Saturday, December 15, 2007

Regardings Mems Again..

Here is a follow-up on the blog posting on Mems: More on Mems Restating of Its Earnings.

Read the following article posted on the Edge.
14-12-2007: Major MEMS Tech shareholder disposes of 1.8m shares

  • AKN Equity Ventures Sdn Bhd, a substantial shareholder of MEMS Technology Bhd which is being investigated by the Securities Commission for possible irregularities in its financial statements, has reduced its direct shareholding by selling 1.8 million shares or a 0.27% stake in the open market.

    A filing with Bursa Malaysia on Dec 12 showed that after the disposals on Dec 7, 10 and 11, AKN Equity’s direct interest in the Mesdaq company was reduced to 126.9 million shares or 19.35%. The share price closed at 21, 20.5 and 20 sen respectively on the three days.
    MEMS share price tumbled 16 sen or almost 45% on Nov 28 after the company told Bursa Malaysia it could not issue the audited accounts due to concerns over certain transactions.

    Subsequently, the counter has been hovering between 19.5 sen and 21.5 sen with an average of 5.64 million shares traded daily.

    On Nov 30, the company said it was not able to issue its audited financial statements for the financial year ended July 31, 2007 for public release, within the four months from close of the financial year, which falls on Nov 30.

    The board of directors of MEMS wishes to announce that the company is not able to issue its audited financial statements by Nov 30, 2007, as the company’s external auditors have expressed concerns over certain transactions relating to revenue and property plant and equipment.

    ”In light of the above, and after due deliberation, the board has resolved not to recognise revenue of RM19.72 million. As a result of this, the unaudited consolidated revenue for the financial year ended July 31, 2007 will be revised to RM53.7 million.

    This will consequently result in the unaudited profit after tax for the financial year ended July 31, 2007 to be reduced from RM21.47 million as announced on Sept 27, 2007 to RM13.45 million,” it said.

    Bursa Malaysia Securities on Dec 4 rejected the company’s application for an extension of 45 days from Nov 30, 2007 to submit its audited financial statements for the financial year ended July 31, 2007 (FY07).

    Late last month, a SC spokesperson confirmed that the company was being investigated for possible irregularities in its financial statements.

Do you like what you see in this company?

Company restates its earnings, company major shareholders dispose their shares, company not able to submit its earnings in time. Rather terrible, isn't it?

Wrote the following on Sahamas back on Nov 28th 2007.

  • All this is giving us (our stock market) such a bad name.

    In Mems case, yes it was not as drastic as say Megan or Transmile but over stating earnings is simply unacceptable.

    Consider the following...

    If Mems did not over-state their earnings, there would be no growth for 3 years!

    Without the growth, MEMS would have been rather unattractive and most of all, it would never had commanded such a rosy stock price.

    Just in July 2007, MEMS traded at a high of 81 sen, giving it a market valuation of 531 million.

    Now based on an actual earnings of 13 million, surely this 81 sen would have been an insane stock price for Mems!

    Now consider this. Let me flip it around.

    Mems is now trading at 25 sen. Its market valuation is only some 163 million.

    So if the market valuation now is about fair for a company making only 13 million, then Mems is worth only some 163 million.

    However, due to the overstated earnings, MEMS was valued as much as some 531 million!!!


Just for the record, Mems closed yesterday at 19 sen.