Thursday, November 24, 2005

Ze Numbers Game!

Ok..ok..ok...we have this company which made a reverse takeover of a listed company...

And the company net earnings showed the following set of numbers:

15.5 -> 16.2

Now if a research company comes in with all guns blazing: Bang! Bang! Bang! and declares the following earnings projections (in green italic):

15.5 -> 16.2 -> 26.7 -> 41.3 -> 50.7million.

And the most recent/rolling net earnings was only at 16.9million....

So a company with a hardly visible growth record is expected to grow ini macam!

What do you think of such earnings projections?

Fairly optimistic?

Or overly optimistic?

Oh i am toking about OSK and Crestbuilder. Click here for proof:

So the company reported its earnings today. Click

So this stock made a total net profit of 9.667million for the first 3 quarters of its fiscal year 2005.

Nothing really wrong lah with the company's earnings performance. (Make moola mah... beh pai mah... tiok boh?)


it just makes u wonder.... cos OSK is projecting a net profit of 26.7 million for Crest Builder fiscal year 2005.

Which means Crest Builder has to make an astounding net profit of 17.03 million (err.. 26.7 - 9.667 = 17.03 lor) for its Q4 period.

Dun u think that would pretty hard to achieve?

And if so.... we have yet another company failing to meet EXPECTATIONS?

or perhaps the EXPECTATIONS was simply wayyyyyyyyyyy too optimistic?

ahem... makes u wonder.... doesn't it?

No? How about this then? When OSK made that write-up in April 2005, Cresbld was trading at a price of 1.44. And this how OSK valued Cresbld:

However, by taking into account only the basic shares outstanding, we obtained a fair value of RM2.59 based on FY06 earnings, which provides an upside of 72.7% to its current share price.

See onot?

And they based it on fy 2006 earnings! Earnings which went bang! bang! bang! like this below:

15.5 -> 16.2 -> 26.7 -> 41.3 -> 50.7million.

Fiyoooh... 41.3 million!!!

Incredible isn't it?

2005 FY projections is already perhaps a bit too optimistic at 26.7 million... but no... OSK did not based their valuations upon those numbers but instead they based it at an even more optimistic earnings of 41.3 million!!!!!!!!!!!!!!!

Now wouldn't u say that this is a bit too optimistic?

And when they make such optimistic projections, this simply allows them to create a stock with such a great upside potential (72.7% wor!) when they make their so-called BUY recommendation!

ps. Cresbld closed at 0.795 today.

And when OSK made the buy recommendation Cresbld was at 1.44!

Oh... see the clear and present danger of relying on research reports!