Wednesday, December 21, 2005

Move Over Who?: Part VII

Truly incredible, isn't it?

Me do think so lah.

Remember i wrote in Part III the following?

Company was burning up cash fast.
Loans were increasing!

And the company simply had an enormous problem with their sales collections. If one cannot collect, sooner or later, these debts are deemed doubtful and when it drags on longer it is deemed bad debts. And when it happens, the company has to write it off as a loss. And Karensoft's trade receivables were simply ballooning! It was totally incredible!

Ahh... this trade receivables indeed became a whopping problem.

Variance Between Audited And Unaudited Results For Financial Year Ended 31 December 2004

The Board, with the recommendation of the Audit Committee and external auditors, has made an additional specific provision for doubtful accounts amounting to RM4,952,000. The said additional provision, amongst others, has resulted in the Group registering an audited net loss after tax of RM3,930,000 for the financial year ended 31 December 2004. When compared to the unaudited net profit after tax of RM977,000 previously announced, the above is a deviation of more than 10%.

See? The external auditors recognised this issue. These account receivables were simply questionable to the point that they recommend it to be classified as doubtful debts.

And by doing so, Karensoft had to reclassify and account for for these doubful accounts totalling some rm4.952 million.

Which meant that Karensoft has lost rm3.930 million for fy 2004!

Which meant that Karensoft has lost money two fiscal years in a row!!!

Which meant that Karensoft has lost each year since being listed in the Messdaq!!!!!


And since the losses is derived from doublful accounts, there were some who even questioned the whole integrity of Karensoft sales, especially when their trade receivables kept ballooning each single quarter. Yup, the intergrity of their sales!

And consider this.. a doubtful accounts totalling rm4.952 million is really a lot when one considers that Karensoft's fiscal year 2004 sales only totaled 6.1 million. See the justifcation in questioning the integrity of their sales?

When a company reports 6.1 million in sales, how could 4.952 million be doubtful?

Kinda blows ur mind away, doesn't it?

And yet again... the whole issue of quality control over the companies seeking listing on the Messdaq comes to mind...

Just how did these companies got listed?


Oh and this was Karensoft last reported earnings.

Quarterly rpt on consolidated results for the financial period ended 30/9/2005

Lost money yet again! And look at the ytd losses. Incredible. Just incredible.

Now now consider this issue.

When Kenanga first wrote on Karensoft, Kenanga stated that Karensoft some 69.2 million shares then.

Get this... at 0.96 sen, Karensoft then had a market capital of rm65.8 million


Karensoft (which had a 1-for-2 bonus issue in June 2005) now has some 115.015 million shares.

Now at 0.065 sen, Karensoft market value (market cap) is only some 7.475 million.

Soooooooooooo ...... from 2nd Dec 2004 to 20th Dec 2005, some 58.35 million in market value has simply vanished!

Would you call this as Value Creation or would you consider as Value Destruction?


me think i shall call it the end.... for now.... :P

Quick ref:

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