Saturday, January 27, 2007

Huge Article on MP Technology

Last evening I blogged that MP Technology announced its Quarterly Earnings. Just saw a huge write-up on Star Bizweek on this company.

In loud distress
MPTech grapples with financial irregularities and tough industry conditions:

  • It is clear that MPTech is a company is in some distress. Its shares closed last Friday at 7 sen, the lowest among companies that are not under PN17 status. But that soon changed. In the evening, the company announced that it had a RM66.7mil deficit in its shareholders' equity, thus shoving it under the PN17 banner.

    But the company's woes are not all about financial irregularities. It operates in a tough industry blighted by the high oil prices, which have led to rising raw material costs. The evaluation of anti-dumping duty in Europe during the second half of 2005 has had an impact as well. On top of that, MPTech has undergone a painful transformation.

    In the annual report 2005, Mat Hassan, writing then as an executive director, attributed the poor performance to loss on disposal and discontinuance of the operations of certain subsidiaries.

    He said these changes had been planned and executed by the board of directors and the management in response to shifts in the market environment and following an internal operation review.

    The action plan, he added, was part of a group-wide reorganisation plan that also included consolidation of the remaining operating units, diversification to reduce dependence on the plastic industry and reduction of gearing.

    “Whilst this action caused a one-time write-off in the books, the board believes that its leaner business structure will augur well for the group going forward, “ he wrote back in April last year. The reorganisation plan was completed in financial year 2005.

    However, as evident from the latest numbers, there is no sign of a recovery. MPTech is still bleeding. For the year ended November last year, the company recorded a net loss of RM144.5mil.

    In the notes to the latest quarterly results, the company said the negative publicity about the financial irregularities had further dampened the group’s effort to bounce back.

    It added, “In view of the major setback in the FY06, a new board was formed comprising parties with different expertise to regularise the group in both operation and financial aspects, and new group managing director was appointed as well to turn around the group going forward.”

    The financials are not the only sign of trouble. The company has seen several boardroom changes over the last six months and the composition of its audit committee has been altered almost as many times. The new group MD is Cai Zhao Quan, a 54-year-old Singapore entrepreneur.

    Cai, who had been the chief operating officer of a plastic player in Singapore for two decades, was appointed MPTech's managing director last Monday. Insiders say he was brought in to try to revive MPTech's fortunes. He may have a lot more to contend with, if the financial irregularities turn out to be crippling problems.