering with positive larger market sentiment. not gonna get my $2 chicken rice price now. hahaha.

nevermind I am buying for yield, even if up to $2.50-$3 range also a good buy wait and see what happens for now.

@bigtoe, did you manage to dip your toes in or also queue and cant get any?
[/quote]

why Han (wife founder) sell the shares (1k shares in early 2026), when they can pay more dividends? div yield is 6-7%...much higher than borrowing money....

why sell the cow when cow is expected to produce milk in near future....

more importantly, they just received a big chunk of regular dividends earlier before they sold shares.....

this company doing PCB before...then managed to get into cybersecurity....like I said, the son CEO Foo dont look like those can do tech sales type....and their main outsourcing work is in India....

[Big Toe]

Yes I think the business model itself is not robust. But the structural demand for its products is strong.
If you look at Hour Glass / Cortina, they carry somewhat similar risks.

And I am more comfortable with the demand of cyber security than luxury watches.

[weijian]

A little bit more info on the response.

"Mr Ker Jian Yan has disclosed to the Board of Directors that the interview covered claims reimbursement relating to vendor personnel"

So this statement may imply that the vendor had claimed "some expenses" from multichem.
The details of which is unknown.
Again it is not an invoice and likely not an official contract.
This may or may not be related the earlier voucher thingy.
Likely related.

And my best guess is that Mr Foo Suan Sai might have given the green light for this transaction to happen (or at least informed and aware of this)
and that the amount is significant. Exciting times

Times are exciting for potential or new shareholders of Multi-chem but not so for the rest, isn't it?

I concur that it is likely related to the 2024 incident and to add some (of my own) spice to it - it might not be confined to only the vouchers....Ok, I think i should probably stop speculating lest I get myself into trouble (you never know who is reading this and then get offended by it!)

It is probably going to take some time before charges (if any) are announced. For reference, S Iswaran's case took 6 months between arrest to charge, and his case was probably expedited for the sake of public interest. So let's move on from the nature of the arrest/probability of been charged, to the impact on the company's fundamentals in the event that both EDs are charged/found guilty.

Below is what I mapped out after reviewing my old Multi-chem notes (the notes were last updated in 2023):

The entire value chain should be below (in italics):

IP owner of IT solutions (vendor) --> M-Tech (regional distributor) --> channel partner/reseller (guys holding the customer relationship with enterprises and doing the integration/installation at customer site) --> enterprises (end user of IT solution)

So first, Multi-chem holds neither the IP of the IT software nor the customer relationship with the end users (enterprises).

From vendor perspective: These distribution contracts are not exclusive and do not have contract periods but M-Tech acts as some sort of sales/training extension for them. M-Tech is additive to the vendor and has the added bonus of a regional reach in Asia Pacific. Currently, we are not sure which is the affected vendor and what would be the impact, but it should be a single vendor and so with a portfolio of products, any sort of termination is only restricted to one.

From the channel partner/reseller perspective: The channel partner/reseller have big dependency on the training/certification capabilities that M-Tech provides on behalf of the vendor. While the channel partners/resellers are the ones doing the actual dirty work (site installation/customization) but I suppose M-Tech will be integrated with them early iņ the sales life cycle (ie. start from the RFP stage). In a 2018 corporate video, M-Tech says that they work with "over 300 resellers", so M-Tech looks relatively safe since they are positioned pretty high up on the funnel per say.

From end customers' perspective (enterprises): Many of them are big enterprises and government agencies. Therefore, there could be a certain "code of conduct" in terms of supplier mgt that the procurement dept needs to adhere to. If their relationship is largely with the channel partners/resellers, then it may be isolated to an extent.

Business Continuity: Finally, if the founder couple has to step down, their son (general mgr) should be ready to take the helm. Son has a computing background and IT certification (hands-on?) and been around since 2011.

[opmi]

The 2 directors are arrested, means next time must declare in the future RFPs....standard disclosures....I guess can forget about doing work for SG Gov...no project manager will stick out their necks for vendors...

[BlueKelah]

The 2 directors are arrested, means next time must declare in the future RFPs....standard disclosures....I guess can forget about doing work for SG Gov...no project manager will stick out their necks for vendors...

I believe impact on company wont be that big as this is not a fraud thing, just a business to business corruption thing, company will still continue to run as business, cash flow wont be affected, just depends if the boss is charged then maybe a fine on the company at worst. Multichem should still have plenty of cash to pay the fine.

Share price recovering well today back up to 2.90 congrats to Big Toe and VBs who stuck with the company

...vested,,,  to infinity and beyond!!!

[weijian]

Since 1H26 accounts should have long been closed, I do not understand why is a range of 5-10% been provided rather than a more specific number? I presume competition is too intense and/or the vendor simply wants to remain private (like how Rolex/Patek forbade TheHourGlass/Cortina from revealing more segmental information)

RECEIPT OF NOTICE OF SUSPENSION OF ORDERS FROM A KEY VENDOR

The Key Vendor has informed M.Tech that it has suspended all order acceptances, marketing and business development activities, and commercial communications with M.Tech with immediate effect until further notice. Technical support activities required to support existing end-customers will continue through appropriate technical support channels.

Based on invoices issued to customers of the Group for the six-month financial period from 1 January 2026 to 30 June 2026 (“1H2026”), business generated from products supplied by the Key Vendor accounted for between 5% and 10% of the Group’s total consolidated revenue for 1H2026

https://links.sgx.com/FileOpen/Multi-Che...eID=904847

[opmi]

existing end-customers will want to work with Mtech on other products/services in future projects meh? like got career risk..
not as if M.tech got exclusive distributionship...just work with another reseller .....

[weijian]

To be honest, I am surprised by the vendor's suspension of its business activities with M.Tech. But with this suspension as a "new fact", I have to "change my mind". To recall certain portions of the independent audit (in italics with emphasis mine):

Based on the documents reviewed and the interviews conducted, there is no finding that the Group and its employees acted with a lack of probity, for personal gain, or to wrongfully benefit from the Transactions. The evidence provided by the Group and its employees were assessed to be sufficiently credible, with no specific indicators of deliberate concealment or inconsistency being detected.

The evidence reviewed included bank statements from the Group’s employees showing the flow of funds and a confirmation letter from the vendor’s employee on the vendor’s letterhead and bearing the vendor’s company stamp that the vendor employee had received the corresponding amount of funds on behalf of the vendor from those Group employees.

In addition, there is no finding that the Group suffered any financial losses or financial disadvantages as a result of the Transactions.

Results of independent audit (Dec2024): https://links.sgx.com/FileOpen/Multi-Che...eID=828458

------------

First, the audit seems to be suggest that besides the Group and its employees, no other external parties were involved. So everything was only from the point of view of M.Tech, including whether it suffered any financial losses/disadvantages as well. But with what has transpired thus far, maybe the transaction was supposed to give a financial advantage to M.Tech and so maybe the audit result is spot on. Next, VB Big Toe has mentioned that a key piece of evidence is only a confirmation letter with the vendor's letterhead/company stamp certifying its authenticity, and that may not be sufficient for a 2mil expense. The vendor's actions suggest that something more nefarious has happened and they may not have benefitted or is a victim themselves.

Multi-Chem's annual report does not reveal the supplier concentration but have mentioned that "the Group is subject to risk of reliance on a few key vendors". With 5-10% of 1H26 revenue, this vendor is probably a key one. Munger/Buffett used to say that when you see a cockroach, expect to see more its relatives soon.

[opmi]

"a confirmation letter from the vendor’s employee on the vendor’s letterhead and bearing the vendor’s company stamp" - I dont know what type of company (SME not MNC for sure) can issue this kind of letter for employee

you know how difficult for big companies with proper controls to issue this type of letter...and with company stamp? (I imagine those rubber chops that can get from those small shops)

so it is likely the "vendor" is some kind of smallish company rather than some big firms....

If ever annc of CAD comes in, means GG already.