Tuesday, July 31, 2007

MaeMode III

Malaysian AE Models (MaeMode) announced its earnings last night.

Here is the updated financial data for MaeMode.



1. Earnings growth is there, no doubt. Back in 2002, it earned 8.259 million. 5 years later it earned some 16.218 million. Earnings grew at an annual compounded rate of 14.45%. Impressive. Fantastic!

2. Margins are terrible. Back in 2002, net earnings margins was around 7.6%. Now? It's only 4.3%.


3. Cash management is terrible. The evidence of debt built up is there to be seen. Back in 2002, MaeMode was in a nett debt of 65 million. 5 years later, it is now in a nett debt position of 150 million. Which meant that the nett debt grew at an annual compounded rate of 18.2%!

Is the debt built up justifiable?

4. Trade receivables. WOW! Warning bells all over. A year ago it was 109 million. Now it's 243 million.

If you put the trade receivables TRACK RECORD into perspective, back in 2002, MaeMode's trade receivables was only 57 million. 5 years later, it's now 243.109 million. Do you know that this means that MaeMode's receivables has compounded at an annual rate of 33.64%?!

So, its earnings grew at an compounded rate of 14.45% since 2002 but its nett debt grew at annual compounded rate of 18.2%. Its trade receivables grew at an annual compounded rate of 33.64%!

How?

4 comments:

Seng said...

Dear Moola,

An excellent long-term analysis. I agree the company has warning bell signs written all over it. Long-term investors who wish to sleep soundly at night would do well to avoid this stock.

Equally disturbing is a recent article by Alan Voon, the "warrant specialist" promoting MAEMODE-WA to the Star readers on the 14th this month. http://www.biznewsdb.com/english/newspage/newspage1.asp?ID=707148&file1=7&bulan=07&kw=maemode

The warrant expires on 19/9/2010, or more than 3 years away. I am not as confident as the equity analysts on what will happen to MAEMODE's business in 3 years time. At best, there is so much uncertainty written all over the projected figures. Worse, we might see a repeat of MEGAN and TRANMIL ... And the problem with MAEMODE-WA is that the chance of losing 100% of one's hard-earned capital is very real by the expiry date, compare to the mother share. The trader's only hope is to find a greater fool who would buy it off them at higher prices.

Do keep up the good work!

Cheers,
Seng.

Moola said...

Seng,

Many thanks for your kind words.

As it is, the numbers shown by MaeMode clearly shows that it does not represent a fantastic company.

Hence, from an investing perspective, I would seriously avoid the stock.

Btw, I read your latest blog posting. Fantastic write-up!

Cheers

jackofalltrades said...

Seng, I was actually holding maemode and sold it before Alan Voon recommending maemode-wa. Luckily I didn't dive in after reading his article.

A couple of months ago he was promoting S**. Since my family is in the furniture retailing business, we received an "insider" information that someone big in the co. was frying the stock with foreigners in 2006. It was during that time the big guy actually sold down his stakes in the co. About a year later the big guy was recollecting the stock at lower prices. Alan Voon actually took this as one of the good signs for holding the warrant of the stock.

John said...

It would appear much easier to raise money via a private placement rather than collect receivables. :P