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F40 MoneySwap and PCG Entertainment – a look back in history at the former chairman and his brother. It’s a game of two halves….

By Nigel Somerville, the Deputy Sheriff of AIM | Thursday 9 June 2016

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Picking up on Cynical Bear’s footballing analogy and having previously wondered whether there might be a skeleton in the cupboard of ShareProphets AIM-China Filthy Forty MoneySwap (SWAP) in the light of last week’s ‘fessing up by fellow Filthy Forty PCG Entertainment (PCGE), further digging reveals a festival of Red Flags. Look no further than the previous stamping ground of MoneySwap and PCG Entertainment (PCGE) former chairman, Mr Kung Min Lin, at Power Capital Global Limited (PCGB), which started life as Sportswinbet (SWB) in 2005. Here are the first half highlights.

As with MoneySwap and PCG, Mr Kung Min Lin served as Chairman and the company was involved in related party deals with his brother, Mr Heng Jui Lin - via his Kolarmy entity (the one we now learn is not paying bills contractually agreed last year as part of an RTO deal with PCG).

Wind the clock back to June 2005 when the referee’s whistle blew: a company called Sportswinbet Limited joined the Casino (ticker: SWB) with a placing of 6 million shares at 50p, to add to an already existing 51 million shares. Thus it started its AIM career with a market capitalisation of £28.5 million.

It listed as an investment company, looking for opportunities in the online gaming (ie gambling) sector, but as at the date of the admission document it had not concluded a deal. We were told that more than £275,000 had been raised before the placing and admission. But directors had got in at just 0.01p – with the bulk of those (25 million!) going to exec director Kung Min Lin at the end of April 2005, just five and a half weeks before the listing at 50p. Mind you, some lucky folks got in at 64.1p just a few days ahead of the IPO!

The net effect was that of the £28.5 million market capitalisation at admission, for a company with less than £3 million of assets (post placing and expenses), the directors accounted for about 45% of the shares and had paid a total of just £2580 for them. Nice work, fellas - come back David Lenigas, all is forgiven!

The share price action after admission was just bonkers, with the stock peaking at a whopping £2 a share during 2005 – online gaming was certainly in vogue, but a market cap of £114 million for a company with just a gaming license application and less than £3 million in cash as its total assets? Benjamin Graham’s Mr Market had certainly been overdosing on the happy pills!

Gravity started to assert itself when the shares collapsed to around 65p: FY05 numbers showed net assets of just 4p per share, with the company having sent almost £1 million of the £3 million raised at IPO to money heaven – and still no operational gaming license. By the time of the 2006 interims (released that September) there was still no operational gaming license, cash was down to £1.5 million and the online gaming bubble had been pricked by regulatory issues, raising serious concerns as to industry viability.

Finally in April 2007 something happened: a deal was done whereby the company’s Sportswinbet brand would be used for a trial period by a Philippines based company operating under a gambling and online betting license issued by the Cagayan Economic Zone Authority. That company was called Kolarmy Technology Inc -  the very same name as the company at the centre of PCG’s disastrous RNS last week). PCG also told us in its AIM readmission document (when the RTO under which the business was bought, and which Kolarmy was the majority owner of ahead of the deal) that Kolarmy was owned and controlled by Mr Heng Jui Lin, the brother of PCG’s then chairman, Kung Min Lin.

The Sportswinbet/Kolarmy trial apparently did well enough initially, but a number of technical and structural issues saw it suspended. By the end of 2007 Sportswinbet shares had crashed to less than 15p. Undaunted, the company later announced that these technical issues were, apparently, resolved and late in 2008 a new trial commenced, with the company updating in Jan 2009 that it had performed well and that the platform was to be expanded.

Sadly, operational issues were again encountered and the whole thing was consigned to the bin, as reported by the company in Sept 2009. By the end of 2009 the shares were just 10p. Despite the difficulties the company ended the year with net current assets of £1.9 million and no non-current liabilities. Down but not out, it was time for another roll of the dice: Kung Min Lin was to step up from Exec Director to the role of Chairman, with his brother eventually joining the board too (understandable, as it appears that he took on a load of debt from his chairman brother and provided ever more debt funding as time went on). So the substitutes’ bench was fully employed, and the company was to dip into the transfer market too.

To lose half of the £3 million raised at 50p (with boardroom holdings at just 0.01p) and with nothing to show for it bar losses over a four and a half year period is hardly anything to write home about. The fact that it was via a related party in a deal involving something which didn’t work (twice) is obviously all completely fine and dandy.

So we have reached half time, with all to play for. Mr Lin’s 0.01p shares are still (very) well in the money – not something which can be said for those who ponied up at 50p in the IPO placing. But have you noticed how a losing team can sometimes just go into complete meltdown during the second half? That’s when the recriminations really get going in the dressing room.

Stay tuned for the second 90 minutes. Remember, it’s a game of two halves!

To be continued, after the break….

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