Today's RHG AGM

Well, I attended RHG Limited’s AGM today. The outcome of the resolutions were disappointing with David Coe re-elected and Steve Johnson and Greg Hoffman failing in their attempt to be elected. It was pleasing though to see so many shareholders voted against Coe and for Johnson and Hoffman. Without the board members voting their own shares, all those resolutions might’ve  gone the other way. It was also good to see Stephen Mayne & Johnson give it to the board on several issues. My first impression of John Kinghorn was not good. He seemed to treat Steve Johnson and Greg Hoffman with contempt (never mind other small shareholders).

Kinghorn, the chariman of RHG, reiterated that the company will take advantage of any “superior” business opportunities if they arise before the loan book is totally run down. If none present, then Kinghorn stated he would return whatever funds that are available, to shareholders.  I’ve listed my issues with this strategy below.

  • Coe and Kinghorn do not have an enviable track record, with both associated (especially Coe) with Allco Finance (and its sudden demise under loads of debt). Any “superior” opportunity they partake in, is more than likely to fall apart, with further loss of shareholder value.
  • Coe was also associated with the failed takeover attempt of Qantas.
  • Coe only attended 2 board meetings in 2008/09 year, but still got paid $80,000. That’s nice work – if you can get it.
  • Kinghorn stated at the 2007 AGM that RHG would return all funds to shareholders as the loan book runs down. He made no mention of “superior” business opportunities then.
  • The global market for RMBS (residential Mortgage-backed Securities) is closed, and while it may slowly open again, its likely that costs will be much higher than prior to the GFC.
  • The board of directors have a conflict of interest in RHG. If they let the mortgage book run down and return funds to shareholders, they’ll be out of a job as there will be nothing left of the company. Given their disastrous track record, its unlikely they’ll be hired by any diligent company in the future.

I was also left stunned by some of the views of other small shareholders. Im sure one person was a plant by the company. This lady was happy to let the board do what they liked, while she sat on a paper loss of 72% from $2.50 to 70 cents and the possibility that she’ll get nothing, if the board go ahead with their plans. Obviously, this lady has no idea how to invest. Usually you invest to make money, not to lose it. I can’t understand how she’s happy with that situation, but she certainly made glowing comments about the board and their strategy.

It makes me more determined than ever to get this issue out in the open and try and inform other shareholders what’s going on with this company.  Which brings me to another issue. How Fund managers vote our superannuation investments.  THis is just a black hole, no one really understands how they are going to vote, they are not active shareholders, tending to go with the incumbent boards. Some managers are starting to voice their concerns, but not enough. That’s one reason why I have my own Superfund. Anyway, enough for now. Will be interesting to see what The Intelligent Investor (www.intelligentinvestor.com.au) have to say in the next few days.

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