Symphony sees Strong Revenue Growth!

My dearest Moo Moo Cow,

Remember the Symphony posting I made the other day?( see Symphony Again )

• So how did Symphony do for it's fy 2006? Have a look, Quarterly rpt on consolidated results for the financial period ended 31/12/2006. It lost 4.607 million for the quarter and made only 2.116 for fy 2006!Symphony just announced its earnings. Any better?

Today, there is an article on Business Times, Symphony sees strong revenue growth

• SYMPHONY House Bhd, which has re-positioned itself as an outsourcing services provider, is confident of seeing double-digit growth in its revenue this year.
  
  "The shareholders are happy with the new direction of the company to exit the technology business and focus on the outsourcing business which would provide a more visible and stable income," group chief executive Datuk Azman Yahya told a media briefing after the company's AGM in Kuala Lumpur yesterday.

Confident of seeing double-digit REVENUE growth? LOL! It's a revenue growth and not an earnings growth!

Quote: "The shareholders are happy"

I wonder HOW and WHY!!

The following is a 2 year chart of Symphony House. Compare the performance of Symphony House versus the broader market index. How could any shareholders be happy?

• Azman said with the new focus, the company has decided not to go ahead with its listing plans for its 72 per cent-owned subsidiary VSource Asia Sdn Bhd, which would be the main anchor for its outsourcing business.

Ah, this VSource was another issue!

Back in May 2005, have a look at this announcement, Quarterly rpt on consolidated results for the financial period ended 31/3/2005

• The Group recorded revenue and profit before taxation ("PBT") for the quarter ended 31 March 2005 of approximately RM32.5 million and RM2.3 million respectively. This is an increase of 104% in revenue and a decrease of 58% in PBT when compared to the same quarter of the last financial year. The drop in PBT for the quarter under review was largely due to lower profit margin for IT billings during the quarter and initial quarter losses incurred by the Company's new subsidiary, Vsource Asia Berhad.

See the problem with VSource was best described by Surf88 ( an investment advisor which unfortunately no longer exist now).

• By: Surf88
  Date: Friday, December 12, 2003
  Time: 8:20:10 AM
  
  Symphony House (Symphony) (susp @ RM2.29, stock code 0016) has proposed to acquire 30.3% of Vsource (Malaysia) for RM27.9M cash from its US-based parent company, Vsource Inc. Vsource (Malaysia) is principally involved in business process outsourcing (BPO) services, which covers areas such as claims processing, invoicing, human resources and payroll, finance, procurement and customer support. Vsource Inc also plans to sell another 9% stake in Vsource Malaysia to one or more Malaysian investors.
  
  Meanwhile, Vsource (Malaysia) is in the midst of acquiring Vsource Inc’s business operations in Japan and Taiwan, which will essentially give Symphony indirect exposure to the two countries. Based on available information, Vsource (Malaysia) has done well with revenue of RM94.4M and pretax profit of RM23.9M in the financial year ended Jan 2003, translating to a healthy margin of 25%. The performance of the to-be-acquired businesses in Japan and Taiwan was not disclosed.

Symphony simply wasn't too transparent in disclosing full details of VSource, yes? For a rm27.9 million purchase, surely as a listed company, you should have disclosed fully.

And to make matters worse, SYMPHONY HOUSE BERHAD ("SYMPHONY") - PROPOSED DEBT PURCHASE

• The Proposed Debt Purchase involves the purchase by Symphony the sum owing of USD1,739,000 by Vsource Asia to Vsource, Inc. The sum owing are advances previously made by Vsource, Inc. to Vsource Asia to fund their working capital requirements.

Now the company has performed poorly.

• Symphony House posted a revenue of RM218.39 million, up 10 per cent from 2005, but saw its net profit decline 88.3 per cent to RM2.12 million for the financial year ended December 31 2006

Can someone please tell me how could the shareholders be happy?

Reviewing the events at TransMile

My dearest Moo Moo Cow,

Here is a summary of what was written on this blog on Transmile.

I first did a posting on TransMile back on Nov 18th 2005.

• X We like Transmile for: (1) Its unique product, i.e. point-to-point express air transportation service; (2) Its ability to secure traffic rights for lucrative routes; and (3) Its EPS that is expected to grow at a CAGR of 67% between FY12/04 and FY12/07, backed by two full-fledged US-bound services. Maintain OUTPERFORM with a DCF-derived indicative fair value of RM12. In our DCF model, we apply a discount rate that is equivalent to Transmile’s WACC of 10.1% (based on a 20-year risk free rate of 6%, an equity premium risk of 7.5%, Transmile’s Beta of 1.07x, a target debt-equity ratio of 0.7x, and an average before-tax borrowing cost of 6% per annum).

A CAGR of 67% between fy12/04 and fy12/07? See how the Mile game was set back then in 2005! (This posting has an update here: Update on Transmile )

• Note: Malaysian air cargo firm Transmile Group Bhd said on Wednesday a special accounting audit had found there may have been an overstatement in its revenue by 30 percent in 2006 and by 36 percent in 2005.

TransMile and its receivables was blown wide open here: Transmile Receivables

• Validity of Transmile's 87 per cent higher pre-tax profit of RM206.7 million for the 12 months to December 31 2006, was questioned following the logistics group's failure to furnish its auditors with required data to substantiate the figures, Transmile told Bursa Malaysia yesterday.

Here's the 4th quarter report of the fiscal year earning, Quarterly rpt on consolidated results for the financial period ended 31/12/2006

Below is a snapshot of Transmile's balance sheet!



Fiscal year 2006 receivables were reported at 381.247 million, which is much more than the previous year fiscal year 2005 receivables of 111.113 million!

WOW!

I can understand why the auditors want to see more data!

Transmile opened limit down at 9.10 this morning. It is now trading at 9.95. A crisis buying opportunity? This is really risky because at this moment we do not know how drastic this issue is!

I was then asked, How about TransMile?

• Any chance of light for transmile?? I still like the biz model despite the recent hoopla..

Given what is happening, from an investing perspective, what I believe we have is a whole bunch of unknown factors. At this moment of time, we do not know exactly what is happening and neither do we know the extent of the troubles, if any.

So frankly, I do not see how I would want to invest in Transmile at this moment of time because there is no way I could make a rational investing decision.

But the greatest risk is if TransMile is guilty of wrong doing. IF. And if that happens, one cannot really treat TransMile as a quality stock anymore. For the issue of integrity is then gone. Ah yes, the business model will still have value. But then it becomes a case where one is forced to value a company whose integrity has been shot to pieces!

Of course, if forced to, I could speculate and I could guess but all I am doing is I am speculating what would happen.

And frankly, this is simply beyond me and it's certainly beyond me to speculate if there is a chance of light for TransMile now.

On May 14th, I did the following posting, TransMile

The following table is taken without that quarterly earnings reported on Feb 2007. Have a look.

1. Clear built up in receivables.

2. nett debt kept on increasing!

Now the most important thing I would ask is where is the wealth generated?

From 04 Q3 to 06 Q3, the company said it generated sales of 1.476 billion ringgit and it said it earned 200.881 million.

Good numbers but look at the cash position. For a company earning 200.881 million, this company went from a nett debt of 123.861 million to 680.819 million!

The following table showed the inclusion of 06 Q4 earnings.

Quarterly rpt on consolidated results for the financial period ended 31/12/2006

Profits and cash increased substantially. nett debt decreased. Somehow.. the numbers do not tally... And given such data... perhaps... an investment in transmile could be questionable!

And then I wriote this other posting More on TransMile

• ......there is speculation that management was perhaps under pressure to keep its numbers high to please investors and possibly facilitate a placement of shares completed in November last year that was largely taken up by foreigners.

In all honesty, all I can do is speculate what has had happened. And most of it is based on quoted stuff from news.

Which is really not intelligent at all.

Which is why the main grouse so far is perhaps best said by the Spore Btimes reporter saying why had the management not saying anything at all. And why had Bursa and SC remained silent?

That it had dragged on for so long indicates something was wrong in their accounts.

Right now, the issue would be, two things.

1. How badly stated was their account?


2. Was there intent?

Now those two issues would have a huge barring.

1. Transmile has had been priced for a growth stock. If their accounts were badly overstated then would it mean that the status of it being a growth stock is tarnished? And if so, then Transmile would probably not command the higher price earnings multiple it had enjoyed previously. And as noted, Transmile had done several placement issues in recent times. The POS placement was done around 30% and several various form of placement has been done. All of which will have an impact if one were to use the pe multiple as an indicator.

2. The issue of intent. This is by far more serious. The fact that Transmile went limit down on the first day and as mentioned by the press, foreign funds sold out. Damage has been done. If the allegations of intent were proven, I would seriously believe that these foreign funds would avoid Transmile like plague. So how much can our kampung fund do? And also, a lot of other investors would avoid this stock simply because it makes no sense to be an investor of a company whose owner/manager has been proven guilty in an attempt to cook their books. The issue of trust is but gone.

And if one adopts the rational approach, perhaps it simply makes no sense trying to be a hero in a hard place. Market is hot. Perhaps there is much better investment around for our hard earned money.

And what is the flipside of such a safer approach?

Well one missed an opportunity, that's all.

Does it hurt?

Nope.

The Market is always there, my friend. Other much better opportunities will arise in the future.

And then there was the question of a 50 Million Adjustment for TransMile?

So the Edge Weekly is suggesting that perhaps a 50 million adjustment is required.

Let's do some simple calculations.

The following table shows TransMile earnings.

\

So a 50 million adjustment could see fy 2006 earnings adjusted from rm157 mil to rm 100mil.

Now TransMile current number of shares is extremely tricky since it is ever expanding.

So as it is today, there are 270.118 million shares.

This means that TransMil eps 'could' be adjusted to a mere 37 sen, IF its earnings is adjusted by rm50 million to rm100 million.

So what PE multiple do you reckon TransMile could command after the adjustment?

Do you reckon it could command a pe multiple of 20x after this adjustment?

But if market take the adjustment poorly, TransMile could trade as low as a simple 15x multiple.

20x on an eps of 37 sen = 7.40

15x on an eps of 37 sen = 5.55!

How? Me? Honestly, I would rather not guess in such a fashion for I do not really know what is happening but a 50 million adjustment, could do some damage on TransMile in my opinion.

Last night:

• Malaysian air cargo firm Transmile Group Bhd said on Wednesday a special accounting audit had found there may have been an overstatement in its revenue by 30 percent in 2006 and by 36 percent in 2005.

See The Full audit Statement on Transmile!

It's one terrible mess and I do not think it is advisable to hunt for value in such a stock!

The Full audit Statement on Transmile!

My Dearest Moo Moo Cow,

Here it is.

• On 4 May 2007, the Directors of the Company received a letter from the Company's auditors, Messrs. Deloitte & Touche ("D&T") stating that D&T was unable to obtain the supporting documents from the management to satisfy D&T as to the fairness of the trade receivables and related sales to 18 companies identified by D&T. D&T also informed the Directors that they were unable to obtain satisfactory supporting documents for purchases of property, plant and equipment which amount was correspondingly credited to the unpaid balance owing by the 18 companies identified by D&T.
  
  As a result, the Board of Directors of the Company ("Board") expressed its concerns through the announcement dated 7 May 2007 as to the reliability of the unaudited consolidated results for the financial year ended 31 December 2006 announced on 15 February 2007, in particular, the items highlighted by D&T.
  
  On 7 May 2007, the Board appointed Moores Rowland Risk Management Sdn Bhd ("MRRM") to carry out a special audit on the issues mentioned above.
  
  This announcement is made in view of the Board's intention to maintain transparency of the findings by MRRM.
  
  1. FINDINGS OF SPECIAL AUDIT
  
  On 25 May 2007, MRRM issued a first interim report on its findings, a copy of which was submitted to the Securities Commission following a request by the Securities Commission.
  
  In the interim report, MRRM reported that:
  
  · In the financial year ended 31 December 2006, invoices were issued and recorded for purported services to 20 companies (comprising the 18 companies identified by D&T and 2 additional companies identified by MRRM) totalling RM333 million and representing 30% of the consolidated revenue stated in the unaudited consolidated results announced on 15 February 2007. This may result in an overstatement in the consolidated revenue by RM333 million;
  
  · Based on the unaudited consolidated financial statements as at 31 December 2006, the trade receiveables from the above 20 companies totalled RM236 million; and
  
  · In the course of the special audit, MRRM also noted that in the financial year ended 31 December 2005, invoices were issued and recorded for purported services to 19 companies (including 17 of the 20 referred to above) totalling RM197 million and representing 36% of the audited consolidated revenue of the Company for the financial year ended 31 December 2005. This may result in an overstatement in the consolidated revenue by RM197 million.
  
  For the purposes of illustration based on the above findings, on the assumption that TGB makes full provisions relating to the revenue recorded in respect of the companies mentioned above, the unaudited consolidated profit before taxation of the Company will be reduced by RM333 million for the financial year ended 31 December 2006, from RM207 million profit before taxation to a loss before taxation of RM126 million and the audited consolidated profit before taxation of the Company will be reduced by RM197 million for the financial year ended 31 December 2005 from a profit before taxation of RM120 million to a loss before taxation of RM77 million.
  
  The above illustration of the impact to profit before tax is subject to changes that may arise from the on-going special audit and the statutory audit for the financial year ended 31 December 2006 and does not take into account tax implications.
  
  The special audit by MRRM is still on-going in respect of the financial statements arising from the above.
  
  2. ON-GOING AUDIT
  
  The Company wishes to highlight that the special audit of MRRM is presently still on-going. Updates of any further material findings will be made in due course.
  
  In conjunction with the special audit, the Company will work towards finalising the annual statutory audit of the financial statements of the Company for the financial year ended 31 December 2006. With the findings of MRRM, the audited financial statements of the Company for the financial year ended 31 December 2006 are likely to include prior year adjustments.
  
  3. OPERATIONAL FRAMEWORK
  
  The Board has instituted the following:
  
  (a) A formation of an Executive Committee ("Exco") which assumes the authority of the Chief Executive Officer, arising from governance issues relating to the release of the announcement on the unaudited consolidated results for the financial year ended 31 December 2006, dated 15 February 2007 by the Board. The Executive Committee will be chaired by Mr Kuok Khoon Ho, and will comprise two other members of the Board, namely, Tan Sri A. Razak bin Ramli and Datuk Abu Huraira bin Abu Yazid. All of the Directors on the Exco are non-executive Directors of TGB;
  
  (b) The appointment of Mr Ong Teng Ping as the acting Chief Financial Officer. Mr Ong has been seconded from Chem Quest Sdn Bhd (a subsidiary of PPB Group Berhad), where he is a Director and the Group General Manager; and
  
  (c) On-going review of the systems to strengthen operations and internal controls of TGB and its subsidiaries ("TGB Group").
  
  4. CONTINUITY OF BUSINESS
  
  The TGB Group is keen to ensure the continuity of its business in providing express air cargo transportation services comprising international express freight services, chartering of aircraft, aircraft leasing and general freight services. The other services that are provided by the TGB Group include aircraft ground handling, aircraft maintenance, supply of aircraft parts, equipment and warehousing. In this respect, the TGB Group is presently actively engaging various stakeholders for its businesses including its principal customers, who are multinational cargo integrators, freight forwarders and courier companies, as well as its bankers, its shareholders and regulators, through appropriate channels.
  
  The TGB Group has in excess of 600 people with 49 managerial staff. It has its operational head office at Subang Airport and corporate head office in Damansara Heights.
  
  The Board is confident that the day-to-day business and service levels of the TGB Group will remain uninterrupted with the help of Group Chief Operating Officer, Robert Hyslop and the management team. With its landing rights and fleet of aircraft, the TGB Group is expected to continue to benefit from its niche within the express air cargo transportation market by providing its express air cargo transportation services.
  

Screaaaaaaaaaaaamyx!

My dearest Ngyok Yee,

Many thanks for you video clip.

Love it too much!

Gurus Explain Why They Were Wrong About the Stock Market

My Dearest Moo Moo Cow,

Here is a hilarious top-10-posting. Gurus Explain Why They Were Wrong About the Stock Market

10. You took my statement out of context, leaving out all the obfuscatory elaboration, conditional clauses, counterpoints and equivocations. Your judgment is unfair.

9. I was close enough. You should give me credit.

8. I will be right eventually; I just don't know when. (Or sometime later: I was right, but my timing was off.)

7. I may be wrong on some little things, but I'm dead right on all the big ones. You shouldn't count the little ones.

6. I provide risk assessments based on historical tendencies, not forecasts. You should not call it wrong. The low probability scenario happened, so it was just bad luck.

5. My public statements may be sometimes wrong, but I am 100% right in my private newsletter. You have to pay for the good stuff.

4. Since I am rich and famous, I must be smart. Since I am smart, I must be right. Quid est demonstrandum. No need to check up on me any more.

3. If brokers weren't so manipulative and investors so gullible, what I said would happen would have happened. You should give me credit for my compelling argument.

2. The Plunge Protection Team (or the President, or the Vice President and his cabal, or the Treasury Secretary, or the Federal Reserve, or the Japanese, or the Chinese) intervened to prop up the market. You shouldn't count that against me.

1. What forecast? Let me tell you about a great new investment opportunity!

US$100 mil contracts?

My Dearest Moo Moo Cow,

Sometimes I really wonder how easy it is to win US$100 million contracts!

Take this article posted on Star Bizweek, US$100mil contract for Mesdaq's Daya Materials.

• LITTLE-KNOWN Mesdaq-listed Daya Materials Bhd is close to securing a US$100mil (RM350mil) contract from national oil company Petroliam Nasional Bhd (Petronas). The contract is for Daya Materials to supply catalyst to Petronas’ oil refineries.
  
  Daya Materials is in the process of acquiring Seca Dyme Sdn Bhd, a company that is currently in talks with Petronas to secure the contract. Daya Materials has been in talks to acquire Seca Dyme from Datuk Mazlin Md Junid and Datuk Muhammad Junid Mohammad Yusof for RM24mil since August last year.

So the reporter, Jose Barrock is saying that this company, this little-known Mesdaq company, Daya Materials in in talks to acquire this company called Seca Dyme for rm24mil.

And what's interesting in this Seca Dyme is that the company is close to securing a US$100 mil contract from Petronas!

WOW!

So easy to make money eh?

Say why don't you my dearest Moo Moo Cow offer rm30 mil for this Seca Dyme???

And the reports then continues..

• For the financial year ended December 2006, Daya Materials posted a net profit of RM2.9mil on the back of RM29.3mil in sales. In its notes, which accompany its financials, company officials state that with some RM30bil allocated for transmission, distribution and rural electrification under the 9MP, the outlook for the polymer industry, Daya Materials included, seems bright.

Exactly! Daya Materials made only 2.9 million! Which is less than 1 million USD!

And isn't this why Daya Materials is so little known?

And what do you think of the reporter usage of the title, "US$100mil contract for Mesdaq's Daya Materials"??

!!!!

Yeah, yeah I thought so too!

Reading stuff for the Weekend

My Dearest Moo Moo Cow,

I have not covered much on Berkshire Hathaway Annual Shareholder Meeting this year. Yes, I have been lazy. Extremely lazy.

I do believe that these 3 links would prove to be extremely great weekend reading!

Enjoy!

1. http://www.bankstocks.com/article.asp?type=1&id=9881373
2. http://groups.msn.com/BerkshireHathawayShareholders/general.msnw?action=get_message&mview=0&ID_Message=30738&LastModified=4675622861790577809
3. http://groups.msn.com/BerkshireHathawayShareholders/general.msnw?action=get_message&mview=0&ID_Message=30739&LastModified=4675622861904712588

Investing Real Money vs Paper Portfolio

My Dearest Moo Moo Cow,

Here is a nice quote taken from Warren Buffett's 2007 AGM.

Read everything you can. I read every book on investing in the Omaha Public Library. Fill up your mind with competing thoughts and decide what makes sense. Then jump in the water and start investing real money, rather than a paper portfolio. The difference between investing real money and is the same as reading a romance novel and actually dating. There’s nothing like experience. The earlier you start, the better. - Warren Buffett 2007 AGM.

Second biggest Bubble?

My Dearest Moo Moo Cow,

I noted that FSO has a new market commentator and Mr. Gary Dorsch decides to do an editorial on the current hottest topic in the financial world, Greenspan on China:

Guru Greenspan Turns Bearish on Shanghai Red-Chips

• Guru Greenspan is now predicting that the world’s second biggest bubble, the Shanghai Red-chip stock market is about to deflate in a very big way. “It is clearly unsustainable. There’s going to be a dramatic contraction at some point,” adding that a market correction could also cause problems for Chinese personal wealth. The Shanghai Red-chip market soared 130% in the past year, hitting an all-time high of 4,205 on May 24th, and is up 56% so far in 2007.

Music Video On The Chinese Stock Market

My Dearest TK,

Many thanks for your link to the music video on the Chinese Stock Market!

http://www.tudou.com/v/_J5S3lNeb1s

Hope that everyone else enjoys the video!

regards

How Much Did They Want Your Maxis Shares?

Here is a simple question.

How much do you want to pay for a company that has an operating cash flow of 951 million per quarter?

Have a look at the numbers yourself.

An operating cash flow of 951 million is simply awesome!

Again it's simply so sad that whenever there is an IPO, the investing public is USUALLY asked to invest at the most priciest price based on the most optimistic pricing.

And during privatization, they want you, yes you, the minority shareholders, to sell your shares back to them at the cheapest price possible based on the most pessimistic pricing!

Fair? Life is never fair, yes?

A free market?

One day... just imagine.. there might not be anyone interested in investing in the share market!

Megan Media

My Dearest Moo Moo Cow,

The Edge Weekly has an article on Megan Media here.

rgds

HLG Research and Symphony

My dearest Moo Moo Cow,


I need to give back some credit to HLG Research.


Yesterday i blogged on Symphony Again.


I need to point out that HLG Research had on 24th November 2006, downgraded Symphony House Bhd (RM0.32) to a SELL. Here's a screenshot of their research report on 24th November 2006.






And today, they released another report on Symphony House. Here is a screen shot of that report.

Privatization puts Bursa's Relevance at Risk!

My dearest Moo Moo Cow,

I was forwarded this article which was posted on the Singapore Business Times. I would like to share it with you.

• Delistings put Bursa's relevance at risk
  
  By PAULINE NG
  KL CORRESPONDENT
  
  IT'S only mid-way into May and three listed companies have announced that their major shareholders would like to buy out minorities and exit the stock exchange. There have been five so far this year, and this is a noticeable acceleration of a trend from last year.
  
  On the positive side, it reflects the maturity of the market, say some bankers and top government officials. Although that might be undeniable, so are the longer-term consequences for the local bourse if good companies continue to be taken off it.
  
  One long-standing gripe of foreign funds is the market's lack of depth - its pool of liquid big cap stocks being too few - a point Standard & Poor's again highlighted last week when it commented on the proposal to take the country's most valuable mobile company Maxis Communications private and then to de-list it.
  
  While not entirely bad, since current merger and acquisition activities add fresh interest to the market, Maxis's eventual delisting 'does not help global investors' view that Malaysia has a dearth of large-cap issues and this may reduce the weighting of Malaysia in regional indices', S&P vice-president of equity research for Asia Lorraine Tan observed.
  
  Last year's estimated RM35 billion (S$15.8 billion) worth of M&A activity is expected to increase threefold this year, many of which are likely to involve delisting.
  
  Maxis stunner
  
  Maxis Communications has been the biggest shocker thus far, for when it exits the bourse, it will take some 4 per cent of the market capitalisation of the Kuala Lumpur Composite Index along with it. Coming on the heels of Malakoff's and PPB Oil Palms's proposed delisting, the absence of three institutional favourites from Bursa in a short space of time cannot be underestimated.
  
  Even though the exchange has over 1,000 listed entities - admittedly too many for a market its size - only a small group qualifies as sufficiently big and liquid enough for most funds. And of that lot, only a fraction has the fundamental ingredients to make them institutional favourites.
  
  The huge number of listed companies aside, only some 10 per cent are actively traded, so the recent moves by major shareholders to take less active ones private will not be missed.
  Second Finance Minister Nor Mohamed Yakcop believes that there is no need to sound the panic button yet as listings and delistings are the norm in any capital market. But he did say that the local bourse needs sufficient vibrancy and appeal so that companies, including hopefully a number of good foreign ones, would be attracted to list on it.
  
  Locally, there are fewer than a handful of large companies left that can be listed. Besides hard disk drive maker JCY Holdings, which is set to list later this year, the other government-linked companies such as Felda or Petronas's unlisted subsidiaries show little signs of going public.
  
  One engineered giant cap that is already attracting strong investor interest is Synergy Drive - the special purpose vehicle for the merger of the Sime Darby group, Golden Hope Plantations and Kumpulan Guthrie. The share prices of the companies involved in the merger have shot up since the proposed merger in November, pushing Synergy Drive's market cap to around RM48 billion - the third largest on the bourse and on par if not slightly bigger than the country's biggest banking group, Maybank.
  
  Many are already anticipating a warm reception on the bourse when it lists in October and more so if it can demonstrate the enormous savings and greater efficiencies that can be leveraged from the merger.
  
  
  Bursa challenge
  
  In the interim, Malaysia must act quickly to ensure that the local exchange continues to be relevant. The increasing number of corporate buyouts is welcome if minorities are taken out at a fair price and the exercise helps trim the number of inactive companies. Fewer companies on the bourse is not necessarily a bad thing. But fewer quality companies certainly is - especially since the original pool was not big to begin with.

As you know, I am totally against these delistings!

Here's a good blog posting by StockTube: http://stocktube.blogspot.com/2007/05/privatization-gaining-momentum-junk.html

Past blog postings here:

Posting on Bumi Armada

• http://whereiszemoola.blogspot.com/2006/09/pirates-which-siezed-armada.html
  
• http://whereiszemoola.blogspot.com/2006/09/more-on-privatisation-issue.html

Posting on Privatization issues

• http://whereiszemoola.blogspot.com/2006/08/privatisation-heathy-trend.html
  
• http://whereiszemoola.blogspot.com/2006/09/more-on-privatisation-issue.html

Posting on MetroJaya Privatization issue.

• http://whereiszemoola.blogspot.com/2006/11/muis-purchase-of-metrojaya_02.html
  
• http://whereiszemoola.blogspot.com/2006/11/muis-purchase-of-metrojaya-ii.html

Symphony Again

Last year I wrote the following post. eResearch, Symphony and HLG

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

How do you rate Bursa's eResearch program ?

Good? Bad? Or a waste of time? ( see this posting last month: Research Reports Good For Stocks?? )

I was organising my personal stock notes when I came upon this old issue on Symphony House write-up done by HLG Research under Bursa eReseach program.

On Sept 7th 2005, HLG initiated their coverage on Symphony. ( click here for the report ).

Symphony was trading at 0.415 when the article was written.

Here is the snippet of recommendation.

• There is no pure comparison to pit Symphony against, due to its diversified earnings base. While its IT peers are trading at 7.2x, there are no listed BPO companies. Consequently we have derived a fair PER of 12x for Symphony. Based on 12x FY06 EPS, the stock is valued at RM0.57. This provides 37% upside for the stock from current levels.

The stock is considered cheap because based on 12x FY 2006 EPS, the stock's potential value is 0.57.

Fair statement. But point for me, is how realistic is HLG's projection of Symphony's earnings?

Firstly, it was known that Symphony's 2nd quarterly earnings (announced in Aug 2005) was poor.

Symphony announced that ...

• For the six months to June, net profit fell 48.6 pct to 5.18 mln rgt from 10.1 mln a year earlier and pretax profit also declined 42 pct to 7.96 mln, despite a 65 pct jump in revenue to 88.31 mln.

So..

1. Symphony made only 5.185 million for the first 2 quarters of fy 2005.
2. HLG is projecting a net profit of 25.7 million for fy 2005. (see page 4 of that pdf file)
3. HLG is projecting a net profit of 31.3 million for fy 2006. (see page 4 of that pdf file)

So do you think HLG projection of 31.3 million for Symphony's FY 2006 earnings is realistic or not?

In Nov 2005, Symphony announced their 3rd quarter earnings.

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

Symphony made a net profit of 2.679 million. Which means for the first 3 quarters of fy 2005, Symphony only earned 7.864 million (do note, last fiscal year 2004 Symphony made 14.849 million!)

Now... 7.864 million very far from HLG's rosy earnings projections of 25.7 million!
HLG made another write-up on 24th Nov.

• Symphony reported a 9-month net profit of RM7.1m (-56.9% yoy) on the back of revenue of RM130.7m (+42.3% yoy). Operating margin was significantly lower at 6.2% vs. 23.4% a year ago largely due to the growth of its managed services division which normally carries lower margins compared to its higher margin IT business. Annualis ed net profit was 59% short of our full year net profit forecast.


• The variance against our forecast was due to lower revenue recognition from its IT division. 9-month revenue for its IT division was RM70.9m, or only 57% of our full year forecast. We suspect that this could be due to some delays in the start up of certain projects as well as timing of recognition due to its lumpy nature, as the group has some RM150m of IT solution contracts in hand. Contribution from its managed services division was in line with our expectations. Besides the higher effective tax rate of 31.9% vs our forecast of 27% was another factor.


• We are downgrading our forecast to take into account the delays in recognition of its IT contracts, and therefore lowering our net profit estimates by 37.2% for FY05 and 19.8% for FY06. Consequently, FY05 net earnings is expected to register a decline of 19.9% over FY04.

Waa... lowering their net profit estimates by 37.2% for fy05 and 19.8% for fy 06.
Which means...

1. Symphony made only 7.864 million for the first 3 quarters of fy 2005.
2. HLG is projecting a net profit of 16.1 million for fy 2005. (Waa...25.7 -> 16.1 !!!)
3. HLG is projecting a net profit of 25.1 million for fy 2006. (Waa...31.3 -> 25.1!!!)

Huge adjustments, eh?

Symphony's price now is 0.335 (down from 0.415).

So when you downgrade the earnings by so much, what do you think should be the logical recommendation?

Well... here is HLG recommendation:

• Despite the downgrade, we are keeping our BUY recommendation on Symphony. We believe that there is no change in fundamentals for the stock and only a problem of timing for recognition of earnings. Although FY06 PER valuations at 8.8x are on par with its IT peers, this has yet to take into account the strong growth potential from its Business Process Outsourcing. (BPO). Bear in mind that the Asia BPO business is expected to be worth some USD110bn by 2008.

Now this is extremely puzzling for me. If you downgrade by so much, why is it still worth a BUY? And secondly, it there is no change in fundamentals, then why did Symphony missed their earnings projection by so much???

A couple of weeks ago, on Feb 8th 2005, HLG did another company update on Symphony

• Earnings Outlook
  FY05 net profit likely to be within expectations. For the 9-mths of FY05, Symphony has achieved 64.8% of our full year revenue forecast and 44.1% of FY05 net profit. Despite that, we believe full year FY05 earnings should fall within our expectations, as this will be underpinned by the commencement in major IT contracts from EPF and MCMC, worth some RM115m, which were previously delayed. These contracts should also arrest the declining EBIT margin trend for its IT division (14% 1Q05; 9% 2QFY05; -7% 3QFY05). Its FY05 result is expected to be released later this month.




• Valuation & Recommendation
  More expensive than peers, but premium justified Symphony is currently trading at FY06 PER of 9.1x while its peers are trading at an average PER of 7.8x. Despite that, we think that Symphony deserves to trade at a premium as its peers are mere IT firms with more volatile earnings (and hence earnings risk) whereas Symphony has an edge with its exposure into the steady and growing global BPO market. As of 3QFY05, the contribution of BPO business to Symphony’s overall EBIT has increased to 41%, rising from 26% over the same period in FY04. We maintain our BUY rating on Symphony, but with a lowered target price of RM0.41 vs RM0.57 previously, based on a reduced assigned fair PER of 11x. (a 20% discount to our fair KLCI PER of 13.9x). Share price is at its all time low, pricing in the delay in the IT contracts rollout and under-delivered unit - Global Impact.

Ahem... so.....

1. Symphony made only 7.864 million for the first 3 quarters of fy 2005.
2. HLG is still expecting Symphony to earn a net profit of 16.1 million for fy 2005.
Amazing isn't it? This means that despite all the data, HLG is still insisting that Symphony will make some 16.1 million for their fy 2005. Since Symphony's 3 quarters total earnings for fy 2005 is at 7.864 million, HLG is expecting Symphony to make 8.24 million for its 4th quarter fy 2005.

Which means ... err.. symphony's quarterly net earnings is to jump from 2.679 million (fy 2005 q3) to 8.24 million (fy 2005 q4)! Er... excuse me Doc but isn't this a bit way too optimistic?

Oh... and did i not mention that Symphony price is around its all time low? :p

So back to Burs eResearch thingy.

Yes, it's great to see more companies given coverage by the local analysts but on the other hand, what good is the coverage to the investor if the recommendations are written in such a rosy and optmistic manner?

Oh... of course this issue is more complicated than this... for example, for whom are these analyst writing for? Who are their targeted audience? etc etc... but for me... I'm mumbling form an investor point of view!

ps...
Symphony should be announcing their earnings sometime this month... so do stay tuned!


--------------------
Update: 21st May 2007

So how did Symphony do for it's fy 2006? Have a look, Quarterly rpt on consolidated results for the financial period ended 31/12/2006. It lost 4.607 million for the quarter and made only 2.116 for fy 2006!

Symphony just announced its earnings. Any better?

Have a look ....

Update on Dufu

Here's an update to the posting Reagrading Dufu.

DuFu announced its quartely earnings. Here is the snap shot of it's quarterly earnings.

Investing In China

My Dearest Moo Moo Cow,

I just came across this news article from Associated Press posted on Yahoo!. ( 1st-time investors buy up Chinese stocks )

Some of interesting comments were made.

1. watching Chinese stock prices gallop upward for months, Ding Xiurui wanted a piece of the action. The 45-year-old office worker stood in line at a bustling brokerage Friday to open her first trading account. She brought her sister, who opened an account too. They joined millions of other novice investors who are jumping into a market that has soared to dizzying heights, with prices up nearly 50 percent this year.

"We still can make money," Ding said as she stood at the counter at Tiantong Securities with the paperwork for her new account. Asked what stocks she would buy, Ding said, "I don't know. I'm still learning."

2. Economists say the government should take steps to moderate the price surge or risk a sharp fall that could hurt millions of small investors.
"This is a very critical time. If policy adjustments take place now, the market can still have a sustainable development," said Hong Liang, a Goldman Sachs economist. "The longer they wait, the harder the eventual landing will be."

3. Enthusiasm for stocks is fueled in part by a lack of other investments in a heavily regulated economy. Famously frugal Chinese families save up to 40 percent of their incomes, but bank accounts pay just 3 percent interest — less than the rate of inflation.

4. "I have a stable income but in China now a stable income doesn't mean a good life," said a 26-year-old government employee who was opening an account at Tiantong Securities and would identify himself only by the English name Leon. "Seeing other people earning a lot of money, all you can think is, you're earning so little and how can you make more?"

5. A 60-year-old cleaning woman in the southwestern city of Chongqing is being feted in the media as a market wizard after doubling her 20,000 yuan ($2,600) investment in two months.
"At a time like this, who can lose money?" the newspaper Chongqing Morning Post quoted her as saying.

6. The Beijing Youth Daily carried a photo of a Buddhist monk opening a trading account last week at a brokerage in the western city of Xi'an.
In Nanjing in the east, a man in his 70s mortgaged his apartment to raise 60,000 yuan ($7,800) to play the market, the Web site Shenzhen News Net reported.

7. "It might be dangerous, but who knows? People thought it was dangerous in March," Leon said

8. Stock prices are 30 to 40 times earnings, an unusually high ratio for many major markets, which some say makes them unrealistic. "But that is not paying attention to earnings growth, which is very, very strong," Liang said.

9. "We hear that before 2008, the government won't let prices fall," said Ding's sister, Ding Jingxian. "We're not afraid."

And the most interesting point in my opinion is number 10.

10. "We are opening 40 to 50 new accounts a day," said Zhang Jun, the branch's deputy manager. "Six months ago, it was four to five a day." Nationwide, the number of trading accounts has soared by 30 percent over the past year to 95 million, one-sixth of them opened in the past four months, according to the China Securities Depository and Clearing Corp., which is owned by China's two stock exchanges.
On Wednesday alone, investors opened 552,559 new accounts, the company said.

WOW!

95 million trading accounts.

Yes, it does sound massive ... but ... so is the China's population.

I wonder.. if just one quarter of China population were to open a trading account and buy some shares.. I wonder ... the impact on the market.

What Kind of Warning is This?

My Dearest Moo Moo Cow,

I was just told about this newsclip on Star Biz. Bursa Malaysia cautions investors on Transmile

• Friday May 18, 2007
  
  Bursa Malaysia cautions investors on Transmile
  
  KUALA LUMPUR: Bursa Malaysia has warned players to be cautious of their investment decisions on Transmile Group Bhd's securities in view of the non-availability of reliable financial information on the latter.
  
  In a statement yesterday, the exchange said it viewed this seriously and had reminded the company to make necessary disclosures on its actual financial position to the market as soon as possible.
  
  On Feb 15, 2007, the company announced an unaudited pre-tax profit for the year ended Dec 31, 2006 of RM206.73mil.
  
  Subsequently, on May 7, the board expressed concern on the reliability of the unaudited consolidated results.
  
  Transmile is involved in providing air-freight, aircraft engineering and maintenance services. – Bernama

TransMile receivables issue was known on May 7th. ( See Transmile Receivable. )

A warning to the investors only on May 18th?

Seriously my dearest, I wonder for whom this warning serves?!

Really!

Strike Two For Megan

MEGAN MEDIA HOLDINGS BERHAD
MATERIAL LITIGATION The Bank of East Asia Limited versus MJC (Singapore) Pte Ltd

• The Board of Megan Media Holdings Berhad wishes to announce that its subsidiary, MJC (Singapore) Pte Ltd ("MJC"), has been served with a writ of summons on 11th May 2007 pertaining to a suit filed by The Bank of East Asia Limited ("BEA") for a claim amounting to S$3,039,403.83 in respect of banking facilities granted by BEA in 2006.
  
  MJC have obtained legal advice on this action and have engaged solicitors to defend the suit. The appointed solicitors have entered a Memorandum of Appearance on behalf of MJC with the High Court of The Republic of Singapore on 15th May 2007.
  
  The said action is not expected to have any financial or operational impact on the Group.
  
  This statement is dated 17 May 2007

Strike Three For KarenSoft

KRNSOFT - APPEAL AGAINST DE-LISTING DISALLOWED

• The company wishes to announce that we had today received a letter from Bursa Securities dated 17 April 2007 in respect of the above matter.
  
  Bursa Securities had earlier announced on 17 April 2007 its decision to de-list the securities of KRNSOFT from the Official List of Bursa Securities as the Company had failed to comply with the extended timeframe granted by Bursa Securities until 16 April 2007 to make the Requisite Announcement in accordance with Rule 8.16 of the Listing Requirements of Bursa Securities for Mesdaq Market and GN3.
  
  Bursa Securities further announced on 24 April 2007 that the Company had submitted its appeal against the decision of Bursa Securities to de-list the Company's securities from the Official List of Bursa Securities and given the appeal, the removal of the securities of the Company shall be deferred pending the decision on the appeal by Bursa Securities.
  
  After having considered all the facts and circumstances of the matter, Bursa Securities has resolved that the appeal by the Company be disallowed and that the securities of the Company be de-listed from the Official List of Bursa Securities as the Company does not have an adequate level of financial condition to warrant continued listing on the Official List of Bursa Securities.
  
  In this connection, the securities of KRNSOFT will be removed from the Official List of Bursa Securities at 9.00 am on Tuesday, 29 May 2007. The Company is required to communicate Bursa Securities' decision to their shareholders.
  
  With respect to the securities of KRNSOFT 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 accounts maintained with Bursa Depository at anytime after the securities of the Company has 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 unlisted entities. The Company is still able to continue its operations and business and proceed with their corporate restructuring and their 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.

Cymao

My Dearest Totomaster,

The above table highlights Cymao earnings performance. And as can seen, the recent fy 2006 showed that Cymao has performed pretty well after its dismal fy 2005 performance.

The above quarterly earnings highlights Cymao's performance. Actually if you look at it, perhaps one would say that Cymao's earnings hasn't been too outstanding.

Anyway, as mentioned by you, Cymao has got their 'forest consession' now.

Yes, in my opinion, the ability to get the supply of logs is rather crucial for a plywood player like Cymao. In a buoyant timber market, without the supply of logs, the plywood manufacturer margins will be squeezed by the higher prices of logs. And in the competitive plywood market, passing the buck down to its customers is rather difficult.

I see two announcements for Cymao.

Logging and Marketing Agreement between Magarida Timbers Limited and Kupiano Forest Products (PNG) Limited, a wholly-owned subsidiary of Cymao Holdings Berhad for the logging and downstream processing operations in Papua New Guinea.

• Cymao group is in the business of plywood production where logs are the main source of raw material for its manufacturing. Logs procurement has always been purchased from third party concessionaires in the State of Sabah where the prices are subject to market conditions. Thus, the margin is highly affected by the log prices. In order to better control the cost of raw material, Cymao group is compelled to venture upstream of the business by securing its own supply of logs by way of having a full control over the operation of logging of logs. In addition, this is also an opportunity to trade timber logs to provide additional income stream to the Cymao group.

ACQUISITION OF 6,000 ORDINARY SHARES OF RM1.00 EACH REPRESENTING 60% EQUITY INTEREST IN SYABAS MUJUR SDN BHD WHICH HAS A TIMBER SALE AGREEMENT

• The Acquisition will be very strategic to Cymao Group's existing operation. The Licensed Area contains log species which are suitable for plywood production as well as export. Log costs form a major cost of production to Cymao Group and logs procurement are made with third party concessionaires where prices are subject to market conditions. Thus, the margin is highly affected by the log prices. Therefore, in order to control the cost of raw material efficiently, the Cymao Group is compelled to venture upstream by securing its own supply of logs.
  
  The prospect of the Acquisition will be positive as the Licensed Area is located in Sandakan where the Cymao Group's plywood production facilities are situated. It is expected that the Acquisition will contribute positively to the Cymao Group by way of savings on log costs which are expected to be about 20-25%. In addition, sale of logs of export grades can provide additional revenue stream to Cymao Group's income.

Will this two said venture pay-off?

I cannot answer you because as you can see, that's all the information I have. (The potential is there for Cymao to perform better, this I have to admit.. but will Cymao turn this potential into reality? )

rgds

On Shanghai Again

My Dearest Moo Moo Cow,

Everyone is talking about Shanghai again and FSO Market Commentator, Mr.Frank Barbera, has made some brief comments on his write-up today, A Little Bit of This, A Little Bit of That...

• Yet, as we noted last week, the Shanghai Stock Exchange looks dangerously unstable, and in my view, that is a key market to be watching as the volatility there continues to increase, with prices tumbling last night by nearly 4%. Again, it is very possible that the Shanghai Market may continue to move higher still, expanding its parabolic arc to the 4,500 level, but if that is to happen, it will happen soon as the parabolic bust is now knocking on the proverbial door -- with mid-to-late June a prime candidate.
  
  

  

  
  

  Above: The long term weekly chart of the Shanghai Composite…perhaps a few more weeks, then POW! Right in the kisser. Expecting a 30% sell off in Shanghai early this summer; it will not be pretty and it will likely not go unnoticed by other markets.

Fellow blogger Sal, has made some interesting posting too.

• http://malaysiafinance.blogspot.com/2007/05/t-he-emperor-is-very-naked-naked-is.html
• http://malaysiafinance.blogspot.com/2007/05/nasdaq-vs-shanghai-there-is-not-much.html
  
  

50 Million Adjustment for TransMile?

My Dearest Moo Moo Cow,

So the Edge Weekly is suggesting that perhaps a 50 million adjustment is required. Let's do some simple calculations.

The following table shows TransMile earnings.



So a 50 million adjustment could see fy 2006 earnings adjusted from rm157 mil to rm 100mil.

Now TransMile current number of shares is extremely tricky since it is ever expanding.

The follow screen shot shows TransMile current number of shares today.



So as it is today, there are 270.118 million shares. This means that TransMil eps 'could' be adjusted to a mere 37 sen, IF its earnings is adjusted by rm50 million to rm100 million.

So what PE multiple do you reckon TransMile could command after the adjustment? Do you reckon it could command a pe multiple of 20x after this adjustment?

But if market take the adjustment poorly, TransMile could trade as low as a simple 15x multiple.

20x on an eps of 37 sen = 7.40
15x on an eps of 37 sen = 5.55!

How?

Me?

Honestly, I would rather not guess in such a fashion for I do not really know what is happening but a 50 million adjustment, could do some damage on TransMile in my opinion.

More on TransMile

My Dearest InvestBullbear,

You wrote the following.

......there is speculation that management was perhaps under pressure to keep its numbers high to please investors and possibly facilitate a placement of shares completed in November last year that was largely taken up by foreigners.

Extracted from the Edge this week:

• Extracted from the Edge this week:
  
  On Monday, May 7, while the counter was suspended, it announced that the unaudited results showing a pre-tax profit of RM 206.734 million for last year were unreliable.
  
  The clues for solving Transmile’s mystery lie in the company’s announcement, particularly in the part where the auditors state that “they have not been able to get hold of supporting documents from the management on certain transactions relating to trade receivables and related sales and additions to property, plant and equipment”.
  
  What exactly is the “accounting relation between trade receivables and related sales, and additions to property, plant and equipment” that the company is talking about?
  
  “Some amount of trade receivables was paid not in cash, but in the form of property, plant and equipment where the documents are not available. That is the problem,” a source says.
  
  The said amount is about RM 50 million.
  
  An accounting official says there could be a related party transaction with Transmile, for example, in which it provided a service to the related party. The payment for the service may have been made later in the form of property, plant and equipment. However, the absence of proper documentation to substantiate the transaction could have prompted the auditors to refuse to sign off the accounts.
  
  This begs the question: Are the accounting woes of Transmile simply a matter of poor record-keeping or a scheme to obliterate the paper trail, which could raise doubts about the legality of those transactions?
  
  There is also another view that the problem could have started in FY2005, which explains why the documents cannot be found.
  
  More importantly, is the amount so big that it will impact Transmile significantly?
  
  To get an idea of the quantum of the amount in dispute, analysts are looking at Transmile’s trade receivables, which ballooned to RM381 million in FY2006 from RM111 million the previous year. This is despite an 80% increase in revenue to RM 989.2 million in FY2006 from RM550.1 million the previous year.
  
  The point to note here is that the receivables accounted for much of the company’s sales growth. Hence, if a large part of the figures has to be provided for, Transmile’s net profit of RM157.5 could be revised down significantly.
  
  With no guidance from the company on the worst-case scenario, analysts are looking at a complete wipe-out of Transmile’s profits for FY2006 amounting to RM157.5 million.
  
  JP Morgan’s Lucius Chong believes that a 5% restatement of Transmile’s earnings is the best- case scenario.
  
  In FY2006, Transmile’s cash and bank balance almost doubled to RM417.7 million from RM261.2 million in the previous year. Its property, plant and equipment figures showed a slight decrease to RM 1.55 billion from RM1.57 billion a year ago.
  
  But in FY2005, Transmile’s property, plant and equipment revealed an increase of RM1 billion due mainly to the purchase of aircraft, parts and equipment. (In May 2005, Transmile took delivery of four MD11 aircraft. In the same year, it also acquired two Boeing 727 aircraft, which were supposedly delivered in 2006.)
  
  The facts and figures are at the disposal of investors. Still, it may not be easy to detect any discrepancies due to the lack of information on the accounts.
  
  Another point to note is that if it is a matter of unsubstantiated transactions, how can the appointment of another accounting firm help solve the matter in about a month?

In all honesty, all I can do is speculate what has had happened. And most of it is based on quoted stuff from news.

Which is really not intelligent at all.

Which is why the main grouse so far is perhaps best said by the Spore Btimes reporter saying why had the management not saying anything at all. And why had Bursa and SC remained silent?

That it had dragged on for so long indicates something was wrong in their accounts.

Right now, the issue would be, two things.

1. How badly stated was their account?
   
2. Was there intent?

Now those two issues would have a huge barring.

1. Transmile has had been priced for a growth stock. If their accounts were badly overstated then would it mean that the status of it being a growth stock is tarnished? And if so, then Transmile would probably not command the higher price earnings multiple it had enjoyed previously. And as noted, Transmile had done several placement issues in recent times. The POS placement was done around 30% and several various form of placement has been done. All of which will have an impact if one were to use the pe multiple as an indicator.

2. The issue of intent. This is by far more serious. The fact that Transmile went limit down on the first day and as mentioned by the press, foreign funds sold out. Damage has been done. If the allegations of intent were proven, I would seriously believe that these foreign funds would avoid Transmile like plague. So how much can our kampung fund do? And also, a lot of other investors would avoid this stock simply because it makes no sense to be an investor of a company whose owner/manager has been proven guilty in an attempt to cook their books. The issue of trust is but gone.

And if one adopts the rational approach, perhaps it simply makes no sense trying to be a hero in a hard place. Market is hot. Perhaps there is much better investment around for our hard earned money.

And what is the flipside of such a safer approach? Well one missed an opportunity, that's all.

Does it hurt?

Nope.

The Market is always there, my friend. Other much better opportunities will arise in the future.

rgds,





**** this blog posting is reproduced from a Sahamas posting. please feel free to voice your opinions. ****

Sea of Debt!

My Dearest Moo Moo Cow,

FSO Market commentator, Mr. Tony Allison has written a timely reminder, A Sea of Debt.

• Prepare for the Ebbing Tide

  The solution is not to go the ostrich route and ignore the problem, but to take prudent action while you go on about your life. The drill should be familiar. While Uncle Sam can’t get out of debt, the average citizen would be well advised to do so, or at least lower one’s debt profile. Next would be to invest in areas that will mitigate against rising inflationary trends, such as the natural resource sectors and other tangible assets. Thoughtful, ongoing preparation is the key. It’s somewhat analogous to getting punched in the mid-section. If you know its coming and prepare yourself, the punch may hurt a bit, but it’s manageable. If you are totally blind-sided, you end up writhing on the ground, gasping helplessly for oxygen. If you believe inflation will be a major issue in the years ahead, now is a good time to get started on protecting yourself.

  Noting the aforementioned wisdom of Warren Buffett, when the great global tide of liquidity finally ebbs into reverse, make sure you are one of the forward-looking swimmers dressed for the occasion.

  “No generation has a right to contract debts greater than can be paid off during the course of its own existence.” George Washington to James Madison, 1789.

  
  

  U.S. NATIONAL DEBT CLOCK

  
  

  The Outstanding Public Debt as of 14 May 2007 at 10:13:53 PM GMT is:

  
  
  
  

  The estimated population of the United States is 301,880,797
  so each citizen's share of this debt is $29,225.94.

What lies the future of OUR Financial News?

My Dearest Moo Moo Cow,

Posted on Star Bizweek, KFH eyes jeweller

• Saturday May 12, 2007
  
  KFH eyes jeweller
  
  KUWAIT Finance House (KFH) is in discussions to acquire a 20% stake in DeGem Bhd for RM2 per share or RM53.6mil. The deal, says a source, will be concluded soon and following the acquisition, KFH will have board representation in the company.
  
  Now why would a Middle-Eastern financial conglomerate be interested to take up equity in a jeweller? According to sources, KFH's entry as a shareholder in DeGem may be in line with the latter making inroads to the jewellery market in the Middle East. It may be hoped that the company's foray into that region may be eased with KFH as a substantial shareholder.
  
  As at end last year, DeGem had a net asset per share of about 78 sen, while its shares had been trading below the RM1 band since May 2005 and only surpassed the mark end last month.
  
  News of this acquisition has heightened interest in DeGem and the company’s shares have gained by as much as 84% year to date, closing on Thursday at RM1.47.
  
  It is not clear which shareholders are parting with the equity, but the company’s substantial shareholders list is pretty straight forward with privately held Legion Master Sdn Bhd controlling some 51.7% of the company, while Diamond Landmark had almost 7%.
  Legion Master is the vehicle of the Choong family who helm the company while Diamond Landmark is controlled by Datuk Hassan Taib who has an additional 2.2% in his own name. – By Jose Barrock
  

And as EXPECTED my dearest Moo Moo Cow, that speculative NEWS was denied by DeGem, DEGEM BERHAD ("DEGEM" or "the Company") ARTICLE ENTITLED : "KFH EYES JEWELLER"

• We refer to the Exchange's letter dated 14 May 2007 in relation to the article appearing in The Star, Bizweek section, Page BW3, Saturday, 12 May 2007 and in particular to the following sentence which was carried in the article:-
  
  " .... Kuwait Finance House (KFH) .... to acquire a 20% stake in DeGem Bhd for RM2 per share or RM53.6 million ..."
  
  The Management of DEGEM have made due enquiries with the directors and the shareholders with substantial interests in the Company and none of them is aware of such a development.
  
  Any change in substantial shareholders of the Company will be announced in accordance with the Exchange's Listing Requirements and the Companies Act, 1965.

And that's not all!

Yes, that's more. In a separate article, the same reporter, wrote the following, MMC plans to list Saudi joint venture

• Saturday May 12, 2007
  
  MMC plans to list Saudi joint venture
  
  By JOSE BARROCK
  
  MMC Corp Bhd and its partner in the massive US$30bil (RM105bil) Jizan Economic City development project in Saudi Arabia, the Saudi Bin Laden Group, are believed to have secured a preliminary approval by the relevant authorities to list the joint-venture company (JVC), sources familiar with the matter tell BizWeek.
  
  It is understood that the two parties, having secured the green light, plan to list the JVC as early as end of this year or early 2008 on the Saudi Arabian Stock Exchange.
  
  Sources familiar with the company say that MMC may rake in anywhere between US$500mil (RM1.75bil) to US$700mil (RM2.4bil) from the flotation exercise, but declined to elaborate on the details of the initial public offering. Understandably, these details are in the midst of being worked out.

And when so many sources are required to report such a news, guess what?

Exactly!

It's simply getting EXTREMELY EMBERASSING!!!

ARTICLE ENTITLED: "MMC PLANS TO LIST SAUDI JOINT VENTURE"

• We refer to the above reported article that appeared in The Star, Bizweek, page BW4, on Saturday, 12 May 2007.
  
  We wish to inform Bursa Malaysia that we have not secured a preliminary approval by the relevant authorities to list the joint-venture company on the stock exchange of the Kingdom of Saudi Arabia.
  
  We are reviewing several options in relation to the funding required for the Jazan Economic City project, and the initial public offering ("IPO") and subsequent listing of the joint-venture company on the Saudi stock exchange is one option that is currently being explored. We will make appropriate announcements once there are significant developments on the IPO proposal.

Companies need to waste valuable time and public money just to answer such reporting which has proven baseless time after time again!

Sigh!

TransMile

My Dearest Smart Investor,

The following is a compiled quarterly tables on TransMile. Data is taken from Bursa Website.



The following table is taken without that quarterly earnings reported on Feb 2007.Have a look.

1. Clear built up in receivables.

2. nett debt kept on increasing!

Now the most important thing I would ask is where is the wealth generated?

From 04 Q3 to 06 Q3, the company said it generated sales of 1.476 billion ringgit and it said it earned 200.881 million.

Good numbers but look at the cash position. For a company earning 200.881 million, this company went from a nett debt of 123.861 million to 680.819 million!

The following table showed the inclusion of 06 Q4 earnings.



Quarterly rpt on consolidated results for the financial period ended 31/12/2006

Profits and cash increased substantially. nett debt decreased.

Somehow.. the numbers do not tally...

And given such data... perhaps... an investment in transmile could be questionable!

NextNation

My Dearest ywt06,



The above table shows what NextNation has done since listing. It's impressive no doubt.

Net margins show some weakness but the growth is impressive!

NextNation is in the mobile gaming industry and here are some latest news posted on its website.

• 2007-04-13 Nextnation signs agreement with Saudi Arabia’s Tawasul Telecom
• 2007-04-13 Mobileklub partners Buena Vista to offer free movie trailers for mobile phones
• 2007-04-02 Ozura Mobile Partners with Zingy Inc. on Mobile Games Distribution
• 2007-03-28 Nextnation Group Maintains Robust Double-Digit Growth
• 2007-03-14 Press Statement in Response to Article in The Edge Daily and The Sun
• 2007-02-28 Video Killed the Radio Star, and Now Aims for Mobile - Nextnation Partners Jinny to Deliver Video Ring Back Tones
• 2007-01-29 Ozura and ChinaByte Partner to Deploy China's First Mobile Gaming Community Supports Mobile Tournament Games
• 2007-01-26 Nextnation Wins 5-year Mobility Technology Contract with the Human Resource Development Foundation of Indonesia
• 2007-01-24 Bright and Positive Year
• 2007-01-11 Ozura Powers DiGi 2188 Space Wars Mobile Mame Tournament for Coca-Cola Ceriakan Peluang Campaign

However, if you do a quarterly table, there are signs of weakness.



* 2007 Q2 cash boosted by 9.272 million due to placement of new shares. *

The biggest concern for me is that NextNation has an issue with its receivables and because of this, one do not really see wealth being generated in the company's cash flows despite its very impressive earnings.

Some other notes.

NextNation did an interim dividend less than 2 months after listing. Interim Dividend

Difficulties in selling its placement shares. March 2006 it announced NEXTNATION COMMUNICATION BERHAD ("NEXTNATION" OR "COMPANY") PROPOSED PRIVATE PLACEMENT OF UP TO TEN PERCENT (10%) OF THE EXISTING ISSUED AND PAID-UP SHARE CAPITAL OF THE COMPANY ("PROPOSED PRIVATE PLACEMENT") and recently in May 2007, have a look at this announcement, NEXTNATION COMMUNICATION BERHAD ("NEXTNATION" OR "COMPANY") PROPOSED PRIVATE PLACEMENT OF UP TO TEN PERCENT (10%) OF THE EXISTING ISSUED AND PAID-UP CAPITAL OF THE COMPANY ("PROPOSED PRIVATE PLACEMENT"). What's happening? So difficult to sell a mere 10% placement? Why?

Lastly, it's long awaited Bonus Issue is finally here. (Bonus plan was announced almost a year ago!)

rgds

Answers to Questions On Megan

My Dearest Newbie,

You wrote the following.

• I am a newbie investor, just wonder to ask few questions regarding Megan.
  
  1st, everyone knows that Megan is having financial difficulties right now, but one thing to say is that Megan still remained profitable in the past 4 years even though they have incurred lots financial expenses. As they disclosed, the difficulties arised because of big bulk of receivables, is this really an issue? If it is not collectible, why the auditor nor the finance department did not write off the debts? Does it mean it is still collectible? If yes, although the current ratio is not healthy but it's still acceptable.
  
  Moola: Receivables were just part of the problem. If company cannot collect then the earnings aren't exactly earnings, are they? The other was the debt issue.
  
  The receivables rose substantially after MJC purchase. And the receivables kept rising after the purchase. What's happening here? And at the same time, the company took on more loans.
  
  Which brings us to your question, "If it is not collectible, why the auditor nor the finance department did not write off the debts?" Yes, why didn't Megan's financial department not acknowledge this issue? We were talking about a receivables compounding at the rate of more than 66.4% per annum since 2003!!!!!
  
  Receivables are money if they can be collected to the company. So instead of dealing with this issue, the company decided to keep on borrowing more and more money.
  
  Why?
  
  I don't have the answers but it was SO CLEAR that either the management is totally incompetent or they simply do not care!
  
  Either way, does it seem sensible to be an investor of such a business?
  
  2nd, The long term debt is really incredible but even so, long term debt can be recovered by years earning isn't it?(Provided cash inflow from debtors)
  
  Moola: At the end of the day, a debt is a debt is a debt. And all debts will have to be REPAID! And Megan's total debts total some 880 million!
  
  3rd, 211mil of deposit is paid for future expansion, for purchasing land and plant(Extracted from 06 report),I don't understand why the management decide to do this when they know they will be having financial difficulties, one explanation is that they should be able to service the loan to overcome today's problem. Please be reminded that they still having a capital commitment of over 10mil.
  
  Moola: At this moment of time and I do not have the exact info to make any rational comment on this issue.
  
  4th, The industry is estimated to be going downside, but as i know, none of the product can replace or substitute DVD-R, at least for now.
  
  Moola: Bottom-line is the economics of the business industry looks bleak.
  
  5th, This is not a good investment simply because of the capital structure? Or because of the future prospects? Capital structure looks unhealthy because of huge long term debts, but lenders are not stupid, i believe lenders will assess the credit rating before they lend the money to Megan, so, should we believe it's credit although current issue is exposing?
  
  Moola: It been defined that "superior businesses possess certain common characteristics, in­cluding robust profit margins, strong earnings and revenue growth, a clean balance sheet, and competent management."
  
  Would you agree with such an assessment?
  
  Back in Jan 2006, I tried to use this concept of buying a quality business on Megan. I found no positive at all. See http://whereiszemoola.blogspot.com/2006/01/buying-quality-businesses-megan-part.html
  
  How?
  
  There was simply ZERO JUSTIFCATIONS to buy Megan back then.
  
  In fact it was a HUGE SELL for Megan back then!
  
  Lenders are in the business of lending. Some loans are being treated as part of one's job. Some earn performance pay paid on loans achieved. Their focus is always on issuing the loan. Collection of the loan is not part of their job. So would I judge Megan on its ability that it managed to obtain such huge loans? Would you?
  
  Or do you think it's wise to judge Megan's business based on its own merits?
  
  And in that posting mentioned, did Megan have any investing merit(s)?
  
  6th, Although there are excessive selling of shares from their directors but i actually found that a person called BRAHMAL A/L VASUDEVAN acquired more than 10mil of share in March 06'. I can't get any explanation of this, can Moola help me?
  
  Moola: People buy shares for all kind of reasons. There is no way we can justify each buying or selling of shares. Some might even have some hidden agenda behind a purchase.
  
  Most important, in my opinion, it's impossible to justify each buying and selling of shares by individuals. Hence, i would not delve too much on this issue.
  
  Regarding the selling of shares. The timing of the sales is so questionable! Perhaps I was being too generous with my comments. Have a look at this blog posting by Sal, http://malaysiafinance.blogspot.com/2007/05/insider-selling-101-sc-and-bursa-must.html , and do read some of the comments posted!
  
  These are the questions i really wonder to know about. Thanks Moola.
  
  Moola: No problem at all!

KPJ Healthcare

My Dearest SlowDay,

Here is a snippet from a recent Business Times article, "KPJ Healthcare confident of RM1b turnover this year" (9th May 2007)

• Last year, the group took over Sentosa Medical Centre, Kuala Lumpur, (Sentosa-KL) for RM66.3 million and Sentosa Medical Centre, Kajang (Sentosa-Kajang) for RM5.2 million or a total of RM71.5 million.
  
  The acquisitions, which were completed in the fourth quarter 2006, will see KPJ increase its network to 17 private hospitals in Malaysia, three in Indonesia and one in Bangladesh.

Yes, KPJ Healthcare has acquired more hospitals and from these acquisitions, it would simply mean that there is a very strong possibility that KPJ earns more money in the future.

For me, given such a scenario, I believe it would be nice to know what kind of history KPJ has.

The following table shows KPJ performance for its last four fiscal year.

Fy 20006 numbers in the table above are un-audited numbers. And from the table below, there is ground of reasons to argue that KPJ has shown tremendous growth.

Now KPJ listed its REIT back in Aug last year, in which KPJ disposed several properties for the listing of its REIT, which resulted in some 18.2 million in extra ordinary gains. See the quarterly earnings table below.

So to get a better picture, you probably need to discount the 18.2 million from both tables I had posted.

So let's look at the purchase of Sentosa Medical. The following announcement was taken from Bursa website. KPJ HEALTHCARE BERHAD (215179-P) ("KPJ" OR "COMPANY") PROPOSED ACQUISITION BY KUMPULAN PERUBATAN (JOHOR) SDN. BHD ("KPJSB"), A WHOLLY-OWNED SUBSIDIARY OF KPJ OF 100% OF THE EQUITY INTEREST IN SENTOSA MEDICAL CENTRE SDN BHD ("SENTOSA") COMPRISING 8,692,076 ORDINARY SHARES OF RM1.00 EACH ("SALE SHARES") AND 5,215,239 CUMULATIVE PREFERENCE SHARES OF RM0.10 EACH ("SALE PREFERENCE SHARES") FOR AN AGGREGATE CASH CONSIDERATION OF RM72,000,000 ("PROPOSED ACQUISITION")

The purpose of this exercise is to get a rough understanding the impact of this purchase.

The attached word file in the above announcement is most useful. In it has a table of Sentosa earnings performance. See below.

So for a cash purchse of rm72 million, KPJ was buying Sentosa group of hospitals whose earnings looked rather sluggish. The above table stated that Sentosa's profit after tax earnings for fy 2005 only totals some 2.991 million.

On 8th March 2007, KPJ announced the following. KPJ HEALTHCARE BERHAD ("KPJ" OR "THE COMPANY") MANAGEMENT AGREEMENT ("AGREEMENT") ENTERED INTO BETWEEN KUMPULAN PERUBATAN (JOHOR) SDN BHD ("KPJSB"), A WHOLLY-OWNED SUBSIDIARY OF KPJ AND NEW JEDDAH CLINIC HOSPITAL ("NJCH") AND JEDDAH CLINIC HOSPITAL KANDARAH ("JCHK")

The next day, RHB mentioned the following in its notes.

• Secures Management Contract For Two Private Hospitals In Saudi Arabia
  
  Share Price : RM2.20 Fair Value : RM3.42 Recom : Outperform (Maintained)
  
  �� KPJ Healthcare (KPJ) has secured a 5-year management contract for two private hospitals in Saudi Arabia, namely, New Jeddah Clinic Hospital and Jeddah Clinic Hospital Kandarah, for a fee of RM0.6m per annum.
  
  �� While slightly lower as compared with RM1m per annum KPJ earns from managing the Continental Hospital in Dhaka, this Saudi contract is highly strategic as it opens KPJ up to other markets in the Gulf region.
  
  �� No change in our forecasts as we already assume in our earnings model that KPJ will secure at least two new hospital management contracts in FY12/07.
  
  �� We continue to like KPJ for the strong growth potential of the private healthcare sector in Malaysia on the back of rising affluence and health awareness. To capitalise fully on the sector’s growth potential and strengthen its market position in the sector, KPJ will continue to grow via acquisition as well as greenfield projects.
  
  �� Indicative fair value is RM3.42 based on 14x FY12/07 EPS that is in line with our 1-year forward target PER for the pharmaceutical/healthcare sector. Maintain Outperform.

So it appears to me that KPJ is indeed extremely aggressive. It's acquiring more business in hope of generating more earnings for its shareholders.

However, at this moment of time, I do believe that perhaps it's a bit too early. The earnings table from of Sentosa group of hospitals is just a brief indicator. Perhaps KPJ could manage it in a more profitable manner. Or it could run into trouble. I cannot say for sure.

Perhaps it might be slightly more prudent to wait for another one or two sets of quarterly earnings from KPJ.

Hope these set of second opinions helps!

rgds

Hexza

My Dearest Moo Moo Cow,

I had posted on this before Regarding Hexza and there is a good posting on Sahamas, hexza.

Ok, do not get me wrong, this posting is nothing against Hexza but I would like to point out an interesting issue posted on Star Business, today. Hexza at one-month high

• Saturday May 12, 2007
  
  Hexza at one-month high
  
  By YVONNE TAN
  
  PETALING JAYA: Hexza Corp Bhd shares hit a one-month high of 77 sen yesterday after a local brokerage initiated a “buy” call on the counter, on prospects of the company's profits escalating and a higher dividend.
  
  In a report released yesterday, SBB Securities Sdn Bhd senior analyst Ng Jun Sheng said he regarded Hexza as a “hidden gem”, given its stable growth and abundant net cash

That very last line.

• SBB Securities Sdn Bhd senior analyst Ng Jun Sheng said he regarded Hexza as a “hidden gem”, given its stable growth and abundant net cash

Well, what I do NOT admire about such article is because I do remember what was written a couple years ago.

Last year, Oct 13 2006, posted also on Star Biz, Hexza does well despite challenges

• The research house's senior analyst Ng Jun Sheng told StarBiz yesterday that SBB recommended Hexza in October 2004 when the stock was at 54 sen, but the share has not been active and its price has traded in the range of 42 sen to 64 sen in the past two years.

So how could this be a "INITIATED BUY CALL"? The very same senior analyst acknowledged last yeat that SBB HAD RECOMMENDED Hexza back in October 2004!!!!!!!!!!!!!!

• In a report released yesterday, SBB Securities Sdn Bhd senior analyst Ng Jun Sheng said he regarded Hexza as a “hidden gem”, given its stable growth and abundant net cash.

So if Hexza is a "hidden gem" then Hexza has been hidden since October 2004!

And last but not least, Hexza just announced its quarterly earnings and the 2 month earnings was kind of disappointing if you average it out and the net profit declined sharply to about 4.6%.

For more, there's a good update here at Sahamas. ( See the second last posting http://sahamas.net/forum5/1041-4.html ) And over at the blogging community, Seng of Fusion Investor has posted a good write-up here, http://fusioninvestor.blogspot.com/2007/05/hexza-financial-results-update.html.

More stories on Magnum Again?

My Dearest Moo Moo Cow,

This is simply getting disgusting.

I am well aware that you had blogged on Magnum before. Magnum Mulls Capital Repayment? and Update On Magnum

In short, the article posted on Business Times back on Saturday 14th 2007, Magnum mulls capital repayment exercise had been DENIED by Magnum before.

• Having made due and diligent enquiry with the directors of Magnum Corporation Berhad ("Magnum" or "Company"), Magnum wishes to inform Bursa Securities that the Board of Directors of Magnum has not considered any plan or proposal to return capital to Magnum's shareholders. Nevertheless, the Board of Directors of Magnum is constantly committed to increasing returns to shareholders and, in the event the Magnum Board decides on any relevant proposal, Magnum will make the necessary announcement in accordance with Bursa Securities' Listing Requirements.
  
  As for the second underlined sentence in the said article which makes reference to a "proposal to distribute in specie scripts of its parent Multi-Purpose Holdings Bhd (MPHB)", Magnum wishes to place on record that Magnum has already announced on 8 February 2007 that Magnum had on that day disposed of all its holdings of securities in MPHB, comprising 94,379,261 MPHB shares 94,902,966 MPHB warrants, via off-market transactions.

And again as shown in your Chart Update on Magnum went from 3.46 to close on Monday morning session at 3.76!!!!!

And the following chart showed how Magnum DIVED when Magnum denied the story.

Today, May 12th, the same writer writes the same thing on Business Times yet again!

Yup, he strikes again!

Magnum may dish out special 'ang pow'

See my dearest Moo Moo Cow, I wonder why the corporate always has to answer what's written in the press when the press bases their story on sources! I wonder do they QUESTION the press where these SOURCES came from?

Here's the article posted today.

• Magnum may dish out special 'ang pow'
  By Francis Fernandez
  bt@nstp.com.my
  
  May 12 2007
  
  THE directors of Magnum Corp Bhd, a gaming firm, are scheduled to meet on Tuesday to discuss a plan to reward shareholders, bankers familiar with the matter said yesterday.
  
  Business Times was told that the country's second biggest number-betting operator by market value, will consider a proposal to return between 70 sen a share and 80 sen a share to shareholders via a special dividend.
  
  About a month ago, Magnum denied a Business Times article on the plan, but did not discount considering such a proposal in the future.
  
  Speculation of a possible payout has intensified of late, fuelled by the massive open market buying of Magnum shares by its parent Multi-Purpose Holdings Bhd (MPHB).
  
  MPHB, in which tycoon Tan Sri Quek Leng Chan bought a 19.4 per cent stake in February, had bought slightly more than 50 million Magnum shares in a span of one month, filings to the stock exchange show.
  
  Bursa filings show that Multi-Purpose has 730.96 million Magnum shares or about 51.15 per cent as at April 4. This has risen to 54.64 per cent on May 8.
  
  The special dividend is a plan that aims to improve the attractiveness of Magnum as an investment stock.
  
  In February, Malayan Banking Bhd's (Maybank) research unit said in a report that the country's oldest four-digit gaming company was working on a plan to distribute up to 98 sen per Magnum share to minority shareholders.
  
  For the year ended December 31 2006, Magnum posted a net profit of RM252.90 million.
  
  The company is also proposing to pay a dividend of 14 sen a share or RM83.5 million for 2006.
  This is the first time since 2001, when it doubled dividend per share to 10 sen, that the company has increased the payout ratio to stakeholders.

How?

Would you trust this same story again?

And if this story is DENIED, don't you think that these 'bankers familiar with the matter said' should answer to the investing public?

Personally I believe it's simply DISGUSTING based on what happened before and especially the stock moves substantially higher based on a story which proved to be nothing but baseless speculation! But hey, that's just my opinion, yes?

3.24 pm 12 May 2007

I was just imformed that Star Business carried the same speculation. Magnum may unveil big special dividend

• Magnum Corp Bhd is finally set to proceed with its long-expected capital management plan as it may soon announce a bumper payment to shareholders.
  
  A source said the company, subject to board approval at a meeting on Tuesday, could announce a special dividend of between 60 and 70 sen a share.
  
  The board may give the go-ahead for the numbers forecast operator (NFO) to distribute its vast cash pile of more than RM700mil.
  
  Last year, Magnum raised its dividend to 14 sen a share from 10 sen. The return of cash will benefit shareholders and none more greatly than Multi-Purpose Holdings Bhd (MPHB), which owns 51% of Magnum.
  
  The cash from Magnum may help MPHB pare down debt but the source said MPHB also had a good story to tell.
  
  MPHB, the source said, was set to announce a record profit for its first quarter ended March 31, thanks to Magnum's strong NFO business and a robust stockbroking business owing to the bull run on Bursa Malaysia.
  
  MPHB announced a pre-tax profit of RM86.4mil and a net profit of RM60.5mil, or 6.3 sen a share, for its fourth quarter.

So said the source!

Interview with Warren Buffet

How about TransMile?

My Dearest Sahamgurl,

• Any chance of light for transmile?? I still like the biz model despite the recent hoopla..

Given what is happening, from an investing perspective, what I believe we have is a whole bunch of unknown factors. At this moment of time, we do not know exactly what is happening and neither do we know the extent of the troubles, if any.

So frankly, I do not see how I would want to invest in Transmile at this moment of time because there is no way I could make a rational investing decision.

But the greatest risk is if TransMile is guilty of wrong doing. IF. And if that happens, one cannot really treat TransMile as a quality stock anymore. For the issue of integrity is then gone. Ah yes, the business model will still have value. But then it becomes a case where one is forced to value a company whose integrity has been shot to pieces!

Of course, if forced to, I could speculate and I could guess but all I am doing is I am speculating what would happen.

And frankly, this is simply beyond me and it's certainly beyond me to speculate if there is a chance of light for TransMile now.

By the way, there is a decent collection of articles and comments at http://sahamas.net/ on TransMile. Do refer to this posting: http://sahamas.net/forum5/4147.html

rgds

Mungerism Time Again

My dearest Moo Moo Cow,

It's that time of the year for Wesco Annual Meeting and good old Charlie Munger is on form yet again ( http://news.morningstar.com/article/article.asp?id=193723 )

Some memorable widsom quoted in the article.

• --Munger stated that many smart people handicapped themselves with "nuttiness." One example is being an "extreme ideologue," which is the equivalent of "having taken your brain and started pounding it with a hammer."
  
  --Your life must focus on the "maximization of objectivity."
  
  --"You must learn the method of learning."
  
  --"It is totally unproductive to think the world has been unfair to you. Every tough stretch is an opportunity."
  
  --"You can get away with more than you deserve in life by being slightly more rational."
  
  --"I'm not going to complain about my age because without it, I'd be dead."

On the issue of railways.

• One questioner asked about a closely held belief that Munger had recently overturned. After some thinking, Munger responded that Berkshire's recent purchase of railroad stocks marked a 180 degree change in thinking about the industry. According to Munger, railroads now have a huge competitive advantage over trucking because of innovations such as double-stacked cars and computer modeling of routes. Munger said he and Buffett were too late in recognizing the changes and could have made much more money. Apparently, Bill Gates figured out it out two years ago and made "multiples of his money" with railroads.

Other links.

• Notes for Wesco Financial Annual Meeting

Review on OrnaSteel Again

My Dearest Ngok Yee,

Many thanks for your comments.

• A respectable Q result.
  However, there are something which is not so spectacular.
  
  1)Rise receivable and short term investment...
  
  Other than this, really nothing much to prick upon.Now, the only problem is its current price still atractive to go in? That's a million dollar Question which i need you to answer :) ?

Here is my review of OrnaSteel. And the best way I think is to review my last review mentioned previously. ( See OrnaSteel )

I will add in new comments in purple italic fonts.

First the minus point.

1. As you know, OrnaSteel belongs in the highly cyclical steel industry. And as seen above, the past 2 years were rather disappointing in terms of earnings performance. ( There is a clear turnaround in earnings! )

2. The company dabbles in the share market! Yuckos dude! Currently the company holds some 30.389 worth of marketable securities. According to their quarterly earnings reported on 16/8/2006. Quarterly rpt on consolidated results for the financial period ended 30/6/2006

• During the quarter under review the Group has invested RM20.240 million in AmIncome Fund and the status of this investment as at the end of the reporting quarter is as below:-

And in their last reported earnings on Feb 2007, Quarterly rpt on consolidated results for the financial period ended 31/12/2006

• The status of the Group’s investment in marketable securities as at the end of the reporting quarter is as follows:-
  (i) at cost: RM30.240 million;
  (ii) at carrying value: RM30.388 million; and
  (iii) at market value: RM30.388 million .

Ok, that quarterly earnings was up to 31st Jan 2007. AmIncome Fund manages company marketable securities. And up to Dec 2006, that Fund did not look like it performed...

And the current quarter, OrnaSteel reported the following!

OrnaSteel purchased another 10 million of securities. Some questions.

1. Is this a concern?
2. Is this getting out of hand?
3. Why so poor results in such a hot market?
4. Does the fund manger know what he/she is doing?
5. Does this bug you??

The better points.

1. Although Ornasteel earnings performance was disappointing for fy 2005 and fy 2006, it held up strongly during times when demand and prices were poor. So the assumption is when the good times come, surely Ornasteel would perform much better. ( Performance is decent!)

2. How the company transformed itself from a net debt to a net cash company is most impressive. (this now not a better point as OrnaSteel turned into a net debt company of 5.999 million!

Took some screen shot of the cash flow...

See where the cash went?

3. Dividends. Last year, Ornasteel paid a 5% less tax ( First and Final Dividend ). This year, a 10% less tax had already being proposed. ( RECOMMENDATION OF A FIRST AND FINAL DIVIDEND OF 10% OR 10 SEN PER SHARE LESS 27% ) ( Still waiting! )

4. 4. The market. Market till today is around 1350 points. Surely AmIncome Fund would have performed some little bitsy bit of wonder for Ornasteel's investment, right? ( Do they know what they are doing! )

How?

What say you my dearest Ngok Yee?

rgds

Strong Sell on Megan Media

My Dearest Moo Moo Cow,

Someone passed me this research report on Megan Media.

• Megan Media Holdings
  
  Recommendation: STRONG SELL
  
  MMHB MK Price: MYR0.455 12-Month Target Price: MYR0.26 Date: May 9, 2007
  
  Summary: The Megan Group was set up in 1994 as a provider of plastic injection service to the electronics and automotive industry. It later diversified into the media storage business and became the first licensed local CD-R/DVD-R manufacturer in Malaysia.
  
  Analyst: Robert Lin
  
  Recent Developments
  
  • On May 4, Megan announced that two of its 100%-owned subsidiaries defaulted on MYR47.3 mln trade facilities and indicated both companies would be unable to meet other repayments. This is due to an exceptional build-up of its trade debtors, according to the announcement. Megan will decide whether it will go into bankruptcy within three business days.
  
  • Based on the available information, we estimate that the group’s total exposure to its subsidiaries amounts to MYR465 mln, comprising a US$40 mln loan that was extended by the parent company to a subsidiary (source: FY06 annual report), and an issue of Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS) with guarantee from the parent company (source: FY06 annual report).
  
  Earnings Outlook
  
  • We have slashed our earnings forecasts for Megan. We now forecast Megan to record net losses of MYR101.9 mln (from net profit of MYR54.7 mln) and MYR6.1 mln (from net profit of MYR64.0 mln) in FY07 and FY08. Our revised forecasts are based on (i) the write-off of the US$40 mln loan extended by the parent company, and (ii) higher interest expenses.
  
  Recommendation & Investment Risks
  
  • We downgrade our recommendation on Megan to Strong Sell (from Hold) after cutting our 12-month target price to MYR0.26 (from MYR0.70), which is derived from ascribing 0.15x (from 0.25x) to our revised FY08 BVPS estimate.
  
  • We believe the group is technically insolvent, with total borrowings of MYR888 mln vs. total shareholders’ funds of MYR507 mln by end 3QFY07. Given the potential bankruptcy and related liabilities that may exceed our estimate, we believe there is significant downside for Megan.
  
  • We have picked a target P/B multiple of 0.15x, suggesting a 40% discount to the trough P/B of Taiwanese optical disc manufacturers.
  
  Nevertheless, we view this is a benchmark as opposed to a fair value for Megan, as the financial health of the group is highly uncertain.
  
  • Risks to our recommendation and target price include a higher-thanexpected proceeds from the disposal of the group’s assets. In addition, an extension of debt obligations and lower-than-expected interest rates proposed by lenders will enable Megan continue its operations without being liquidated.

How?

Do NOTE that the analyst has not touch the issue of receivables at all!

And if a chunk of that were to be classified as bad debts, the losses would simply be devastating!

A target of rm0.26? That is simply too generous!

Still want to sit on paper losses ( Good posting, my dearest Moo Moo Cow! )?

Still want to average down on? Isn't this like trying to average down on one's mistakes? Denying that one is wrong?

Review on OrnaSteel

My Dearest Ngok Yee,

OrnaSteel releases its earnings tonight, Quarterly rpt on consolidated results for the financial period ended 31/3/2007.


I have updated the tables for you.

How?

Can I have your opinions instead?

:D

Transmile Receivables

My Dearest Moo Moo Cow,

Published on today's Business Times, Transmile to audit latest financial figures .

Highly interest because the auditors are seeking more data!

• Validity of Transmile's 87 per cent higher pre-tax profit of RM206.7 million for the 12 months to December 31 2006, was questioned following the logistics group's failure to furnish its auditors with required data to substantiate the figures, Transmile told Bursa Malaysia yesterday.

And the data required were linked with certain transaction relating to trade receivables and related sales and additions to property, plant and equipment.

• "The company's auditors have not been able to obtain relevant supporting documentation from the management on certain transactions relating to trade receivables and related sales and additions to property, plant and equipment," Transmile said.

Here's the 4th quarter report of the fiscal year earning, Quarterly rpt on consolidated results for the financial period ended 31/12/2006

Below is a snapshot of Transmile's balance sheet!



Fiscal year 2006 receivables were reported at 381.247 million, which is much more than the previous year fiscal year 2005 receivables of 111.113 million!

WOW!

I can understand why the auditors want to see more data!

Transmile opened limit down at 9.10 this morning. It is now trading at 9.95. A crisis buying opportunity? This is really risky because at this moment we do not know how drastic this issue is!

Anyway, this reminds me of The Receivales Issue and Megan once more!

Were There Warning Signs For Megan?

My Dearest Moo Moo Cow,

Were there warning signs for Megan?

I believe that has got to be one big under statement! Perhaps those who have vested interest in the stock, Megan Media, would discounting my views because I was being too critical and pessimistic and I had always based my investing perspective on the issue of debts and receivables. Anyway, my dearest Scouser had in fact posted a clear warning at Sahamas back on 25th July 2006 (click here).

It details RAM downgrading Memory Tech's rm320 million debts notes to negative! How ironic because Memory Tech and MJC are the subsidiaries of Megan which had defaulted on its loan payments!

• Rating Agency Malaysia Bhd has revised the rating outlook on Memory Tech Sdn Bhd’s (MTSB) RM320 million bai’ bithaman ajil Islamic debt securities (BaIDS) (2005/2012), from stable to negative.
  
  RAM said on July 25 that the BaIDS is currently rated A2 by RAM and carries a corporate guarantee from MTSB’s holding company, Megan Media Holding Bhd.
  
  As MTSB is the main contributor of the Group’s earnings, the rating essentially mirrors Megan Media’s business and financial profiles.
  
  "The negative outlook reflects RAM’s concerns about Megan Media’s rising debts to support its capital spending and the prevailing industry depression.
  
  "The increase in borrowings has resulted in a lower-than-expected debt coverage ratio, and could lead to non-compliance of 2 financial covenants in the Trust Deed for the BaIDS (depending on the interpretation of specific key clauses in the Trust Deed)," it said.
  
  RAM said the management was negotiating with the BaIDS holders to address this issue prior to the release of its financial statements for FY ended April 30, 2006 (FY April 2006), so as to avoid an event of non-compliance altogether.
  
  Additionally, the squeeze in the Group’s margins reflected the dynamism and volatility of the blank-data-storage media industry, which offers less comfort vis-a-vis the stability of Megan Media’s earning capacity.
  
  Megan Media could also embark on more aggressive capital spending to fuel its expansion into HD-DVD and Blu-Ray technologies, which may yield higher margins.
  
  Financially, Megan Media performed well in FY Apr 2006 and was able to meet RAM’s earlier expectations. It posted a RM249.64 million operating profit before depreciation, interest and tax (OPBDIT) on the back of RM1.03 billion of revenue.
  
  "That said, RAM notes that the global blank-data-storage media industry remains volatile and fast-paced, thus exposing Megan Media to industry fluctuations. This was evident from the numerous challenges faced by the Group in FY Apr 2006 (e.g. increases in polycarbonate prices and lower average selling prices for DVD-Rs due to global oversupply)," it said.
  
  Meanwhile, Megan Media’s borrowings increased to RM838.91 million as at end-FY Apr 2006 from RM647.16 million a year earlier, well above the peak of RM700 million that had been anticipated for the tenure of the BaIDS (This is not an imposed limit nor a covenant of any lender to Megan Media).
  
  RAM said the additional debt, mainly utilised for the purchase of new plants and machinery as well as for working capital, had augmented the Group’s ratio on total debt to equity to 1.78 times, while pushing up its ratio on total debt to earnings before interest, tax, depreciation and amortisation (EBITDA) to 3.35 times.
  
  Megan Media is currently considering options to reduce its debt burden; RAM will closely monitor further developments on this matter.
  
  RAM notes that the rating outlook could be revised to stable if the Group successfully reduces its gearing level and the industry shows sign of recovery. On the other hand, the rating could be lowered if Megan Media’ s net debt continues to rise and its debt-protection measures weaken as a result of increased capital spending.

Another thing. I find it incredible that somehow despite this RAM warning, Megan managed to increase its debts by another 50 million! Incredible! What were their bankers thinking off?

How? Wasn't RAM warning good enough?

Look Who HAS Sold Their Shares in Megan Media!!!

Given Megan's woes with their loan default issue, have a look: Changes in Director's Interest (S135) and Changes in Director's Interest (S135) -






And check these out.

• Changes in Director's Interest (S135) - DATO' DR MOHD ADAM BIN CHE HARUN
• Notice of Person Ceasing (29C) - BRAHMAL A/L VASUDEVAN
• Changes in Director's Interest (S135) - YEO WEE SIONG
• Changes in Director's Interest (S135) - ALICE KUEK AI-LEE
• Changes in Director's Interest (S135) - YEO WEE SIONG
• Changes in Director's Interest (S135) - DATO' DR HJ MOHD ADAM BIN CHE HARUN

Makes you wonder, doesn't it?

How?

Have you sold also?

Or are you going to be the ones LEFT HOLDING these shares?

How now for Megan?

Here's an interesting news article, Megan Media down on RM49m trade loan default

• The company added “it was established that further impending maturities are also unlikely to be paid”.
  
  “MTSB and MJC are experiencing financial difficulties as a result of constraints on its current cash flow from its operations which are insufficient to service and repay amounts due to lenders. Principally, this has been due to an exceptional build-up of its trade debtors,” it said.

Exceptional build-up of its trade debtors, ie the RECEIVABLES issue mentioned in the posting The Receivables Issuie and Megan.

Hey, this is a dead serious issue!

At this moment of time, if one have this stock, it looks like one had made a poor stock selection or had probably listened to an extremely poor stock recommendation.

If one continue to hold it, what's one risk?

Reason it out.

The company, right now, cannot settle this rm47 million in loans. The company has total loans worth some rm880 million! Given the fact that company acknowledge that the main problem is due to the exceptional build-up of its trade debtors, then it's extremely likely there will be huge problems with its whopping receivables of rm430 million. How much of it will turn into bad loan? And when it does, it will be recorded as losses ( And the size of losses will erase Megan status as a cheap 'PE stock'! ). So one's need to address the risk of Megan reporting losses and with the huge debts hanging over its head then one has to ask evaluate the possibility of Megan could go under! And if the possibility of it is real, does it make sense to continue holding?

What's your reward? A turnaround? For a turnaround to happen, the receivables issue has to be dealt with. There's no escape. Bad debts have to be declared. Losses have to be recorded. How about its industry outlook? Is it promising enough to seduce buyers to rescue this company with debts totalling a whopping 880 million?

Yes, debts does matter!

Me?

I really see so much more pain before anything else!

Given current situation, I would sincerely reckon that acknowledge this investing mistake and move along is probably the wisest thing to do. There is still time now!

By not doing so, one is stubbornly hanging on and refusing to admit one is clearly wrong on a poor stock selection!

It's Bubble Everywhere

My Dearest Moo Moo Cow,

Did you read the article posted by Show Me The Money, columnist, Ms. Teh Hooi Ling on Singapore Business Times? ( Saw a copy of the article posted here It's bubble everywhere )

• 'The necessary conditions for a bubble to form are quite simple, and number only two,' he said in his letter. 'First, the fundamental economic conditions must look at least excellent - and near perfect is better. Second, liquidity must be generous in quantity and price: it must be easy and cheap to leverage. If these two conditions have ever been present without causing a bubble, it has escaped our attention.'

Liquidity is everywhere, yes?

• The 'bubble' today, said Mr Grantham, is different from earlier bubbles - namely the South Sea Bubble, the Japanese land and stock bubble, and the Internet bubble. The earlier bubbles were mostly confined to a certain geography or certain sector.
  
  But this time, everyone, everywhere is reinforcing one another. 'Wherever you travel, you will hear it confirmed that 'they don't make any more land', and that 'with these growth rates and low interest rates, equity markets must keep rising', and 'private equity will continue to drive the markets'.
  
  'To say the least, there has never ever been anything like the uniformity of this reinforcement,' Mr Grantham wrote.

Is this what we call a globalized bubble?

• The results are predictable and consistent. All three major asset classes - real estate, stocks and bonds - are expensive compared with their histories and compared with replacement cost, according to Mr Grantham.
• Meanwhile, global credit is more extended and more complicated than ever before. So no one is sure where all the increased risk has ended up.

Here's an interesting issue. The issue of uncertainty caused by 'no one is sure where all the increased risk has ended' versus known risk.

• Mr Grantham's most important message is: Every bubble bursts.

Yes, they all do.

• The big question is, of course, when will the bubble burst? Here's where those who are long on assets will take heart.
  
  'Most bubbles, like Internet stocks and Japanese land, go through an exponential phase before breaking, usually short in time but dramatic in extent,' Mr Grantham wrote.
  
  'My colleagues suggest that this global bubble has not yet had this phase and perhaps they are right. (A surge in money flowing into private equity might cause just such a hyperbolic phase.) In which case, pessimists or conservatives will take considerably more pain. Again.'
  
  What will be the catalyst that bursts the bubble?
  
  According to Mr Grantham, up until today we haven't quite agreed on the catalyst for the 1929, 1987, or 2000, or even the South Sea bubble bursts. Still, there are a couple of vulnerabilities in today's near-perfect market conditions. One is rising inflation; the other is declining profit margins.

The full commentary from Mr. Jeremy Grantham can be read here: It's Everywhere, In Everything: The First Truly Global Bubble . ( registration is free but required)

2007 Berkshire Annual Meeting Links

Links to articles on Berkshire Hathaway Annual Meeting.

• Berkshire halves hurricane exposure
• Buffett Says Berkshire Is Ready to Buy `Big Business' (Update3)
• Berkshire Hathaway's General Re Life gets new CEO -
• Berkshire Hathaway: a growing concern
• Berkshire ready to buy 'big '
• Berkshire Shareholders Prefer Buffett
• Berkshire Hathaway shareholders reject PetroChina resolution
• Berkshire on the prowl: Buffett
• From Investments To Farming, Big Weekend Opens
• Berkshire weekend's byword is 'Ka-ching!'
• Berkshire rejects Darfur divestment
• Lucky the Texas longhorn welcomes the shareholders at the ...
• Jimmy Buffett Opens Berkshire Meeting
• Berkshire Live: Updates from Q&A session
• Author says work has been 'wonderful'
• Buffett provides some details about 1 of 3 positions in his ...
• Buffett says regulators, not PacifiCorp, will decide dams' future
• Buffett's Berkshire posts higher income
• Berkshire holders seek social actions
• Berkshire's ties to Lloyd's grow
• Behind the scenes at Berkshire Hathaway’s annual meeting this ...
• The "Oracle of Omaha" speaks
• Warren Buffett's tax advisor? President George W. Bush
• http://biz.yahoo.com/ap/070505/berkshire_shareholders.html?.v=2
• http://www.fool.com/investing/value/2007/05/05/quick-take-the-berkshire-bum-rush.aspx
  http://yahoo.reuters.com/news/articlehybrid.aspx?
• http://biz.yahoo.com/ap/070505/berkshire_shareholders.html?.v=2
• http://www.marketwatch.com/news/story/buffett-says-berkshire-hathaway-insurance/story.aspx?guid=%7BB16CDD24%2DA5D5%2D4E0A%2DAB53%2D02D5A2D807A1%7D&siteid=yhoof
• http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b817DADC5-3315-4D00-97BA-6D6F91543C58%7d&siteid=yhoo&dist=yhoo
• http://www.fool.com/investing/international/2007/05/05/quick-take-the-questions-begin.aspx
• http://www.fool.com/investing/value/2007/05/05/quick-take-more-questions-for-warren-and-charlie.aspx
• http://www.fool.com/investing/value/2007/05/05/quick-take-shorting-gambling-being-like-buffett.aspx

Man United Crowned Champions!

Manchester United are crowned champions after defeating Manchester City 1-0 and Arsenal was held by Chelsea 1-1.

Here are some news and comments.

• Mourinho promises United guard of honour
• Relieved Fergie celebrates 'special' title win
• Champions United hit the spot
• UNITED CHAMPS AFTER CHELSEA DRAW
• FERGIE 'INVIGORATED' TO PUSH ON
• SQUEAKY BUM FOR FERGIE
• MOURINHO APPLAUDS CHAMPIONS
• DUO IN THE CLEAR OVER HOWARD
• MANCHESTER UNITED MATCH-BY-MATCH
• UNITED DO IT IN STYLE
• WHY FERGIE'S FAITH NEVER WAVERED
• FERGIE EARNS CRITICAL ACCLAIM
• UNITED'S KEY MEN
• Fergie is the special won
• Fergie's best title of them all
• Nine all mine
• How United bagged the title
• Man Utd secure Premiership title
• How the title was won
• Man Utd's season in photos
• Alan Hansen's column
• Man City v Man Utd ratings
• Man City 0 Man Utd 1
• Where does United's title victory rank?
• Fergie hails special title
• Manchester City 0 Manchester Utd 1: Van der Sar gives justice a leg-up to pressure Chelsea

MAN UTD 5-1 FULHAM (20/08/2006)
Cristiano Ronaldo and Wayne Rooney begin the season in astonishing fashion, scoring one and two respectively in a match which sees United go 4-0 up inside 19 minutes.

CHARLTON 0-3 MAN UTD (23/08/2006)
Darren Fletcher, Louis Saha and Ole Gunnar Solskjaer score in a routine but impressive victory at The Valley.

WATFORD 1-2 MAN UTD (26/08/2006)
Ryan Giggs stars, scoring the winning goal, at Vicarage Road after Damien Francis cancels out Mikael Silvestre's first-half opener.

MAN UTD 1-0 TOTTENHAM (09/09/2006)
Giggs' flying start to the season continues as he scores the only goal of the game to maintain United's 100% start to the season.

MAN UTD 0-1 ARSENAL (17/09/2006)
The Red Devils' first defeat of the season proved a hurtful one, at the hands of 'former' title rivals Arsenal. A stalemate was been on the cards until Emmanuel Adebayor's winner four minutes from time.

READING 1-1 MAN UTD (23/09/2006)
After Kevin Doyle's penalty threatened to inflict another defeat on United, Cristiano Ronaldo - barracked after the World Cup controversy - grabs a valuable equaliser.

MAN UTD 2-0 NEWCASTLE (01/10/2006)
Renaissance man Solskjaer scores either side of the break to secure victory against the Magpies.

WIGAN 1-3 MAN UTD (14/10/2006)
Resilient United bounce back from Leighton Baines' early opener with Nemanja Vidic, Saha and Solskjaer netting at the JJB Stadium.

MAN UTD 2-0 LIVERPOOL (22/10/2006)
A 2-0 win over their old rivals, courtesy of Paul Scholes and Rio Ferdinand's goals, gives United their first high-profile win of the season.

BOLTON 0-4 MAN UTD (28/10/2006)
Rooney's hat-trick, with another from the sublime Ronaldo, leaves Bolton dazed and confused at the Reebok.

MAN UTD 3-0 PORTSMOUTH (04/11/2006)
In-form Portsmouth get short shrift at Old Trafford. Saha's penalty, plus goals from Ronaldo and Vidic, wrap up the win.

BLACKBURN 0-1 MAN UTD (11/11/2006)
Saha continues his purple patch with a 64th-minute winner at Ewood Park.

SHEFF UTD 1-2 MAN UTD (18/11/2006)
Former United youngster Keith Gillespie fires the Blades into a shock lead before Rooney's class shines through with goals either side of the break.

MAN UTD 1-1 CHELSEA (26/11/2006)
Ricardo Carvalho cancels out Saha's early goal to disappoint the 75,000-crowd but the draw is enough to keep United at the summit.

MAN UTD 3-0 EVERTON (29/11/2006)
Unlucky Everton find themselves on the receiving end of a three-goal battering with Patrice Evra and John O'Shea adding to Ronaldo's opener.

MIDDLESBROUGH 1-2 MAN UTD (02/12/2006)
No slip-ups at the Riverside but plenty of controversy as Ronaldo wins a disputed penalty - which Saha converts - and though James Morrison equalises, Darren Fletcher is on hand to grab a winner.

MAN UTD 3-1 MAN CITY (09/12/2006)
The first Manchester derby of the season goes with form, with Rooney, Saha and Ronaldo providing the goals. Hatem Trabelsi managed a consolation.

WEST HAM 1-0 MAN UTD (17/12/2006)
New West Ham boss Alan Curbishley masterminds a stunning victory at Upton Park courtesy of Nigel Reo-Coker's winner.

ASTON VILLA 0-3 MAN UTD (23/12/2006)
United bounce back, Ronaldo scoring twice with Scholes netting in between.

MAN UTD 3-1 WIGAN (26/12/2006)

Two more for Ronaldo with Ole Gunnar Solskjaer adding a third. Leighton Baines manages a spot-kick consolation.

MAN UTD 3-2 READING (30/12/2006)
Ibrahima Sonko cancels out Solskjaer's opener but Ronaldo's brace earns the win, before Lita's late strike.

NEWCASTLE 2-2 MAN UTD (01/01/2007)
Scholes' brace sees United level James Milner's goal and earn a half-time lead only for David Edgar to earn a point.

MAN UTD 3-1 ASTON VILLA (13/01/2007)
Ji-sung Park, Michael Carrick and Ronaldo fire United to a 3-0 lead after 35 minutes before Gabriel Agbonlahor's reply early in the second half.

ARSENAL 2-1 MAN UTD (21/01/2007)
Everything goes according to plan when Rooney opens the scoring 53 minutes in but goals by Robin van Persie and Thierry Henry in the last seven minutes turn the game on its head.

MAN UTD 4-0 WATFORD (31/01/2007)
Ronaldo's penalty, combined with Lloyd Doyley's own goal and strikes by Henrik Larsson and Rooney, secure an easy victory.

TOTTENHAM 0-4 MAN UTD (04/02/2007)
Another Ronaldo penalty precedes Nemanja Vidic, Scholes and Giggs all chipping in during another rout.

MAN UTD 2-0 CHARLTON (10/02/2007)
Survival strugglers Charlton fall victim to United at Old Trafford. Park and Darren Fletcher provide the goals.

FULHAM 1-2 MAN UTD (24/02/2007)
Gritty win at Craven Cottage really emphasises United's title credentials, thanks to Ronaldo's 88th-minute winner.

LIVERPOOL 0-1 MAN UTD (03/03/2007)
Defensive utility man John O'Shea proves to be the hero with an injury-time winner.

MAN UTD 4-1 BOLTON (17/03/2007)
Poor Bolton offer little resistance as Park (2) and Rooney (2) help United to a comfortable win.

MAN UTD 4-1 BLACKBURN (31/03/2007)
Despite taking a while to get out of second gear - after Matt Derbyshire's 29th-minute opener - Ferguson's side hit back with goals by Scholes, Carrick, Park and Solskjaer.

PORTSMOUTH 2-1 MAN UTD (07/04/2007)
A howler between Ferdinand and Edwin van der Sar puts the game beyond United on the south coast.

MAN UTD 2-0 SHEFF UTD (17/04/2007)
Carrick and Rooney find a way past Paddy Kenny in either half en route to a routine win.

MAN UTD 1-1 MIDDLESBROUGH (21/04/2007)
Perhaps with Champions League affairs in mind, United let two points slip at home to Boro. Richardson opens the scoring only for Mark Viduka to fire a cool equaliser.

EVERTON 2-4 MAN UTD (28/04/2007)
The most decisive result of the season sees United come from 2-0 down to win at Goodison courtesy of O'Shea, a Phil Neville own goal, Rooney and youngster Chris Eagles. Meanwhile, challengers Chelsea failed to beat Bolton at home.

MAN CITY 0-1 MAN UTD (05/05/2007)
A largely uninspiring derby sees Ronaldo's first-half penalty earn the spoils - thanks in large to Van der Sar's late penalty save against Darius Vassell.

Megan And MJC

My Dearest Moo Moo Cow,

• Megan Media Holdings Berhad ("MMHB or "the Company") wishes to announce that its subsidiaries, Memory Tech Sdn Bhd ("MTSB") and MJC (Singapore) Pte Ltd ("MJC"), have defaulted on maturing trade facilities amounting to RM47,362,332.46.

Since it involved MJC, let's go back in time and determine if that purchase of MJC made sense or not?

To answer that let's look at its 2003 quarterly earnings b4 the purchase of MJC.

Quarterly rpt on consolidated results for the financial period ended 31/1/2003

It had total loans of 95.647 million and its cash balances stood at 5.005 million!

The company's financial status is already poor. Yes?

So in March 2003 it reported its acquisition of MJC, a Singapore company which belongs to its big bossie, a Singaporean also, Yeo Wee Siong.

PROPOSED ACQUISITION BY MEGAN OF 32,875,000 ORDINARY SHARES OF SINGAPORE DOLLAR ("SGD") 1.00 EACH REPRESENTING THE ENTIRE EQUITY INTEREST IN MJC (SINGAPORE) PTE LTD

• For the financial year ended December 31 2002, MJCS recorded a turnover of S$112.9 million (S$1 = RM2.17) and an after-tax profit of S$6.7 million.Compare fy 2002 figures. Megan had a net profit margin of 17.03%. MJC had a net profit margin of only 5.9%!

So if one thinks about it, the Yeos, were asking Megan Media to buy their own company, MJC, whose profit margins were worse than Megan Media!

Some comments from Surf 88.

• Following the recent Memorandum of Understanding, Megan Media (Megan) (RM1.97, stock code 7101) has entered into a conditional sale and purchase agreement to buy 100% of MJC (Singapore) Pte Ltd (MJCS) for US$25.6M cash, or approximately RM97M. As highlighted previously, this is a related-party transaction given that Yeo Wee Siong (Executive Director and substantial shareholder of Megan) and Yeo Wee Koon (substantial shareholder of Megan) jointly control MJCS.
  
• Post acquisition, Megan would have to take on RM97M in purchase funding, as well as another RM135M borrowings currently under MJCS. On a pro-forma basis, group net debt would be raised to about 1.9x shareholders’ funds, after incorporating MJCS’ proposed sale of Megan shares.

So to think of it..

Megan is paying 25.6 million USD or 97.2 million ringgit to buy MJC. But in return what does Megan inherit? The 63 million SGD in debts or 135 million ringgit in debts and not forgetting, Megan needed to finance 97.2 million to buy MJC!

Or would it be wrong to say that Megan bought a company belonging to their big bossie company, which included some 135 million in debts in their books and Megan needed to finance some 97.2 million to conclude this purchase, which ulimately meant that Megan had increased its loans to a whopping 330 mil.

And of course one would have asked if such a business made any sense at all. This was because the business had already shown strains of difficulties! Megan business had already showed a clear continous drop in its net profit margins since 2001. And there were no signs of improvement.

How?

Megan, a company which was ALREADY in a poor financial health, inccured more debts to buy a company BELONGING to its boss. And to make the matter business, Megan own's business was already showing declining profitability, bought a company in the same business industry and worse still, the company's profitability was even worse than Megan. And to make it worse, consider the financial health of Megan back then. It had total loans of 95.647 million and its cash balances stood at 5.005 million!

Honestly, don't you think this deal was rather poor and it simply made no business sense for Megan to do so?

Some argued that perhaps not all corporate debts are bad.

Yes, not all corporate debts are bad. However, sometimes one needs to consider the business involved. In Megan's case, was it wise to for Megan to take such high debts considering the fact that they are in a tech business? A simple production line were said to cost some 20 million. Could these CDr's and DVDrs last that long? What if there is a new format? Would Megan survive a drastic change? And worse still, some 230 million of debts was incurred to purchase MJC!

How?

Well, they might survive but they might not, but for us, the investor, was it worth a bet?

And how about a much simpler question? Why insist on Megan?

Our market has so many listed companies and there are quite a few companies who were showing great improvement in their earnings back in 2003. And they did not have such a debt issue and neither did they have such a funky corporate issue.

Meaning an investor could have easily chosen another stock investment, one without this debt issue.

And do remember, investment itself is one big risk. Markets could crash, financial crisis could happen beyond our control. So for me, when I invest, I would try to limit my risk. The less questionable issues a stock has, the less potential risks I take. Yes, why take unnecessary risks? Why attempt to be a hero in a hard place?

And what did they say about debts? Debts are never good. Debts are cost to a business. The higher debts, the higher costs. And also look at most failed businesses. What's the one common factor? High debts! Debts kills - sooner or later.

By the way, Investing in poor quality stocks is best described by Warren Buffett as cigar butt investing.

• http://www.frips.com/cst.htm
  
  To quote Robert Benchley, "Having a dog teaches a boy fidelity, perseverance, and to turn around three times before lying down." Such are the shortcomings of experience. Nevertheless, it is a good idea to review past mistakes before committing new ones. So let's take a quick look at the past. My first mistake was in buying control of Berkshire. Though I knew its business – textile manufacturing - to be unpromising, I was enticed to buy because the price looked cheap. Stock purchases of that kind had proved reasonably rewarding in my early years, though by the time Berkshire came along in 1965 I was becoming aware that the strategy was not ideal. If you buy a stock at a sufficiently low price, there will usually be some hiccup in the fortunes of the business that gives you a chance to unload at a decent profit, even though the long-term performance of the business may be terrible. I call this the "cigar butt" approach to investing. A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the "bargain purchase" will make that puff all profit. Unless you are a liquidator, that kind of approach to buying businesses is foolish. First, the original "bargain" price probably will not turn out to be such a steal after all. In a difficult business, no sooner is one problem solved than another surfaces - never is there just one cockroach in the kitchen. Second, any initial advantage you secure will be quickly eroded by the low return that the business earns. For example, if you buy a business for $8 million that can be sold or liquidated for $10 million and promptly take either course, you can realize a high return. The investment will disappoint if the business is sold for $10 million in ten years and in the interim has annually earned and distributed only a few percent on cost.

Sometimes too much emphasis is based on which share would move up and by how much.

And when this happens one tends to take risks on riskier investments and hope that their share appreciates quickly in the near term.

And the result? Well, sometimes it could prove very rewarding but sometimes it could turn into a disaster.

Yes, the common adage is No Risk, No Gain.

But risking our money just to gain more? That does not sound like an investment for me.

It sounds more like a gamble.

I would rather go for those Gain Only or as they say go for the sure winners only.

Like Warren Buffett once said, "I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out."

I believe that would be a good definition of a sure win. :)

Anyway back to Megan...

However, one thing I am very sure from the very start is that I would not had put any money into this stock. There is just no investment value at all in this stock!

Now today, 2007, MJC is involved in a loan default worth some 47 million.

How?

At this moment of time, if one has this stock, one just have to realize that they had made a poor stock selection. Wise up, acknowledge the mistake made and move along.

It would be insane to attemp to stay invested in such a company?

Yes, there is a possibility that Megan one day could rise again. But is this a wise bet at all?

There is this saying, in the share market, you just do not have to win your money back they way you have lost it.

Bursa's Appeal Not Affected

My Dearest Moo Moo Cow,

Published on the Business Times, CEO: Bursa's appeal not affected by privatisation

• Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff said the recent privatisation trend "is a signal of the market's maturity and robustness".
  
  "We do not envisage the privatisation of certain listed companies critically affecting the status of Bursa Malaysia in terms of its appeal as the bourse does offer an attractive platform for listing.
  
  "Our fundamentals remain strong and stable; attention from local and foreign investors continue to be high; and the over 1,000 listed companies on the exchange have a natural home-ground advantage as investors are already familiar with them," Yusli said in an e-mail reply to Business Times yesterday.

Here is a simple question.

Out of the so-called 1,000 listed companies, how many are truly investment grade stocks?

And if more and more so-called quality stocks start to embark on such privatization exercises, how many quality stocks will remain?

And when that does happen, I wonder what will the market attract?

And do the investors or the minority shareholders matter in the stock market?

Let me put it this way, if the minority shareholders continues to be abused in the share market, one fine day, there will exist no more minority shareholders!

Think of it, in a hot market, minority shareholders probably matters not but wait till the time turns bad, then the market will truly remember the folly of these minority shareholders, them folks who HOLDS the shares, even during the bad times. So imagine if there are no minority shareholders, who then HOLDS the shares during the bad times?

First Strike Call For Megan Media

My Dearest Moo Moo Cow,

Have a look at this announcement, ANNOUNCEMENT PURSUANT TO PRACTICE NOTE 1/2001

• In accordance with PN 1/2001, Megan Media Holdings Berhad ("MMHB or "the Company") wishes to announce that its subsidiaries, Memory Tech Sdn Bhd ("MTSB") and MJC (Singapore) Pte Ltd ("MJC"), have defaulted on maturing trade facilities amounting to RM47,362,332.46.
  
  Introduction
  
  On 27 April 2007, MTSB and MJC ("the Borrowers") were unable to meet these debt obligations and by 30th April 2007, it was established that further impending maturities are also unlikely to be paid.
  
  1. Reason for default.
  
  MTSB and MJC are experiencing financial difficulties as a result of constraints on its current cash flow from its operations which are insufficient to service and repay amounts due to lenders. Principally, this has been due to an exceptional build-up of its trade debtors.
  
  2. Measures taken to address the default.
  
  The Company has appointed a suitably qualified Deputy CEO and specialist advisory team to support an investigation into the underlying causes of default and, if necessary, to formulate and initiate a comprehensive debt restructuring process. This will likely entail meetings with regulatory authorities, lending institutions, rating agencies, trustees and other relevant parties as well as appointment of an appropriate investment bank, accounting and legal firms to facilitate the due process.
  
  3. Financial and legal implications in respect of the default in the payments.
  
  These defaults are only just unfolding and the lenders have not called an event of default. The company will be advising all Lending Institutions on the current situation and the proposed course of action.
  
  4. In the event the default is in respect of secured loan stocks or bonds, the lines of action available to guarantors or security holders against the listed issuer.
  
  Not applicable.
  
  5. In the event the default is in respect of payments under a debenture, to specify whether the default will empower the debenture holder to appoint a receiver or a receiver and manager.
  
  Not applicable.
  
  6. Whether the default in payment constitutes an event of default under a different agreement for indebtedness (cross default and the details thereon, where applicable).
  
  The defaults could constitute a technical default on banking facilities granted by other lenders to the Group. This is presently being assessed by the Company in consultation with their lawyers.
  
  7. Declaration of Solvency
  
  Based on standard accounting principles and practices, the Company remains in a state of solvency. However, the Company shall consult its auditors for further inputs prior to providing a Solvency Declaration within 3 business days from the date of this announcement. At this early stage of enquiry and investigation, it is difficult to be conclusive on this issue.
  
  By order of the Board
  
  This announcement is dated 4 May 2007.
  

Errata

My Dearest Zappy,


Many thanks for pointing out the errata in my posting.


Enclosed is a screenshot of the posting I made to you in Sahamas.

See the problem was I used Business Times as a reference. http://www.btimes.com.my/Current_News/BT/Thursday/Frontpage/BT620913.txt/Article/

• Maxis, whose profits have surged 46 per cent in two years, may also join Usaha Tegas in taking a stake in Sri Lanka's Telecom Ltd.

The correct point is Maxis earnings increased by 509 million or 31.9% for the last 2 years.

rgds

* ps.. if you ever discover any error in my postings, pls understand that I am human just like you, so do please point it out to me and I will be more than happy to acknowledge my error and correct my mistakes made *

Ornasteel

My Dearest Ngok Yee,

As per requested the following is Ornasteel track record.



The fy 2005 numbers are slightly distorted because Ornasteel made a change in their financial year end. Hence the Fy 2005 numbers shown above are represented by 13 months of earnings.



And the following table shows the quarterly earnings performance from OrnaSteel. The very first column, 05 Q1 earnings is muddled, it represented 4 months earnings as explained earlier.

Some views.

First the minus point.

1. As you know, OrnaSteel belongs in the highly cyclical steel industry. And as seen above, the past 2 years were rather disappointing in terms of earnings performance.

2. The company dabbles in the share market! Yuckos dude! Currently the company holds some 30.389 worth of marketable securities. According to their quarterly earnings reported on 16/8/2006. Quarterly rpt on consolidated results for the financial period ended 30/6/2006

• During the quarter under review the Group has invested RM20.240 million in AmIncome Fund and the status of this investment as at the end of the reporting quarter is as below:-

And in their last reported earnings on Feb 2007, Quarterly rpt on consolidated results for the financial period ended 31/12/2006

• The status of the Group’s investment in marketable securities as at the end of the reporting quarter is as follows:-
  (i) at cost: RM30.240 million;
  (ii) at carrying value: RM30.388 million; and
  (iii) at market value: RM30.388 million .

Ok, that quarterly earnings was up to 31st Jan 2007. AmIncome Fund manages company marketable securities. And up to Dec 2006, that Fund did not look like it performed...

The better points.

1. Although Ornasteel earnings performance was disappointing for fy 2005 and fy 2006, it held up strongly during times when demand and prices were poor. So the assumption is when the good times come, surely Ornasteel would perform much better.

2. How the company transformed itself from a net debt to a net cash company is most impressive.

3. Dividends. Last year, Ornasteel paid a 5% less tax ( First and Final Dividend ). This year, a 10% less tax had already being proposed. ( RECOMMENDATION OF A FIRST AND FINAL DIVIDEND OF 10% OR 10 SEN PER SHARE LESS 27% )

4. The market. Market till today is around 1350 points. Surely AmIncome Fund would have performed some little bitsy bit of wonder for Ornasteel's investment, right?

How?

What say you my dearest Ngok Yee?

Aseambankers Advisory on Maxis

My Dearest Moo Moo Cow,

Just got the copy of Aseambankers research report on Maxis. Asemabankers is advocating its shareholders to ACCEPT the GO.

Now if I am the minority shareholder, don't I need to reason out if the GO price valuation is justifiable? Have a look at what Aseambankers is saying.

• Binariang offers a healthy 20% premium. Binariang, made up of shareholders accounting for 59% of Maxis shares, surprised the market by offering a 20% premium to Maxis’ last done share price in an effort to take Maxis private. The now unconditional general offer (based on 59% of irrevocable acceptances by Binariang’s shareholders) hopes to attract 100% acceptances in taking Maxis private and thus de-list it.
  A historic landmark deal that should benefit shareholders. Binariang listed a slew of factors for the proposed privatization, not least the greater-thanguided investment costs required for its overseas operations. In light of these developments, Binariang is offering to relieve shareholders of the short-term uncertainty faced by Maxis – although it did not rule out re-listing Maxis in the future (with no timeline suggested).
  Accept GO. In light of the unexpectedly phenomenal amount of investments by its competitors in both the Indian and Indonesian markets over the last few months, we suspect that from a competitive standpoint, Maxis needs to bite the bullet now and review its spending plans upwards. After a 46% share price appreciation over the last 6 months, investors should accept an additional 20% premium to its current share price for a total gain of 66% in 6 months or 132% annualized, by accepting the GO.

Is anything new being said?

Nope.

I feel that it's like a recording of what CIMB had said in the news conference.

How about showing us reasoning that the VGO is actually a fair representation of Maxis valuation and potential?

Comparing the VGO price to the traded price and the IPO price makes no sense.

Maxis IPO price was based on Maxis potential back in 2002. And Maxis 2002 differs from Maxis 2007 and differs from Maxis 2008 or Maxis 2009.

VGO price versus traded price? That's a non-issue comparison.

Now have a look at the screen shot of Aseambankers financial data for Maxis.

Let's look at what Maxis had achieved in 2006.

Look at the EPS growth stated for Maxis in 2006. 24%. Now that's a fact. And the net profit actually grew some 429.7 million or some 25.7%.

Now see how Aseambankers projected Maxis growth to be in 2007. A mere 7% for fy 2007 and a mere 8.9% in fy 2008.

Now is that a fair projection?

Someone once said to me, that it's very normal that in IPO, research reports tend to display extreme optimistic projections and for privatization cases, these projections tend to turn very pessimistic!

Are we seeing the case here?

Now given the fact that India has started to contribute maiden earnings of around 180 million, surely the growth potential is far greater for Maxis?

Now if i use a simple 22% growth projection for the next two years, Maxis eps based on Aseambankers table should be 101.8 sen for fy 2007 and 124.2 sen for fy 2008.

And if ever a pe multiple of ONLY 15.6 is deemed fair for a company that has a potential growth of over 20%, then the company is worth at least rm19.30 sen.

But is it fair?

And not forgetting such valuation is TOTALLY ignored the immense operating cash flow shown currently by Maxis.

Maxis in its fy 2006 balance sheet, depreciated some 1.014 billion from its earnings.

Now this 1.014 billion is money which hadn't really vanished into thin air and neither has it gone to the money heaven. Want to try including these money into the valuation?

Yeah, rm24.00 would have been a fair value based on current data. Not a sen less!

The Receivables Issue And Megan

My Dearest Moo Moo Cow,

I made this following post to you and I know realize that there's so much more I wanted to add to the posting, so I have decided to make a brand new post on it.

Do you visit Mr. David Webb's website, Webb-Site.com? One of his older postings written last year is a posting called, Blackout on Receivables.

The following passage was extremely interesting in my opinion.

• Do you remember why Peregrine Investment Holdings Ltd collapsed? It was because of a very large bridging loan, made in the ordinary course of business, on normal commercial terms, to an Indonesian taxi company. That's the kind of information which, if disclosed to investors, would indicate that their company may be taking large amounts of concentrated credit risk, and would be likely to affect the share price.
  

  Other examples of accounts receivable leading to difficulties include the recently delisted Wanasports Holdings Ltd (8020), a retail franchisor, which collapsed after supplying large amounts of inventory to franchisees for which they were not paid. The accounts receivable were disclosed in this announcement.
  
  In another case, the rule was breached by Thiz Technology Group Ltd (8119) which belatedly admitted on 18-Apr-05 to having given credit to a single customer amounting to 84% of Thiz's market value. That was after we pointed out the probable breach in our article of 21-Mar-05.

Can you relate this to the posting, Auditing Megan?

• Do you know that the (Megan Media) trade receivables compounded at an whopping 66.4% per annum since its fy 2003?

Well they say that growth is finite. And if that is the case, then in Megan's case, this insane receivables bubble will burst SOON. And when it does, 430.354 million of trade receivables will cause SEVERE DAMAGE to the company!

Consider the following issue. Let's go back in time to March 2004. The following is an excerpt from Surf 88 (an independant investment website which no longer exists)

• Exceptional boost. Megan Media (RM3.32, stock code 7101) recognised RM12.8M negative goodwill in its Nov 03 – Jan 04 quarter from the acquisition of MJC (Singapore) Pte Ltd (MJCS), propelling a more than doubling in sequential net profit. This is also the case on cumulative nine-month basis (May 03 – Jan 04 against May 02 – Jan 03).
  
  Excluding the exceptional item which had no cashflow implications, Megan Media still posted a commendable performance within our expectations. Nine-month sales more than doubled from the corresponding period last year on the back of continual capacity expansion, offsetting pricing pressures from DVD-R to still drive pretax profit 36% higher. Note that the nine-month results included about one month contribution from MJCS, without which turnover would have still expanded by 127%.
  
  Still promising outlook. The outlook for Megan Media remains promising as the merged entity (with MJCS) continues to raise capacity to strengthen its industry positioning while improving economies of scale. This would compensate lower prices for DVD-R, while CD-R prices are expected to be stable in comparison.
  
  Incorporating MJCS, Megan Media’s production capacity has increased by 50%. Meanwhile, the first production line in its new factory, which will add another 1.5x capacity upon full commissioning, is expected to start commercial production soon. The new factory can house 22 lines eventually, of which 10 lines will be installed in stages for 2004. The new lines are switchable between CD-R and DVD-R production, although Megan Media plans to focus more on DVD-R which it expects to outpace the growth of CD-R next year.

This one sentence caught my attention.

• Note that the nine-month results included about one month contribution from MJCS, without which turnover would have still expanded by 127%.

So Megan's purchase of MJC drew a lot of flak because it was a related-party transaction, in which Yeo Wee Siong (Executive Director and substantial shareholder of Megan) and Yeo Wee Koon (substantial shareholder of Megan) jointly controlled MJCS.

In another posting by Surf 88,

• …while raising net debt to 1.9x shareholders’ funds. At the same time though, one would have to keep a closer watch on Megan’s post-acquisition balance sheet. On its own and following aggressive expansion, Megan’s net debt has been raised to RM101M, or 62% of shareholders’ funds as of Jan 2003. Servicing ability though looked well manageable with pretax interest cover of above 4x in the latest quarter ended Jan 2003. Post acquisition, Megan would have to take on RM97M in purchase funding, as well as another RM135M borrowings currently under MJCS. On a pro-forma basis, group net debt would be raised to about 1.9x shareholders’ funds, after incorporating MJCS’ proposed sale of Megan shares.

The point was the Yeo's sold their company to Megan and along with it rm135 million in borrowings.

Now that's not all. That's old news. What I wanted to focus on is the receivables issue and note when this receivables really started to snowball.

Since MJC started contributing earnings to Megan back in March 2004, I would just do a simple before and after comparison.

22nd Dec 2003. Quarterly rpt on consolidated results for the financial period ended 31/10/2003 ( Receivables at 88.933 million)

30th March 2004. Quarterly rpt on consolidated results for the financial period ended 31/1/2004 (Surf 88 stated that MJC started contributing earnings for this quarter. Receivables is now at 158.130. Receivables ballooned by 69.197 million. How much was it contributed by MJC? )

29th June 2004. Quarterly rpt on consolidated results for the financial period ended 30/4/2004 (receivables now at 189.964 million)

How?

Again my question is simple. How much did MJC contributed to this receivables issue?

Which is why in Re Megan again I brought up the issue that Yeo Wee Siong is now longer a majority shareholder! And given what had transpired, it's not too difficult to understand why! See how Yeo had sold his company which had high debts to Megan? See how Megan's receivables started to inflate after this MJC purchase?

Anyway, back to the receivables issue. I remembered this morning that I had posted on this issue before. ( see http://whereiszemoola.blogspot.com/2006/02/trade-receivables.html )And this is what I wrote back then.

• I believe I have mentioned several times on the issue of trade receivables issue in Megan Media. (see Megan: Part VIII )
  
  I was shifting through some of my old market notes and issues on our listed shares, I came across this incident regarding Bintai Kinden.
  
  Have a look inside the following quarterly earnings announcement. Click on the attached excel worksheet attached.
  
  Quarterly rpt on consolidated results for the financial period ended 31/3/2005
  
  Look into the balance sheet and look for the trade receivables amount. It showed Bintai Kinden had a huge trade receivables amounting to 373.841 million versus 215.411 million. Which is a good example of a company's having a build-up in their trade receivables.
  
  Just for the record, that quarterly earnings was announced on 31st May 2005 and Bintai Kinden announced a net loss of 13.843 million for fiscal year 2005.
  
  A couple of months later, 29th July 2005, Bintai Kinden made another announcement. See below:
  
  Variance between audited and unaudited results for the financial year ended 31 March 2005
  
  The Board of Directors of Bintai Kinden Corporation Berhad ("the Company") wishes to announce that the Group's audited loss after tax and minority interest for the financial year ended 31 March 2005 was RM19,149,000 as compared to the unaudited Interim Report for the same financial year announced on 31 May 2005 of RM13,843,000.
  
  The deviation was mainly attributable to the trade receivables due from a sub-contractor to a subsidiary company of the Group whose sub-contractor's agreement with the subsidiary company was terminated during the financial year. Subsequently, the subsidiary company made an allowance for doubtful debts of RM6.5 million notwithstanding that the company is in the process of recovering the amount due from the sub-contractor.
  
  The issue here is not on Bintai Kinden but the deviation in earnings attributable to the trade receivables, forcing an allowance for doubtful debts of 6.5 million to be made.
  
  Point is .. when trade receivables keeps on increasing each single quarter, then it is utmost prudent that the investor be on the alert... for these trade receivables can easily be re-classified as doubtful debts! Which ultimately means the company did not earn as much money as it reported it did!
  
  So when a company's earning report keeps showing an increase in trade receivables... then it's best we be on the alert!
  
  Remember the old salesman saying again... a sale is not a sale until the money is pocketed!

See how the trade receivables were re-classified as doubful debts? So do note.

• Point is .. when trade receivables keeps on increasing each single quarter, then it is utmost prudent that the investor be on the alert... for these trade receivables can easily be re-classified as doubtful debts!

And for Megan's case, this trade receivables is now at 430.354 million.

How much is 430.354 million?

How about these comparisons? The receivables is now 15x Megan's cash on hand. The receivables is now 48.4% of its total borrowings. Scary?

Now consider this.

We know that these receivables which has COMPOUNDED at a rate of 66.4% since 2003.

We know that such growth is clearly not sustainable and sooner but not later it will go burst and when it does, the question that needs to be asked is how much of these receivables will be classified as doubtful/bad debts?

And when this happens, mark my words, the damages will be severe!

Windfall for Maxis?

The following article was the Front Page Headlines posted on Star, Windfall for Maxis shareholders

Sorry but windfall for whom?

For a company that has earnings growth of over 30% the last 2 years, a net cash flow from operating activities of over 3.3 Billion and had already invested some 2.7 billion of its shareholders money in a country which has extreme potential, India, would a general offer price of rm15.60 be considered a windfall?

How about rm24.00?

That would have been my bare minimum of what Maxis should be worth at least.

So I do hope you do not mind me asking a silly question. If the company is worth rm24.00, would a offer of rm15.60 deemed generous?

Would any sane minority shareholder be happy?

Exactly!!

• This means that an investor who had bought 1,000 Maxis shares at RM13 each just before trading was suspended on Monday will make RM2,600, or a 20% gain on his investment.

The above was mentioned in the article and it's really kind of silly. How many would have 'invested' at rm13.00? Did they know of this VGO? If no, then this 20% gain of investment is irrelevant. Nothing but a feeble attempt to make this VGO sound generous!

And posted on the Star Biz Section. VGO allows shareholders to exit at attractive price

First of all, one needs to realize that CIMB, ABN AMRO win Maxis mandate again. So do bear in mind the possibility of the minority getting a slightly biased comments and opinions from CIMB because this Maxis privatization represents business to them.

• “Shareholders who have held shares in Maxis since its IPO in July 2002 would enjoy a total return of 301%, including dividends, which represents a 36% internal rate of return should they accept the offer,” Nazir said.

This is not a right comparison to make.

The right comparison is what Maxis should be worth now based on current facts and not comparing the IPO price versus the VGO price!!

When one makes such a comparison then the comparison ASS-U-MEs that the VGO price is fair.

Is it fair?

Let me repeat again, we are talking about a company that has earnings growth of over 30% the last 2 years, a net cash flow from operating activities of over 3.3 Billion and had already invested some 2.7 billion of its shareholders money in a country which has extreme potential, India.

Is rm15.60 fair?

So if the investor knows that the share is worth at least rm24.00, why isn't the minority investor not given a fair chance to be adequately compensated for the risk to invest in the company since 2002?

• To grow further, it needs huge funding and it is learnt that Maxis needs over RM12bil from now up to 2010.
  
  The risks are also greater when operating in markets away from home and, given the huge cash outlay needed, a strain on its cash flow can be expected to limit its ability to pay dividends and affect its share price.
  
  “The privatisation will eliminate the impact of earnings volatility on public shareholders,” said Raja Datuk Arshad Raja Tun Uda, chairman of Binariang GSM Sdn Bhd, the company created to undertake the privatisation exercise.

Wait!

Shouldn't the minority shareholder be given a fair chance to decide on this issue?

My say is simple. If Maxis requires massive funding in the future, Maxis could easily have asked its minority shareholders first. Why is it so important to ask them? Well, they should have never forgotten that the minority shareholders are part owners of the business.

So for the sake of the integrity of the company, the company should have asked the minority shareholders if they want to continue to be a owner of this company given this heavy funding issue.

And this could be easily achieved by asking the minority shareholders to partake in a RIGHTS ISSUE to generate fund for the company to help it grow. By issuing a VGO meant the company had not taken into the consideration of its minority shareholders!

Why aren't they being a fair chance to participate in the company further?

And remember, rm2.7 billion of the shareholder money had already been invested in India. So in all reality, they are already part of this massive plan to invest in India.

By issuing a VGO simply takes everything away from the minority shareholder!

• Taking Maxis private is seen as a viable option as it gives Ananda greater flexibility to chart the forward direction for Maxis and re-enter Bursa when it has “stable earnings” again.

Once Maxis is taken private, will Maxis the PRIVATE ENTITY be willing to share its earnings books with everyone on the outside? Would this be acceptable?

• Raja Arshad also did not believe the de-listing of Maxis would erode the company’s strong brand value as it would be business as usual at the company with no “management changes” expected.

The minority shareholder is now NOT GIVEN A CHANCE to participate in a company that could grow tremendously in India. And worse still, part of their money, some rm2.7 billion had already been invested. So how do you think these minority shareholders feel about the brand Maxis???? Would some even go the extremes of switching to DiGi or Celcom?

Posted on Business Times, Maxis could be relisted later

• Q: Is the offer a fair one?
  A: Definitely. The offer price of RM15.60, payable in cash, represents a huge premium over the last traded price of RM13. It represents a price level which Maxis shares have never achieved since its listing on Bursa Malaysia. A shareholder who subscribed to Maxis shares at IPO (initial public offering) and accepts the cash offer would have enjoyed a total return of 301 per cent (including dividends).
  This represents an internal rate of return of more than 36 per cent.

Come on. The issue of fair is based on the VGO price.

So how about asking is the VGO a fair price representation of Maxis true value?

How about RM24.00?

• Q: Delisting Maxis will reduce the large number of large, liquid, high-quality companies available to investors on Bursa Malaysia. Will this not reduce the attractiveness of the Malaysian stock market?
  A: The market capitalisation of Maxis is more than RM33 billion and Maxis ranks in sixth position in terms of market capitalisation on Bursa Malaysia. However, as this only constitutes four per cent of the KLCI 100 market cap, we believe the presence of other big companies and medium- cap counters will ensure the continued robustness of Bursa Malaysia.

Here's a simple issue.

Given the fact that privatization happened in Powertek, in Bumi Armada and now Maxis, one cannot DENY that the threat of privatization would not happen in other sister companies of Maxis. So how would fund managers and investors feel about their investment in Astro, Measat or Tanjong? What if they do the funky privatization again?

The Nasdaq 100 Earnings Issue

My Dearest Moo Moo Cow,

Today's FSO Market Wrap is done by Mr. Martin Goldberg and Mr.Goldberg focus on The Nasdaq 100 - Wall Street's Dirty Little Secret.

• The stock market looks at valuations, but sometimes it doesn’t see them. This is one of those times. Valuations of the Dow and S&P 500 are often discussed since they can now compare somewhat favorably with other times in recent history. What the market may not be seeing is the fact that the stocks within the major indices have just completed a multi-year run of double digit earnings growth and this cannot continue indefinitely. Still the bull case sees this double digit earnings growth resuming after the most recent quarter’s growth decelerated into high single digit percentages. And to be fair, may be this earnings growth is something that I’m not seeing. The most recent quarter’s single digit percentage earnings growth beat analysts’ “expectations” and this was the apparent reason for a sharp and erect multi-month market rally. The bear case has earnings growth decelerating in the near term future while P/E’s compress as a result and the bear market resumes. For the major indices, one can defend either the bull or bear case, but for today, the market has decided – bulls win! For tomorrow, it’s anyone’s guess.
  
  While the valuation case can be argued either way for the Dow and S&P 500, similar arguments cannot be brought forth with a straight face for the Nasdaq 100. It amazes me that there are precious few references where one could evaluate the price/earnings (P/E) ratio of this almost $2 trillion index. You can find the P/E of the Dow Industrials, S&P 500, Dow Utilities, or Transports by simply looking them up in the Wall Street Journal, Barron’s, or Investor’s Business Daily (IBD). But no such “look ups” seem to be available for the Nasdaq 100. Is there something to hide? Fortunately with the ability to download spreadsheet data from Yahoo Finance, one can easily evaluate the index as a whole as I did. What was found is staggering. The index is overpriced by any reasonable measure except for those involving technical chart analyses.
  
  If one were to ignore the components of the Nasdaq 100 with triple-digit P/E’s and those with no trailing earnings at all, the arithmetic average trailing P/E of the remainder of the companies in the Nasdaq 100 is 34.3 and the forward P/E is 22.1. Including all components of the Nasdaq 100, the forward P/E is a whopping 34.9. Earnings growth based on Wall Street analyst expectations is projected to be over 35% over the next year. There seems to be something in the collective business models of these companies that make payment of dividends to shareholders passé. While the current dividend yield of the S&P 500 is 1.91% (way low by historic standards), the dividend yield of the Nasdaq 100 is a mere 0.36% (0.5% capitalization weighted) by comparison. Given that Nasdaq 100 companies are among those most implicated for options back-dating and shareholder dilution, a reasonable person would expect that shareholders would now demand dividends and corporate managements would oblige. Forget it; beyond momentum, there is no reason on Wall Street.
  
  Analysts expect that only seven companies in the Nasdaq 100 will post lower earnings in the next year compared to the previous year. With only seven companies (7%) expecting to have an “off year,” this would seem to be a rosier forecast than any reasonable soul not from Wall Street would expect. What happens if the US economy slows?
  
  Are the rich valuations justified by corresponding earnings growth rates? A decade ago, the sector was largely unknown and misunderstood; it is 10 years later and the long term fundamental outlook can be evaluated with a higher degree of accuracy. The implied growth projections put forth for the public by Wall Street are unrealistic by any historic standards. Yet, while the Street still tells us “the sky is the limit,” the public will learn otherwise the hard way.

Click here for the rest of the article. Mr. Goldberg has compiled a summary of Nasdaq 100 key fundamentals.

As expected MrCB's Denial

The followwing post, MrCB, was posted early this morning. MrCB just made the following announcement, ARTICLE ENTITLED: "MRCB may lead RM1b Penang road job".

• We refer to your letter dated 3 May 2007 and to the article which appeared in the New Straits Times, page 39 of even date.
  
  After due and diligent enquiry with all the directors, major shareholders and all such other persons reasonably familiar with the matters, we confirm that we have not at this present time entered into any agreements in relation to the matters set out in the article.
  
  MRCB constantly seeks new opportunities to expand our core businesses and will make the appropriate and timely announcement to Bursa Securities as and when there are matters which require immediate announcement in accordance with the Bursa Securities' Corporate Disclosure Policy.

So who is the sources that said the following?

• Sources said the Government is keen to have a government-linked company helm the RM1.02 billion ring road, one of three projects for the state under the Ninth Malaysia Plan
  
  "The Government is keen to have a player with a proven track record undertake this project," a source said.
  
  It is learnt that MRCB is likely to be issued a letter from the Government soon, offering it a stake in the company.
  
  When contacted by Business Times yesterday, MRCB group managing director Shahril Ridza Ridzuan declined to comment.

What if more listed companies decide to opt for foreign listing?

The following article was posted on Business Times, Malaysian-listed firms going private to grow faster

• "The rules and regulations could prevent a company from making any major decisions such as expanding overseas, acquiring new businesses or getting new shareholders.
  
  "Because of that, they tend to take the company private, enhance its position and value, and then list the firm overseas," he said.
  
  Syed Moheeb added that when a company is taken private, it could also mean that something bigger will happen next.
  
  "Taking a company private has all got to do with creating a different perspective value, that is by introducing new shareholders, venturing overseas, planning major expansions and acquisitions, joint ventures, and diversifying," he said.

Question for Mr. Syed Moheeb. "What if more listed companies decide to opt for foreign listing? What would happen to our Bursa Malaysia, stock market?"

20% VGO premium for Maxis?

My dearest Minority Shareholders of Maxis,

Regarding this news report, Ananda may offer up to 20pc premium for control of Maxis

• Ananda, through his private firm Usaha Tegas Sdn Bhd and its affiliates, is ready to offer between RM14 and RM15 for each of the remaining Maxis shares that they do not already own, the sources said.
  
  This means that Ananda could end up paying up to RM20 billion based on the nearly 53 per cent stake held by other shareholders, making it the biggest deal in Malaysian corporate history.
  
  Ananda, Malaysia's second richest man with an estimated wealth of about RM16.88 billion, held an indirect interest of 47.05 per cent in Maxis as at April last year.
  
  Analysts had estimated that based on Maxis' last traded price of RM13, the 53 per cent stake would be worth about RM17.4 billion.
  
  A media conference is due today to announce Ananda's voluntary general offer, the sources said, adding that CIMB and ABN AMRO have been appointed advisers for the deal.
  
  Maxis shares were halted from trading on Bursa Malaysia on Monday. They are expected to be requoted tomorrow.
  
  Its share price, which had gained about 198 per cent since its listing in July 2002, hit an all-time high of RM13.20 twice last week. It has surged 27 per cent this year.
  
  Some analysts have said that there are merits to taking Maxis private, especially if its impending investment costs in overseas markets like India and Indonesia significantly exceed expectations.
  
  Maxis, which owns India's Aircel and Indonesia's PT Natrindo Telepon Selular, has said it plans to spend US$450 million (RM1.54 billion) this year on its Indian operations.
  
  Maxis, whose profits have surged 46 per cent in two years, may also join Usaha Tegas in taking a stake in Sri Lanka's Telecom Ltd.

Some issues that needs to be remembered.

This is a VGO and not a MGO.

So do NOT SELL yet!

Fight this VGO to the very end!

A 20% premium over the last traded price is nothing! It's really peanuts compared to what Maxis is really worth. So does it make sense to forgo the actual worth for this peanut offering?

Remember these points.

1. Maxis Net Profit is at 2.104 billion. It has surged over 30 percent the last two years!
2. Net cash flows from operating activities saw Maxis generating some 3.352 billion ringgit this fiscal year!
3. Last reported fiscal year, Maxis has invested some 2.725 billion in India. And Maxis India operations have just started contributing some 187 million in earnings!

Rm14 to rm15 for Maxis?

Is it enough or is it simply peanuts?

Would you be happy accepting a peanut offer from Maxis when given the growth potential of Maxis in Malaysia and in India?

Would you be happy accepting a peanut offer for a company generating some 3.352 billion from its business operations?

Would you be happy given the growth potential, you know very well that the company will be generating even more cash from its business operations this fiscal year?

Would you be happy at all?

Tell you what, show me rm24.00!

MrCB

My dearest Moo Moo Cow,

Saw this headline news posted on Business Times, MRCB may leadRM1b Penang road job.

• Business Times learns that Malaysian Resources Corp Bhd (MRCB) is likely to be the lead shareholder in Peninsular Metroworks Sdn Bhd (PMW), the project's concessionaire.
  
  Sources said the Government is keen to have a government-linked company helm the RM1.02 billion ring road, one of three projects for the state under the Ninth Malaysia Plan.

Sources said again!

• "The Government is keen to have a player with a proven track record undertake this project," a source said.
  
  It is learnt that MRCB is likely to be issued a letter from the Government soon, offering it a stake in the company.
  
  When contacted by Business Times yesterday, MRCB group managing director Shahril Ridza Ridzuan declined to comment.

Now, this is certainly puzzling. First, I wonder which yesterday the article is referring to. Now get this, my dearest Moo Moo Cow, if the group MD declines to comment on this issue, then why should they publish this news since the group MD failed to verify this news?

Are these sources more knowledgeable than the group MD itself?

Oh Maxis

My Dearest Moo Moo Cow,

As it is, the talk is a VGO and not a MGO. Meaning the minority investor does NOT have to sell.

But this isn't something to be brushed off lighted. Cause if enough folks sell out, then the VGO will turn into a MGO. And the outcome is not nice at all.

As it is, I for one, feel that all the minority shareholders of Maxis and all the investors of Bursa Malaysia to fight this VGO tooth and nail.

Why should the minority shareholders be the ones made scapegoats?

They say Maxis is undervalued! Well it is and this is the very reason why the investors invest in the stock. Should listed corporations be allowed to privatize based on this reasoning? Whose fault is it that their share is undervalued? Take DiGi into consideration. Their stock too was once unloved BUT the management realised this and they showed the investors the money. Yeah, show us the money. And DiGi soon became a darling investment stock! So if Maxis thinks it is undervalued and unloved then what it should do is to start thinking of ways to improve itself like increasing the dividends payout. Don't you think so my dearest Moo Moo Cow?

And Maxis is undervalued elsewhere in Indonesia and in India. Ah less we forget, the current minority shareholders had stood by Maxis and supported Maxis overseas ventures. And so far more than rm2 billion has been invested. Money which these minority shareholders were willing to forgo for the sake for a better company tomorrow. So is it ethical that Maxis turns around, after all these money has been spend to say it wants to be privatize or perhaps list in foreign companies?

And so my dearest Moo Moo Cow, why do you think folks invest in a company? Well, these folks sees a certain value in a company. And because of this perceived value, they then take the monetary risk to invest in such a company. Now if the company starts shifting the goal posts in the midst of the game by making VGOs such as this, what is the incentive left for the investor to investor to invest? And this is why investors like me is so disgusted to see issues such as this. Ask the trader, if the stock market starts shifting the goal posts by imposing last minute trade rules, would the trader be happy at all?

And without the investors, the minority shareholders in a listed company, can a stock market exist?

And what about the implications?

Let's not talk about the implications on the whole market for now but the implication on Maxis's sister companies. Given the fact it happened before with Powertek and that it also happened when the pirates siezed Bumi Armada, what would investors think of their investment in Tanjong Holdings or Astro? The risk of being privatized becomes a real investment risk that the minority shareholder cannot discount no more. And if that is the case, there is not much justifications remainding to hold on their investments in Tanjong or Astro. So would minority shareholders sell because of this risk? By the way, could the past actions on Powertek and Bumi Armada caused investors to be already weary about Maxis? And could this be a reason why Maxis is undervalued or unloved? And would todays corporate exercise caused Tanjong and Astro be unloved stocks in the future?

And what about the implications of the whole market, Bursa Malaysia? If Bursa Malaysia continues to allow companies to list and de-list anyhow and anyway they desire, then the risk of de-listing then becomes a risk for foreign investors. Where is the integrity of our stock market? Which foreign investors want to invest in our stock market then? Remember in all privatisation isssues, the minority shareholders are never given a fair chance to be adequately compensated for their risk in investing in the stock(s).

And someone once said this to me.

• That's because in deciding for privatisation, the deal hugely favours the controlling party already - hence someone must look out for the long-suffering small tenacious investor.

How then?

rgds




Recent postings.

1. http://whereiszemoola.blogspot.com/2007/04/maxis-to-be-privatised.html
2. http://whereiszemoola.blogspot.com/2007/04/quick-update-on-maxis.html
3. http://whereiszemoola.blogspot.com/2007/04/maxis-implication.html
4. http://whereiszemoola.blogspot.com/2007/04/how-much-for-maxis.html
5. http://whereiszemoola.blogspot.com/2007/05/maxis-again.html

Posting on Bumi Armada

• http://whereiszemoola.blogspot.com/2006/09/pirates-which-siezed-armada.html
• http://whereiszemoola.blogspot.com/2006/09/more-on-privatisation-issue.html

Posting on Privatization issues

• http://whereiszemoola.blogspot.com/2006/08/privatisation-heathy-trend.html
• http://whereiszemoola.blogspot.com/2006/09/more-on-privatisation-issue.html

Posting on MetroJaya Privatization issue.

• http://whereiszemoola.blogspot.com/2006/11/muis-purchase-of-metrojaya_02.html
• http://whereiszemoola.blogspot.com/2006/11/muis-purchase-of-metrojaya-ii.html

Q&A with Peter Bernstein

Posted on Marketwatch.com.

• MarketWatch: Has the fact that people know so much more about how markets work made investing any less risky?
  
  
  Bernstein: The central role of risk, if anything, has grown rather than diminished. We really can't manage returns because we don't know what they're going to be. The only way we can play the game is to decide what kinds of risk we're going to take. Risk is the beginning. The return above a benchmark -- "alpha" -- is how you measure whether you've outperformed. Alpha is what you're trying to get, but risk is the road you have to travel to get there.
  
  
  Q. What advances are helping investors capture above-average returns?
  
  
  A. With new active strategies, the big event is what they call "portable alpha." It didn't really develop until recently. Alpha means outperforming the market after adjusting for risk. That's what "beating the market" means. Meanwhile, "beta" measures what the market itself is doing. Beta risk, the risk of being in the markets, is the risk you can't avoid if you're going to be an investor. That's a matter of choosing which kinds of markets you want to be in -- stocks, bonds, cash, international, real estate. Those are basic decisions to make before you even begin. Then you say these are markets I want to be in, but I would like to earn a return greater than I expect I can get from simply being in the market, from being a passive investor.
  
  
  The interesting thing that developed from putting the question that way is these are separate decisions. Where you seek to outperform the market -- to get alpha -- and how to have your basic allocation of assets are completely separate decisions. Portable alpha means that you find ways to achieve alpha that are completely separate from the way you manage the basic portfolio. You're looking for alpha wherever you can find a manager who can beat a benchmark. It doesn't have to be in an asset class that you hold; it can be anywhere.
  
  
  Q. "Portable alpha" is a sophisticated institutional strategy, but is this innovation also finding a place in retail investors' portfolios?
  
  
  A. These are not simple strategies to execute. Let's say you don't want to be in international markets, but you know of a manager who can beat the index regularly. You'd like to get that extra return, so you have to fund that manager without disturbing your basic asset allocation. So one way or the other, these strategies involve leverage or derivatives, and sometimes both.
  
  
  For individual investors, Pimco, one of the biggest managers in fixed-income securities, has a mutual fund called StocksPlus plus an alpha.
  
  
  Money comes into the fund, and the fund buys futures on the S&P 500. It doesn't buy the S&P 500. For futures you only have to put up about10% cash, and the balance is invested in the bond market where it earns an alpha. That additional return is added to the return of the S&P. So StocksPlus is really only holding about 10% of its money in stocks and 90% in bonds. The 10% in stocks is S&P futures, so you're going to get the S&P return, but it's using the rest to try to get an edge -- alpha -- out of the bond market.
  
  
  Q. Early financial theories laid the foundation for modern Wall Street. Are they still relevant?
  
  
  A. Theories established a jumping-off point. But the assumptions were rigid and far from reality. Markets don't respond the way the theories describe, yet you can't understand the markets without this stuff.
  
  
  Think of the level of discussion about portfolio management before 1952, when Harry Markowitz said you have to think about risk as well as return. There was some sophisticated sense about asset selection, but in terms of the role of risk and risk management of the portfolio -- the whole collection of assets you own -- there was nothing. It was a great leap forward.
  
  
  Today, these ideas are alive and well. You take these highly sophisticated people in the business, like Barclays Global Investors, Goldman Sachs or the Yale endowment fund, and all start from these early ideas and go from there into elaborate forms of active management. David Swenson at Yale said it the best: It was out of his deep respect for the efficiency of the markets that he went away from conventional financial assets like stocks and bonds into hedge funds and real assets where markets were much less efficient.
  
  
  There are two things that make financial markets function. Financial markets are a bet on the future, so in their gut they're risk-taking. The other is that financial markets can't function without information. When you put these two together, you're making a bet on an unknown future but you're basing that bet on information. The theories follow from these two important features. Markowitz said you have to think about risk as well as return, because you don't know what the outcome is going to be. You do that by diversification, trying to maximize the trade-off between risk and return. ( source of article )

Underneath it All of Dow's 13000

My Dearest Moo Moo Cow,

Here is an interesting posting by FSO market commentator, Mr. Tony Allison. DOW 13,000!! Relatively Underwhelming

Mr. Tony Allison highlights the relative value of Dow's 13000.

• Relative Value

  
  

  “Everything is relative” goes the old saying. So how is the Dow doing relative to other measures of value?

  
  

  

  
  

  Measured in dollars, the Dow has put in a very impressive performance over the past five years.

  
  

  

  
  

  Measured in euros, the Dow has been improving slowly, but is still not back to 2002 levels.

  
  

  

  
  

  Measured in gold, the Dow has had a rough ride.

  
  

  

And my dearest Moo Moo Cow, this reminds me of No Doubt's Underneath it All video

• You're really lovely
  Underneath it all
  You want to love me
  Underneath it all
  I'm really lovely
  Underneath it all
  And you're really lovely

Meanwhile over at FSU Editorial, Peter Schiff made the following remarks, What Record High?

• Despite its recent eclipse of 13,000 the Dow now buys 30% fewer euros than it did then back in 2000 when it was priced at approximately 11,500. It also buys 35% fewer gallons of milk, 40% fewer bushels of corn or wheat, 65% fewer ounces of silver, 70% fewer barrels of oil, 80% fewer pounds of copper, and 90% fewer pounds of uranium. Try figuring what the Dow will buy in terms of other necessities, such as housing, insurance, college tuition or hospitalization. Any way you measure it, the Dow is worth far less today then it was in January of 2000.
  
  

Maxis Again

Posted on the Business Times.

• Ananda launches mega buyout of Maxis
  
  Market rumours are rife that the VGO price may be in the range of RM15 to RM16 per share, which works out to about 20 per cent premium over Maxis' last traded price.

Me say?

Ah yes, the premium would make it extremely interesting for the traders and I congratulate all the traders who has the hindsight to make this short term punt on Maxis but from an investing perspective, this 20% premium price is actually extremely disgusting from an investing perspective.

Me?

I know Maxis is worth at least rm24.00.

Yes rm24.00.

Rm15-rm16?

Gosh!

If minority shareholders are going to be constantly not given a chance to be adequately compensated for the permanent withdrawal of a good investment opportunity then what's the point of being a minority shareholder?

Imagine.. a market without any minority shareholders!

And what would them foreign value investment funds think?

• Bursa will lose a quality stock, say analysts
  
  "Bursa will lose in terms of valuation to the KLCI (Kuala Lumpur Composite Index). But this will not have a negative impact on trading activities as these funds will be channeled elsewhere in Malaysia," said OSK Research analyst Jeffrey Tan.
  
  Minority shareholders and retail investors would also lose out on the deal as they would have one less good company to invest in, analysts said.

If privatizations are allowed to be done anyhow and anyway, then why does anyone wants to be a minority shareholder anymore?

From Star Biz.

• Proposal to take Maxis private
  
  “Yes, we are shocked with the takeover plan but it does make a lot of sense to take it private, given that the current major shareholders see huge value in Maxis that the market does not. Maxis’ India unit, Aircel Inc, for one is a brilliant asset and the market is not valuing it,” an analyst said.

Again Mr.Analyst what about the minority shareholders? Do give them some due respect. Imagine a market without any minority shareholders!

• “Taking Maxis private also allows the major shareholders to restructure it without having to deal with the minority shareholders. That gives them the flexibility of doing what they need to do with the group and some private equity investors may emerge to nurture the companies within Maxis.
  
  “At some point, we will not be surprised if Maxis makes its way back to the Malaysian bourse but it is expected to also have a dual listing somewhere on an international bourse and its units will also be listed separately,” he added.

“Taking Maxis private also allows the major shareholders to restructure it without having to deal with the minority shareholders."

Gosh. That's so sickening. Doesn't the minority shareholder count anymore?

And if Maxis seeks a listing elsewhere, the whole Bursa Market will lose its entire integrity. The implications for the rest of the market would be extremely damaging. Which foreign fund would invest in our market if the investment grade stocks in our listing can list and de-list anyhow and anyway they like?

• Taking companies private is becoming a trend although most companies that are taken private usually trade below their book value. The potential takeover aside, there is also talk that Ananda may even take Astro All Asia Networks plc and Tanjong plc private, something analysts have discounted.

Now consider this. If I am a minority shareholder of Tanjong or Astro and given what had happened back to Powertek a good couple of years ago, I would NOT DISCOUNT this issue. Heck, I would be extremely nervous too!

Why should I invest in a company where I run the risk of not being fully compensated for my risk of being a minority shareholder when the company can and will de-list their stocks as per their liking!

How?

Tell you what, show me RM24.00 and I will be walking out your door!