Thursday, October 25, 2007

Salcon

I find it so rather amusing to read the news on Btimes..

  • Salcon: 30pc of profit to come from insurer in 2008
    By Jeeva Arulampalam
    jeeva@nstp.com.my

    October 25 2007

    SALCON Bhd expects its latest insurance acquisition to start contributing 30 per cent to the company's profit for the fiscal year ending 2008.

    The remaining profit will come from its core business - designing and constructing water and wastewater treatment plants and related facilities.

    For the financial year ended December 2006, Salcon's net profit was RM5 million on the back of RM121 million revenue.

    "We are waiting for the day to take over the company (Oriental Capital Assurance Bhd) and run it profitably," Salcon Bhd chairman Datuk Seri Goh Eng Toon told reporters after the company's extraordinary general meeting, where shareholders approved the proposed acquisition of Oriental.

    Salcon will acquire 74.17 per cent of Oriental for RM130 million from Maika Holdings Bhd and the remaining shares it does not own through a mandatory general offer.

    Goh said Salcon's rationale for acquiring the general insurer was to diversify into something more consistent and permanent. He said the insurance business will provide stability and sustainability of long-term recurring income and revenue stream.

    Director Datuk Seri Megat Najmuddin Khas said Salcon also had the in-house expertise, making reference to Goh who was previously chairman of Aviva Insurance Bhd, which has since merged into MSIG Insurance Bhd.

    "We are in the process of building the team to run this new acquisition of ours," said Megat Najmuddin.

    Goh said Salcon has a local candidate in mind to spearhead Oriental but will only make the announcement after receiving Bank Negara Malaysia approval.

    He said the total acquisition will cost RM180 million and is expected to be completed by end-February 2008.

    On Salcon's water business, chief operating officer How See Hock said the company will continue to look for investments in the water sector.

    Salcon's current order book stood at RM650 million, while total worth of local and overseas projects it has tendered for was RM7.5 billion.

    "A few projects in negotiations are in advance stages in Indonesia and we hope to seal it very soon. By year-end we should get something," said How.

Here are some of the things i find so amusing...

1. For the financial year ended December 2006, Salcon's net profit was RM5 million on the back of RM121 million revenue.

Now that statement is so amusing when you compare it to point 2 below.

2. Salcon's current order book stood at RM650 million, while total worth of local and overseas projects it has tendered for was RM7.5 billion

So huge is the company's water projects order book! 650 million! And it tendered a whopping 7.5 billion worth of projects. (hmm.. a tender is a tender, yes?)

Now when you compare it to point 1... u get a company bidding and winning so many projects but yet.... there is so little to show. A profit of only 5 million?

Now consider this point... based on Salcon's current price of 1.06, this company is worth a whopping 463 million!!!

My oh my!

What a wonderful stock market it is to value Salcon at 463 million when you considered the fact that the company only earned a mere 5 million for it's last fiscal year 2006.

And clearly water isn't delivering for Salcon despite all the hype.

Btw.... if you think i am terrible on Salcon, look at the bare facts. Look the most recent 7 quarterly earnings Salcon has announced.

.............. earnings
07 Q2..... 0.030
07 Q1..... 0.274
06 Q4..... 4.816
06 Q3..... -0.672
06 Q2..... 0.024
06 Q1..... 0.164
05 Q4..... -28.112



Well, if you total its most recent 7 quarterly earnings, it's losing money isn't it?

And the current half year, fiscal 2007, Salcon only earned some 330k.

YES .... SALCON ONLY MADE 330k!!!

so why wasn't this mentioned in the press?

Ah, some would argue that is the past. Currently Salcon has some order book worth 650 million and bidding for billions of contract. Surely based on future expected earnings, then perhaps there is some justifications for Salcon.

True. I do not doubt that.

But...

if the past Salcon cannot produce, what guarantee that one has it will produce in the future?

Anyway, clearly Salcon water projects ain't delivering too good.

So now it wants to go into insurance too!

Well, I am not going to lay judgement on its insurance thingee... but i just find it so rather amusing!

*** Disclaimer ... I have ZERO ideas on how Salcon the stock price would perform! ***

1 comments:

oldman said...

this counter is cursed!