Court's Ruling Threatens Repco's Gaming Operations
By Raphael PuraStaff Reporter of The Wall Street Journal
Dec. 9, 1996 12:01 am ET
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KUALA LUMPUR, Malaysia -- A Malaysian court ruling could threaten publicly listed Repco Holdings Bhd.'s gambling business, one of the controversial company's key profit centers.

Repco's potential problem stems from an unpublicized Court of Appeal decision reached in September, but only recently circulated in written form.

Ruling on a dispute between Sandakan Turf Club in Sabah state and Sababumi (Sandakan) Sdn. Bhd., the court declared illegal an agreement under which Sababumi operated a lucrative gambling concession under a gaming license granted to the Turf Club by the federal government. A three-judge panel said that the Turf Club, under the conditions of its license, couldn't legally assign or transfer its right to manage its gaming business to another party, in this case, Sababumi.
The Court of Appeal decision could affect Repco because the company is the successor to Sababumi in managing the Sandakan Turf Club's gaming concession and sharing in its profits. Through a unit of its Everise Capital Sdn. Bhd. subsidiary, Repco currently manages public lotteries in Sabah under an agreement with Turf Club that is similar, in some ways, to the Sababumi arrangement.

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The Turf Club-Sababumi legal dispute began in late 1994, when the club terminated its 20-year agreement with Sababumi, a unit of publicly traded Magnum Corp. Bhd., a major gaming concern in peninsular Malaysia. Sababumi then sued the Turf Club in early 1995 seeking a declaration that its agreement was valid and for about 530 million ringgit ($210.1 million) in compensation. A Malaysian High Court judge in April 1995 ruled in favor of Sababumi, but the Court of Appeal reversed that decision. Sababumi plans to appeal the decision to Malaysia's highest judicial body, the Federal Court.

Legal Questions
Although the Court of Appeal decision doesn't mention the Everise-Turf Club agreement, some lawyers following the Turf Club-Sababumi case say the ruling raises legal questions about Repco's arrangement with the Turf Club.

However, Sandakan Turf Club chairman Datuk Yap Pak Leong said Sunday that the club's arrangement with Repco shouldn't be jeopardized by the court decision. "Repco is only a manager for the Turf Club," Datuk Yap said, adding that "all the money received is the Sandakan Turf Club's money and the management company (Repco) is paid a management fee." He acknowledged, however, that Repco's "fee" reflects, in part, the volume of revenue flowing from the Turf Club's gaming license.

(Detailed terms of the Turf Club-Everise agreement haven't been publicly disclosed, but gaming-industry analysts say the arrangement effectively entitles Everise to more than 90% of the gross gaming revenue generated by the Turf Club's license. In turn, analysts said, the club receives a "royalty" of 3% of gross revenue.)

Datuk Yap said that even if the Court of Appeal decision brings the validity of the Turf Club's agreement with Repco into doubt, "Repco is willing at any time to make amendments (in its arrangement with the Turf Club) to overcome any legal problem."

Repco chief executive officer Choo Chin Thye didn't return phone calls seeking comment on the court decision. A company official said, however, that Repco's request on Thursday to suspend trading in its shares on the Kuala Lumpur Stock Exchange wasn't related to the court decision. Repco stock last traded at 79.50 ringgit.

Revised Projections
Repco's gaming business is crucial for the company, which has been among the highest fliers on the second board of the stock exchange. When Repco acquired a 75% stake in Everise in April, company executives said Everise would contribute pretax profit of 29.5 million ringgit to Repco's income from its Sabah gaming business for the year ending June 30, 1997. Repco has forecast total pretax earnings of 80.82 million ringgit for the current fiscal year, with most of its nongaming income to come from timber-related ventures.

Repco and its CEO, Mr. Choo, are already entangled in a separate legal action stemming from profit projections Repco made last January that were later lowered. In October, Malaysia's Securities Commission charged Mr. Choo in a Malaysian Sessions Court with giving false or misleading statements that may have influenced trading in Repco stock. He pleaded not guilty. In late November, the Securities Commission made similar charges against Repco itself; the company has pleaded not guilty.

The Security Commission's charges followed a huge run-up in Repco's stock price in 1995 and early 1996 that was based, in part, on expectations that Repco would take over Sababumi's role as the operator of Sandakan Turf Club's gaming business. Repco's stock price peaked at almost 100 ringgit a share in early 1996, after climbing from less than five ringgit a year earlier.

The impact of the Court of Appeal's decision on Repco could turn on whether the terms of Everise's gaming management agreement with the Sandakan Turf Club amount to the assignation or transfer of the Turf Club's gaming license rights, which the court said is illegal.

Public Lotteries
Sandakan Turf Club initially obtained licenses to operate horse-race related betting, as well as public lotteries in Sabah, in 1984 under a state gaming ordinance. In 1987, the club signed a 20-year agreement with Magnum's Sababumi subsidiary. Under the arrangement, Sababumi agreed to construct and manage a race course in Sandakan and to set up both "on course" and "off course" gaming operations on behalf of the Turf Club. In return, Sababumi was given the exclusive right to manage the gaming operations and reap the profits, save for paying the Turf Club 2% of gross revenue.

In January 1995, the federal government issued a new license to the Turf Club, after Malaysia's Finance Ministry canceled the state license in a move to enforce federal gaming legislation in Sabah.

The new federal license prohibited any transfer or assignment of "any part" of any of the rights, duties and obligations noted in the license to another party.

Sababumi, faced with the loss of its lucrative agreement, sought a High Court declaration that its agreement with the Turf Club was still valid under the club's new 1995 license and that Sababumi retained the exclusive right to manage the club's gaming operations and to take 98% of their gross revenue. High Court Judge Ian H.C. Chin decided in favor of Sababumi in April 1995. He suggested in his written judgment that the Turf Club was unhappy with its 2% take from gambling revenue and had used the new license as a pretext to escape its agreement with Sababumi "because the club was very much motivated by the very large sum that it stood to gain."

But Repco -- then a tiny unprofitable auto parts concern -- had already positioned itself to take over Sababumi's gaming business. On Feb. 10, 1995, Repco arranged to buy a controlling stake in Everise Ventures Sdn. Bhd., a company in which Turf Club chairman Datuk Yap was an indirect shareholder. A few days earlier, the Turf Club had selected Everise to manage its gaming operations in place of Sababumi.

Repco's proposed purchase was altered after the High Court ruled against Sandakan Turf Club in April 1995. The following month, Repco said it would buy Everise Ventures' parent company, Everise Capital, instead. Everise Capital was owned by Mr. Choo and businessman Low Thiam Hock, who became key Repco shareholders and executives last year.

With the Everise purchase pending, Repco's stock price soared to 88 ringgit in January 1996. The company predicted its pretax profit would jump to 107.48 million ringgit in the year ended June 30, 1997 from a projected 29.13 million ringgit a year earlier and a loss in the year prior to that. Malaysia's Securities Commission challenged the profit projection, however, and Repco cut its forecast for the year ended June 1997 to 80.82 million ringgit. That led to the commission's charges in October against Mr. Choo.

Sandakan Turf Club, meanwhile, appealed the High Court decision in the Sababumi case. It argued that its agreement with Sababumi had been invalidated by the conditions contained in the 1995 gaming license.

The Court of Appeal concurred. In its written decision by Justice Gopal Sri Ram, the court ruled that the Sababumi agreement was "illegal and void because it violates the terms of the new (gaming) license" issued to Sandakan Turf Club in 1995.

People now tikam covid.  4D bisuness down

But i check stc 4d close 50 percent shop around 1995 or 1996
And magnun berhad 4d shop no more at sabah
Do you know why??

at sabah only left sports toto,sabah lotto,stc 4d

many sabahan have oil palm plantation
Some do timber business also very rich

Means diriwan business not good?