The manner in which Comsa Farms restated their earnings is really worth looking at.
LOL!!... We need to study how these buggers do it mah!
Quarterly rpt on consolidated results for the financial period ended 31/12/2005
The restated earnings caused Comsa to report a loss of over rm110 million!
Here is a snapshot of the major adjustments in Comsa balance sheet.
(Click on the picture for a bigger view..)
As you can see the biggest adjustment was made in...
1. Inventory.
The adjustment of 90.273 million was made! So from an inventory balance of 98.301 million, Comsa's adjusted balance became 8.028 million!
Holy chicken!!! That's simply mind-boggling!
2. Trade receivables.
Comsa initially reported a trade receivable balance of 70.185 million. This figure is adjusted to 100.799 million!!
And the following announcement was made by Comsa explaining the adjustment.
(i) The adjustments to the inventories and biological assets are due to the adoption of International Accounting Standards ("IAS") 41 on 1 April 2005 and the related accounting policies. For further details, please refer to Note (I) (a) of the Restated Financial Results;
(ii) The adjustments to the consolidated revenue and cost of sales are due to the overstatements of sales and purchases, which have not been substantiated with valid invoices and other supporting documents;
(iii) The adjustments to trade receivables are due to the provision for bad and doubtful debts and the overstatement of sales mentioned in item (ii) above, whilst adjustments to trade payables are due to the overstatement of purchases mentioned in item (ii) above; and
(iii) The adjustments to the Property, Plant & Equipment ("PPE") are necessary to reflect the fair value of PPE as at the Said Dates.
Waaa.... consolidated revenue and cost of sales are due to the overstatements of sales and purchases which have not been substantiated with valid invoices! Holy chicken!!!!!
And the end result of this overstatement of sales... (from Comsa notes) (ahem! from 60.9 mil to just 9.9 mil!)
- The Group's revenue for the current financial period ended 31 December 2005 decreased to RM9.9 million from RM60.9 million in the prior financial period ended 31 December 2004 while the loss before taxation was RM110.2 million from a profit before taxation of RM2.5 million in the previous corresponding quarter. The decline in revenue and the loss was mainly due to the over-statement of sales during the period, loss on disposal of wholesale, retail, breeder and broiler operations and the provisions for bad and doubtful debt as disclosed in Note 7 of this section.
Truly incredible!
Do you find the explaination made by Comsa to be sufficient?
So the areas to look out for.... overstating of sales, inventories and trade receivables. Overstating of sales is complex and not easy to spot but the tell-tale signs in inventories and trade receivables should never be ignored and discounted. Remember the issues of inventory and trade receivable build-up?
And those that had been following Comsa for a while, Comsa has turned into deadly value trap because at one time, it was argued that Comsa used to be trading at a low price earnings multiple and it had always traded well below its NTA. Investing lessons yet again?
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8 comments:
I just wanna to say 2 words...Malaysia Boleh!!!
CB,
LOL!!!
Yeah... Malaysia really Boleh... :)
However, do note... such fiancial shenanigan happens all over the world.
nm,
It's time to chicken out for those who is still in Comsa. Let MAA foots the bill.
Anyone noticed the previous MAA ads in TV which is so sub standard i thot i m seeing a snack company Ads. SOmthing like old man trimming tree with a shape of MAA and at the end..
"Say yes to MAA, say yes to financial bla bla bla."
But looks like MAA doesnt even know how to manage its lending operation....
One of the comsa directors sit on Confarm, while its boss's wife is related to Confarm's boss. I think this is what they call birds of a feather, they flop together. Comsa farm and confarm boleh, BM tak boleh. Cheers. For those analysts who study financial statement with a fine comb, they should bear in mind those figures could be more fictitious than Harry Porter's story. Cheers.
Anon,
LOL!!!
"For those analysts who study financial statement with a fine comb, they should bear in mind those figures could be more fictitious than Harry Porter's story."
Very interesting... could one have avoided this danger in Comsa?
Yes, the company's cashflow statement give some hints, the company's borrowing was snowballing faster that the sales. There is no moola from operation prior for the past few years. The account was destroyed by fire and water. I think its the act for god to punish them for not telling the truth. The ex auditor chicken out and resign. This company's story is a good joke, go read the rosy vision of its chairman's statement before the company went burst. If you believe 5% of his words, you also die. cheer.
btw, for those who are holding other chicken stock, it pays to check if their share director is related to comsa. Comsa got its bird flu from Confarm and look what happen to it now.
nope,i think they are lundering the money.
those directors is all expertise in breeding chicken, as i heard this from east-malaysia.
they want to make a quick money, so they use water and fire to destroy all the invoice.
(provision for bad debt, huh?)
like confarm, they said their chicken was all dead, but how then the external auditor know the chicken was all dead?
evidence not concrete!
i heard the supplier and customer is all come from related party. they deny to pay divident, sub-contract outside, pilfer money.
according to litigation note,
the stock and feed is missing in overnight!
currently they are charged by lawsuit due to the missing stock and unable to deliver the stock to their customer.
who stole the huge bulk of stock in overnight!???
insider inside,i think.
LOL!!..
thanks for sharing the chicken tales!
Point is... there was never an investment justification in COMSA in the first place...
Cheers!
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