Wednesday, December 21, 2005

Move Over Who?: Part IV

Let's review what happened so far.

So far we have a rather interesting case: potential prospect versus actual performance.

The potential prospect is Karensoft execsuite could sell like hot cakes.
The actual performane? Very poor so far.

Would a bet on Karensoft made sense at 0.96 sen?

Look at the picture above.

Look at the 2005 vertical line. Look at how Karensoft started its plunge just after the December period. See the implications on it?


Came Feb 28th 2005.

Karensoft closed the trading day at 0.78 sen. (down from that lofty 0.96 sen in Dec 2004)

Karensoft reported its 2004 Q4 earnings.

Quarterly rpt on consolidated results for the financial period ended 31/12/2004

1. Sales 1.543 million
2. Net Profit 0.164 million
3. Cash 2.990 million
4. Loans 4.799 (up again!)
5. Trade receivables 12.962 million (WOW!!! this company has no collections or what??)

So the initial reaction was.... Where is the Moola? Where? 164 thousand in net earnings wor. Peanuts, isn't it?

And here is what Kenanga said in its review of performance.

Going forward, margins and hence earnings should be more exciting especially from 1Q05 as revenue and earnings from its Execsuite software kicks in (already some RM41k in sales was locked in in 4Q despite the late launch last year). The Execsuite will nevertheless be the key earnings driver for Karensoft going forward as it is expected to contribute to in excess of 60% of turnover in FY05.
We are maintaining our projections for FY05-FY07.

Our BUY rating on Karensoft is very much based on the premise that its Execsuite software takes off. We remain positive that this “one software”, an alternative to the Microsoft Office will be successful given the favourable pricing of the product vis-à-vis the Microsoft Office, the attractive vendor commissions to promote the product as well as the successful bundling of its products with PC/notebook manufacturers which enables cheaper overall pricing of their PC/notebook. Based on a fair P/E of 15x for FY05, Karensoft is fairly valued at RM1.46.

They maintained their lofty projections and their BUY rating on Karensoft despite it was rather clear that Karensoft actual performance did not match Kenanga's optimism.

Coming next in Part V....drama starts... the selldowns begins!!!....

Quick ref:

Move Over Who?
Move Over Who?: Part II
Move Over Who?: Part III
Move Over Who?: Part IV