About Lion Diversified

• Question : Do u think LIONDIV is worth investing? the growth is there... the profit is showing...

My Dearest SS,

Lion Diversified is tricky because every single year there are some big ticket disposals made by Lion Diversified.

Have a look.

So for me, yes this year looks great for Lion D but it's so difficult when I do not know exactly what is happening in the company and with so many outstanding corporate exercises (which are so complex and so very funky in nature), will the minority shareholder see these profits or even be adequately compensated for their investment?

rgds

How Much For Maxis?

My Dearest Moo Moo Cow,

So Usaha Tegas wants to make a VGO on Maxis.

Let's see how much money Maxis generated this whole year.

Open their last report quarterly earnings, Quarterly rpt on consolidated results for the financial period ended 31/12/2006

If you add back the depreciation of 1.014 billion, Maxis operations generated 3.352 billion ringgit!!

My dearest Moo Moo Cow, consider that you have cash and you want an investment that can generate 3.352 Billion ringgit, how much do you reckon that you have to invest in a business that generates say 6%.

Is 6% a good return?

It's simple math. How much would you need to invest at 6% to generate a return of 3.352 billion? Answer? 3.352 divided by 6% = 55.4 billion!!

If someone offered you less, would you accept?

Recently there was an article on Star Bix, New chapter at Maxis.

This line is most interesting.

• To grow in India, Indonesia and locally in broadband and 3G, the funding requirements are huge, but that is not really an issue, said Jamaludin. This year alone, the company needs RM2.77bil (of which RM1.57bil is for India and RM1.2bil for Malaysia) and in India alone..

And this is confirmed if you look at the cash flow.

If you are a current shareholder of Maxis, your share of this 2.725 Billion has already being invested in India and Indonesia by Maxis.

How?

Should there be a value placed on these investments?

So how much does Usaha Tegas wants to offer you?

rgds

Maxis Implication?

My Dearest Moo Moo Cow,

Posted on Bloomberg News, Billionaire Krishnan Offers to Buy All of Maxis

• Ang Kok Heng, who manages $114 million, including Maxis shares, at Phillip Capital Management in Kuala Lumpur. ``For long term investors, it's going to be an opportunity lost because you have one less good company to invest in here.''

Ultimately this means that the minority investors would never be given a chance to being adequately compensated for the permanent withdrawal of a good investment opportunity.

So what's the point of investing in the share market if a company can list and de-list their company anyway and anyhow as they like?

Is this a fish market?

• ``The Board of Directors of the company is currently studying the implications of the potential takeover,'' Maxis's Chief Executive Officer Jamaludin Ibrahim said in a statement.

My dearest Moo Moo Cow, I do HOPE these folks study the SERIOUS IMPLICATION here, not just for the sake of your group of companies but for the whole of Bursa Malaysia! If companies are allowed to list and de-list as per their own fancy, is there any justification left to invest in any stocks on the Bursa Malaysia?

My Moo Moo Cow, do you reckon that a stock market can exist without the investors or minority shareholders?

And if Maxis was to seek listing in a foreign companies, don't you think that the implication would be deadly serious, my dearest Moo Moo Cow?

Them Sunrise Projectiles!

My Dearest Moo Moo Cow,

Let's look at Aseambankers projections again.



Now I am extremely lucky enough to have a saved copy of OSK report on Sunrise. See, I want to put this 154.9 million into some sort of perspective.

Back in Aug 2004, OSK projected earnings of 141.7 million for Sunrise in 2006. Sunrise had that huge funky provision back for its fiscal year 2006. Anyway, current nine month year to date fy 2007, Sunrise only managed 72.7 mil.



Ok, we can say that OSK is extremely powder-full with their earnings projections as expected.

Ok that was then. In Dec 2006, OSK report projected a net profit of only around 142 million for Sunrise fy 2008. LOL!! 2 years later, OSK is still using the same projected earnings for Sunrise? See table below.



And the following table is from RHB's research report dated 18th April 2007. RHB projected Sunrise to achieve a net profit of 134.4 million for its fy 2008.



Now if you thought Aseambankers was extremely optimistic, then how about HDBS research report on 18th April? HDBS projected an earnings of 190.7 million for Sunrise's fy 2008! WOW!!!




Yeah! I know what exactly you are thinking. Tell me more about it, my dearest!

Aseambankers on Sunrise

My Dearest Moo Moo Cow,

I just on the Edge website that Aseambankers Research raises Sunrise's TP to RM4.50. I find so amusing the way the brokers raises the target price of a stock by raising the forecasted profits based on a very optimistic growth projection. Yes, the higher the expectations, the higher the target price.

Here's what written on the Edge based on that Aseambankers research report.

• Aseambankers Research has raised the target price for Sunrise Bhd from RM3.92 to RM4.50 based on 11.5 times the calendar year 2008 earnings per share, supported by its revised net asset value (RNAV) of RM4.58.
  
  Maintaining a buy on Sunrise at RM3.78 and the earnings forecasts, it said the target price was well supported by the RNAV (previously RM4.50), which incorporates surplus from the recent proposed JV development on a 3.19 acre land in Mont Kiara.
  
  "Management guided that Sunrise has no plans to develop this new JV land in the immediate future, but merely intends to secure more land due to scarcity of supply around the Mont Kiara area," Aseambankers Research said.
  
  It said Sunrise's latest nine-month net profit at RM72.7 million, which was a 15.1% rise year-on-year, was within expectations, even though it only met 61.6% of consensus' and 65.9% of its full-year estimates.
  
  Aseambankers expected Sunrise's 4QFY07 results to be stronger, backed by a strong unbilled sales of RM1.3 billion as of April 23, 2007, and the near completion of Kiara Designer Suites and Solaris Mont Kiara (MK), which should lift margins. (read here for the rest of the Edge posting. )

And I was lucky enough to get a hold of Aseambankers research report.

Sunrise latest nine-month earning is around 72.7 million. So a full year earning of around 110 mil is about fair.

However, no one values stock based on current earnings. It's all about the future earnings.

And here is where it gets funky!

And in Sunrise case, the future earnings are based on an earnings expectations of 154.9 million. See the screenshot taken of Aseambankers research report.

And that works out to roughly a growth expectation of 40.8%

How?

Now my dearest Moo Moo Cow, I am not judging the issue of Sunrise as a stock but I am just totally amazed by the incredible projections made by our local research houses. Growth projections are simply worth 10 sen a dozen!

Quick update on Maxis

My Dearest Moo Moo Cow,

Incredible! Maxis was suspended in the morning.

And the following was posted on Bursa website.

• The Company has received notification, after close of business on 27 April 2007 from Usaha Tegas Sdn Bhd ("UTSB"), a substantial shareholder of the Company, that UTSB and its affiliates intend to launch a voluntary general offer through a special purpose vehicle for all the ordinary shares of the Company. UTSB has indicated that, barring unforeseen circumstances, the notice of takeover offer will be served on the Company on or before 3 May 2007

Maxis to be Privatised?

My Dearest Moo Moo Cow,

Yet another story based on sources. Plan to take Maxis private?

• Plan to take Maxis private?
  By Adeline Paul Raj
  bt@nstp.com.my
  
  April 30 2007
  
  MAXIS Communications Bhd’s controlling shareholder Tan Sri T. Ananda Krishnan is working on a multi-billion-ringgit plan to take the telco private, sources say.
  The plan, which involves a general offer, may be unveiled as early as this week.
  
  Maxis share price, which closed at an all-time high of RM13.20 twice last week, last traded at RM13.
  

A very simple cow sense questions for you my dearest Moo Moo Cow.

1. If there is so much value being private, why bother listing a company?

2. In a hot stock market, doesn't it make more sense to ride on the bullish stock market? As a private entity in a hot stock market environment, can the company create such value?

So if there is no valid reason for a company to go private, why such a story?

Who are these sources creating such stories? Why?

PCCS

My dearest Ezi,

The following table highlights PCCS earnings track record.



TTM stands for trailing twelve months or current 4 quarters.

Here's my interpretation of what PCCS has done.

If I view from what PCCS has done since its fy 2002, I would say that PCCS has done nothing really because if I consider that PCCS made 15.230 million for its fy 2002, then its current earnings or ttm earnings only indicates earnings of around 14.472 million. Which means for me, there simply has was no growth since fy 2002 and considering that the company's nett debt position has increased tremendously, I would normally just call this a investment a pass.

However, I do see some interesting issues.

Now fy 2004 was bad year for PCCS, however, the company has nicely recovered since then. So I guess it would be helpful if one takes a step back and understand what has happened back then.

27th May 2004, PCCS announced its fy 2004 Q4 earnings, Quarterly rpt on consolidated results for the financial period ended 31/3/2004

• Total turnover increased from RM53.1 million recorded in the preceding quarter to RM71.6 million achieved in the current quarter. This was mainly due to increase in orders from the Group’s Apparel and Labelling Division. But the loss incurred by Jusca Garments (Cambodia) Ltd was the main factor attributed to the decline in pre-tax profit from RM1.7 million to a loss of RM7.2 million.

Hm, the losses were due to PCCS's investment in Cambodia. (Here's an issue worth remembering, not all overseas ventures is profitable and in this instance, PCCS's Cambodia investment is perhaps an example!)

Back in Aug 2004, I receieved a copy of iCapital's write-up on PCCS. Do you like iCapital?

This is what the article said. I will add in some comments in blue italic.

• Perusahaan Chan Choo Sing Group (PCCS) was listed on the KLSE on 16 Aug 1995 and its share price has been performing miserably since the 1997 Great Asian Crisis. The group’s core activities span 5 areas; namely, apparel manufacturing, embroidery, fabric knitting, labelling, and marketing and distribution.
  
  Perusahaan Chan Choo Sing S/B (PCCS S/B), PCCS Garments Ltd (PGL) and Jusca Garments (Cambodia) Ltd (Jusca), undertake apparel manufacturing with the latter 2 operating in Cambodia. Approximately 98% of its product are exported overseas to the US, Canada, EU, Japan, Singapore and the Middle East. Among the major clients of this division are Adidas, The Gap, Banana Republic, William Carter, Fila, Nike, Cross Creek, Old Navy and Visage. The operations in Cambodia started in 1999 with the acquisition of a 60% stake in PGL for US$2.1 million and a subsequent 40% for RM5.32 million in 2002. (this details the Cambodian investment by PCCS) This allows it to benefit from the abundant cheap labour available and the Generalised System of Preferences. Jusca was acquired in 2003 for US$0.7 million, representing a 70% interest. Unlike PGL, being new, Jusca has not been profitable and recorded a loss of RM4 mln in fiscal year 2004. (PCCS had invested in a loss making company. Is this advisable? Perhaps their strategy is to invest in a poor company at a cheap price and then attempt to turn it around.. hmm.. it does have some risks in such a strategy, yes? ) The current production capacity of the group’s apparel division is 40,000 dozens of apparels per month for PCCS S/B, 70,000 dozens per month for PGL and 30,000 dozens per month for Jusca. In total, PCCS’s apparel division contributes more than 80% to the group’s revenue.
  
  Although PCCS has an in-house fabric knitting and elastic webbings operation, the main buyers for its fabrics are other garment manufacturers and polymer coating factories that use fabrics as raw material for making carpets or car seats. (interesting! i wonder if PCCS is still active in this business considering the fact that the motor industry is in a slump) The current capacity is 75,000 kg of knitted fabrics and 4,500 kg gross of elastic bands per month. Another complementary activity undertaken by the group is embroidering emblems and logos for garments, towels, handkerchiefs, gifts and souvenirs including appliqué and normal embroidery. (highly diversified PCCS business) Its embroidery division has the capacity to produce 570,000 dozens of apparels per annum. The group also ventured into the labelling business, producing and supplying computer labels, textile labels, barcode labels, security labels and computer imprintable labels. With the current capacity, this division contributes RM1.2 – 1.5 million of sales per month.
  
  The group has a division specifically involved in the local marketing and distribution of its products under PCCS Capital S/B. It also has exclusive distributorship of US upmarket golf apparel, the “Cross Creek” brand under Cross Creek Distribution S/B. On 1st Apr 2002, Jusca Development S/B, formerly a marketing division, entered into a joint venture agreement with Swee Tian Brick Works S/B to develop 17.37 acres of vacant land in Tangkak, Johor.
  
  Both 2003 and 2004 marked significant developments in PCCS with the group actively acquiring new subsidiaries (ah, the acquisition trail. the engineering of new profits) to complement its existing business and diversify into new businesses. Realising it is short of a printing operation to be an integrated garment manufacturer, PCCS acquired Beauty Silk Screen S/B and Beauty Silk Screen Ltd in Mar 2003 and Apr 2003 for RM109,000 and RM190,000 respectively. With extensive testing of the print quality and getting buyers approval in 2003, this new division will start contributing to the group in fiscal year 2004. As an added sweetener to its existing apparel services, PCCS acquired Top Cheer S/B to market and distribute socks.
  
  In Jul 2003, the group also ventured into China with the acquisition of Blopak China P/L (Blopak) for RM4.1 million and China Roots Packaging Pte Ltd (China Roots) for US$1.201 million with an additional investment of US$1.0 million in Jul 2004. Blopak is involved in producing packaging materials and label stickers in China. China Roots is set to take over Blopak’s business in stages to be eligible for investment incentives in China. (Waa.. much more diversification of its business!)
  
  Another major development within PCCS is the disposal of Texline Associates Pte Ltd (TLA), its 60% owned subsidiary acquired in 1994 for RM5.7 million. TLA is engaged in the business of buying and trading textile and apparel, based in Singapore. In 2001, the group sold 15% of its TLA stake for RM10.4 million. The balance 45% was sold in Dec 2003 for RM16.34 million. Even though TLA was profitable, PCCS decided to cash out as the business was deteriorating. Nevertheless, by selling TLA, the group was able to [1]. Focus on its own marketing arm amidst a trend of direct purchasing from customers, [2]. Reduce its debt, and [3]. Eliminate the corporate guarantees of RM50 mln.
  
  Conclusion and Advice
  
  An important point worth noting about PCCS is that although the group recorded a sharp decline in profit for financial year 2004, a closer look will show that the group’s fundamentals were still intact. (but.. the company is really diversifying into so many businesses. Is this a concern to its business fundamentals? Would 'Jack of all trades' be of a concern here?) Taking out the loss of the newly acquired Jusca Garments (Cambodia) Ltd, the RM9.0 mln loss on the disposal of TLA, and TLA’s contribution in fiscal years 2003 (RM4.1 million) and 2004 (RM2.8 million), the pre-tax profit for PCCS would be approximately the same in 2003 and 2004. In addition, despite the plunge in profit, the group also continued to generate positive cash flow from its operations, signifying sound business operations.
  
  However, the most interesting development in PCCS is the group’s new venture in China via China Roots and Blopak. Although the usual advice is for companies not to venture into an unrelated business, the same may not hold true for Blopak. First, Blopak is the 5th largest plastic bottle supplier to Amway (China) Co Ltd. With Amway China a large tax contributor to the Chinese government, the long-term potential of Blopak and China Roots is huge. Secondly, it can be a window to expand the group’s current labelling and stickers operation, with both being able to complement each other. Nevertheless, with the existing net borrowings of around RM33 million, any major capital expenditure by PCCS would add substantially to the gearing of the group.
  
  At RM1.04, PCCS is capitalised at over RM62 mln. Assuming that Jusca reaches breakeven level in fiscal year 2005, assuming no positive or negative contribution from its China expansion and with no exceptional loss expected, PCCS is selling at a PE multiple of only 4 to 5 times. i Capital revises its Hold rating and now rates PCCS Group a Buy for the longer-term.

Ok, I am not keen on such Hold and buy for the longer-term strategy. I would rather wait for a clear confirmation that the business has turned around before investing. Yes, the investor could end up paying more for their investment but at least they are getting a more solid guarantee that their potential investment has turned around.

Consider this, back then in Aug 2004, PCCS was around 1.04. Now if one adopted the safer approach, almost a year later in May 2005, PCCS announced a net profit of around 11 mil for its fiscal year 2005. That was reported on 24th May 2005. If one had used this as a guide, their investment reasoning would have been more justifiable since PCCS had clearly turned around from their 2004 woes. And one could have invested in PCCS after this earnings announcement at a price of under 90 sen. That would have been a much better investment approach, yes?

Anyway, back in Sept 2004, there was this article in Star Biz called "PCCS has big plans for China unit".

• “These companies are plagued by high wastage, inferior quality, late delivery and bad sales services,'' Gan told StarBiz in an interview.
  
  PCCS had in July 2003 acquired 100% in a loss making packaging company, Blopak China Private Ltd, for RM4.12mil and turned it around within a year, he said, adding that it broke even in June 2004 and would probably make a profit by the end of the year.

Interesting. Same strategy of buying a loss making company.

May 2006.

• Monday May 22, 2006
  
  PCCS to boost China ops
  
  By Zazali Musa
  
  APPAREL maker PCCS Group Bhd wants to build up and strengthen its labelling and packaging division in China in the coming years.
  
  Group general manager Gan Hoe Lian said the company would focus on three market segments namely consumer goods, electrical items and garments.
  
  He said prospects for the labelling and packaging business in China was bright considering its position as the manufacturing hub of the world.
  
  “The three segments provide us with quantity. In addition, volume is not a problem in China,’’ Gan told StarBiz in an interview recently.
  
  He said with a large number of multinational corporations (MNCs) and international manufacturers having operations in China, the prospect was endless.
  
  The presence of the MNCs and international manufacturers in China offered good business opportunities for many local and foreign companies and businessmen.
  
  The company found that producers of consumer goods, electrical items and garments needed the services of support industries such as those in labelling and packaging.
  
  Gan said demand for labelling and packaging materials in China would grow even higher in future due to the booming manufacturing sector there.
  
  “Our labelling and packaging division in Malaysia is doing well, so we believe we can do the same in China.’’
  
  Although there were many packaging companies in China, a majority of them could not cope with the high standards set up by the MNCs, he said.
  
  Sensing a business opportunity, the company had in July 2003, acquired 100% equity in loss-making packaging company Blopak China Private Ltd for RM4.106mil.
  
  Blopak was already supplying bottles to an international multi level marketing (MLM) company in China.
  
  “Prior to our acquisition of Blopak, there was a lot of wastage where raw materials were not properly controlled during production,’’ Gan said.
  
  The company had successfully reduced the high wastage from 25% to 30% previously to the current 1% and 2%.
  
  Gan said with the improvement in quality, it was able to convince the MLM company to outsource bottle caps from Blopak as well.
  
  In addition to bottles and bottle caps, the company has started supplying toothbrushes and T-shirts to the MLM company.
  
  The supply of T-shirts came under its wholly owned subsidiary PCCS Garments (Shuzou) Ltd, set up in April last year.
  
  Gan said the prospects for apparel manufacturing in China was even brighter with Beijing hosting the Summer Olympics in 2008.
  
  “PCCS managed to turn Blopak around within a year. The company broke even in June 2004 and is now starting to contribute positively. It was a wise decision to acquire Blopak.”
  
  Gan added that several MLM companies and manufacturers in China had expressed interest to outsource packaging materials from the company.
  
  The company was currently providing product samples to five MNCs in China and Gan was confident of securing orders from them.
  
  He added that at present the company would focus on making plastic-based packaging materials before introducing other types of packaging products.
  
  “Demand for plastic-based packaging materials especially bottles in China is high particularly from beverages and consumer goods producers.”

PCCS reported its most recent earnings on Feb 2007. Quarterly rpt on consolidated results for the financial period ended 31/12/2006

I would check out this non-apparels business and see how PCCS is doing.

The following table below is taken from that quarterly earnings announcements.

Non-apparels earnings totals some 1.605 million for the first 3 quarters of current fiscal year. Which kind of pales against 3.611 million achieved the same period last fiscal year.

And there are no geographical segmentation reports. It would have been nice if PCCS included that report since the investor should know what exactly is happening with PCCS's Cambodia business and also its China business.

And its recent developments stated in that earnings report.

• On 26 December 2006, Beauty Electronic Embroidering Centre Sdn. Bhd. (“BEEC”), a wholly-owned subsidiary of PCCS, had invested USD1,000,000/- in JIT Embroidery Limited (“JIT”), which was incorporated in Cambodia, representing 100% of the registered capital of JIT. On 20 January 2007, E.M.I. Embroidery Sdn. Bhd. (“EMI”), A 90% owned subsidiary of BEEC, a wholly-owned subsidiary of PCCS, had completed its voluntary winding-up proceedings.

So as it is, it would appear that PCCS has actively acquired businesses in Cambodia and China the past couple of years. And at this moment of time, PCCS earnings pales in comparison to what it had achieved for its fy 2002.

How would you rate such a business? Would you be concern of PCCS constant acquisitions of new businesses and with it, its nett debt increases? And moving ahead, do you see any catalyst for PCCS earnings to improve?

I hope the opinions posted on this blog posting helps as a second opinion!

Cheers

How Now My Dearest Moo Moo Cow?

My Dearest Moo Moo Cow,

Mr.Brian Pretti, the managing editor of ContraryInvestor.com has written a fantastic editorial on today's FSO market wrap, Deficit Attention Syndrome

Do give it a good read as Mr.Pretti has raised several very interesting issues.

For example.

• The next chart is really the important one in terms of defining and characterizing the US trade deficit, as we know it today. What we are looking at is the percentage of the total US trade deficit being driven by both imports of crude oil and imports from China. I’ve delineated each separately as well as presented their ongoing combined value in the blue columns. The message is clear. In 2006, 66% of the US trade deficit is accounted for by crude imports and the trade deficit with China. It's no wonder China/US trade circumstances are such a perceptual political flash point. Unless something acts to change the trajectory of these trends, it will probably only be a year or two until crude and China account for three-quarters of the total US trade deficit. Outside of crude and China, it almost seems trade with the rest of the planet is an afterthought in terms of the overall US deficit specifically.

  
  

  

  Although this may sound both a bit philosophical and gloomy, here's the question. Just what is the US going to do to change this? Limiting trade with China means heightened domestic inflationary pressures. And crude oil is simply another story. As you know, the political answer to the crude import issue of the moment is to promote corn based ethanol, which is completely economically inefficient. Corn based ethanol is simply politics as usual (farm lobby) and guaranteed to raise the total price of energy to US consumers (that ought to do wonders for the economy). But that's for another discussion. For now, I see crude as intractable. China is open to debate.

  Simple question. How do we stop what you see below? Talk about a two-decade up trend of significance. This has to be the biggie for the US economy. For now, this is not about to change any time soon. Talk of eliminating the US trade deficit in its entirety is whistling in the wind.

  
  

  

  
  

  When Worlds Collide

  So there you have it, the big message in the trade deficit report of the moment is that a contracting rate of change in goods imports has been a very important pre-recessionary indicator of the past. A message worthy of monitoring. Before concluding this discussion, a few comments on other pre-recessionary dominoes that are stacking up one by one as of late. First, the leading economic indicators are clearly pointing toward recession, if indeed historical experience is still to be any guide at all. I’ve been through housing stats so many times that I won’t recant them here. Housing indicators of the moment are already in recessionary mode. Retail sales? Just have a look below. The following is the year over year rate of change in the quarterly moving average of retail sales. A method of smoothing out the trend a bit. The last time we saw this type of trajectory and level of change was right in front of the 2001 recessionette.

  
  

  

An Mr. Pretti closes with the following commentary.

• We’re going to leave you with a quote that I first posted last year on our subscriber site and in our January open access monthly discussion. In the clarity of hindsight, it now takes on much more meaning and gravity. It’s a quote from a Fortune Magazine interview with Treasury Secy. Hank Paulson from last November. As suggested when it was first posted, LISTEN CAREFULLY to what Paulson is saying. The editorial inserts (ed.) are mine.
  
  

  Fortune: Aren't you concerned that GDP growth dropped to 1.6% in the latest quarter? That's kind of anemic, and we've seen a downturn in the housing market. Convince us we're not going to have a recession next year.
  
  Paulson: "I can't convince you. But as I looked at the third quarter, I felt good because I saw a major correction in the housing market, and I knew that was going to take more than one percentage point off GDP. And then I'm looking at the rest of the economy - strong corporate profits (ed. this is now slowing) and investment (ed.
  slowing also), good growth outside the U.S. (ed. still true), strength in the construction sector away from housing (ed. this is now slowing), and then an equity market that has gone up and added $1 trillion in value.
  
  I know how much people care about housing. But I would be quite hopeful that through 401(k) plans, pension plans, and elsewhere that the average American is feeling an uplift from the appreciation of the equity market that would be very offsetting to any potential decline in housing."
  
  

  As I’ve suggested probably too many times, we’re an asset inflation dependent nation. From stock bubble to housing bubble, and now back to potential stock bubble? What else could Paulson be referring to in his quote? Although you don’t need me to tell you, directly from the horse's mouth, no? Do yourself a favor and savor the moment. After all, how often do you get a rare glimpse of truth on the Street? Ignore Paulson's comments at your own investment peril.
  

Exciting times ahead? Well, the Dow closed a third straight closing record while the US Dollar tumbles to record low versus euro!and Bill Bonner of the Daily Recknoning nicely puts as Dollar Fights Dow for Importance Supremacy.

And finally Bernard Ber of CIBC, Toronto, raises an interesting issue, is this too Much Like 1929?

And Mr Ber raises some interesting issue about China.

• The Chinese stock market began to rise in value dramatically starting in November 2006. It has literally doubled in value since then (over a period of 6 months), with the Shanghai composite index rising from 1800 to a present level of 3600. The over-inflated state of the Chinese stock market recently resulted in a one-day decline of 9% on February 27, 2007, which in turn caused global stock markets to sell off sharply. As well, the economic growth rate in China has accelerated to an annualized rate of 11.1% in the first quarter of 2007. The run-up in the Chinese stock market and the acceleration in economic growth at the same time that China’s foreign exchange reserves rose sharply is also no coincidence.
  
  The point is rapidly approaching when China’s central bank will be forced to abandon their fixed exchange rate regime. On March 20, 2007, the governor of China’s central bank stated for the first time that they “will not stockpile foreign exchange reserves any more” (an extraordinarily important comment that few people took note of). Given the present state of affairs, how could that possibly be accomplished without the abandonment of the fixed exchange rate system? They will realize that the alternative to this (keeping the policy in place) can only result in the destruction of the Chinese economy. When the peg on China’s foreign exchange rate is dropped, the US economy (as well as the global economy) will implode.
  
  The global economy is critically dependent right now on what happens in the Chinese economy. To that extent, it is very important to focus on three elements going forward: the growth of China’s foreign exchange reserves, Chinese economic growth and the Chinese stock market. In turn, what happens in China will depend on the rate of deterioration in the US economy (which will determine the amount of private investment capital that returns back to China and causes their economy to overheat further). At this point, we are witnessing an extremely unusual relationship, whereby deterioration in US economic growth actually causes an acceleration in Chinese economic growth.
  
  Further deterioration in US economic growth from this point onward will cause the US Federal Reserve to consider cutting the US short term interest rate. While many participants in the US financial markets are conditioned to look at this outcome favourably, at this point such a decision would result in a repatriation of foreign capital (and rising longer term interest rates), because the interest rate differential versus other countries will become less favourable. An interest rate cut for a highly indebted country that is highly dependent on foreign capital will result in a completely opposite effect from that intended. The flight of private foreign capital back to China would result in the termination of China’s fixed exchange rate system, as the tremendous increase in their domestic money supply would necessitate it. Once that occurs, the foreign capital outflow would turn into a flood, given that there would be no foreign central bank intervention to offset it. Any benefit to debtors from a lower short term interest rate will be negated by the tremendous offsetting cost of sharply higher longer term interest rates (as US government debt is sold off in the US dollar liquidation). The US Federal Reserve is in a box. The Fed is now powerless to rescue the US economy, because of the threat of foreign capital flight. The emperor has no clothes.
  
  The tension in the world financial system will continue to build as the system is stretched from two opposite ends (the US and China). Further acceleration in Chinese economic growth or further deterioration in US economic growth will increase this tension to the point that the system literally breaks (remembering again that these two trends are linked together). Any further increases in the Chinese short term interest rate or decreases in the US short term interest rate will amplify these stresses and cause the cracks in the dam to widen (until the dam bursts).

And Mr.Ber poses this very important issue.

• Now fast forward to today, and what you see is China as the emerging industrial power and the United States as the mature and stagnating industrial power. China is printing money in an effort to prop up the economy of the mature industrial power (the US). The inflation of the money supply is resulting in the overheating of the Chinese economy and stock market. Very interestingly, on February 27, 2007, it was the sharp 9% one-day drop in the Chinese stock market that led to the sharp drop in stock markets worldwide, including the US. People may be conditioned to think that economic events in developing countries pale in significance to economic events in the US, and may fail to see how what happens “way over there” in China would have any significant impact on their economic well-being. But how different the truth really is. I think most people even now after the February 27th turn of events, fail to grasp why the US stock market sold off so sharply after the Chinese stock market sell off occurred first. The idea that a foreign stock market could dictate what happens in the US stock market almost offends the American sense of national pride (so the event is casually dismissed as “market irrationality”). A word of advice: you better get used to it, as there is much more of that to come. The crash is coming.
  
  

The Profitable Call Warrants II

My Dearest Moo Moo Cow,

I would like to do a follow-up on the following blog posting, The Profitable Call Warrants

1. Astro-CA.

Born 23/5/2006.

COMMERCE INTERNATIONAL MERCHANT BANKERS BERHAD ("CIMB") PROPOSED ISSUE OF UP TO 28,000,000 NON-COLLATERALISED CASH-SETTLED CALL WARRANTS ("CW") OVER ORDINARY SHARES OF ASTRO ALL ASIA NETWORKS PLC ("ASTRO") ("ASTRO CW")

28,000,000 Call Warrants was issued by CIMB at 0.225.

Call Warrants expired 29th Jan 2007.

MONTHLY DISCLOSURE PURSUANT TO PARAGRAPH 5.11(2) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD

The following table is interesting.



Only 1,693,600 out of the 28,000,000 call warrants were exercised. What happened to the 26,306,400 call warrants? Did they died on expiry and went to the share heaven?

2. Scomi-CA

Born 23/5/06 .

COMMERCE INTERNATIONAL MERCHANT BANKERS BERHAD ("CIMB") PROPOSED ISSUE OF UP TO 35,000,000 NON-COLLATERALISED CASH-SETTLED CALL WARRANTS ("CW") OVER ORDINARY SHARES OF SCOMI GROUP BERHAD ("SCOMI") ("SCOMI CW")

35,000,000 Call Warrants was issued by CIMB at a price of 0.175.

Call Warrants expired 29th Jan 2007.

MONTHLY DISCLOSURE PURSUANT TO PARAGRAPH 5.11(2) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD

The following table is even more interesting!



35,000,000 died on expiry and I wonder if they too went to the share heaven also?

And as mentioned in the first posting, The Profitable Call Warrants

• Assuming CIMB managed to sell all their warrants on listing day, this is pretty profitable, eh?
  
  My dearest Moo Moo Cow, do not get me misunderstood. I am not saying that you cannot make money in such so-called instruments. (Actually, I call them 100% pure stock market gambling chips) Some traders have indeed profited from trading such instruments during the short life span of these warrants but if one buys this warrant in hope of profiting from the exercise price, then this example would show clearly how risky this venture is.

Just for the sake of you, my dearest Moo Moo Cow, I have uploaded both these two charts to see if the following point mentioned above is true.

• Some traders have indeed profited from trading such instruments during the short life span of these warrants

And as can seen from the above charts, I do not dispute that there existed the window of opportunity for the smart trader to make money from these two call warrants but as seen from the exercising of warrants, if one buys these call warrants in hope of profiting from the exercise price, then this example would show clearly how risky these venture are.

Silver Bird says confident of turning around

Saw this business news posted, Silver Bird confident of returning to the black.

• Group executive director Derec Ching said the group had been registering stronger sales in the last few months after a product crisis from September to January.
  
  “We are recovering, and certainly doing better now,” he said after the group AGM yesterday.
  
  Silver Bird registered a net loss of RM18.24mil for the first three months ended Jan 31 from RM1.21mil in the previous corresponding period. Ching said the losses largely reflected the crisis’ impact on the company’s bottom line in the first quarter of FY07.
  
  “Q107 was not a normal quarter for us and not reflective of our normal performance. Apart from the crisis, we were investing heavily to start up our Singapore operations,” he said.
  
  However, Ching said based on rising sales of bakery and consumer food products, and coupled with new launches in the current year, the group was “reasonably confident” it would be able to turn around within the remaining three quarters.
  
  Silver Bird recently secured an exclusive supply contract from a leading player in Singapore to supply bakery products to retailers in Singapore. This will help turn its Singapore operations around this year.
  
  Managing director Jackson Tan said the group would embark on a multi-million ringgit advertising and promotion (A&P) campaign earliest by July to drive up sales and regain the market share it used to enjoy.
  
  “It will be a major A&P campaign running for more than six months,” he said.
  
  He said as part of the group’s efforts to preserve High-5 products as the main driver for the group’s consumer division, Silver Bird would be appointing a famous personality as its product ambassador.
  
  Among other things, the group will introduce what Tan describes as innovative consumer products this year. “These will help us regain market share and bring back our glory days,” he said.
  
  On the group’s alliance with the AmBank group to offer micro lending services to small businesses, Ching said the parties had finalised the product, called AmMikro, and would be rolling it out soon.
  
  “We are only an agent that will facilitate AmBank in the distribution of this product via our distribution channel,” he said.

Me? I really do not understand why this company is diversifying into the micro lending business. It's own bread business is running into huge losses and this group wants to diversify its group business and mess around in a totally unrelated business! Why can't it fix its core business first?

For past Silver Bird postings: click here

• Silver Bird
• Silver Bird: Part II
• Silver Bird: Part III
• Silver Bird: Part IV
• Silver Bird: Part V
• Silver Bird: Part VI
• Silver Bird: Part VII
• That Silver Birdie..
• Silver Bird: Part VIII
• Shocking Silver Bird?
• Regarding Silver Bird Yet Again
• Silver Bird?
• That 'Roti' Man

Tanjong's Power Listing?

My dearest Moo Moo Cow,

Saw this news article on Star Bizweek, Tanjong power listing. My initial reaction upon seeing the news headline was, "Oh my, they can't be serious, can they? What about them shareholders of the stock Powertek, which Tanjong privatised a couple of years ago? Surely, they cannot be too happy seeing such news, can they?"

Then I read the article.

Guess what?

The article was filled with the usual according to sources, is expected, it is understood!!!!

Yet again, we are seeing tons of un-known sources being quoted yet again!! And the whole basis of the article is based on expectations!

• Friday April 27, 2007
  
  Tanjong power listing
  
  By C. S. Tan
  
  PETALING JAYA: Tanjong plc is expected to spin off its power division for a listing overseas, which will enable the power and gaming group tap funds for acquisition of more power assets in other countries.
  
  As the company examines this option, sources say they expect such an exercise to unlock the value of its existing power assets, possibly before year's end.
  
  Tanjong started out as a numbers forecast operator (NFO) but later diversified successfully as an independent power producer (IPP).
  
  The power business has worked out so well that it produces larger profits than the NFO operations. The power division generated an operating profit of about RM430mil after interest costs, dwarfing the gaming division's operating profit of RM150mil in the financial year ended Jan 31, 2007.
  
  An initial public offering of the power assets could lead to a value of over RM3bil to emerge in a power company, the sources said.
  
  Visibility of earnings in the power division is clear again, now that negotiations between the Government and IPPs are believed to have been discontinued last month.
  
  The Government had hoped to re-negotiate supplementary agreements that would reduce the current burden of the bill that Tenaga Nasional Bhd has to pay to the IPPs.
  
  It was expected that a re-negotiated agreement would have been neutral to the value of the IPPs as measured by their discounted cash flows but the cash flows would be received over an extended concession period. That would have affected current dividend flows from Tanjong's three IPPs in the country.
  
  Since that may not be an issue anymore, Tanjong will be able to go to the capital markets and commit its Malaysian power assets to a certain level of dividend payout.
  
  The group owns three power plants in Malacca, two in Egypt and a 10% stake in a power generation and water desalination complex in Abu Dhabi, the United Arab Emirates.
  
  Tanjong has shown an ambition to expand its power business. It managed, for instance, to double its total net power generating capacity in the past year or so to 3,055 MW after its acquisition of power assets in Egypt and Abu Dhabi.
  
  The group has the balance sheet to expand further. It has a sizeable free cash flow of about RM500mil a year from its power and gaming businesses. That will enable it to obtain financing for any power assets that it acquires.
  
  Additionally, the group had RM1.29bil cash as at end-January, which should rapidly increase until it makes its next acquisition.
  
  The group is understood to be scouting around for acquisitions in the growth economies of Asia rather than the mature markets in the United States and Europe. Thus, it is searching for power assets in the Middle East, North Africa, Indian sub-continent and South-East Asia.
  
  Such acquisitions need to go through a tendering process and it has experienced a few failures in the past two to three years.
  
  Nonetheless, it took that as a step up the learning curve and the acquisitions of two sizeable power plants in Egypt last year vindicated its claims that it can succeed.
  
  Sources say Tanjong has the capacity and capability to acquire additional power plants every few years.

How?

Would Tanjong deny such a story?

Purpose In Life

My dearest Moo Moo Cow has forwarded me a very nice quote made by Dr. Van Tharp. I would like to share a snippet of it with everyone.

• We live in a universe filled with energy that we can tap into if and when we are aware of it. Those who are creating problems tend to manipulate others (because they feel week and insecure) to gain power and money. They end up making others feel weak and ready to fight back to regain their energy.
  
  This competition for energy will end when we experience a connection to the power within all of us. Much of my coaching is about helping people channel into this sort of power.
  
  Knowing what you are all about, your purpose in life, will make it much easier to tap into the power of the universe. When you are on purpose, mysterious things seem to happen to keep you on track.
  

* click here for the rest of the posting *

Many thanks again my dearest Moo Moo Cow.

MaeMode

My Dearest Moo Moo Cow,

One of the stock earnings that caught my eye was Malaysian AE Models: Quarterly rpt on consolidated results for the financial period ended 28/2/2007

It does look pretty impressive.



The above table shows what MaeMode has done.

Well here is my interpretation. MaeMode's earnings performance has been rather lackluster from its fy 2002 to fy 2005. But things are starting to look good since fy 2006 where its earnings jumped to 11.897 million. And as can seen the ttm numbers are indicating a net profit of around 18 mil, which means that fy 2007 should be a grand year for MaeMode.

So I investigated more. I always like to watch the cash/debt position. It's always the very first step I take before digging for more info. Here is what I found.



How?

I see the classical debt built-up again.

Sigh!

I guess I will call this a pass.

KHSB: Regarding Accountability Again

My Dearest Moo Moo Cow,

Remember the previous blog posting called It's All About Accountability?

Here is the announcement posted by KHSB, ARTICLE ENTITLED : SYABAS SHAKE-UP IN THE PIPELINE

• We refer to Bursa Securities' letter dated 23 April 2007 with regards to the above article appearing in Star Bizweek, page BW3, on Saturday, 21 April 2007 and wish to clarify and confirm with Bursa Securities that Kumpulan Hartanah Selangor Berhad ("KHSB" or "the Company") is not aware of the acquisition of 70% interest in SYABAS by Kumpulan Perangsang Selangor Berhad and KHSB providing the consideration for the same.
  
  We further confirm that the Company is furnishing the above after due and diligent enquiry with directors, major shareholders and such relevant persons reasonably familiar with the above matter.

How my dearest Moo Moo Cow?

See the extreme danger in trading based on such news?

Capital Ideas

My Dearest Moo Moo Cow,

I like the following website http://www.capitalideasonline.com/.

One of the main reasons I like is because Chetan Parikh does a constant review of books. And currently two articles posted by Mr.Parikh is of interest.

1. Limitations of financial reporting
2. Accountants and analysts

Really good stuff

rgds

Regarding Toyochem again

My Dearest Moo Moo Cow,

On Saturday, I blogged on the following: Is Toyochem interesting?

Let's look at from a plus - minus point of view.

The plus points.

1. Its balance sheet remains healthy. Net cash per share of RM1.25 is one of the highest on the second board. Net tangible asset stood at RM3.64 a share as at end-December 2006
2. On Thursday, Toyochem announced a final net dividend for FY06 of 11 sen, translating into a decent yield of 4.0%. For FY05, it paid a gross final dividend of 11 sen per share. The net dividend payment for FY06 implied an improvement from FY05.

Minus points.

1. No growth. And from the table posted on the last posting, Is Toyochem interesting? , there is no growth. And in fact, one could say that Toyochem earnings has been declining since fy 2004.
2. And cash per share means nothing really if the company does not share adequetly with its shareholders. Is 4% sexy enough?

The growth issue is highly interesting. I, for one, always believe that growth and value goes hand in hand. You cannot have value without the growth.

And this reminds me of a discussion posted on Sahamas here.

• there is one thing i would like to add... growth and value - it really goes hand in hand.
  
  Think of this way. Growth is an integral part of value. Always is.
  
  Easiest put.. a company which has a stagnant set of earnings, indicates that probably this could be the best the company could earn OR the company management simply has no ambition or drive to push the company to the next level. Taking out the issue of the stock price, would you think this as a great company? For me, my answer is no. Won't you want a good company that is growing?
  
  And incredibly it's never the other way around.
  
  Some companies simply engineer their growth by haphazard acquisitions or expansions. They borrow and borrow.. building the company as how one would stack up a deck of cards. Or the company could grow huge by sacrificing their profit margins to induce more sales revenue. How long could such unhealthy business last? Yes, there is growth but there is never value.

Is Toyochem interesting?

My Dearest Moo Moo Cow,

Saw this business article posted on the Star, Toyochem earnings look promising

• Saturday April 21, 2007
  
  Toyochem earnings look promising
  
  By Yeow Pooi Ling
  
  PETALING JAYA: With main board counters having touched new highs, it is just a matter of time that second board-listed companies follow suit.
  
  However, as with the main board, not all second board stocks would see a re-rating in their prices. Only companies with strong fundamentals, attractive valuation and healthy cashflow would attract investors.
  
  Toyochem Corp Bhd seems to fit the above criteria. The company has continued to post high earnings with earnings per share at 27.5 sen for fiscal year (FY) ended Dec 31, 2006, despite facing rising raw material prices.
  
  Its balance sheet remains healthy. Net cash per share of RM1.25 is one of the highest on the second board. Net tangible asset stood at RM3.64 a share as at end-December 2006. Based on yesterday’s closing price of RM2.78, Toyochem was trading at a discount of 24%.
  
  Toyochem is involved in the manufacture and trading of printing ink, as well as services the graphic art industry. It is the largest ink player in the country with a market share of 40%.
  
  Toyochem is 51% owned by Toyo Ink Asia Ltd, Hong Kong, which is a wholly- owned unit of Toyo Ink Manufacturing Co Ltd of Japan (TIJ).
  
  Listed on the Japan Stock Exchange since 1965, TIJ is one of the most established printing ink manufacturers in the world with over 60 subsidiaries worldwide.
  
  This close association has enabled Toyochem to enjoy easy access to the most advanced technological developments.
  
  The costs of raw materials make up a significant bulk of Toyochem’s operating expenses. The raw materials include pigments, resin and additives, which are oil-derivative products.
  
  Nonetheless, while crude oil prices remained high, operating profit margins improved to 10.4% in the second half of FY06 from 8.2% in the first six months.
  
  Earnings per share recorded in the fourth quarter was the strongest at 9.1 sen; indicating that efficiencies had improved and Toyochem was able to pass on costs to its customers.
  
  The impact of crude oil prices on earnings is usually reflected three to four months later.
  
  Given that crude oil prices have weakened and hovering between US$60 and US$69 per barrel since the last quarter of 2006, the ink maker’s earnings, going forward, could be stronger.
  
  Furthermore, raw materials are purchased in US dollar denomination and Japanese yen so the strengthening of the ringgit would have translated into lower raw material costs for Toyochem and higher earnings.
  
  Based on FY06 results, about 58% of sales came from Malaysia, 22% from Singapore, 9.3% from the Middle East and 9.7% from East Asia.
  
  The company has indicated that export prospects to the Middle East are “improving” and the Indian market looks “promising.”
  
  Toyochem also plans to introduce vegetable oil-based ink to cater to customers that prefer environmental-friendly products.
  
  On Thursday, Toyochem announced a final net dividend for FY06 of 11 sen, translating into a decent yield of 4.0%. For FY05, it paid a gross final dividend of 11 sen per share. The net dividend payment for FY06 implied an improvement from FY05.
  
  It is learnt that the company intends to increase dividend payout to 50% of net profits in two years. With net cash of RM51mil and steadily growing earnings, there is a high chance that Toyochem can achieve the 50% payout. Reserves ballooned to RM106.5mil as at end-December 2006. If it decides to reward shareholders further, it could also declare a two-for-one bonus issue. This would also help it meet the requirement for a transfer to the main board.
  
  Given its solid fundamentals, Toyochem has attracted strong institutional investors like Skim Amanah Saham Bumiputra and Lembaga Tabung Haji, which held 11.35% and 4.16% respectively as at April 28, 2006.

Wah, my dearest Moo Moo Cow, this reporter is making Toyochem looks like one must-buy kind of stock investment.

Let's have a look at the company's track record.

How my dearest Moo Moo Cow? Despite having a solid balance sheet, Toyochem's earning is simply not that exciting at all, for there is simply no growth!

rgds

It's about Accountability

My Dearest Moo Moo Cow,

I am well aware of the your blog posting; Trading Idea: KHSB

• Saturday April 21, 2007
  
  Syabas shake-up in the pipeline?
  
  By JOSE BARROCK
  
  THE possibility of a shake-up is looming over the water supply landscape of Selangor, Kuala Lumpur and Putrajaya, sources familiar with the matter tell BizWeek.
  
  It is understood that Kumpulan Perangsang Selangor Bhd (KPSB) is looking at acquiring Puncak Niaga Holdings Bhd's 70% equity interest in water supply services player Syarikat Bekalan Air Selangor Sdn Bhd (Syabas). Kumpulan Darul Ehsan Bhd (KDEB), the Selangor government's investment arm, owns the rest of the Syabas shares.
  
  KDEB is also KPSB's parent company, with a 55% shareholding. KPSB intends to buy the 70% stake at the present market value, according to a source, who declines to disclose any figures.
  
  Syabas has a 30-year concession, which commenced in early 2005, to supply water to Selangor, Kuala Lumpur and Putrajaya.
  
  KPSB is considering the share purchase so as to allow the State Government to firmly control the concession.
  
  There is also likely to be synergy between Syabas and KPSB's existing water businesses. Says a source, “It's about accountability”.
  
  “At present, the accountability for the water supply lies mainly in the hands of a listed company controlled by an individual. This will change when KPS takes over the helm,” the source adds.
  
  Executive chairman Tan Sri Rozali Ismail is the face of Puncak Niaga. He has a 41% stake in the company, both directly and via Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd.
  
  KPSB is no greenhorn in the water sector. It has 55% equity interest in Titisan Modal Sdn Bhd, whose subsidiary, Konsortium ABASS Sdn Bhd, operates a water treatment plant in Selangor. KPSB also has an associate stake, to the tune of 30%, in Syarikat Pengeluar Air Selangor Holdings Bhd, another supplier of treated water.
  
  At press time, it is not clear how KPSB plans to finance the acquisition.
  
  After a loss-making 2005, the main board company rebounded last year to post an unaudited net profit of RM17.8mil on the back of RM351.3mil in sales.
  
  As at December, the company had RM271.3mil in deposits and cash balances, while its trade receivables stood at about RM561mil.
  
  KPSB has a 57% shareholding in Kumpulan Hartanah Selangor Bhd (KHSB), another main board company with several property development projects and a few hotels and golf clubs under its belt. Industry sources say KHSB may be involved in the Syabas deal by providing the consideration for the acquisition.
  
  KPSB shares have been actively traded lately, and closed last Thursday at RM1.34. The day before, the share price went up to RM1.54, the highest in about three years, before closing at RM1.42.

All about Accountability, said the source?

Goodness me, where is the accountability here?

How many times have we seen the companies involved deny articles written based on sources?

And where is the accountability in this news article?

• After a loss-making 2005, the main board company rebounded last year to post an unaudited net profit of RM17.8mil on the back of RM351.3mil in sales. As at December, the company had RM271.3mil in deposits and cash balances, while its trade receivables stood at about RM561mil.

First, the above statements are facts however they are simply lacking in the exact detail. See KPS latest earnings report here, Quarterly rpt on consolidated results for the financial period ended 31/12/2006, and also see excel file of KPS latest earnings here.

1. KPS reported a loss for the quarter. Why isn't it NOT mentioned? Why only highlight the nicer part where KPS made profit for the full fiscal year?
2. Reporter starts to talk about deposits. Fine. That figure is indeed accurate but what the interest bearing loans which totals some 1.378 BILLION??? ( you can get the figure here ) And again the issue is simple, why highlight the cash and discount the borrowings??

Based on the 2 points above, is there intent to highlight only the good stuff and discount the bad?

Where is the accountability in such a financial article?

How my dearest Moo Moo Cow?

Genting Share Split Gets Highlighted!!

My Dearest Moo Moo Cow,

Previously, I had blogged on Genting's confusing share split issue.

1. Genting's confusing Share Split.
2. More confusion on Genting split issues
3. Update on More confusion on Genting split issues

Those were the three postings made.

And I wrote the following comments.

• So correct me if I am wrong here.
  
  Right now, in Genting's share split case, Bursa is NOW saying one could have sold their subdivided or split shares even before they are listed and quoted?
  
  Isn't it so confusing?
  
  And most people were taught that you could only sell shares only when the new shares are listed and quoted. That is you could only sell when you have these 'new' shares credited into your account.
  
  Well apparently in Genting's case, this was not the case.
  
  Now get this, Genting traded as high as 9.95 on the 11th. Yesterday, on the 13th it closed at 8.50. Wouldn't it be nice if everyone knew exactly that they could have sold their shares on the 11th itself when Genting was trading as high as 9.95 or even 9.50? It would be a good price to sell considering the massive run up in Genting's share price.
  
  So I reckon it's simply not fair level playing field because the confusion caused by this simple issue of when one could have sold their subdivided shares.
  
  Why can't the announcement be written in simpler English?
  
  Say for example in Genting's case, post the exact date when one could have sold the shares because as it is, it's so confusing.
  
  And my dearest Moo Moo Cow, it's rather ironic because I was highlighted by my dearest Scouser of one particular news article back in 2005. http://www.dailyexpress.com.my/news.cfm?NewsID=32801

In today's Star Bizweek, this issue was highlighted. Share split poser

• In Genting's case, the 738.93 million shares of 50 sen each were subdivided into 3.69 billion shares of 10 sen each. According to a Bursa Malaysia announcement on April 13, the split shares would be “listed and quoted” on April 16.
  
  Says one investor: “When I read that announcement, did it mean that I can now (on April 13) sell my subdivided or split shares even before they are listed and quoted? From what I know, we are allowed to sell share only when the new shares are listed and quoted. That is, you can only sell when you have these 'new' shares credited into your account.”
  
  Had investors known exactly when to sell their shares, that would have been sweet, as Genting traded as high as RM9.95 on April 11, but closed the day at RM9.50, which was still its all-time high.
  
  “I wanted to sell my shares, but was afraid that I would be punished by Bursa for selling shares that had yet to be credited into my account,” says one contra trader.
  
  A Bursa Malaysia official says the confusion was mainly due to this being the first time a share split was carried out under the new SPEEDS (Sub-Division of Shares, Shares Consolidation and Bonus Issue Exercise in the Central Depository Scheme) initiative.
  
  Genting and Resorts were the first two issuers to implement exercises under SPEEDS. This is the stock exchange's latest initiative to enhance the efficiency of certain corporate exercises, namely share splits, share consolidation and bonus issues.
  
  It works by enabling issuers to have a shorter time-to-market for the securities arising from these exercises. With SPEEDS, these securities can be traded on the next market day after the books closing date (BCD) instead of the current timeframe of 6 to 10 market days after BCD.
  
  “Prior to this, stocks undergoing splits were suspended a total of 10 days. With SPEEDS, its seamless, and there is continuous trading,” says the official.
  
  For instance, prior to SPEEDS, a stock undergoing a split would be suspended four days before book closure, and requoted six days after BCD. Under the SPEEDS timeline, there is no trading suspension. The newly split shares can be traded the day after BCD.
  
  Thus, a trader who was trading Genting on a contra basis, would still be able to do it as if the stock had not undergone any split exercise.
  
  If this contra player bought the stock on April 10 (a day before the ex date), but sold it on April 13 (T+ 3), his settlement would still be done on a 50 sen basis, as he bought the stock before it went ex.
  
  Says the Bursa Malaysia official, “It's quite simple. Genting shares went ex on April 11, with BCD on April 13. Settlement of Genting shares on April 11, 12 and 13 will still be on a 50 sen basis, because the purchase of this stock would have been done on April 6, 9 and 10.
  
  “However, if a buyer bought Genting shares on April 11 or later, settlement would have been on a 10 sen basis. If as of 5pm on April 13 (the BCD), an investor were holding Genting shares, then his name would appear in the register, thus entitling him for the corporate action. His shares would be split.”

How my dearest Moo Moo Cow?

Let me repeat again.

• Had investors known exactly when to sell their shares, that would have been sweet, as Genting traded as high as RM9.95 on April 11, but closed the day at RM9.50, which was still its all-time high.

To know that one could have sold when Genting traded as high as rm9.95 would have been extremely nice. Yes?

A Video Worth Watching

My Dearest Moo Moo Cow,

I saw this video link posted on Bloomberg.com where Mr. Ken Heebner of CGM Realty Fund, comments on the current US housing market.

I do believe it's worth watching.

http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vvefEajX3Khs.asf

rgds

How now my dearest Moo Moo Cow?

My Dearest Moo Moo Cow,

Some interesting stuff around, eh? Firstly, your Shanghai 180 posting was rather interesting given what happened yesterday with the Chinese market falling some -4.5% and at one point the market was down as much as 7% and this dragged the Asian markets down with the concern focued mainly on China rate fears. But is the rates fear just the issue? Or is it the case of an extremely high Shanghai 180 market?

Some interesting commentary taken from the following news article.

• However, analysts warned that the price levels were unsustainable and the market could be approaching another correction.
  
  "This is definitely a bubble in the making - for most stocks, positive earnings growth has been priced in until 2009," said Steven Sun, HSBC equities analyst. "At the height of the last bubble [2000-01], we saw investors opening 2m accounts a month, which is half the current rate."
  
  "Any money getting into the market now is not smart money and is coming from the kind of people who can least afford to lose it," said Fraser Howie, author of a book on the Chinese stock markets. "That has to have the government worried about social stability."
  
  The rush to join the Chinese stock-buying frenzy comes after the market rose more than 130 per cent last year and a further 40 per cent so far this year.
  
  The benchmark Shanghai Composite Index rose 0.01 per cent on Wednesday to another record high.
  
  Retail investors began returning to the stock market in large numbers in May, following a five-year bear market. The figures for new accounts are considered a rough proxy for new retail investors entering the market, although there have been cases in the past where individual traders have opened thousands of accounts using fake identifications. There is also an element of double-counting in the figures as many investors open accounts in both Shanghai and Shenzhen.
  
  Even as retail investors continue to pile in to the market, foreign investors have grown cautious. One international fund manager said he now had more of his Chinese assets in cash than at any time since the government allowed foreigners access to domestic stocks.
  
  Before the February correction, the government had tried to cool market sentiment, publishing prominent editorials warning of the risks. However, since then, it has been quiet, leading many to assume there is tacit approval of the ongoing bull run.
  
  "We expect the government to come out with more measures to cool the market soon," said Jing Ulrich, JPMorgan chairman of China equities.

Some real concerns?

And then there is the commodity guru, Jim Rogers. He has another news article out. But first, I had posted a posting on his views back in March; And what about Jim Rogers Views?. Now I want to bring out this article again because he had an interesting comment.

• But he added: "China is one of the few countries in the world where I'm willing to sit out a 30-40 percent decline."

That's mighty interesting cause if the 30-40% percent decline were to happen, what about the chain-effects caused? Would want consider it as a correction? Or would one consider it as a crash?

Anyway, on March 29th, Mr. Rogers has another news article, Commodity guru Rogers says not selling China shares.

Some interesting comments from that news clip:

• HONG KONG, March 29 (Reuters) - Commodities and investment guru Jim Rogers said on Thursday he was holding on to his Chinese shares, even though the market is pricey and a bubble may be developing.
  
  "I own Chinese shares. I'm not selling Chinese shares. If the Chinese stock market doubles again this year I'll have to sell, because then it's a full-fledged bubble," he told a media briefing after a speech in Hong Kong.
  
  "If it goes down 50 percent this year I will buy a lot more Chinese shares. I'm not smart enough to know what it's going to do, but I'm not selling China at all."
  
  "There's no question that PEs (price to earnings ratios) in China in the A-share market are too high for some companies, but that doesn't mean it can't get much worse. When you have a bubble develop, crazy things happen," he said.
  
  "The Chinese stock market could double this year, even though it's expensive right now."

So how my dearest Moo Moo Cow? What do you think of his bullish veiws on the Chinese markets?

Moving on, just in case you do no notice but there's the extreme weakness in the US Dollar. ( click here for one of the many articles around).

Last but not least, Mr. Marty Chenard, who wrote that Shanghai 180, article has posted another update and you can read it here.

rgds

Reply to comment on PriceWorth

• Anonymous said...
  allow me to add some real-life facts. P'worth is also a logger.All the timber concessions are awarded by Yayasan Sabah through YS private arm Innoprise which comes in the form of two agreements-timber extraction contract and logs purchase.Majority of the timber if not all are sold as round logs in the export market...and underdeclaring of price is a common practice in the timber industry...the question is has all the income derived been taken up or just the contracting income...Your Guess. I was a bit surprised when I saw a reputable researcher recommending a Buy.P'wrth & Sanbumi are the 2 principal operators of Yayasan Sabah...notice that Sanbumi reports their monthly production figures. You decide

My Dearest Anon,

I hope you do not mind me saying this but it would extremely nice if you could put a name behind your posting. This is because there is so many Anon around.

Anyway, you are correct that PriceWorth is also a logger.

However, this does not change my concerns.

1. Declining net profit margins. Extremely clear margin erosions can be seen each fy since fy 2002. Is this not a concern?
2. Incredible deterioration seen in PriceWorth's balance sheet. Company's nett debt is increasing each single year at an alarming rate.

Those are my concerns.

And yes, research house such as S&P, which is part of the CBSR program ( see Research Reports Good For Stocks?? ), has just upgraded to a buy. I am well aware of it.

Here is their past recommendation and target price.

Date      Recommendation Target Price
New       Buy            1.12
5-Mar-07  Hold           0.94
30-Nov-06 Hold           0.83
13-Nov-06 Hold           0.78
4-Sep-06  Hold           0.65
6-Jun-06  Hold           0.59
2-Mar-06  Hold           0.53
14-Dec-05 Hold           0.49 

They say buy, should we follow? Or is it more important to reason out our own investment reasoning?

Me?

I always prefer to reason out my own reasoning. And my reasoning tells the that those concerns should not be discounted if I want to invest in priceworth.

Thanks again for your feedback.

Is PriceWorth really Worth Investing?

My dearest Sally,

I actually posted about PriceWorth on Sahamas before.

Anyway, since I have the time now, here are my comments again. First, the below earnings, highlights PriceWorth's earnings since fy 2002.




First of, it's very clear that PriceWorth earnings growth is incredible. I do NOT dispute this fact all. And if one based its current or ttm (trailing twelve months) earnings per share, then perhaps there is a valid reasoning to invest in PriceWorth with a reasoning that it is selling at a cheap earnings multiple.

But is PriceWorth really worth an investment? How good is the quality of its earnings? Why is the company being priced so low in the current hot market? If PriceWorth is so good, is the market seeing something I am not seeing? Or am I not seeing what the market already knows (ie PriceWorth is a risk?) ( *These are simple basic questions that I will ask myself *)

Now let me highlight another table below. I added in some extra columns. These are some basic issues I think that an investor should consider in their investment.

Here's the list of my concerns as seen from the data above.

1. Declining net profit margins. Extremely clear margin erosions can be seen each fy since fy 2002. Is this not a concern?
2. Incredible deterioration seen in PriceWorth's balance sheet. Company's nett debt is increasing each single year at an alarming rate.

How?

For the issue of declining net profit margin, in my opinion (I could be wrong but this is my opinion), this means that PriceWorth is NOT really benefiting as much in this great bull run in timber prices!

And again, this shows that the downstream timber industry such as PriceWorth, is simply not as profitable as them loggers. The loggers enjoys the bulk of the profit when the timber prices rises. The plywood players has to content with the rising inventory cost (logs are more expensive) and players like PriceWorth, as seen in their earnings track record, has not been able to pass the buck down in a profitable manner and enjoy the benefit of higher timber prices.

This is my interpretation on PriceWorth's declining margins.

The second issue of increasing nett debt. Some say that debt is ok. But for me, if the debt increases sharply as seen in PriceWorth example, then I reckon it is a concern. A worry. And in terms of a propsective investor, this is one huge risk.

Consider this simple issue. PriceWorth is on track to record it's largest and best ever historical earnings. But yet, when you look deep down the company and look into their balance sheet, where is the wealth? Where is the Moola? Company now is in a nett debt position of 198.534 million. Just five years ago it was in a mere debt of 18.302 million. Is this justifiable?

So based on these 2 concerns, do you reckon there is enough justification to invest in this company?

Yes, the company is selling at a cheap price but the quality of the company is so questionable. How? Does all cheap PE stocks equate to a great investment? Must it?

Last but not least, my comments were all based from an investor perspective. Timber prices are still hot. And in a hot market, anything can happen. The hot timber prices could result in a timber sector rally for all related timber stocks. Hence, the stock go easily move up despite its poor and questionable fundamentals. I do hope you recognize this issue and most importantly I do not know if PriceWorth can go up to 1.60 as suggested to you.

All I can offer you are these second opinions and I do hope they can help you.

Best of luck.

Systems and Old Mistakes

My Dearest Scouser,

Here's a repeat posting of an old posting I did long ago. I called it Systems and Mistakes.. when I blogged on it long ago.

Anyway, in my opinion, this is a nice posting to re-read again because I get to see one of my old mistakes.


~ ~ ~ ~ ~ ~

If a man didn't make mistakes he'd own the world in a month. But if he didn't profit by his mistakes he wouldn't own a blessed thing.
- LiverMore - Reminiscences of a Stock Operator

During the past few years, I or rather we have witnessed so many various stock market strategies applied in the market in an attempt to make money from the stock market.

Some punted and simply whacked Ze market, some chiak and chiak da bugger, some whacked simply based on hot-air, some used various trading techniques and skills, which included trading in a short term basis, scalping, tape reading, swinging and daytrading, while some others traded on a longer term basis based on Market Timing or cycles, and some simply invested in the market - yeah the buy and hold long, long buggers, and then we have the more technical savy techno canSLIMers, traders/investors who combine ta/fa in their strategy, some simply bought and prayed hard-hard!

So how are we doing?

Good, bad or so-so?

Or is there something wrong in our system?

Are we 'playing the game' correctly or are we in the need to go on a holy grail search for Ze best method?

Now, for the holy grail searchers, those switch hitters who moves from one system to another in search for the best method, the biggest problem and the biggest risk is simply time. Mistakes cost money and what if one takes too long to discover our mistakes?

Each system/strategy has got its own winning point and its weak point. And this the holy grail seekers greatest risk. Finding, testing and discovering each strategy takes time and lots of mistakes will occur along the way.

And of course, the ultimate question would be: could one ultimately find the best ever technique?

Is there ever a 100% fool proof strategy?

What if it takes you too long a time to find it?

And what if there isn't such a thing as a perfect strategy?

Ahhh... how? Profiting from our mistake(s). This is i think is the ultimate key. Be it if you are an investor or you are a trader. So the alternative is to take a good review of what we have done and what we have not done correctly the past year. Look at our own methods. Can we avoid repeating the same mistake or we doomed to make the same mistake again?

Or are we even using the technique correctly?

Or how about argument which argues that the system is usually correct, it is the user of the system which is wrong?!

Or even to the more extreme, do we and will we ever acknowledge the flaws in our own system?

And lastly, what if our current system is really a no-hoper?

Are we going to accept and acknowledge these fact(s) or are we just going to keep on repeating our mistakes over and over again?

Read thru Ze compilation!!!! a couple of times and i thought it would be really good if I had shared my own personal investing mistake.

Isn't this not one of the most important thingy? Are we are gonna profit from our past mistake(s)?

Let's go back in time.

Way back in 2003. Near towards the end of the year, I 'invested' into one furniture business stock. Baswel Resources.

It was a small little decent company, with decent profit margin and there was growth also.

Hence, I embarked on an investment into Baswell. 8,000 shares at around 1.50.

Now my mistake was that after my purchase, I failed to acknowledge the weak trend shown in its fiscal year 2004 Q1.

Yes, the sales were pretty much flat, however, the net profit margin declined quite substantially. From 14% to a mere 7%.

I discounted its poor performance as a temporary dip in form.

Now the weakness continued.

The next quarter, 2004 Q2, the clear GET OUT sign was there!

Its profitability slumped to a mere 3%.

Oh, another issue first, i had also failed miserably understanding the rubberwood furniture business.

Baswell did not have it own resources.

It had to purchase rubberwood and when the price of rubberwood increased, Baswell's margin was squeezed.

And another issue, Baswell, was not active in all the furniture trade fairs we see so often.

Ahh, this should have had been a clue for me. A big one. I should have realize that by being not active, perhaps its business maybe was not as attractive or as strong as other furniture players.

All said, after reasoning out Baswells 2004 Q2 earnings, I decided that I have made a poor rotten investment decision, and it was time to sing 'so long and farewell, it's time for me to go...'

But... butt... butttt....

I faced another issue... this was a dead counter!!!

Yalor.... D E A D ..... not laku at all....si-kiau-kiau!

So disposing that 8 lots or 8000 shares became a truly task for me.

I was faced with trading quotes such as: buy 1.10, sell 1.30...

The huge gap between the buyer(s) and seller(s) and the lack of buyers turned into a huge PROBLEM for me....

Now the thing was, I could have and I should have 'given' to the buyer as soon as i decided.... but noooooo sir me... i tried to be a smarty alec... and i dilly-dallied on my sale....

In the end.... i got out.... 6 lots at 1.20.... and the last 2 lots at 1.08.

Ouchhhhh!!!!!!

And yes.... this will be a big lesson for me!!!!!

And regarding the D E A D counter issue....

I think that this is was one big lesson I've learned.

Do not discount this factor when investing.

Now, do not get me wrong, for I agree very much that IF a stock is truly great, then it matters not how the stock is traded.

Yup, my focus has always been on the stock and not the market... for simply, the market is just where we make our transactions.

However, i am afraid to say, that there is one small thingy.... there is a potential failure in such system... ie... what IF we are wrong?

Ahhh.... what if we made a mistake in our stock selection?

Let's face the facts, we are just normal buggers, tiok boh?.

We are not Ze super-duper investors, rite?

Sooo sometimes (as hard as we want to avoid doing so) we can still make mistakes!

So if we make a mistake in our stock .......

then how?.....

Soooooo..... if the stock is a D E A D counter.... then our escape hatch... our cut-loss strategy faces a huge obstacle....!!!!!


ps.
Baswel is now trading at 0.51!
Baswel lost money for the last 3 quarters!
buy and hold will never work if u hold a company gone bad!

================

19th april 2007. Baswel now trades at 0.30!

If I had used the buy and hold forever nonsense, this would caused serious damage to my well being.

rgds

US Corporate Earnings

My Dearest Moo Moo Cow,

The Dow had another wonderful run again finishing at the all time high. ( click here for CNN Market Wrap. )

I thought it would be nice to read what the market commentators at FSO would say. Today's market wrap is made by Chris Puplava. Who's Carrying the Economic Baton? Part I -- The Corporate Sector?

I would like to highlight the point he made about US Corporate profits, as I believe a more balanced view is always needed.

• The Corporate Sector

  Analysts are right to point out the health in the corporate sector as quarterly profits have consistently come in with double-digit gains on a year-over-year (YOY) basis for years now.

  
  

  Figure 1

  
  

  
  Source: Moody’s Economy.com

  
  

  However, what is also clear is that the trend in corporate profits is slowing, with Q4 2006 profits down 0.3% from Q3 2006, though the YOY rate came in at a very respectable 18.3%, though down from the 30.56% rate seen in Q3 2006. The argument many financial and economic pundits are making is that with pristine balance sheets, corporations will pick up the slack in the economy from a weakening consumer. In essence, corporations will continue to spend and take on more leverage by expanding their businesses. Is this happening? Yes and no.

  Corporations are taking advantage of their pristine balance sheets and the low interest rate environment by taking on more debt as corporate debt growth reaccelerated after what appeared to be a peak earlier last year. Corporate debt growth came in at 6.5% Q3 after peaking at 9.6% in Q1 2006, but reaccelerated to 10.9% in Q4 2006. Can corporate debt growth compensate for decelerating household growth to support the economy?

  Generally both the corporate sector and household sector debt growth trends move in unison, with household debt growth leading the corporate sector. There has only been one period in the last 50 years where corporations continued their debt growth while the consumer segment contracted.

  The period occurred in the middle 1960s as consumer’s retrenched while the corporate sector also retrenched briefly before reaccelerating its debt growth, and presents a possible scenario to the current picture. In Q2 1966, corporate debt growth peaked at 12.4% and then fell to 9.1% in Q4 1966. It then reaccelerated to 13.6% in Q4 1967 to help offset the decrease in consumer debt growth which peaked at 11.1% in Q1 1965 and bottomed at 2.8% in Q4 1966.

The Profitable Call Warrants

My Dearest Moo Moo Cow,

Let me share some interesting stuff with you.

12th July 2006: COMMERCE INTERNATIONAL MERCHANT BANKERS BERHAD ("CIMB") PROPOSED ISSUE OF UP TO 25,000,000 NON-COLLATERALISED CASH-SETTLED CALL WARRANTS OVER ORDINARY SHARES OF BERJAYA SPORTS TOTO BERHAD ("BJTOTO") ("BJTOTO CW")

25,000,000 call warrants were listed by CIMB.

Issue price was 30 sen.

Fast forward 2nd April 2007: MONTHLY DISCLOSURE PURSUANT TO PARAGRAPH 5.11A(2) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD



WOW!!

Zero exercise of warrants!

Now assuming CIMB managed to sell all their warrants on listing day, this is pretty profitable, eh?

My dearest Moo Moo Cow, do not get me misunderstood. I am not saying that you cannot make money in such so-called instruments. (Actually, I call them 100% pure stock market gambling chips) Some traders have indeed profited from trading such instruments during the short life span of these warrants but if one buys this warrant in hope of profiting from the exercise price, then this example would show clearly how risky this venture is.

rgds

Kencana

My dearest Jake,

I do not know if Kencana will benefit from the Northern Corridor project. As it is I am sceptical because in my opinion the Northern Corridor project is a project where a massive pipeline will be built. Anyway, do note that the following topic was covered by Sal in his blog: http://malaysiafinance.blogspot.com/2007/04/south-johor-being-relaced-by-north.html

• Refineries will be built in Yan and Bachok, touching Kedah's west coast and Kelantan's east coast. The 320km pipeline will also service downstream industries planned along the pipeline (e.g. shipyards, slipways, lubricant plants). Already 3 jvs have been signed. One for each of the refinery and one for the pipeline. The Yan refinery will be built by NIOC and SKS Ventures Sdn Bhd. SKS Ventures Sdn Bhd has just signed a US$16bn deal to develop 2 gas fields in southern Iran. The Bachok refinery will be built by Merapoh Resources Corp as the lead team. The pipeline will be built by Trans -Malaysia Petroleum. Foreign investors having signed up include Saudi Arabia, South Korea and Japan, following after Iran being the biggest jv partner. Kedah and Kelantan will have a 5% stake in each of the jv.

And then there is also the Eastern Corridor as mentioned by Sal: http://malaysiafinance.blogspot.com/2007/04/oil-gas-dailog-sapcrest.html

Let me paste some comments from OSK during Kencana IPO. I see no mention of Kencana being involved as a oil pipeline player.

• OPERATIONS

  24 Years of history. The company started out in 1982 as a contractor for fabrication yards providing skilled and unskilled manpower. It was founded as Hin Loon Engineering by its Deputy Executive Chairman Chong Hin Loon who remains in charge of yard operations in Lumut. It then began operations in 2000 at its Lumut Fabrication Yard where it fabricates structures related to offshore production platforms. It was awarded its first topside and jacket project from Murphy in 2002 for the West Patricia field. As part of the listing exercise, Hin Loon Engineering (renamed as Kencana HL) was grouped with Best Wide Matrix SB (renamed as Kencana Bestwide). Kencana Bestwide had been incorporated in 1995 and provides design, engineering and project management services amongst others. Kencana’s current major activities are indicated in Figure 1.

  A medium sized fabricator. Kencana owns and operates a 53 acre fabrication yard located in Lumut Port Industrial Park, Perak. It has also leased another 14 acres next to its yard and the total fabrication capacity is currently 24,000 tonnes per annum.
  

  Differentiation as an integrated engineering and fabrication facility. The yard itself is located in a sheltered river mouth in Lumut. It has one of the largest covered workshops at 27,000 sq m which enables it to work in all weather conditions 24 hours per day. Kencana also differentiates itself through the services provided by Kencana Bestwide which allows it to be multi-disciplinary in terms of in-house design, engineering and fabrication.

  Diversified range of Products and Services. In terms of its products and services, Kencana is able to carry out engineering, fabrication and commissioning of process skids, modules and platforms (topsides and jackets) for the oil & gas industry.
  Platforms are offshore metal structures that are used in the extraction, processing and storage of oil. A platform can be roughly subdivided into the topside, which is above the water line and the jacket, which supports the topside and is below the water line.

  
  

  Modules are individual components within a platform that carry out specific functions such as gas compression, carbon dioxide removal and water injection. Skids are smaller versions of modules that perform similar functions. In manufacturing these modules, Kencana’s process involves:

  
  
  • Engineering based on specification from clients
    
  • Arranging for procurement from equipment and steel vendors
    
  • Fabrication of hardware
    
  • Installation of equipment, metering and control systems.
    
  • Factory acceptance testing
    
  • Handover to client
    
  • Site testing
  
  

  For the fabrication of platforms, the process involves:

  
  
  • Engineering based on specification from clients
    
  • Arranging for procurement from steel vendors
    
  • Blasting and painting of steel
    
  • Cutting of steel
    
  • Welding of steel structures
    
  • Blasting and painting of weld joints
    
  • Final inspection
  
  

  In addition to the equipment mentioned above which are also manufactured by its competitors such as Ramunia, Kencana has recently completed the first conversion of a jack-up drilling rig into a Mobile Offshore Production Unit (MOPU) by a Malaysian yard. A MOPU is a movable production platform that is suitable for use in marginal fields as it can be relocated at a new field when the current oil runs out. This was done for Global Process Systems and Tanjung Offshore to be used at Petrofac’s Cendor field.

  Given the experience in doing his, Kencana is hopeful for more similar contracts in the future as they expect more MOPU will be needed for Malaysian waters.

And here is some comments from icap written on Jan 2007.

• First, i Capital explains Kencana’s in-house capabilities, which comprise engineering, fabrication, installation and commissioning. Engineering works refer to the application of design and engineering knowledge to the creation of various structures such as the topside and jacket. They include initial solution conceptualisation, process simulations, undertaking research and development, front-end engineering and design (FEED) and detailed engineering. Fabrication activities cover the complete production facilities and process equipment system (modules and process skid) that are intended for use in production facilities. This phase includes the procurement of raw materials and components, all engineering disciplines such as electrical and instrumentation installation, cutting, fit up and welding, quality assurance and testing of offshore platforms and process skid systems utilising in-house design and installation resources. Installation and commissioning are the steps that are taken to bring a production facility or structure to a fully operational state. In most cases, the platform is installed, hooked-up and commissioned at the client’s site by third parties. The group undertakes a final round of testing at the site, before commissioning and undertaking a final handover. Usually, for those structures that are fabricated in the yard, the commissioning part starts when the structures are loaded onto the vessels. In some cases, the group carries out the complete scope of work, including installation, hook-up and commissioning.
  
  The current services provided by the group can be categorised into:
  
  [1]. Engineering and fabrication of offshore production facilities
  Kencana is involved in the engineering and fabrication of offshore platforms, which typically comprise two parts, the topsides and the jackets. Various modules are installed on the topside. Topside modules and jackets are typically fitted with equipment and brought as close to full operational status as possible at the Lumut fabrication yard. This is to minimise the amount of on-site equipment installation required, as well as to facilitate testing and corrective action should any of these systems fail to function as specified. However, third party contractors carry out the installations of the jackets and topsides, as highy specialised, heavy, and expensive equipment are required.
  
  [2]. Engineering and fabrication of modules
  A module is a set of equipment fabricated on a small platform that is designed to fulfil one or more functions. A module may be engineered and fabricated independently of the rest of the facility. It is similar to a process skid system, with the exception that a module is much larger and therefore less mobile. This is because of the high output required in terms of compression pressure and output volume. The modules fabricated by the group consist of gas compressors, carbon dioxide removal, and water injection.
  
  [3]. Engineering and fabrication of process skid systems
  A process skid system refers to any type of equipment or system that is housed on a transportable mini-platform. A process skid system incorporates all of the piping, electrical, control and instrumentation systems, and other systems that are required for it to function. The process skid may be integrated into a larger facility, or used on a stand-alone basis. Process skid systems currently fabricated by Kencana include metering, de-sanding, air compressor, gas conditioning, chemical injection, air dryer and crude oil separator. The group, with its in-house technical capabilities, is capable of designing and fabricating deoilers, electrostatic precipitators, and glycol dehydrators.
  
  Lumut yard
  The group owns its major fabrication yard at Lumut Industrial Park, Perak, which is equipped with modern facilities, including heavy overhead cranes, plant & machinery, covered workshop and fabrication equipment. The yard is equipped with all the necessary facilities and heavy lifting equipment to support in-yard fabrication and load-out of structures onto barges. The yard is capable of providing jetty facilities for loading and off-loading of barge structures of up to 17,000 tonnes. This production facility has 24,000 of tonnes capacity and 15,000 tonnes of fabrication volumes. Kencana has the yard space and resources required to undertake simultaneously fabrication of topsides, modules, and their accompanying jackets. The group usually handles large and heavy structures, the lifting and transporting of which require the use of specialised equipment. As such, the group engages a service provider to undertake transportation to the client’s site. The utilisation rate of the yard is approximately 70% and thus, there is a lot of room for the group to expand in the future.

Again, no mention of pipes.

And here is some 'newer' news on Kencana posted on BTimes.

• Kencana jobs in devt area surpass RM1b mark
  February 8 2007
  THE value of Kencana Petroleum Bhd's total contracts in the Malaysia-Thailand Joint Development Area (JDA) has surpassed the RM1 billion mark, with the latest job that it won.
  It recently bagged a RM136.5 million contract from Carigali-PTTEPI Operating Co Sdn Bhd (CPOC) to build multiple structures and substructures for JDA Block 17 Field Development Project. Located 150km north-east Kota Baru and 260km east of Songkhla, the fields, when completed, are capable of producing 270 million standard cu ft of gas per day.The contract was awarded to Kencana Petroleum through its wholly-owned subsidiary, Kencana HL Sdn Bhd, last Monday.Comprising packages for central living quarter's deck and jacket, central flare platform and tripod, and three interconnecting bridges, the project will have a combined initial weight of 3,800 tonnes.The construction and fabrication of these structures and substructures will be carried out in Kencana HL's 27ha yard in the Lumut area. This project is scheduled for completion in July 2009.CPOC's contract is the third secured by the Kencana Petroleum group within the Malaysia-Thailand Joint Development Area.Currently, the group is already undertaking two separate contracts for greenfield and brownfield development projects. Both contracts are for Carigali Hess Operating Co Sdn Bhd to provide engineering, procurement, construction, installation and commissioning of structures and modules valued at US$254 million (RM886 million).These two projects are expected to be completed by the end of 2007.

So I am not sure where you are getting such news. From what news and info I can get, Kencana is not an oil pipeline player. So if it's not an oil piple player, I find it hard to believe that Kencana will benefit from it. (Ah, stranger things can happen. JVs could be formed, etc etc). Perhaps it might be better if you ask yourself, how reliable is your source or perhaps you should ask Sal in his blog.

rgds

*** edit 11.49 am ***

Just saw that the Edge weekly got 2 articles...

1. 16 Apr 2007: Corporate: Chinese partner for refinery job
2. 16 Apr 2007: Corporate: Eastern Corridor master plan to be unveiled soon
   

The MMM story again

My dearest Moo Moo Cow,

Past blog postings on MMM can be found here.

1. The MMM story.
2. The MMM story again.
3. Update on The MMM story.

MMM or Malaysian Merchant Marine released its earnings today. Any better?

MALAYSIAN MERCHANT MARINE BERHAD
Quarterly rpt on consolidated results for the financial period ended 28/2/2007

Total losses for the quarter is 17.8 million.

How?

MOVED over who? The FINAL Saga!

My dearest Moo Moo Cow,

Here are the past blog postings on Karensoft.

Karensoft
Karensoft: Part II
Karensoft: Part III
Karensoft: Part IV
Karensoft: Part V
Karensoft: Part VI
Karensoft: Part VII
Karensoft: Part VIII
Karensoft: Part IX

Today there was an announcement: KARENSOFT TECHNOLOGY BERHAD TO BE DELISTED

• Bursa Securities had earlier announced on 22 March 2007 that it had decided to grant KARENSOFT an extension of time until:-
  (i) 16 April 2007 to make the Requisite Announcement ("RA") in accordance with Rule 8.16 of the Listing Requirements for Mesdaq Market ("MMLR") and Guidance Note No.3/2006 ("GN3"); and
  (ii) 16 May 2007 to submit the regularisation plans to the Securities Commission and other relevant authorities ("the Approving Authorities") for approval.
  
  It was also decided that if any of the events set out below occurs, the security of Karensoft shall be removed from the Official List of Bursa Securities upon expiry of seven (7) market days from the date Karensoft is notified by Bursa Securities or such other date as may be specified by Bursa Securities :-
  
  (i) the Company fails to make the RA in accordance with Rule 8.16 of the MMLR and GN3 by 16 April 2007;
  (ii) the Company fails to submit the regularisation plans to the Approving Authorities for approval by 16 May 2007;
  (iii) the Company fails to obtain the approval from any of the Approving Authorities necessary for the implementation of its regularisation plans and does not appeal to the Approving Authorities within the timeframe (or extended timeframe, as the case may be) prescribed to lodge an appeal;
  (iv) the Company does not succeed in its appeal against the decision of the Approving Authorities; or
  (v) the Company fails to implement its regularisation plans within the timeframe or extended timeframes stipulated by the Approving Authorities.
  
  Karensoft has failed to make the RA by 16 April 2007.
  
  In the circumstances and in accordance with Bursa Securities' earlier decision, the securities of the Company will be removed from the Official List of Bursa Securities at 9.00 am on Monday, 30 April 2007. The Company is required to communicate Bursa Securities' decision to its shareholders.
  
  With respect to the securities of the Company which are currently deposited with Bursa Malaysia Depository Sdn Bhd ("Bursa Depository"), the securities may remain deposited with Bursa Depository notwithstanding the de-listing of the securities from the Official List of Bursa Securities. It is not mandatory for the securities of a company which has been de-listed to be withdrawn from Bursa Depository.
  
  Alternatively, shareholders of the Company who intend to hold their securities in the form of physical certificates, can withdraw these securities from their Central Depository System (CDS) accounts maintained with Bursa Depository at anytime after the securities of the company have been de-listed from the Official List of Bursa Securities. This can be effected by the shareholders submitting an application form for withdrawal in accordance with the procedures prescribed by Bursa Depository. These shareholders can contact any Participating Organisation of Bursa Securities and/or Bursa Securities' General Line at 03-2034 7000 for further information on the withdrawal procedures.
  
  Upon the de-listing of the Company, the Company will continue to exist but as an unlisted entity. The Company is still able to continue its operations and business and proceed with its corporate restructuring and its shareholders can still be rewarded by the company's performance. However, the shareholders will be holding shares which are no longer quoted and traded on Bursa Securities.

WOW!!

Look at it now. Karensoft did not even make the so-called RA.

Was there even an attempt by the company management to salvage the company?

Was there?

Dec 2004, thanks to KN's write-up, Move Over Bill, Karensoft traded as high as 0.96. That meant that Karensoft was valued at 96 million ringgit.

96 million.

Come April 2006... Karensoft will be delisted!

WOW!

Talk about destroying market capital!

Some Interesting Comments From MARC

My Dearest Moo Moo Cow,

I just came across this news article posted on the Edge: Downgrade credit rating trend in auto, property sectors to continue, says MARC

The comments made on the property sector is most interesting. Its vice president for fixed income research, Adi Asri Baharom made the following comments.

• On the property sector, Adi said MARC expected rising inventories and modest take-up rates were expected to heighten the risk of further downgrades.
  
  He said the exemption of real property tax gains (RPGT) was expected to primarily assist the performance of the high-end segment more than the low to mid-end and weaker players with high inventory levels and little balance sheet flexibility would see further downgrades.

How my dearest Moo Moo Cow?

Do you reckon a more cautious approach is needed?

Update on More confusion on Genting split issues

My dearest Moo Moo Cow,

Remember this blog posting, More confusion on Genting split issues ?

I got this on my mail.

• GENTING BERHAD AND RESORTS WORLD BHD FIRST TO ACHIEVE SHORTER TIME TO MARKET FOR CORPORATE EXERCISE UNDER BURSA MALAYSIA'S SPEEDS
  
  Bursa Malaysia Berhad today announced the successful share split exercise undertaken by Genting Berhad and Resorts World Bhd, members of the Genting Group, which are the first two issuers to carry out such corporate exercise under the newly implemented SPEEDS. An initiative by Bursa Malaysia, SPEEDS facilitates trading of the new underlying securities within a shorter period after the books closure date.
  
  SPEEDS Corporate Exercise now enables shareholders of Genting Berhad and Resorts World Berhad to receive their split shares earlier due to shorter time-to-market for securities undergoing subdivision or consolidation. In the past, securities undergoing such corporate exercise were suspended for a period of 10 market days prior to the listing and quotation of the new subdivided or consolidated shares.
  
  In its announcement to Bursa Malaysia Berhad on 30 March 2007, Genting Berhad and its subsidiary Resorts World Bhd proposed a share split of their 50 sen shares into five 10 sen shares each. Through SPEEDS Corporate Exercise, Genting Berhad and Resorts World Bhd's shares was traded on Ex-Date 11 April 2007, at RM0.10 subdivided shares. Following this, the shares arising from the share split were credited on the evening of 13 April 2006 and settlement took place today on 16 April 2007.
  
  Commenting on the said corporate exercises, Dato' Yusli Mohamed Yusoff, Chief Executive Officer of Bursa Malaysia said, "SPEEDS benefits Genting Berhad and Resorts World Bhd as the stocks did not have to be suspended to make way for the corporate actions as were seen in the past. With SPEEDS, companies are ensured that corporate exercises are expedited with uninterrupted trading for the securities."
  
  Added Dato' Yusli, "As a front-line regulator, we are determined to ensure that the capital market infrastructure keeps pace with the growing demands for greater efficiency and risk management. SPEEDS Corporate Exercise was designed to reduce time to market for orporate exercises, which in turn leads to greater efficiency and reduction in investors' market risk exposure."
  
  Tan Sri Lim Kok Thay, Chairman, President and Chief Executive of the Genting Group said, "As listed members of Bursa Malaysia, the Genting Group is pleased with this improvement made on the share split process that was initiated by Bursa Malaysia. We hope that this will make our shareholders happy due to the timely delivery of our share splits."
  
  Added Justin Leong, Genting Berhad's Head of Strategic Investments & Corporate Affairs, "We are pleased to be the very first issuers to carry out a share split under the newly implemented SPEEDS. Greater efficiency in any capital market is always welcome and we believe this will further enhance Bursa Malaysia as a premier investment destination."
  SPEEDS demonstrates the Bursa Malaysia's drive to provide investors and market players alike with open and efficient market in terms of timely, transparent infrastructure and processes. SPEEDS Corporate Exercise is also one of the exchange's many ways to promote standards and best market practices to streamline processing.
  
  SPEEDS was implemented on 30 March 2007 following amendments made to the Listing Requirements of Bursa Malaysia Securities Berhad and Rules of Bursa Malaysia Depository Sdn. Bhd.
  
  A set of frequently asked questions and answers on SPEEDS are available for reference on Bursa Malaysia's website at http://www.bursamalaysia.com

Did it clear the confusion?

And another thing. Why didn't Genting announce this Speed issue before the ex-date of the split?

Regarding Keck Seng

My dearest Slowday,

I blurted out the following comments to you on Keck Seng, which I now realize that that it is perhaps not as accurate, perhaps very distorted. I am extremely sorry.

• kseng? very fast - underperforming in terms of financial performance but.. the sexy story is their cash on hand mah.. which got good and bad.. good is, it's there. bad? this bugger hoards the cash without really rewarding all its shareholders in a justifiable manner all these years..

The following table shows Keck Seng track record.

Ok, that fy 2005 earnings, saw Keck Seng earning some 97,641 million is distorted because Keck Seng profited some 39.5 million when it earned compensation for its plantation land due to some highway expansion. So even if one minus out this one-time extra-ordinary gain, Keck Seng has still performed pretty well since its fiscal year 2001.

So for me to say that Keck Seng earnings performance has been disappointing is rather inaccurate on my part. I am extremely sorry. A thousand apologies.

And its dividend payout is not that bad.

So I am sorry for those comments made. It's fairly inaccurate and I believe I needed to make it right.

Here's a recent news article written on Keck Seng on the Star Biz. here

• Friday April 6, 2007
  
  

  Revaluation of Keck Seng assets

  By Yeow Pooi Ling

  PETALING JAYA: The market has yet to fully appreciate the potential revaluation surplus of Keck Seng (M) Bhd's rich assets, especially its huge land bank in south Johor.
  

  Main board-listed Keck Seng is involved in four core businesses – property development, hotel management, plantations and palm oil milling.
  

  According to the company's 2005 annual report, about 10,000 acres in south Johor are still valued based on prices at the 1980s level.
  

  The surplus from the revaluation of land, especially in Ulu Tiram, Bandar Baru Kangkar Pulai, Pasir Gudang and Tanjong Langsat, could be significant since land and property prices in south Johor have appreciated due to plans to develop the Iskandar Development Region.
  

  In 2005, Keck Seng sold 181 acres of plantation land in Ulu Tiram to the state government for RM45.4mil, or about RM251,000 per acre, which resulted in a one-off gain of RM39.5mil.
  

  Assuming a price of RM251,000 per acre, the total land bank in south Johor could be worth RM2.5bil, which is a surplus of RM2.3bil from the current book value.
  

  This could enhance Keck Seng's net tangible asset (NTA) by a whopping RM9.50 per share.
  

  The company's plantation land bank could eventually be converted for property development, which would fetch better pricing as it is close to the urban area.
  

  Its commercial properties are also valued at below market prices. The net book value of Menara Keck Seng at Jalan Bukit Bintang, for example, was last valued at RM63.5mil, or RM240 per sq ft, in 1996.

  
  
  
  The MAS building at Jalan Sultan Ismail was sold last year for RM130mil, or about RM481 per sq ft. Based on the same price per sq ft, Menara Keck Seng could be worth RM127mil, double its current book value.
  

  The company also owns properties in Singapore, which were last valued in the 80s; two hotels in Canada (1997 and 2000) and another hotel in Hawaii, last valued at 2000.
  

  Keck Seng's investment in equities is also priced at a book value lower than the current market price.
  

  According to notes accompanying its fourth quarter results ended Dec 31, 2006, the book value of these investments amounted to RM146.7mil, but based on market value as at end-December, they were worth RM567.2mil.
  

  Keck Seng owns 4.9 million shares in PPB Group Bhd and 2.8 million shares in Chin Teck Plantations Bhd.
  

  When the Financial Reporting Standards 139 (FRS 139) are fully enforced, all companies including Keck Seng would have to mark-to-market their investment in equities, and state the surplus or deficit over cost as earnings or losses in the profit and loss accounts.
  

  As a result, Keck Seng could see a surplus of RM420.5mil on its investment in equities, which could boost its NTA by RM1.74 per share.
  

  Meanwhile, its healthy balance sheet enabled it to buy Regency Tower in Kuala Lumpur last year for RM62.5mil cash. Its net cash stood at RM189mil as at Dec 31, 2006.
  

  Based on a conservative estimation arrived at by adding surpluses from the revaluation of Keck Seng's Johor land bank and its equity investments, the company's total NTA could reach as high as RM15 a share compared with RM4.34 currently.
  

  However, the present share price is below the year's high of RM5.45, while other property stocks with exposure to south Johor have soared to their 52-week highs. The counter rose 22 sen to RM4.66 yesterday.
  

  
  KSENG : [Stock Watch] [News]
  
  

  
  
  
  

About SAAG

My dearest Moo Moo Cow,

Were you aware of the issues regarding SAAG placement issues? This issue was also highlighted on last weeks Edge Weekly: 9 Apr 2007: Corporate: Curious exercise at SAAG

The issues mentioned was highly 'interesting'.

• Nevertheless, the company's first tranche of private placement shares (the whole private placement is for up to 5.4 million shares) only managed to sell at RM1.45 each, which was an 8.8% discount to the average price in the five trading days ending Feb 5. Investors continued to place a low value on SAAG shares even after its year-end results were released. The second tranche, priced as at March 9, was issued at RM2 a share, or a 7.4% discount to market. This indicates that despite SAAG already trading at cheap valuations, investors were not willing to buy the stock without a discount. Since mid-March, however, SAAG stock has climbed steadily. It hit its year-high of RM4.46 last Wednesday, which is almost 11 times last year's earnings per share. And, curiously, investors seem more willing to pay a premium for the stock now that it is trading at higher valuations. The third tranche of placement shares were sold at RM3.10, or 5.8% over the average market price up to March 23. A week later, the fourth tranche's issue price was fixed at RM4, almost 10% above average prices up to March 30. The stock closed at RM4.18 last Friday, which means these investors are already sitting on a gain.

WOW!

The two issues mentioned.

1. Still, at the time they took up the placements, were these premium-paying investors acting irrationally?
2. Or did they know of developments in the offing that will add more value to the business and justify a higher share price?

How????

About WTK

My dearest Moo Moo Cow,

Were you aware of the issues regarding WTK Holdings purchase of Linshanhao Plywood (Sarawak) Sdn Bhd. This issue was highlighted on last weeks Edge Weekly: 9 Apr 2007: Corporate: Seeing red over WTK's plywood buy

Firstly, this deal was announced on 27th July 2006. W T K HOLDINGS BERHAD ("WTK" or "Company") PROPOSED ACQUISITION OF 100% EQUITY INTEREST IN LINSHANHAO PLYWOOD (SARAWAK) SDN BHD

Now let's look at the issues mentioned about this purchase by WTK.

• Shareholding dilution, and not a high purchase price, is likely the main reason the Employees Provident Fund (EPF) and Lembaga Tabung Haji objected to WTK Holdings Bhd's acquisition of a plywood company. The EPF is the largest institutional investor in WTK with a 11.31% stake. Tabung Haji holds a 3.8% stake. The largest shareholder in the company is the WTK group with a 33% stake. In a shareholders' meeting to deliberate the deal last Monday, the two institutional investors made known their objections to WTK's directors. The EPF called for a ballot and the majority of shareholders voted in favour of the deal. It was reported that the two institutional investors opposed the deal due to the high valuation.

Well, how bad is the dilution?

In that announcement, there is a word file attached. If you open it, you will see the following table.

11,600,928 new shares will be issued, which is a dilution about 7%.

Is this a serious dilution?

And then the problem is WTK is now trading at 8.35. And these new shares were only valued at rm4.31!!! So accordingly it was a windfall for some.

• However, higher selling prices of timber products due to greater demand have boosted the bottom line of many timber companies, including WTK. The stocks of these companies have increased significantly in value. For WTK, its share price has doubled in the past nine months. The counter closed at RM8.60 last Thursday. This means that the vendors of Linshanhao get a windfall of about RM50 million, as they will be getting WTK shares that have a market price of RM8.60, which is 100% more than the price the shares were valued at nine months ago.

Ah, yes it is a huge windfall but..

• WTK is a timber company with an 850,000ha concession in Sa­ra­wak. It trades and processes timber logs. One of its downstream pro­ducts is plywood. The company is buying Linshanhao Plywood (Sarawak) Sdn Bhd for RM150 million, to be paid with RM100 million cash and the rest via issuance of 11.6 million new shares priced at RM4.31 per share. The contention is the price the new shares are issued at. When the deal was announced in July 2006, WTK shares were trading at about RM4.30.

WTK was trading at 4.30 on 27th July 2006 when the deal was announced. How? Can we call the deal unfair?

• Regardless of the shareholding dilution affect, a market observer says, "To price the new shares at 5% to 10% below the market price is reasonable to sweeten a deal. But to issue them at 50% below the market price is unreasonable."

Well I wonder if this market observer observed the price of WTK when the deal was announced back in July 2006.

How?

More confusion on Genting split issues

My Dearest Moo Moo Cow,

More confusion on Genting's share split issue blogged yesterday.

This is because of the following statement.

• "Further to the Listing Circular No L/Q 42351 of 2007, Bursa Malaysia Securities Bhd would like to clarify that on the basis of settlement taking place on 16 April 2007 with subdivided GENTING shares of RM0.10 each, any shareholder who is entitled to receive GENTING subdivided shares, may now sell any or all of his GENTING shares arising from the subdivision.
  
  For example, if Mr X purchases 1,000 GENTING shares on cum basis on 10 April 2007, Mr X should receive 1,000 shares on 13 April 2007. As a result of the subdivision, 5,000 GENTING shares will be credited into Mr X's CDS account on the night of 13 April 2007 being the Books Closing Date. Therefore, Mr X may, if he so wishes, sell the subdivided shares of 5,000 now."

The problem is the definition of NOW because if the subdivided shares were said to be credited only on the night of April 13th, how could Bursa clarify and said the shareholder could sell now? And since that notice was posted on the 12th April night, this now WOULD have meant the shareholder could sell the split stocks anytime on the 13th April - even if the subdivided shares were only credited later.

Yesterday evening, there was another announcement. GENTING BERHAD ("GENTING") PROPOSED SHARE SPLIT; AND PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION

• On behalf of Genting, we wish to announce that 738,928,954 ordinary shares of RM0.50 each in Genting will be subdivided into 3,694,644,770 ordinary shares of RM0.10 each in Genting ("Split Shares") today as a result of the Proposed Share Split.
  
  The Split Shares will be listed and quoted on Bursa Malaysia Securities Berhad on 16 April 2007.
  
  This announcement is dated 13 April 2007.

So correct me if I am wrong here.

Right now, in Genting's share split case, Bursa is NOW saying one could have sold their subdivided or split shares even before they are listed and quoted?

Isn't it so confusing?

And most people were taught that you could only sell shares only when the new shares are listed and quoted. That is you could only sell when you have these 'new' shares credited into your account.

Well apparently in Genting's case, this was not the case.

Now get this, Genting traded as high as 9.95 on the 11th. Yesterday, on the 13th it closed at 8.50. Wouldn't it be nice if everyone knew exactly that they could have sold their shares on the 11th itself when Genting was trading as high as 9.95 or even 9.50? It would be a good price to sell considering the massive run up in Genting's share price.

So I reckon it's simply not fair level playing field because the confusion caused by this simple issue of when one could have sold their subdivided shares.

Why can't the announcement be written in simpler English?

Say for example in Genting's case, post the exact date when one could have sold the shares because as it is, it's so confusing.

And my dearest Moo Moo Cow, it's rather ironic because I was highlighted by my dearest Scouser of one particular news article back in 2005. http://www.dailyexpress.com.my/news.cfm?NewsID=32801

• SC issues guide to use plain English in prospectuses
  24 February, 2005
  Kuala Lumpur: The Securities Commission (SC) Wednesday released a guide to encourage the use of plain English in prospectuses in efforts to ensure that information in offer documents were easily understood by investors for them to make informed investment decisions.
  
  Investors would be encouraged to read and will find it easier to comprehend prospectuses if those documents were written in plain English, as well as presented in a clear, concise and effective manner, the SC said in a statement here Wednesday.
  
  It said that prospectuses provide vital information concerning the offer and the company as well as the risks of an offered investment.
  
  The Plain Language Guide for Prospectuses outlines several approaches on how to provide clearer disclosures in prospectuses and is available on the SC website at www.sc.com.my.
  
  The SC said that Parties involved in the preparation of the documents were required to comply with the regulatory requirements namely the Securities Commission Act 1993 and the Prospectus Guidelines.
  
  "They should be aware that the use of plain language does not reduce their liability and they have a responsibility to disclose relevant and important information to investors," it said.- Bernama
  

How now my dearest Moo Moo Cow?

What do you think of all this?

Am I beating aimlessly on the drums or do you reckon I have a valid point here?

Genting's confusing Share Split.

My Dearest Moo Moo Cow,

I am totally confused about Genting's share split and what is happening with the allotment of the split stocks.

This is the original split announcement: GENTING BERHAD ("GENTING") - PROPOSED SHARE SPLIT; AND - PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION

On the 10th April, GENTING- TRADING OF GENTING: SHARE SPLIT

This was what that announcement said...

• Kindly be informed that the current share split involving the subdivision of each ordinary share of RM0.50 each into 5 ordinary share of RM0.10 each is undertaken through SPEEDS Corporate Exercise. On Ex-Date ( 11 April 2007 ) , all trading will be on the RM0.10 subdivided shares and settlement on 16 April 2007 will also be on the subdivided shares.

How would you interpret the above statement?

Last night at 8pm, 12th April, there was this announcement: GENTING - TRADING OF GENTING: SHARE SPLIT

• "Further to the Listing Circular No L/Q 42351 of 2007, Bursa Malaysia Securities Bhd would like to clarify that on the basis of settlement taking place on 16 April 2007 with subdivided GENTING shares of RM0.10 each, any shareholder who is entitled to receive GENTING subdivided shares, may now sell any or all of his GENTING shares arising from the subdivision.
  
  For example, if Mr X purchases 1,000 GENTING shares on cum basis on 10 April 2007, Mr X should receive 1,000 shares on 13 April 2007. As a result of the subdivision, 5,000 GENTING shares will be credited into Mr X's CDS account on the night of 13 April 2007 being the Books Closing Date. Therefore, Mr X may, if he so wishes, sell the subdivided shares of 5,000 now."

I am confused.

Take the above example, of Mr.X.

• Mr X purchases 1,000 GENTING shares on cum basis on 10 April 2007, Mr X should receive 1,000 shares on 13 April 2007. As a result of the subdivision, 5,000 GENTING shares will be credited into Mr X's CDS account on the night of 13 April 2007 being the Books Closing Date.

So the subdivided shares will be credited on the night of April 13th, right?

But the next line...

• Therefore, Mr X may, if he so wishes, sell the subdivided shares of 5,000 now."

If he so wishes, he may sell the subdivided shares of 5,000 now. Now? As in now?

But the shares are only credited on the night of April 13th 2007, right?

So what NOW is the announcement referring to?

Can someone enlighten me please?

rgds

Research Reports Good For Stocks??

My dearest Moo Moo Cow,

Saw this news article posted on the Star Biz: Research report good for stocks

• Bursa Malaysia initiated CBRS in 2005, and the research reports on selected companies are available for free to the investing public on the exchange's website (www.bursamalaysia.com).
  Companies covered by CBRS pay RM30,000 each for two years.

I have one opinion. As Bursa is a business entity now, this CBRS program should really be funded by Bursa itself!!

Do you agree?

Here is my opinion.

Charging rm30,000 simply is too much. It's insane. Think about it.

From the owner's perspective. Would you pay so much money for coverage?

From the analyst's perspective. Would you not tend to be a bit generous on your viewpoints?

From the investor perspective. With so much money involved, would the investor get an un-biased report?

How?

On the other hand, let's look at the positives if Bursa was to foot the bill.

1. From Bursa 's perspective, this CBRS is part of a program to generate interest and awareness in their own business. More awareness equals to more business. Yes?
2. At this moment, coverage is still lacking. So many companies aren't being covered. Is the rm30,000 the reason? So without being forced to pay, we, the investors could see more coverage on more companies, right?
3. Without the rm30,000 price tag, the analyst has more freedom. Perhaps, we could avoid cases where analysts are being way too generous in their write-up. Meaning we avoid incidents where analysts give way too optimistic target prices and recommendations.

So how my dearest Moo Moo Cow?

Do you agree that Bursa should foot the bill for this CBRS?

Well, I do.

Shanghai Calling Again

My Dearest Moo Moo Cow,

I have noted that you had blogged on the following postiing called Shanghai 180 yesterday. So I was most interested when I noted the following editorial on FSO called The Great Unkowns.

Here is what Yiannis G. Mostrous, author of the Growth Engines is saying...

• The world’s markets are still in bull mode, with the majority of investors trying to capture this new leg up. As a Hong Kong-based investor told me recently during a phone conversation, “It feels like the correction never took place.”
  
  The reference was in regard to the 9 percent one-day drop in the Chinese stock market on February 27--the largest selloff in 10 years.
  
  Nevertheless, the Chinese market is vulnerable to a new decline in the not-so-distant future. The drop could be as big as 20 percent, and markets around the world would take notice again. Although the trigger could be almost anything (there was no real news that led to the previous selloff), the main reason is this market’s extremely high valuations.
  
  Based on reliable information, retail investors in China have been eager to play the market. Although this isn’t a bad indicator on its own, the problem is that there’s early evidence that money is flowing through mortgages and credit card loans into the stock market.
  
  The Chinese are known to be great momentum players, but practices of that sort have proved harmful before and will be again this time around. The timing, of course, is another issue...

Good comments posted in my opinion. And Mr. Mostrous reminds that..

• Volatility doesn’t mean bear market, and that can be a welcome, healthy change.

Now the issue is this...

If say or rather let's ass-u-me that another correction is possible in the Shanghai 180. The simple reasoning is that this market is at extremely dizzy heights at this moment of time. And even if one ass-u-me that the uptrend is still intact, I wonder what is the impact on the global market if Shanghai 180 does correct? Remember no markets goes up forever and ever, yes? Would Shanghai 180 do an orchestrated slow correction? Or would we see another drastic correction? And if it does happen, what is the impact on the global markets?

How?

Do you think this is an issue? Or do you think this is a non-issue?

rgds

More on Homes, Mortgages And Banks

My Dearest Moo Moo Cow,

Are you feeling uneasy over the US subprime mortagages and do you wonder about the impact it has on the US Banks? Well, there is this article posted on Morningstar.com which is worth a read, How Mortgage Troubles Impact U.S. Banks -- Part One.

And over on the CNN website, it was reported that the National Association of Realtors expects its measure of home prices to fall this year for the first time since the group began keeping track nearly 40 years ago. See Home prices set for first drop in 40 years

• The Realtors said the problems in subprime could actually lead to a stronger housing market over time if tighter lending helps prevent buyers from getting in too deep with low "teaser-rate" mortgage loans before being hit with much higher payments a year or two later.
  
  "Simply stated, a loan with the lowest monthly payment probably isn't in your best interests - borrowers need to understand worst-case scenarios," David Lereah, the Realtors' chief economist, said in a statement.

regards

Financial Shenanigans

My dearest Moo Moo Cow

The best articles I have ever read about the issue about Financial Shenanigans was posted on Wallstraits.com.

• 1) FINANCIAL SHENANIGANS VII: SPECIAL CHARGES
  In the seventh and final article in our creative accounting series, we explore how managers shift future expenses to the current period as a speical charge...
  URL : http://www.wallstraits.com/main/viewarticle.php?id=218
  Last indexed on : 9/14/2002
  
  2) FINANCIAL SHENANIGANS VI: REVENUE SHIFT
  In the sixth article in our series, we explore how creative accountants sometimes shift current revenue to a later period to boost future profits...
  URL : http://www.wallstraits.com/main/viewarticle.php?id=217
  Last indexed on : 9/12/2002
  
  3) FINANCIAL SHENANIGANS V: LIABILITIES
  In the fifth part of our series on creative accounting tactics, we explore how accountants fail to record or improperly reduce liabilities...
  URL : http://www.wallstraits.com/main/viewarticle.php?id=215
  Last indexed on : 9/11/2002
  
  4) FINANCIAL SHENANIGANS IV: EARLY REVENUE
  In the fourth article of our series on creative accounting, we take a look at shifting current expenses to a later or earlier period...
  URL : http://www.wallstraits.com/main/viewarticle.php?id=214
  Last indexed on : 9/10/2002
  
  5) FINANCIAL SHENANIGANS III: ONE TIME GAINS
  Like a magician tapping a magic wand to make a rabbit appear from a hat, managers create profit from thin air...
  URL : http://www.wallstraits.com/main/viewarticle.php?id=208
  Last indexed on : 9/9/2002
  
  6) FINANCIAL SHENANIGANS II: BOGUS REVENUE
  In our second in a series of creative accounting articles, we explore the many ways a company can create bogus sales to boost short term results...
  URL : http://www.wallstraits.com/main/viewarticle.php?id=207
  Last indexed on : 9/6/2002
  
  7) FINANCIAL SHENANIGANS I: EARLY REVENUE
  The year 2002 may go down as the year of creative accounting disclosures. The collapse of Enron was a wake up call to investors to learn more about financial shenanigans...
  URL : http://www.wallstraits.com/main/viewarticle.php?id=205
  Last indexed on : 9/5/2002

Enjoy my dearest Moo Moo Cow!

Do not let them make a fool out of you and your hard earned money!

Rgds

Seven One

My Dearest Moo Moo Cow,

I know I am way off-topic on this blog posting but it was a fantastic night of footie. So I blog this posting just for you, my dearest Moo Moo Cow: Manchester United 7 Roma 1



And click here for all the highlights to the goals... http://www.youtube.com/watch?v=R6OlMLTy1r0&NR=1

And here other links in english.

Carrick 1-0 http://youtube.com/watch?v=ZoS1wYKTMSg
Smith 2-0 http://youtube.com/watch?v=DSPd6kmc_e8
Rooney 3-0 http://youtube.com/watch?v=Iw4ZjfsW69w
Ronaldo 4-0 http://youtube.com/watch?v=kI52MDbNJYM
Ronaldo 5-0 http://youtube.com/watch?v=FpF2ibSIRsc
Carrick 6-0 http://youtube.com/watch?v=bP_jmDaFTf4&mode=related&search=
Evar 7-1 http://youtube.com/watch?v=-x6meiQyIOE

Cheers!

Update on MIDF

My Dearest Moo Moo Cow,

Remember the series of blog postings on MIDF? ( Click here )

Well to make it short, MIDF has always denied the rumors published in our fantastic financial news.

• We refer to the query from Bursa Malaysia Securities Berhad ("Bursa Securities") dated 19 March 2007 in relation to the above article appearing in The Star (Bizweek, page BW4) on Saturday, 17 March 2007 ("Article").
  
  We wish to inform that MIDF is not in a position to make any comments as MIDF is not involved in any manner on what has been reported in the Article. At the same time, MIDF has not been advised by its shareholders or any other parties of any corporate exercise in relation to the Article.
  
  As requested by Bursa Securities, we will make enquiry with Permodalan Nasional Berhad ("PNB") in respect of the above matter and will make the necessary announcement upon receiving a response from PNB.
  
  This announcement is dated 20 March 2007.

Posted on today's Business Times. ( here )

• PNB: We're not buying out MIDF
  By Kamarul Yunus
  ahmadk@nstp.com.my
  
  April 11 2007
  
  PERMODALAN Nasional Bhd (PNB) is not buying out investment bank MIDF Bhd, PNB's chief executive officer Tan Sri Hamad Kama Piah Che Othman says.
  
  He said MIDF is already under PNB's stable of companies.
  
  Neither does PNB have any immediate plan to increase its existing stake in MIDF.
  
  Hamad Kama Piah was responding to recent reports saying that PNB was planning to buy out MIDF or raise its stake in the investment bank from the present 70 per cent it holds.
  
  PNB was said to be planning a RM600 million buyout bid for MIDF, paying about RM2 per share.

See the last sentence...

• PNB was said to be planning a RM600 million buyout bid for MIDF, paying about RM2 per share.

So who exactly were spreading these rumors out?

Why did our financial newspapers carried such un-confirmed stories?

Shouldn't the stories have CREDIBLE SOURCES?

How my dearest Moo Moo Cow? Don't you find it all so disgusting?

Sigh!

NasionCom & Our Financial News Again!

My Dearest Moo Moo Cow,

I was going through my old blog postings and I found these interesting sequence of postings.

Let's take a step back in time.

-------------------------------------------------------------------------------
Saturday, February 11, 2006

Is our financial news really financial news?

Back in Sept 10th 2005, there was this article on Nasioncom.

In that article, again it was crystal clear how ludicrously written the article was. Words like it is believed, sources says, currently believed, it is understood were splattered all over the article.

Makes you wonder if our financial press was printing out actual financial news based on facts or was our financial news being used a tool for some to churn out rumors to seduce punters and speculators to punt on the stock?

And it was such blatant shenanigan when the reporter played around with some actual financial notes.

Take a look at the second last paragraph of that news article:

• For the six months ended June, NasionCom posted a net profit of RM7.2mil on the back of RM112.9mil in sales. In the notes accompanying its financial results to Bursa Malaysia, NasionCom says, “Compared against the group’s results for the financial year ended December 2004, for the half-year ended June 2005, the group has recorded a revenue of RM112.9 million or 70.2% of financial year (FY) 2004’s revenue and a profit after taxation of RM7.18 million, surpassing FY 2004’s full-year profit of RM3.76 million. Moving forward, the group believes that its continuous investments in Internet protocol network infrastructure, broadband infrastructure and Internet data centre, together with development on niche products and services, will yield positive contributions in the future.

The problem is, first of all...

Nasioncom first quarter net earnings was 5.171 million.
Nasioncom second quarter net earnings was 2.009 million.

The earnings report, which the reporter was referring to, saw Nasioncom's net earnings decline from 5.171 million to 2.009 million. This meant that Nasioncom's earnings weren't as rosy as what was indicated by the newsreporter. (see the highlight in blue: a revenue of RM112.9 million or 70.2% of financial year (FY) 2004’s revenue and a profit after taxation of RM7.18 million, surpassing FY 2004’s full-year profit of RM3.76 million.)

Now if I dig into Bursa Malaysia reports, the following is the link to that Nasioncom's earnings report:

Quarterly rpt on consolidated results for the financial period ended 30/6/2005

Click on the attached wordfile... and search for Nasioncom's REVIEW OF PERFORMANCE in their earning notes.... there was 4 paragraphs of remarks...

Ho ho ho... guess what? this reporter DECIDED to highlight ONLY the good stuff!!

The reporter only used the bottom 2 paragraphs, and cleverly ignoring and omitting the first two paragraphs of Nasioncom's notes.

I have pasted those 4 paragraphs in question...

• The 2nd quarter under review has shown a lower overall performance when compared to the immediate preceding quarter ended 31 March 2005. The Group recorded revenue of RM 51.798 million; earnings before interest, tax, depreciation and amortisation (EBITDA) of RM 6.186 million; and profits after taxation and minority interest of RM 2.009 million.
  
  The second quarter results has been impacted by lower revenue due to competitive pricing.
  
  There were no corresponding second quarter results for 2004 as this is the Group’s first 2nd Quarter result after its listing on 25 February 2005 on the MESDAQ Market of Bursa Securities.
  
  Compared against the Group’s results for the financial year ended 31 December 2004, for the half-year ended 30 June 2005, the Group has recorded revenue of RM112.9 million or 70.2% of FYE 2004’s revenue and a profit after taxation of RM7.18 million, surpassing the FYE 2004’s full year profit of RM3.76 million.
  
  Moving forward, the Group believes that its continuous investments in Internet protocol (IP) network infrastructure, broadband infrastructure and Internet data center (IDC) together with development on niche products and services would yield positive contributions in the future.
  
  

~~~~~~~~~~~~~~~

So I wonder, if this reporter made a simple mistake or perhaps there was intent by the reporter?

By leaving out the first 2 paragraphs, the reporter omitted the current poor performance of the company and most important leaving out the fact that the Nasioncom clearly said that the lower earnings was caused by competitive pricing. Isn't this not an important issue to report?

On 30th November 2005, Nasioncom reported its earnings again.

Quarterly rpt on consolidated results for the financial period ended 30/9/2005

Total net earnings from Nasioncom was only a paltry 260k!!!!!!!!! See how important the issue that in the previous quarter, Nasioncom had already being affected by lower earnings caused by competitive pricing?

So in summary:

Nasioncom first quarter net earnings was 5.171 million.
Nasioncom second quarter net earnings was 2.009 million.
Nasioncom third quarter net earnings was 260k.

Yup... and if you look at the very statement of that article: It appears that there is a lot going on at Mesdaq-listed NasionCom Holdings Bhd.

LOL!!!.... what nonsense isn't it?

That was then. In today's Bizweek, the very same reporter, made another attempt to sell the stock!

New major shareholder to emerge in NasionCom

Same style!

"Sources say, it is understood, it is believed" are plastered all over the article again. All hearsay and no actual facts!

Now check this out...

• The price tag of 50 sen may appear a tad high (compared to its current share price of around 29 sen), but an analyst says not necessarily so. “At 50 sen, NasionCom is being valued at a price earnings of about 9 times, which is fair considering the average PE of 15 times of some of the other prominent stocks on Mesdaq such as Green Packet Bhd and REDtone International Bhd.”

Now I really wonder who on earth this analyst is! Nasioncom's current earnings, which is declining drastically, totals some 7.4 million for the first 3 quarters of the year.

Let me put this 50 sen price tag into perspective. This ANALsyt is effectively equating that Nasioncom should be worth, in terms of market capital, some 400 million ringgit!! (This is the price one has to pay if one wants to buy each and every single share of Nasioncom @ 50 sen price tag!)

So can a company making some mere 7.4 million and worse still, in its last reported earnings in November reported a paltry earnings of 260k, be worth a whopping 400 million ringgit????

So clearly this ANALyst is basing the valuation on some incredibly high earnings per share!

Let's see... at 50 sen, with a price earnings ratio of 9 times, this means Nasioncom's earnings per share is some 5.5 sen. Now Nasioncom has some 800 million shares... which means this ANALyst is saying that Nasioncom's net earnings equates some 44 million!

44 million?

Amazing! Truly amazing!.. and how much is Nasioncom's current earnings? Some 7.44 million?

And regarding this ANALyst... isn't it a wonder that this reporter makes no attempt in naming who he or she is?


ps...

this blog entry is not about what and how Nasioncom will trade in the near future! Will Nasioncom go up or down? It interests me not!

Most important issue: Is our financial news really financial news?

--------------------------------------------------------------------------------

4 days later, I wrote the following article.

-------------------------------------------------------------------------------

Wednesday, February 15, 2006

What again about our financial reporting?

The issue of our financial news used to instigate wild speculation ideas on stocks.

Here are some blog postings on the issues:

• Is our financial news really financial news?


• Should Financial Press be allowed to spin-off Rumours?


• Mutiara

And incredibly, all of those articles was creatively written or should I call it engineered by one same reporter and his so-called sources (or should I call it as Maggie Sauce?!)

Take the latest one: Is our financial news really financial news?

Let's take the issue of Nasioncom. That article was posted on 11th Feb 2006.

1. Nasioncom ended the day trading on the 10th Feb 2006 at 0.305.

2. Nasioncom ended the day trading on the 13th Feb 2006, the day after that incredibly creative story was written, at 0.345. See how nice it is to publish a story, throws in the wild speculative 'according to sources" stuff all over the article. And better still, add in a wild insane, nonsensical valuation based on ONE so-called UN-NAMED analyst! Job done, eh? Check the high volume traded on that day!

3. Nasioncom ended the day trading on the 14th Feb 2006 at 0.30. What a lovely, I Love You Deep-Deep Valentine present from this reporter, eh?

4. Now? The selling pressure 'looks' very strong (errr... you might want to get a second opinion on this statement cause I am not one that could read what the trade is saying!).... anyway... at 11.30, Nasioncom is now trading at 0.285.

How?

Do we need such wild no-substance stories?

And worse still, how come one reporter in our financial newspaper can repeatedly publish nothing but speculative rumors in the financial news?

What good is our financial news if everything is but speculative rumors?

How?

Does all this even matters?

Or does it NOT matter as long as it provides us with an opportunity to punt in the said stock(s)?

Or should I question who gives the divine rights to allow this reporter to write as per his own whims and fancy?

How?

Or should I request that our financial news to be changed to our RUMOUR mill?

-------------------------------------------------------------------------------

And the rest is history!

One year later...

---------------------------------------------------------------------------

Friday, February 16, 2007

Nasioncom Caught Inflating Sales Revenue

Posted on Business Times.

SC raps NasionCom
for inflating
revenue figures

The telecommunications service provider has to rectify and re-issue its financial statements for the year ended December 31 2005 within a month

“NasionCom’s revenue of RM194.98 million as reflected in its 2005 financial statements contained RM143.11 million sales that were not transacted,” the SC said in a press release late yesterday.

-------------------------------------------------------------------------------

How now, my dearest Moo Moo Cow?

A view from a Singapore Blogger

Posted by blogger DanielXX, the following blog posting is worth a read: Malaysia Series: Government restructuring

rgds

Re: Megan again

My Dearest Mike,

Regarding Megan Media.

There is this old blog posting I have made before. It's called Price Versus Value.

I believe everyone understands that the current stock market is rather hot. Some would go for the hot stocks, while some were search the market for the low PE stocks - the laggards. But do understand there is risk involved in such a strategy. And since as mentioned, this advice was given to you, perhaps you might want to consider a second opinion on the advice itself. What if such an advice based on such a strategy could be faulty? Do not get me misunderstood here at all. I am not saying that all low PE stocks are bad and neither am I against this strategy at all.

But I believe there is risk involved here. And if not reasoned out carefully, such advice could turn deadly. This is because of the tendency of folks to be focused solely on the price of the stock. And sometimes they focus solely on the earnings, without giving a second thought about what is the driving factor behind the earnings. And by doing so, they simply focus on the price of the stock being traded on the market and they simply failed to understand the value of the company.

Simply put, a stock selling on a cheap PE does not equate that one is investing on a quality company. Sometimes, these stocks are selling at a cheap PE has a simple reason. They are cheap because the markets simply do not rate the stock at all due to all the inherent risk involved in the company. In simpler and cruder terms, they simply know that the company is lousy.

So what's so wrong with Megan?

Now, I have always believe and agree very much that investment is most sensible and intelligent when it is business like.

Now let's look at the issue of the quality of the earnings company.

Fy2005, Megan reported earnings 66.167 million. Company was in a nett debt of 557.526 million. Now get this, Megan's earnings actually increased by a whopping 15.325 million a year ago. But despite increasing so much, its nett debt position went from 371.092 mil to 555.526 million. An increase of 186.434 million.

Now think as a businessman, does it make sense to increase you nett debt by 186 million just to earn 15.325 million more?

Let's look at fy 2006. Megan ended its fiscal year earning only 60.234 million. Nett debt grew to 779.568 million.

Now assuming you consider that it was ok for Megan to ram up its debts in fy2005, to get that extra 15.325 million in profits, what about fy 2006 end figures? Earnings flat but nett debt is now 779.568 million! Which is an increase of 224 million!

Ok.. now this where good reasoning is important. If anyone or any business borrows so much money, don't you want to see some end result? And in Megan's case, where is it?

Now take current ytd fy 2007. See What about Megan? Current ytd net profit 3 quarter is only 39 million. Which is slightly little bit more than its previous year same quarter of 36.7million. Nett debt is now a whopping 863.329 million. Nett debt has increased another 83.761 million so far this fiscal year.

And again, consider yourself as a businessman; do you want to be a business partner of such a business? Since fy 2004, Megan nett debt has increased from a nett debt of 371.092 million to 863.329 million. An increase of 492.237 million!

Does it make sense?

Ask yourself this. If your best friend shows you such a stats, would you want to be his business partner? Would you? In the most logical manner, don't you reckon that your friend has no idea on how to manage and run his business?

See if one asks these simple questions in a rational manner, you simply take focus of the stock price out of the equation. And it's so crystal clear that as an investor, it does not make any sense to be a business partner of such a business!

The following passage in the blog posting, Price Versus Value, is worth remembering:

Buy the Value, sell the Price! Most shareholders only watch the movement of stocks but forget to understand the value quality of a company.

1. To understand the quality of a company, the first step is to look at its financial conditions such as the levels of assets, liabilities and cash.
2. Moreover, we have to look at its business competitiveness in the market, its competitors and its earnings outlook.
3. More importantly, we have to look at the vision, ability and integrity of the management.
4. If a company treats its shareholders badly, it is better not to touch its shares.

There is this other blog posting: Megan: Part XIII

Let me reproduce it here again.. >>>>

In Part XII , I have made the following statements...

• For me, I believe that an investor's primary objective is to invest in only the good, quality companies at a reasonable price. And if that is the case, then the share price or the market reaction to the company's earnings is not in the equation. For the focus is always on gauging the quality of the company. ( If one puts the share price in the equation, the investor focus gets muddled because the likelyhood is that the investor might be focused on what the share will do in the market, will the share go up or will the share go down. And the actual focus on the quality of the company is soon forgotten. )

Ah... in the share market, can it work if one merely focuses on the issue of the quality of a company?

Now before I continue, I have to ass-u-me one thing, and that is, me and you, the reader of this blog posting, we believe in investing. It makes no sense to continue reading if one believes otherwise. Right?

So as investor, do you believe that the main objective is to invest only in the good company at a cheap price?

And if so, the key issue is always on the quality of the company. And needless to say, if the company is NO LONGER GOOD, then it makes no sense that we continue to stay invested in the stock, right?

Now, how am I going to prove this issue to all?

Ah, for those that really knows me, I have simply been a big bad bear on Megan (and ... LOL... they are bored stiff reading my comments on Megan!)

Since when?

Well... I believe since 2003... since the very day, Megan decided to play that funky corporate music by purchasing MJC, a funky corporate exercise that saw Megan purchasing MJC, a company owned by its own majority shareholder.

Let me prove to you. Have a look at this screenshot of an old chap-lap forum. (the forum is closed hor).


That was posted on Sept 2003.

And here is another proof. Click here or have a look at the following screenshot. (Click on the picture to have a bigger view)

That was posted in May 2003.

The opinions back then, was the Megan shareholders was using the company as a tool to enrich themselves. They, the Singaporean shareholders, used Megan Media, a listed company in Malaysia, to purchase a company in which they have own vested interests. And they sold the company at a premium and with the sale the existing debts of MJC were sold to Megan.

As mentioned before, when I purchase a stock, I consider myself being a part owner of the business. A business partner. So when my business partner places their ownselves before me, how could I trust being a part owner of such a company? And most important of all, do I see myself benefiting in such a partnership? Can meh? How can I benefit when the owners main priority is to enrich their ownselves?

Hence, how would I rate such a company? How can I possibly value a company that I cannot trust?

Is it wise to buy and hold such a stock forever and ever?

Take a look at this Reuters chart. (do try to verify the accuracy of the chart hor...)

How?

Three worthwhile things to note...

Firstly, I have mentioned many times before (it would be too tedious to prove this also) that there was some real justifications to invest in Megan but this was in 2001. And as can be seen in the chart above, the early investor would have been rewarded nicely for their investment in Megan.

Secondly.. when Megan played their funky music in May 2003, wasn't it a good time to exit the investment?

Was May 2003 a good time to decide to AVOID/EXIT/STAY AWAY from Megan Media?

Ahh... as can see clearly from the chart, perhaps May 2003 wasn't the perfect time to exit Megan and that perhaps maybe Jan/Feb 2004 would have been a better time to exit Megan.

Yup.. it wasn't perfect.... but.... heyyyyyyyyyyyyyy..... was it shabby to exit Megan back in May 2003?

Lastly, buy and hold... if the company quality is no longer good.. is it wise to HOLD and HOPE that it becomes better? Well the best answer for that question is to look at this chart below.. see the devastating result for holding and hoping?

Ahh... yes... some could argue that all this is nonsense and irrelevant already because this is all past. And it's really make no sense to constantly looking at the rear view mirror when one drives... right?

So what lies in the future for Megan?

How will happen to the share price?

Ahh... let me say this again... I have no idea... but as an investor... my issue is simple.

How do I rate the quality of this company?

Now consider these issues.. the depleting cash, the rocketing debts, the rocketing inventory and the extreme high level of trade receivables, the integrity of the management...

and now we have the issue of how Megan accounts its profits (ie the issue of the depreciation rate)..

how? how do you rate the quality of Megan? Do you even think that Megan is an investment grade stock?

If no... why should you bother with the share price?

:D

----------------------------------------

Now from that blog posting, here is another issue for considertion.

• The opinions back then, was the Megan shareholders was using the company as a tool to enrich themselves. They, the Singaporean shareholders, used Megan Media, a listed company in Malaysia, to purchase a company in which they have own vested interests. And they sold the company at a premium and with the sale the existing debts of MJC were sold to Megan.

That was in 2003. And guess what, the Yeo's in 2006, has disposed most of their shares held in Megan!

See Notice of Person Ceasing (29C) - YEO WEE SIONG

How?

Yes, Megan is being sold at a cheap price versus its earnings but is this really an investment you want to make? What about the quality of the earnings? What about the integrity of the management?

I hope this long set of second opinion helps and many thanks for your kind wishes again and I too wish you all the best in your investments.

rgds

Hope And Faith for Aisya.

My Dearest Readers,

Last month I published a posting highlighting a call for help, "A call for Help: Help Aisya... ". I have received an update from Ms. Daphne Ling.

Bless her kind soul for all the work she has done for Aisya.

• Latest developments on Aisya on my blog
  
  I'll sum up for you here.
  
  Collections have reached Rm 8100, slighltly over...Have compiled a list so that people who wanna donate things (some are worried money might go astray, be misused etc) can do so...
  
  If you know anyone who wants to do so, can please alert me, so I'll put next to the item they wanna donate that there's already a pledge, so we wont have repetitions...Just sms/email/comment and I'll put it up...Nobody has to donate a whole sum...They can just say, "I'll sponsor two months of *fill in blanks*"...Thanks a million.
  
  Will keep in touch...
  
  Daphne

Here is Dapne's posting..

• Dear all,
  
  Donations for Siti Aisya have reached slightly over RM 8100...The donations (some of which have been cashed, some still in cheque form, some in money order) came from as far as Sabah! The Shahidans are extremely grateful for everyone's generosity, and I would like to take this opportunity to thank everyone on their behalf.
  
  I promised to provide a list of things that can be donated to Aisya, as some people find it erm, 'unsafe' to give money. Below are a list of things she needs, which we can help the family with:-
  
  Diapers
  
  Darling Aisya is only 8 kgs plus, so she generally wears a size M. She goes through about 7-8 pieces a day as the family now buys her the cheaper grade diapers, which are not very absorbent. This can go up to about 10 pieces a day. Anyway, we'll assume she uses about 8 pieces a day, which means she will need about 240 pieces of diapers in a month.
  
  To sidetrack a bit: I suppose if she uses a better quality one, Aisya will not need as many, but it's just an opinion of mine...So maybe if someone wants to donate better quality diapers, she can make with 6 pieces a day?
  
  I know for a fact that there are cheap brands from Tesco, Giant and this brand called Baby-Ku (A bag of about 80-slightly-more pieces are about RM 30-35). So Aisya will need about 3 bags...The more expensive will include Mamy Poko (I think it is the most expensive on the market)...
  
  Total, for a year:-
  
  Approximately 36 bags (cheaper quality); 27 bags (More expensive quality)
  
  Food
  
  Her daily porridge, fish, chicken, vegetables etc will be seen to by the family...
  
  But if anyone can see to her milk, nestum and glucose, it will be most appreciated by the Shahidans.
  
  At present, Aisya takes Anmum milk (3 years and above, any flavour). The pediatrician/dietitian have advised the parents to switch to PediaSure, but due to the steeper price, they have not done so. Aisya needs about 2 tins every month (1.8 kg per tin).
  
  As for Nestum, she goes through about one tin on an average month (Price: About RM 9 per tin, unless you get it during promotions)...
  
  The dietitian has asked the family to give her glucose, of any kind, but they have yet to start because of the recent loss of En Shahidan's job. I believe (not professional opinion) Aisya might benefit from Polycose, a special kind of glucose which helps the body retain nutrients and aids in growth...It's pretty costly, I believe, and if anyone is keen, I will speak to the Pediatrician about giving this to Aisya...I believe one to one-and-a-half tins every month is sufficient...
  
  Total, for a year:-
  
  Milk: Approximately 24 tins.
  Nestum: 12 tins (RM 108). *Sponsored by Mdm Sarojini*
  Glucose: 12-18 tins.
  
  Portable Suction Machine
  
  The Shahidans are thinking of buying a portable, light-weight, battery-powered suction machine for Aisya. The present one which they are using is heavy and electrically-powered and was sponsored by Baitumal. The fact that it is electrically-powered means that they cannot carry it along with them when they take Aisya out, especially to HUKM for treatment.
  
  As you all know, Aisya breathes through an opening in her trachea (in the neck). This opening has to be cleaned periodically to remove mucus, fluids, phlegm etc, thus the need for the machine.
  
  The portable one is available from a supplier in Puchong (specifically, I don't know yet), and the cost is about RM 1600...
  
  ***
  
  My hope is that we can all help to raise these products for Aisya for one year...This is to give the family time to try and stand on their own feet again, and I think one year is fair and sufficient...I don't want them to have to worry about Aisya's needs while they try and regain their foothold...When money is tight, you can cut back on clothes, vacations, phone bills, etc, but not Aisya's needs, right?
  
  As usual, please feel free to contact me if you need to, either by email, phone or as a comment...
  
  Please leave me a note if you wish to donate, so that I can update the list with what has a sponsor so we don't have repetitions...Doesn't have to be full year donation: You could just say: "I'll sponsor two months of *fill in the blanks*"...
  
  Cheers people! Thanks for the generous spirit and support...

And do give this posting a read: Aisya: Hope and Faith Never Left... (let me reproduce it here)

• Sigh...
  
  I am supposed to be away, but due to quite a few emails and sms's which came in asking about Aisya after my visit with Kak Pi Bani to see Aisya, I thought I'd better clear this first...
  
  As promised, Kak Pi and I met up (the world is soo small, because we stay in neighbouring neighbourhoods...literally) and went to Aisya's home, along with my parents...
  
  I carried with me a cheque from Inti International College Penang, while Kak Pi, bless her soul, had within the short period of time, collected some cash from her group of friends to be handed over...
  
  Little Syazwan, Aisya's 6++-year-old brother was washing the car (and himself, I might add!) when we arrived. En Shahidan, Aisya's dad himself was waiting for us outside the home.
  
  I felt a sense of nostalgia walking into Aisya's home. And seeing her mother Kak Hayati sitting in the exact same position I saw her in when I was last there, it momentarily felt as if time had stood still for this family...
  
  But for me, it was bittersweet...The first time I had set foot into Aisya's home, she had yet to go for her surgery: There was hope lingering in the air. I could feel the intense hope in Kak Yatie's voice as she talked about the upcoming surgery to create eyelids for Aisya, and having seen Aisya for nearly a year, I shared in the hope...
  
  The last time I set foot in the home, Aisya had returned from surgery, and there was still hope...At that time, the eyepatch was still over her eye, and there was still no news about the existence of her eye, or the lack thereof...I was trembling with anticipation, eagerly awaiting the day when we would know for sure...But there was so much hope in the air...Hope that Aisya would finally see light in her life...
  
  I went for The Star's BRATs Year-End Journey shortly after, and the first day of our journey was the day when Aisya's eye-patch would finally be removed...During a short-in-between break, I finally had the chance to give Kak Yatie a call...Her voice was forlorn when she answered the phone, the first time I had heard her so down...When she told me the verdict (Aisya has only the whites of her eyes), it was all I could do to keep the tears from spilling down...
  
  How anyone could not cry is beyond me...Here was a mother (and family) who had harboured so much hope that their child would finally be able to see...While Aisya's eyelids were still fused, there was so much hope that maybe, just maybe, Aisya can see; but seeing for themselves that she had no eyes, so to speak, it was a terrible blow to all the months and years of hopeful yearning...
  
  When I hung up, I burst into tears...
  
  That was the end of last year...
  
  When I stepped into Aisya's home last Saturday, I wondered momentarily if the hope I had become so accustomed to would be gone...
  
  But when Kak Yatie said "Masuklah! (Come in!)" with a broad smile on her face, I knew I stood corrected...
  
  After a round of introductions, we sat down and chatted...En Shahidan, has been hunting for a job ever since he lost his previous one, and we found it very admirable that the family, despite their difficulties, have tried their best to stand on their two feet...Despite knowing that there were on-going efforts to raise money for them, I admired that that did not stop them from trying on their own.
  
  Right in front of their home was a small gerai, which the Shahidan family are trying to maintain by selling burgers, pizzas and dadih...En Shahidan himself will be going for a MARA-course to help him kick-start his business, and I sincerely hope it comes through...
  
  What pissed me off is, despite Aisya holding an OKU (Orang Kurang Upaya) card, her family does not get the monthly RM 200. The reason: Because they have a car and home!
  
  But can't anyone in the right mind see that those are basic neccesities?!? Anyway, those were bought when En Shahidan was still working...
  
  Guess what the-powers-that-be said when approached for aid: "Kalau susah, jual aje la kereta atau rumah! (If in difficulty, sell the car or the house!)"...Tell me, which person with a heart (and conscience!) can say that and sleep well at night? I know there are rules which dictate who gets help and who doesn't, but I also know there is such a thing as "budi bicara" (A.k.a using your brain) to gauge the situation...
  
  How can these people know it is them and their signature standing between a family and the funds?!?
  
  How do you expect the Shahidan family to survive without a home or car? Little Aisya is terrified of strangers, and she has a permanent tracheostomy opening in her trachea, which has a hole to help her breathe. How do you expect her parents to take her for treatment in a bus or motorcycle? How can you subject a child who is terrified even of foreign footsteps to survive sitting in a crowded bus, or be cradled on a motorcycle, what with all the dust and pollutants in the air which might make her breathing even more laboured?
  
  While all this was going on, En Shahidan was busy preparing a meal for us, made of homemade pizza (Yes, Kak Pi, I had two helpings!) and this homely-man was soon laying a table cloth on the floor with food, dadih and drinks...
  
  We brought some Kentucky for Syazwan, along with a Chicky Meal toy, and he sure lit up when he saw the toy and ice cream. Good to know the little boy had a good time too...
  
  Donations in the Shahidan family's hand have reached about RM 4000, and I believe (and hope!) that more will be coming in judging by the number of enquiries about Aisya and ways to donate, some as far as the United States!
  
  En Shahidan and Kak Yatie sincerely would like to thank all bloggers and their readers who have rallied to their cause, and donated generously....
  
  *Come on, people! We can do better!*
  
  You know what? When I left the home, I realised (a little too late) that hope has always been there...It is because it never left their hearts even when circumstances allowed for it; it is the hope and faith a father and mother has for their child, which can never be extinguished no matter what...
  
  As for me, I always leave the home more humbled than when I stepped in...
  
  PS: Kak Pi, it was a pleasure to meet you!

Now, with the share market has been extremely kind to most folks and if ever you are one that benefited from the hot market and feel that you could help, do please contact Daphne on her blog.

Comeon, let's give some Hope and Faith to Aiysa!

Bless you all.

Regarding Hexza

My Dearest Sally,

Regarding Hexza. This stock was actually discussed on Sahamas. ( This is my favorite stock forum and obviously this opinion is extremely biased!).

Anyway, I would suggest you to visit Sahamas and give that discussion topic a read, as I honestly have nothing more to comment on at this moment of time.

Here is the start of the discussion (note the dates of the postings): Hexza

Rgds

Regarding Cash Flow

Here is an interesting article on Cash Flow: Show Me the Money: Tracing a Firm's Cash Flow

• Earnings, dividends, and asset values are important factors, but it is ultimately a company's ability to generate cash that fuels the growth in these factors. Strong cash flow allows a company to increase dividends, develop new products, enter new markets, pay off liabilities, buy back shares, and even become an acquisition target. It is important to understand the statement of cash flows and the elements that impact upon cash flow trends.

Remember not all earnings are the same. Do not be blinded by this fact. Do look at the cash flow.

And here is something to ponder upon. If you do not look at the quality behind the earnings, yeardsticks such as PE or ROE could easily be distorted. And if that is the case, do you think it is wise to invest based on distorted yardsticks?

Ayway, do give the related-links posted in the article a read.

1. Can I See How a Company Raises Money and What It Is Used For?
2. How Can I Tell If a Firm Is Making Enough Money to Cover Its Day-to-Day Operation?
3. How Are Company Purchases and Sales Recorded?
4. Do the Stocks and Bonds a Firm Issues Count as Cash?
5. How Does a Firm's Cash Flow Relate to Its Income?
6. Why Should a Company Have Excess Cash Flow?

The last article gives a good reasoning why the cash flow is so important.

• Ideally, a company should not only cover the costs of producing its goods and services, but also actually produce excess cash flow for its shareholders. Cash flows from operations represents a good starting point for this type of analysis. However, beyond current production, a growing company must reinvest its cash to maintain its operations and expand. While management may neglect capital expenditures in the short term, there are fundamental negative long-term growth implications to such neglect. Free cash flow refines the cash flow from operations measure by subtracting capital expenditures and dividend payments from operating cash flow. While you can argue that dividend payments are not required, they are expected by shareholders and they are paid in cash, so they must be subtracted from cash flow to calculate a free cash flow figure.
  
  This free cash flow figure is considered to be excess cash flow that the company can use as it deems most beneficial. With strong free cash flow, debt can be retired, new products can be developed, stock can be repurchased, and dividend payments can be increased. Excess cash flow also makes a company a more attractive takeover target.
  
  You may need to make adjustments to the free cash flow figure depending upon the company's industry. Financials do not typically have large expenditures in brick and mortar property, plant, and equipment expenditures. However, they make significant investments in marketable securities, which are not considered in the standard free cash flow calculation. When looking at the cash flow of a financial firm, it would be best to examine total cash flow figures from the statement of cash flows.
  
  Cyclical firms and companies with long development and construction cycles may have periods of slow sales, inventory build-up, and strong capital expenditures that occur over the normal course of business. A firm such as Boeing, which has a long development cycle for new planes, a long ramp-up period when starting production, and an extended and expensive product construction cycle, may show negative free cash flow until it starts to deliver its planes in quantity.
  
  Conclusion
  
  A firm's cash flows are driven by its sales growth and management's ability to manage expenses, capital investment, and financing in response to that growth. The cash flow statement can give valuable insight into how well a company is managing its growth. Sales, inventory control, production and employee costs, accounts receivable management, interest payment levels, product development, and capital expenditures are some of the elements that impact the cash flow statement. It is critical to understand industry norms to gain a complete understanding of the numbers. Ultimately, firms have to produce cash to do well in the long run.

Yeah, Show ME the Moola!!

Cows Don't Trade

My Dearest,


Your dearest beloved Moo Moo Cow has started a new project, called Cows Don't Trade. Do give that blog a click for some cow perspective on trading.


Here is the link to the latest blog posting there: Is there a possible trading entry now for PSCi?


regards

How green is the grass in Southeast Asia?

My Dearest Moo Moo Cow,

I just came across this article regarding real estate in Southeast Asia. The article is called, Low Cost of Living Draws Retirees to Southeast Asia. I do believe it would get you all exited. I really do.

See, folks are starting to consider Southeast Asia as a cheap place to say. Look at the start of the article.

• Ultimately, they picked Phuket, an island on Thailand's west coast blessed with sunshine, tranquility and friendly people. The price of entry also worked in their favor: For about $500,000, they got a four-bedroom luxury villa with a private pool, courtyard and garden. They figure that's less than half what it would have cost in similar spots in most European countries.
  "This is a palace," Mr. Richards declares, surveying his new home. "What more could a man want?"
  The Richardses aren't the only retirees from abroad happily settling into Southeast Asia. More people from around the world are coming to the region, drawn by word of mouth, incentives from regional governments vying for retirement nest eggs, and affordable living, including housing and relatively inexpensive medical care.

The grass over here is considered cheap, my dearest Moo Moo Cow. Look at the ranking of Kuala Lumpur.

• According to Mercer's 2006 cost-of-living study, Kuala Lumpur ranked 114th out of 144 cities, while Bangkok was 127th and Manila came in at number 141. By comparison, Seoul, Tokyo and Hong Kong ranked as the second, third, and fourth costliest places (behind Moscow), while London and New York were in the top 10. Sydney was the 19th most expensive city, Madrid ranked 53rd and Monterrey in Mexico was 103.

And the trend of overseas retirees buying properties is growing in Malaysia!

• While the overall number of overseas retirees in Southeast Asia is still small, it's growing fast. Malaysia, for instance, started issuing retirement visas in 1996. By 1998, there were fewer than 50 holders of such visas. But by 2001, the total had grown to more than 800 and last year topped 8,700, excluding dependents. Malaysia aims to add 3,000 to 3,500 retirement visas annually over the next three years under its Malaysia My Second Home program, says Donald Lim, the country's deputy minister of tourism.

And do you remember the chatter you heard that some mainland China folks are interested in Malaysian properties? This issue is even mentioned in the article.

• Already, Malaysia is benefiting from the growing middle class in China. Lai Shevren, a spokeswoman in Kuala Lumpur for the Malaysian retirement program, notes that the largest single group of retirement visa holders -- about 2,000 -- are mainland Chinese. She says one attraction is that many of them have relatives in Malaysia.

Relatives my Moo Moo Cow. Family!

And then you have Japanese retirees coming here because of the issue of golf. Golf. Yes, my dearest Moo Moo Cow, that's the game where they take the stick and try to whack that small ball into a holes all over your green grass!! Yeah, just tell me all about it.

• For Kiyoshi Shiraiwa, 65, and his wife Yoko, 59, the bonus of retiring to Malaysia is golf. They pay about $425 each for annual membership at Kelab Golf Perkhidmatan Awam, a lush country club 10 minutes away by taxi from their Kuala Lumpur condo. They say that in Tokyo something equivalent would cost 10 times as much -- and be 90 minutes away. "We play golf twice a week," says Ms. Shiraiwa, looking as if she still can't believe it.
  The couple rent their condo, which has a pool, tennis courts and gym, for about $575 a month; they estimate a similar set-up in Tokyo would cost more than $1,700. And the comforts of home -- including shops that cater to Japanese tastes -- aren't far away. "It's like a little Tokyo," beams Ms. Shiraiwa.

Wow. South Koreans coming to KL because of polluted air??? Sure?

• Others intend to make a more permanent move. Lee Hyeung Seock's physician in Seoul recommended he avoid the South Korean capital's polluted air because of a lung ailment. So Mr. Lee, 50, retired as an exporter of women's garments, applied for a Malaysian retirement visa and moved to Kuala Lumpur with his family last September. Being able to enroll his 10-year-old son in an American-style school is a bonus. "In Korea," Mr. Lee says, "there are only a few international schools."

And my dearest Moo Moo Cow, they love the town where your other dearest friend, yeah that 'buaya-kaki' of yours, is working, Penang!!!

• Mr. Simon describes Penang as "unbelievably inexpensive," noting he gets by mainly on his U.S. Social Security checks. He pays about $350 a month for a two-bedroom, two-bathroom condo that overlooks the Andaman Sea and is surrounded by tropical jungle. He plays golf frequently with friends, and dines out four or five times a week. A maid cleans for him once a week.
  All told, Mr. Simon says he lives on less than $1,500 a month, adding that he could never enjoy his current lifestyle on the Florida coast spending the same amount.
  Accessibility to good health care also influenced his decision to stay in Penang, Mr. Simon says. Not long after arriving, he had major spinal surgery at Island Hospital, a local private facility. That was followed by minor prostate surgery. "Medical care here is first rate," he says. Mr. Simon says he isn't insured, so he paid cash, and adds that the two procedures, including hospital stays and 24-hour home care, totaled less than $10,000. He figures his out-of-pocket expenses in the U.S., where much of the bill would have been covered by the government's Medicare program, would still have cost him two to three times more than he paid in Malaysia.
  The low cost of living also drew Takeshi Yano, 63, and his wife, Junko, to Penang. "It's very, very hard to live in Japan with only a pension, so (retirees) are moving here," says the former cosmetics importer from Tokyo.
  Mr. Yano, who says the couple didn't know anyone in Penang when they decided to move there, receives a monthly government pension of about $2,000 to $2,500, depending on the exchange rate. "I wanted to go to Europe or the U.S., but the basic idea is: Can we live with the pension or not?"
  On Penang, he says, he manages by paying about $450 in monthly rent for a three-bedroom, sea-view apartment. Mr. Yano says he plays golf once a week and socializes with other Japanese retirees and expatriates, as well as Penang locals.
  For some, though, the gain in lifestyle doesn't offset the loss of comfort zone. Mr. Yano says some of his acquaintances on Penang went back to Japan after a few months because they couldn't adjust. They didn't speak English -- almost everyone there does. They also didn't own a car, he says, plus Penang isn't pedestrian-friendly and doesn't have enough taxis -- and taxi drivers charge the Japanese more, he grouses.

Hey, how now my dearest Moo Moo Cow? Do you live our grasses here in Malaysia or not?

How?

( article source: here )

Regarding PSCi

What does the Moo Moo Cow think of PSCi? Is it really a stock to avoid at all cost?

Hi,

PSCi is a mess. Really. It's in such a mess that a rescue package has been put in place to help.

The Moo Moo Cow is not able to offer direct advice but all the Moo Moo Cow can do is lay out the facts.

So how bad is PSCI? Here is the link to its latest earnings. Quarterly rpt on consolidated results for the financial period ended 31/12/2006

The following is the important notes in its balance sheet.

1. Deposits: 17.665 million
2. Accumulated losses: 779.481 million
3. Total debts: 589.829

Now obviously, item 2 and item 3 needs to be addressed badly. ASAP.

On Nov 7th, PSCI reported this on Star Biz.

• Tuesday November 7, 2006
  
  PSCI sells building in Penang to lower debts
  
  By IZWAN IDRIS
  
  PETALING JAYA: PSC Industries Bhd's (PSCI) wholly-owned unit PSC Asset Holdings Sdn Bhd has proposed to sell a building known as Menara PSCI in George Town to Boustead Holdings Bhd for RM54mil cash.
  
  Boustead owns a 32.5% stake in PSCI.

Ahh... Boustead owns PSCi. A 32.5% stake. So Boustead will buy a building from PSCi for rm54 million cash. Ok, it's clearly a rescue package and some cynics could be extremely critical and bash such a funky corporate exercise. Well, wouldn't you? (link to announcement on bursa here )

Anyway the other commentary in that news article worth reading..

• The property is currently charged to OCBC Bank (M) Bhd for a principal loan amounting to RM67mil obtained by PSCI subsidiaries PSC Asset and Penang Shipbuilding & Construction Sdn Bhd.
  
  The loan has been in default.
  
  “Proceeds from the proposed disposal would be utilised to partially repay the outstanding loans,'' PSCI said.
  
  As at Dec 31, 2005, the audited net book value of the property was RM70mil. It generated a total gross income of RM5.48mil last year.
  
  The valuation for the disposal was arrived on “a willing buyer-willing seller basis” after taking into consideration, among other things, the building's indicative market value of RM55mil.
  
  “The proposed disposal is expected to result in a group loss of RM4mil for the year ending Dec 31, 2006,'' PSCI said.

And the other rescue package put in place was here. (do read this announcement!)

What it says is..

• The Proposed Share Capital Reduction pursuant to Section 64 of the Act will involve the reduction of the issued and paid-up share capital of PSCI of RM174,083,348 comprising 174,083,348 ordinary shares of RM1.00 each in the following manner:-
  a) 3 ordinary shares of RM1.00 each in the issued and paid up capital of PSCI which are held by Boustead will be cancelled;
  b) the remaining 174,083,345 ordinary shares of RM1.00 each in the issued and paid up capital of PSCI after 2.1.1 (a) will be reduced by RM0.80 per share to become 174,083,345 ordinary shares of RM0.20 each.
  (Collectively the "Proposed Share Capital Reduction")


• Thereafter, the issued and paid-up share capital of PSCI of RM34,816,669 comprising 174,083,345 ordinary shares of RM0.20 each will be consolidated such that every five (5) ordinary shares of RM0.20 each shall constitute one (1) ordinary share of RM1.00 each credited as fully paid-up ("Proposed Share Capital Consolidation") and the issued and paid-up share capital of PSCI of RM34,816,669 will comprise 34,816,669 ordinary shares of RM1.00 each.

Click on the attached word file here in that announcement.

A 5 into 1 capital reduction and then there will be a rights issue.

This funky corporate exercise was approved by the SC recently. (see here )

• On behalf of the Board of Directors of PSCI, Affin Investment Bank Berhad (formerly known as Affin Merchant Bank Berhad) ("Affin Investment") is pleased to announce that the Securities Commission ("SC") has vide its letter dated 19 March 2007 (which was received on 21 March 2007) approved the Proposed Disposal and Proposed Restructuring Scheme.

So is PSCi out of the woods?

Now the following article posted on the Edge is worth reading: 26-03-2007: PSCI to be profitable in FY08.

• PSC Industries Bhd (PSCI) is expected to return to the black in the next financial year ending Dec 31, 2008 after three years of consecutive of losses on the back of its restructuring exercise and a strong order book of RM250 million.
  
  The company has also targetted to wipe out all its accumulated net loss of RM172 million within the next two to three years.
  
  Its deputy chairman Datuk Seri Ahmad Ramli Mohd Nor said PSCI was on track to a recovery as it was now debt free, and could now apply for loans to carry out its business of building ships.

Ok, this is the Moo Moo Cow's interpretation. The strong order book. This was one of the reason: 21-02-2007: PSCI secures RM146m job for 3 chemical tankers.

Ok, it says rm250million in order book. See, this rescue package, does not wipe out everything. There is still residue. rm172 million left. Can a rm250 million order book wipe this rm172 of accumulated net losses within the 2 to 3 years? That's a big ask if you ask the Moo Moo Cow. You are talking about wiping out on an average of rm57.3 million of losses per year for the next 3 years. Is this rm250 order book so profitable for PSCi to achieve this target? This is what I would be asking.

PSCi's best ever performing fiscal year was its 2003 fiscal year. Quarterly rpt on consolidated results for the financial period ended 31/12/2003. Look at the operating margins. It's around 9% only.

So how? Let repeat again: this rm250 order book so profitable for PSCi to achieve this target of wiping out its accumulated losses? This is what I would be asking.

Is PSCI debt free? After this rescue package, there will be a residue of 1.119million in debts. That is what stated by PSCi in their earlier wordfile here. How?

But look at what the intention laid out by the company.

• Its deputy chairman Datuk Seri Ahmad Ramli Mohd Nor said PSCI was on track to a recovery as it was now debt free, and could now apply for loans to carry out its business of building ships.

Could apply for loans again???

WOW!!

Er, some would NOT like it at all. A capital reduction and a rights issue to help clear its mess. Now it wants to apply for loans again in the future?

Start the debt bubble again?

Yeah, it does get really contagious such a habit.

The edge article continues by saying the following...

• “The proposed restructuring scheme will resolve once and for all PSCI’s huge debt overhang and restore the balance sheet,” he told reporters after PSCI’s EGM in Kuala Lumpur on March 26.
  
  He said the company currently had an order book of RM250 million, and it was in talks for several contracts, which it hopes to announce this year.
  
  PSCI reported a net loss of RM93.75 million in its last financial year from a net loss of RM533.49 million in FY05.
  
  The restructuring exercise involved the settlement of the group’s total borrowings of RM595 million via the issuance of new shares and raising RM69.6 million through a rights issue, PSCI said in a statement. The proceeds raised from the rights issue would be used for working capital requirements.
  
  The exercise will also reduce PSCI’s accumulated losses from RM771 million to RM172 million and improve shareholders’ funds to RM67.46 million from the previous negative amount of RM535 million.
  
  Meanwhile, Ahmad Ramli said PSCI’s existing contract include four offshore patrol vessel (OPVs), undertaken by its 20% owned Boustead Naval Shipyard, which would be fully delivered in 2009.
  
  PSCI is also building three tankers for Gagasan Carriers Sdn Bhd, valued at RM146.7 million, to be delivered by March 2009.
  

How now Brown Cow?

This company which is in a mess has a rescue package in motion.

Would PSCi come out a better corporate after this rescue?

Would you dare put your hard earn money on it?

Hope these second opinions help and I have no idea how the share will perform, so please do not ask me if it will move higher or not...

And most of all, are you even aware of the capital reduction and rights issue?

regards,

Reply to Auditing Megan

My Dearest,

Here's a simple issue you wrote on Auditing Megan

• Currently? Megan's financial cost for this quarter alone is 16.724 million! And the financial cost for this fiscal-year-to-date 3 quarters is 44.952 million!!!! And at this rate, Megan's financial cost for this fiscal year would be a whopping 60 million,.

Think... think about that.

60 million of its current fiscal year operating profit will be needed to pay its finiancial cost.

WOW!!

Is this even sustainable?

Remember... sooner or later debts needs to be re-payed.

Currently Megan is only burning cash.

There is zero cash flow at this moment of time.

Despite all recording a 9 months earnings of 39.180 million, Megan recorded a negative cash flow of 26.9 million!!!!

How? At this rate, do you think Megan has the ability of ever paying its 888 million in loans???

Think...

Auditing Megan

My Dearest Moo Moo Cow,

I am taking the liberty of reviewing what you wrote previously on What about Megan? . This is because S&P has upgraded its recommendation to a HOLD from a SELL. Perhaps things are not as bad.

Could you be mistaken?

Were you overly biased, my dearest Moo Moo Cow?

Well I am not gonna audit completely what S&P said but I would just like to focus on the first point they said. This for me, it's most important part of the report because it is rather at it is.

• Megan’s 3QFY07 (Apr.) net profit of MYR10.6 mln vs. MYR19.8 mln a year ago was below our expectations, due to lower margins and higher finance costs. 9MFY07 net profit of MYR39.2 mln reached only 60% of our previous FY07 estimate. Megan did not declare any dividend in 3QFY07.

Let's see what the analyst from S&P is saying here.

Lower margins and higher financial cost.

This is a serious point in any other business, yes?

Take the issue of lower margins. Is this a new issue or is the problem getting worse and worse?

let me do an audit on its previous years net profit margins. Fy 2003 (13.2% margins), fy 2004 (8.7%), fy 2005 (7.2%) and fy 2006 (5.8%). Current fiscal year (3 quarters) margin is at 5.1%.

The net profit margin is getting worse and worse each year. This is a fact!

Financial cost. Back in fy 2003, Megan's financial cost was 7.003 million. (note: in fy 2002. it was only 4.076 million).

Currently? Megan's financial cost for this quarter alone is 16.724 million! And the financial cost for this fiscal-year-to-date 3 quarters is 44.952 million!!!! And at this rate, Megan's financial cost for this fiscal year would be a whopping 60 million,.

Goodness me, it looks like you are correct, my dearest Moo Moo Cow. This debt bubble built by Megan is simply insane.

Do you like figures and stats, my dearest Moo Moo Cow?

Do you realise that Megan's financial cost is compounding at an astonishing rate of 71% per annum for the last 4 years (since 2003)?!!!

That's simply insane.

No sane company runs a businsess in such a manner!

Now I want to check on your balance sheet concern. Let me do my own audit. I will first refer to Megan's fy 2003 Q4 balance sheet. ( refer this excel file: here )

I would want to look at the 2 issues; inventories and trade receivables, mentioned by you...

back in fy 2003 Q4. These were the 2 figures

Inventories.......................................................... 13.252
Trade receivables................................................ 56.939

And the below is figures is taken from it's latest quarterly earnings:

Inventories.......................................................... 125.090
Trade receivables................................................ 430.354

WOW!!!!!!!

My dearest moo moo cow, I do see your extreme concern! I cannot see how any sane business would conduct its business in such a haphazard manner.

Remember inventories could consist of raw materials but 125 million of raw material? Sorry that does not make any cow sense (sorry for the pun, my dearest!) ! And also inventories do consist of stocks on the shelves. Do not discount this issue. Common sense would ask the investor to reason out if the inventories consist of un-sold dead inventory. Yeah, dead stock. Isn't this where warehouse cheap sales come from? That's a possibility that no intelligent investor should discount.

Trade receivables. The simple question begs to be asked again. How could this figure balloon so high? Why isn't the company collecting these debts? Why? Remember the company's debt issue, which is at an insane 888.131 million.

Now if the business owes the bank a whopping 888 million, why doesn't the business attempt to collect this 430 million in trade receivables?? Why?

Is there a reason why it cannot do so?

And is there a reason why this figure is increasing at alarming rate? Do you know that the trade receivables compounded at an whopping 66.4% per annum since its fy 2003?

WOW!!

ps. here is S&P historical recommendation on Megan. And I do think that I would have sold it way back in 2003 and never look back on it. Yeah, megan is an extreme good example that one should not invest just based on the earnings reported. Look at the figures behind the earnings.

Date      Recommendation  Target Price
New       Hold            0.70
5-Jan-07  Sell            0.59
6-Oct-06  Sell            0.60
11-Aug-06 Hold            0.62
4-Jul-06  Sell            0.73
3-Apr-06  Sell            0.66
3-Jan-06  Strong Sell     0.70
30-Sep-05 Hold            1.20
16-Aug-05 Buy             1.34

The Politics of Energy

My Dearest Moo Moo Cow,

Jim Puplava has published his latest highly rated perspectives series on oil, money & war: Part 2 Eyes Wide Shut: The Politics of Energy

Extremely interesting. Give it a read for he warns of the crisis approaching!

• A Crisis Approaches
  Time is running out and we are drawing closer to our next energy crisis. It is a crisis brought on by the conflict between rising global demand for energy and our growing inability to supply that demand. Despite the ominous signs all around us, our nation’s leaders and experts remain in denial concerning it. We have gone from a Republican to a Democrat-dominated Congress. In the transition nothing has changed. The U.S. has no real energy plan that focuses on domestic energy production of oil or gas, renewables or the expansion of our energy grid. For the past 30 years the United States has been losing control over its energy supply and thereby making its economy ever more vulnerable to external political and economic factors. If our economy is to grow, then we must have access to energy. If we are unwilling to explore, refine or build new sources of energy, then what country can we rely on to supply it?
  
  Our leaders have made several errors in judgment in assuming oil will remain plentiful, no alternatives are worth pursuing, and that somehow OPEC will be able to meet the world’s increasing demand for energy. They ignore the fact that despite hundreds of billions in investment, Saudi Arabia has been unable to increase its production capacity over the last two decades. As Matt Simmons writes in Twilight in the Desert, at some point, large oil prospects will vanish completely and reserves will dwindle. Oil products will become much scarcer and less affordable. When oil supply peaks, the world will be forced to ration its use in one way or another.[17] Competition for oil will escalate.
  
  The question remains whether that competition is orderly and peaceful or strewn with conflict. Securing adequate oil supplies was an important element in all of the major wars of the last century and dominates conflicts in this new century. The United States—and the rest of the world by extension—is facing the biggest energy crisis in history. It is a crisis that we are completely unprepared for and one our leaders or the media are unwilling to acknowledge. From politician to citizen, our eyes remain wide shut.

Do they know what they are betting on?

My Dearest Moo Moo Cow,

Good Morning my dearest. Them Scousers won 3-0 against PSV. If you intent to catch some fast quick-eye tonight for MU big match against Roma, do expect them noisy Scousers making tons of noise tonight. Yeah, do ask them to keep quiet, we MU fans are trying to sleep!

Can we win? Well, my dearest Moo Moo Cow, I do hope so.

The biggest chatter yesterday was on the new bunch of Call Warrants or Structured Warrants listed by OSK. See, them went thru the orbit. Your beloved red wearing undies, super hero will never have a chance against these orbiting stocks.

And obviously, you will not be the first blogger on this issue. Sal, wrote the following pieces You Have Been Warned! and Cry Also No Tears!, while Alex wrote New CWs trading at premium of 50%! (re-posted) on his blog.

Let's take a look at what is happening. Take Genting-CD.

If the punters want to bet on it, they should know the simple betting rules lay out by the issuer of these call warrants. The following pdf file would be a great source of info. here for the pdf file.

Yes, my dearest Moo Moo Cow, it does make sense to know what one is betting on, right? Don't they call it as Cow Sense, my dearest?

Rule 1. Entitlement Ratio : Fifty (50) SW shall initially be entitled to one (1) GENTING Share

50 into one. Now you can't change it. The OSK Merchant bank is the banker or 'chong-kah' here. And they tell you that it's 50 into one, my dearest. Now take Genting-CD closing price yesterday of 0.365. It would mean that you need to buy 50 to exchange into one genting Cd. So which means, you need to bet 50 big ones to make your bet make cow sense, yes? That's an outlay of 18,250.00

Get Rule one, so far?

Rule 2. Exercise Price : RM39.00, being 99.4% of the Reference Price.

To change into one Genting, you need to pay 39,000. Now 39,000 + 18,250 = 57,250.00

So far so good? No problem?

Rule 3. Cash Settlement Amount : In respect of the valid exercise of each SW, the amount greater than zero (0), in RM calculated by the Issuer and verified by the Calculation Agent, in accordance to the following formula:-

(Settlement Price - Exercise Price)/Entitlement Ratio - Exercise Expense.

Where your settlement price represents the amount equal to:-

• (a) in relation to an exercise of an SW during the Exercise Period, the closing price of GENTING Shares on the Valuation Date; and
• (b) in relation to the exercise of an SW on the Expiry Date, the arithmetic mean of the closing price of GENTING Shares for the five (5) scheduled Valuation Dates,

Sounds complicated, isn't it?

Make it easier. Do you know money line? Take money line as where the better makes the money.

Now the easeist cow sense money line would be a simplied equation: Exercise Price > Selling Price.

The exercise price using the assumption of 0.365 as the cost of one's bet, then the exercise price as calculated would be 57,250.

Selling Price = market price of Genting.

Genting yesterday closed at 40.00.

And since the selling price is clearly less than the buying price... who wins?? The bank wins!!

Which brings us to the last rule.

Rule 4. Time Frame. Expiry Date : The date falling six (6) months from and including the Issue Date

My dearest Moo Moo Cow, the bet expires in 6 months.

Which means, within the next 6 months, if the market selling price of genting is still less than 57.25, you lose the bet.

You get nothing!

Does it sound a good bet?

I wonder.

So are you betting that the merchant banker here has set an easy game in Genting CD? At a price of 0.365, the merchant banker will only lose money if Genting trades higher than 57.20. Genting is now 40.00. Which means in this 6 months time frame, Genting has to increase by a whopping 43% for them to lose money.

Now consider this. Say you are very confident it will happen. Genting will say increase to a market price of say 60.00 within this 6 months. Which means, assuming you are betting for the cash settlement, then your profit is 60.00 - 57.25 = 2.75.

Congratulations, you won rm2750 from a bet outlay of basically 18,250.00. A 15% return for your bet.

Now think of this way. Ask yourself if the bet makes cow sense? Is this the best bet available? Cos if you lose, you lose whatever you could salvage by selling all those 50 shares of call warrants you bought in the market.

But...

Think of this. Now if you are seriously sure that Genting will surge past rm60.00, at 40.00, you are expecting Genting share price to increase by a whopping 50%.

Say doc, if Genting can increase by 50%, why don't you buy the Genting share instead?

Yeah, why not?

Wouldn't you agree, my Moo Moo Cow? Does it not make cow sense?

You bet the call warrant for the settlement price, you only get 15%. But if you bet the Genting share itself, you can make 50%. Which sounds a better bet to you, don't you think so, my dearest Moo Moo Cow?

Ah... but life is always complicated.

Yes it is. No buts.

See the common thinking is, if Genting does some hippy, hippy shake movement upwards, the call warrants would move in tandem if the Genting share.

And so, the game of the musical chair is played and will always be played.

Last one left holding the shares is the dead duck or as some crazy bugger would call it as the 'mati-katak'!!

Who cares about the money line and exercise price??? Who cares?!!

Right.

And as long as Genting share price, moves up... one can always sell the call warrant and take profit.

Well, if you have no problem in such a bet, neither should I.

How now my dearest Moo Moo Cow?

Bogle on his book: "Little Book of Common Sense Investing"

My Dearest Moo Moo Cow,

Ah, I know your extreme fondness in using your cow sense in your investing reasonings. Hence, I reckon that John Bogle's book "Little Book of Common Sense Investing" should be of extreme interest to you. In fact, Mr.Bogle has an editorial on TheStreet.com talking about his book. And the following snippet is taken from the article posted here.

• One reason that I found this book so easy and rewarding to write is because it called upon two traits that have served me well during my 55-year career -- common sense, and, as one of my detractors put it, "an uncanny ability to recognize the obvious." I'm convinced that successful investing is all about common sense. Common sense, after all, tells you to keep your costs low, minimize the impact of taxes and diversify as broadly as possible.
  
  A low-cost index fund, holding all of our nation's publicly held businesses, bought and held for the long term, is the purest manifestation of such common sense and is the only way to guarantee that you earn your fair share of the returns America's corporations generate in the form of dividends and earnings growth.
  
  Through the miracle of compounding, the accumulations of wealth over the years generated by those returns have been little short of staggering. Over the past half-century, American business has produced a return of 10% per year. Compounded at that rate over five decades, each $1 invested would grow to $117.40. Surely, a strategy of investing broadly and for the long term in American business is a positive-sum game -- a winner's game.
  
  But as Warren Buffett has said, such a strategy is simple, but not easy. Why? Largely because Wall Street's great marketing machine generates a tremendous amount of noise (and little light) in its efforts to convince investors that they can outperform the market. Internet stocks, small-cap stocks, emerging-market mutual funds, hedge funds, commodity ETFs -- the styles and sectors come and go, but the message remains the same: Yes, you can beat the market, and we know how.
  
  But of course, for every winner, there must be a loser. And, as a group, all investors are -- I hope you're sitting down -- average, but only before the costs of all those investment strategies are deducted. But the deduction of all those costs (commissions, administrative and operating expenses, advisory fees, taxes and so on) turns efforts to outperform the market from a zero-sum game into a loser's game, in which the return of all investors as a group lag the market by the amount of the costs they incur.
  
  Of course, these costs can seem remarkably inconsequential in the abstract. Paying a mere 2.5% of your capital each year for expenses couldn't have that much of an impact, right? Why not judge for yourself? If we deduct 2.5% in annual expenses (a conservative estimate of the total costs incurred by the average equity investor) from that 10% long-term return on stocks, the net return is just 7.5%.
  
  As a result, a $1 investment grows to just $37.19, instead of $117.40, representing just over 30% of the return that was there for the taking. The other 70%? Paid year after year, in dribs and drabs, to Wall Street's marketers. If such an arrangement strikes you as absurd, well, chalk one up for common sense.
  
  When I created the world's first index mutual fund more than 30 years ago, it was widely derided. "Bogle's Folly" was one of the more memorable descriptions it earned. After all, it was asked, why would investors want to settle for average? Ironically, by "settling" for average performance, investors who choose what I call traditional index funds -- low-cost funds owning virtually the entire U.S. stock market -- will, over the long term, reap superior returns simply by paying a fraction of the costs that the typical investor pays.
  
  By investing and then dropping out of the system, never paying a single unnecessary cost or tax, the odds in favor of the index strategy's long-term success are staggering, simply because of what I call "the relentless rules of humble arithmetic." Success breeds success, and today individual and institutional investors alike have embraced this wonderfully simple investment concept to the tune of more than $3 trillion.
  
  Nonetheless, ever the idealist, I believe that indexing's reach remains far short of its potential. I'm convinced that if I could spread the message of common-sense investing, as I quote Michael Kelly in the book, "carefully enough, thoroughly enough, thoughtfully enough -- why, eventually everyone would see, and then everything would be fixed." And indeed, the notion of "fixing" the long-term financial security of America's 100 million investors is the ideal that drove me to write my Little Book of Common Sense Investing.

What about Inflation?

My Dearest Moo Moo Cow,

Today's market wrap commentary posted on FSO by Market Commentator, Tony Allison, whould be of interest to you: Inflation: Comparing Apples to Oranges, Smoke & Mirrors Won't Pay Your Bills

Mr. Allison argues that the inflation is there and it only appears to be under control because of how the inflation is measured simply has been changed.

• Inflation is one of those issues that concerns people, but the normal reaction is a shrug of the shoulders, and shake of the head. It’s a problem that affects lives and futures, but most see it as a murky, complex subject beyond their control. And the media seems to think it’s “well under control,” even if our wallets argue otherwise.
  For those who grew up in the 1950’s and 1960’s, the world was a different place. An average guy with a high school education could support a large family. His wife didn’t have to work. He could save for retirement. He could pay down, or even pay off his mortgage by retirement. According to the US Census Bureau, Department of Commerce, the average family income in 1950 was $3,300. But then the average cost of a loaf of bread was 14 cents. That wouldn’t pay the sales tax on a loaf of bread today.
  These days you need two paychecks to support a family, usually with no more than one or two kids. Both parents need college degrees to get good jobs. They have little or no savings and their kids will be saddled with student debt if they go college. How can a middle class family be worse off today than 50 years ago with a booming economy, low interest rates and “minimal” inflation?
  These are complex issues, and globalization and the exporting of a large portion of our manufacturing base play a role. But inflation has not gone away, and is not as “quiescent” as the Fed would like us to believe. In the early 1990’s, the government was watching inflation rise and adversely affect federal deficits and what it paid out in entitlements. To bring down the cost of entitlements, the inflation rate was adjusted lower, but not by cutting government spending, or raising interest rates. No, inflation was lowered simply by changing the way in which it is measured.

Don't you agree?

Even here in Malaysia, what was the price of your favourite plate of chicken rice a decade ago compared to now? What about your absolute favourite 'roti canai'? What's the price now? How?

And Mr. Allison highlights some issue on how they are changing (or should I say fudge?) the numbers.

• Based on today’s numbers, Williams believes that the current inflation rate is approximately 10%, given the way inflation was measured prior to the 1990’s. Williams also reconstitutes M3 (the money supply), which the government no longer reports. “It’s growing 11% on a year over year basis.” Williams notes with dismay that Fed Chairman Bernanke is already planning to change the current CPI index to even more of a substitution basis, instead of a fixed-weight basis.
  “The original intent of the CPI was to measure a constant standard of living,” said Williams. “They are moving toward a declining standard of living, where you substitute hamburger for steak in the CPI because steak is getting too expensive. The next (comparison) may go to dog food.”

Mr. Allison warns the danger in fudging the numbers...

• You can’t get rid of inflation by changing how it’s calculated. And no nation in recorded history has ever been able to create prosperity by printing increasing amounts of its currency. Smoke and mirrors only buys time for elected officials to gain reelection and sweep the problem temporarily under the rug. However, more Americans are discovering their quality of life is in retreat. If the CPI is really 10% as John Williams believes, then those 4.5% Treasury Bond yields don’t look so good on a real return basis.
  While the cost of many consumer goods has fallen over the last few decades, especially electronics, the cost of living has risen relentlessly. The easier availability of credit has helped many to survive, but ultimately the debt load becomes a burden that cannot continue.

My dearest Moo Moo Cow.

Do give the article a good read.

Cheers!

The Art Of Value Investing

My Dearest Moo Moo Cow,

Saw this article posted on BTimes written by Mr. Herman Phua.

(http://www.businesstimes.com.sg/sub/campus/story/0,4574,229296,00.html? or you can read it here )

Here is some highlights...

• Together with David Dodd in 1934, Mr Graham published Security Analysis, still in print and considered as the bible for serious investors. Drawing from his personal experience of the devastation caused by the Great Crash of 1929, Mr Graham developed quantitative techniques that expounded the importance of diligent number crunching in the investment decision process. Basically, he developed a rigorous screening methodology.
  
  In fact, it was Mr Graham who popularised the use of many of the financial tools we are familiar with today - price-earnings (PE) ratio, debt-to-equity ratio and book value. While Mr Graham may not be an immediately recognisable name, he is held in the highest esteem by someone who is.
  
  Warren Buffett, a student of Mr Graham and widely regarded as one of the world's greatest investors, attributes much of his success to his mentor. Besides sophisticated screening tools, Mr Graham developed an investment philosophy that has withstood the test of time.
  
  First and foremost, he believed investors have to approach stock investments as though they are seeking to buy or become a partner in the business. Mr Graham published his second book, The Intelligent Investor, in 1949.
  
  
  POWERFUL CONCEPT
  
  According to Mr Buffett, there are two other essential things all investors will gain from reading it - the concepts of 'Mr Market' and 'Margin of Safety'. The concept behind Mr Market is a simple but powerful idea. It is a story Mr Graham often related to describe how an investor should view market fluctuations.
  
  Think of Mr Market as one of your partners in a business. He is an eccentric person ruled by his emotions, which can swing from amazing optimism to overpowering depression. Each day, Mr Market will turn up and offer to buy your share or sell you his share in the business at a price that corresponds to his mood, even though there has not been any fundamental change in the business.
  
  On some days, Mr Market feels exhilarated over the prospects of the business and is willing to offer you a very high buy-sell price. On other days, he sees only doom ahead for the business and offers a sharply lower buy-sell price. But temperamental as he is, Mr Market does not seem to mind if you decide not to accept his offer and will be back again the next day with another buy-sell price for you.
  
  The point of Mr Graham's story is that the stock market is there for investors to take advantage of. As investing behaviour is heavily influenced by the emotions of greed and fear, there will be times when you will be presented with opportunities to buy or sell stocks at particularly attractive levels.
  
  Of course, the danger is that you unknowingly fall under the influence of Mr Market and find yourself swayed by the emotions of the herd. While there is the possibility that the herd may be right, Mr Graham's point is that to be successful, an investor has to remain rational and make independent decisions about the value of his investments.
  
  Herein lies the problem as most investors - even professionals - usually will have differing values that they place on the same stock. This largely depends on their methods for calculating intrinsic value.
  
  Acknowledging the possibility that his computations may be flawed, or that an external event could occur to affect the stock valuation, Mr Graham introduced the concept of Margin of Safety. This means making sure you have some room for error in your estimate of a stock's intrinsic value by buying at a sufficiently big discount.
  
  Mr Graham believed that a true margin of safety is one that can be demonstrated by figures, persuasive reasoning and reference to actual experience.

Hope you enjoyed it Moo!!

rgds

Bill Miller again

My Dearest Moo Moo Cow,

Saw your postings on Bill Miller: http://whereiszemoola.blogspot.com/search?q=bill+miller

Bloomberg has a new article on Bill: Bill Miller, Mired in Worst Slump of Career, Embraces AES, Tyco

• On board, Legg Mason Inc. money manager Bill Miller was bracing for the blow: The market, he knew, had beaten him at last. His streak -- 15 years of besting the Standard & Poor's 500 Index -- had come to an end. The final numbers showed he'd returned 5.9 percent in 2006, trailing a 15.8 percent gain by the S&P 500.

I will take his track record anytime, wouldn't you? And I have nothing but admiration for what he has achieved. Listen to his following set of comments.

• ``We are paid to do a job, and we didn't do it this year -- which is what the end of the streak means -- and I am not at all happy or relieved about that.''
  
  Miller says he has no plans to change tack just because he's had one bad year. He realized as early as July 2006 that his streak was in jeopardy. All year, nervous clients kept calling.
  
  ``I got asked, `How do you go about analyzing your mistakes?''' Miller says. ``I said, `I don't. I don't analyze my mistakes.' We will analyze spectacular errors, but not garden variety errors.''
  
  His record puts him in the same league as his friend Buffett, whose Berkshire Hathaway Inc. delivered an average annual return to shareholders of 18.8 percent from 1991 to 2005. Buffett, unlike Miller, beat the S&P 500 in 2006, with a 24.2 percent return.

And the issue of luck or skill?

• Luck or Skill?
  In his January letter to investors, Miller said that if beating the market were purely random, like tossing a coin, then the odds of beating the S&P 500 for 15 consecutive years would be the same as the odds of tossing heads 15 times in a row. Using the actual probabilities of beating the market in each of the years from 1991 to 2005, he put his odds at 1 in 2.3 million.
  ``So there was probably some skill involved,'' Miller said. ``On the other hand, something with odds of 1 in 2.3 million happens to about 130 people per day in the U.S., so you never know.''

Absolutely class!