Weekend Reading

Posted on Claire Barnes's Apollo Investment Management ( here ) :

• 'Is your pension fund a dump for toxic waste?' asks Paul Tustain, in the best single article I've seen on this most important of all financial issues.

Do click on that article. Great reading for the weekend.

Analabs

Analabs just announced its earnings 2007 Q4 earnings tonight. Quarterly rpt on consolidated results for the financial period ended 30/4/2007

1. Q4 earnings on a y-y basis was ok but poor on a q-q basis.

2. Poor track record since fy 2002 but the company has performed pretty well this year.

3. This was what the company said in its notes.

• The Group’s turnover for the year ended 30 April 2007 at RM35.403 million was higher compared to RM34.141 million for the corresponding period in the preceding year, representing an increase of 4%. The major contribution of the revenue was derived from formulation and repackaging of chemicals segment and recovery and sales of recycled products.
  
  Profit before taxation increased by RM4.447 million or 101% mainly due to increase in contributions from formulation and repackaging of chemicals segment, recovery and sales of recycled products segment, and gain on disposal of quoted investments for the year ended 30 April 2007.
  
  The decrease in revenue for the current quarter as compared to the preceding quarter was mainly due to decrease in revenue contribution from formulation and repackaging of chemicals segment and aqua-culture divisions.
  
  Profit before tax of RM1.075 million was higher than the loss before tax of RM0.453 million for the corresponding period in the preceding year mainly due to the gain on disposal of quoted investment in the equity market for the current quarter as compared to the preceding corresponding quarter which included an allowance for diminution in value for OTT investment in South Africa.

4. Company dabbles in the share market. The current fiscal profit of 8.325 mil is boosted by disposal of securities, which saw Analabs gaining 1.837 mil from its disposal of shares this fiscal year. Some folks hate such share dabbling!

Currently, as stated in the earnings notes, "The investment of RM5.096 million in the condensed consolidated Balance Sheet for the current quarter has been reclassified as non-current assets". The market value of these shares is now worth rm6.094 million.

5. Cash balance is extremely healthy, so is the cash flow. Net cash is now 35.197 mil.

6. Dividends.

Decent improvement in payout since fy 2005 but pale in comparison since fy 2002.

Now company has tons of cash, hence it is argued that it should have done much better in sharing its wealth back with its shareholders.

Another Misleading News Article?

Surfing thru the Bursa website, I chanced upon this announcement: Ygl Convergence Berhad ("Ygl" or "the Company") - Article Entitled:"YGL embarks on acquisition trail"

• Reference is made to the query letter from Bursa Malaysia Sceurities Berhad ("Exchange") dated 25 June 2007 (Ref No: NM-070625-51075) on the above article ("Query Letter").
  
  The Company wishes to inform the Exchange that the Company had some problems with the office fax machine for the past few days and as such, the Company only managed to receive a copy of the Query Letter which was re-faxed by the Exchange at 3.47 p.m. on 28 June 2007. The Company sincerely apologise for any inconvenience caused to the Exchange by not being able to reply to the Query Letter in a timely manner. Accordingly, the Company furnish herewith the reply within one market day from the date the Company received the Exchange's Query Letter.
  
  In this respect, the Company wishes to clarify the following statements which appeared in the New Straits Times, Biznews, page 42, on Saturday, 23 June 2007:-
  
  (i) Pertaining to the sentence "... several acquisitions and joint ventures are on the horizon this year… ".
  
  The Company wishes to clarify that the Company did not comment on the number of acquisitions and joint ventures nor its timing thereof during the press conference. The press had misinterpreted the Company's statement in reply to the question raised as to the reason for the recent fund raising exercise of RM9 million undertaken through the issuance of new shares via a private placement. The Company informed the press that the fund raising exercise was mainly to cater to the YGL group's working capital requirements.
  
  (ii) Pertaining to the sentence " YGL… is also eyeing listing on a regional bourse… ".
  
  The Company wishes to deny this statement as YGL at this particular moment has no plans to list on a regional bourse.
  
  This announcement is dated 29 June 2007.

How?

1. Was this simply POOR reporting or was there an intent to mislead?

2. How would a normal reader of our newpapers know if what they read was badly misinterpreted by the reporter?

3. Will the newspaper publish a retraction of what has been written?

4. Do you believe that something needs to be done URGENTLY?

NextNation II

Here's an update to past blog posting, NextNation.

NextNation announced its quarterly earnings tonight. Quarterly rpt on consolidated results for the financial period ended 30/4/2007

Well, from an investing perspective, it's pretty ugly.

Compare the quarterly earnings posted versus the quarterly earnings done on the NextNation posting.



It's a worry.

And of course their receivables concern again should not be discounted as mentioned earlier. Frankly I do not see what the receivables should be so high!

Flashback to what was written earlier ( NextNation )

• 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.

Misleading Article: Tamco Part II

Blogged last night: http://whereiszemoola.blogspot.com/2007/06/tamco-misleading-article.html

In this incident, the source had clearly insinuated an extremely price sensitive statement.

• Tamco Corporate Holdings Bhd is mulling a plan to dispose of its core switchgear manufacturing operations to a foreign investor. The deal, if closed, would land it a neat cash pile that could potentially be distributed to shareholders.
  
  Sources reveal that Tamco may get as much as RM388 million in cash if the deal goes through.
  
  On a per share basis, if all the cash is distributed, Tamco's shareholders could get up to RM1.50 per share. However, the disposal will leave Tamco without a core business, which means it will have to acquire a new one.

A cash distribution of RM1.50 per share when the stock was trading only in the 90 sen region.

This clearly drove the price UP.

So now that Tamco has said that it was unable to comment on whether a cash distribution of RM1.50 per share will be undertaken, do you reckon that the reporter should be questioned who the source was?

Yes, my dearest reporter(s), please tell us who your informer(s) are! Just who are your sources of constant misleading information?

Don't you want to see integrity in our financial news?

Now, this Tamco story was published on the Edge Weekly. The denial was posted on Bursa Website. So for the common news reader, if such constant denials were to continue to happen, then how would these news reader know if what they are reading is true or false?

Don't you think it's extremely ludicrous to ask the readers to refer to Bursa website to confirm the news that they had read is true or false?

If this is the case, then I strongly suggest each FINANCIAL NEWS display a huge disclaimer informing their readers that what they read could be false!

Or PLEASE REFER TO BURSA WEBSITE TO CONFIRM THE NEWS THAT YOU HAD JUST READ IS TRUE OR FALSE?

Simply ludicrous, isn't it?

Cooking And More Cooking!!

Two articles posted on The Edge Weekly on TransMile and Megan.

• 25 Jun 2007: Corporate: How Transmile's books were cooked By Doreen Leong and M Shanmugam

Quote: In a nutshell, it was a well-designed scheme running for years involving some customers and suppliers and the company's top management.

• 25 Jun 2007: Corporate: Transmile, Megan spill over to banks By Lim Ai Leen

Quotes:

1. "If everyone writes off their loans completely, the banks will still stand but there will be a substantial impact on earnings. It's a problem," says a bank executive last week
2. "It's like a house of cards. All you need is for one bank to pull the credit line and the whole company will collapse," he says.
3. Megan Media seems to worry the lenders more. As at January, its borrowings total RM888 million, of which RM320 million is in the form of Islamic bonds that have defaulted. Megan's principal bankers are Citibank, CIMB, DBS, HSBC, Malayan Banking and RHB. "
4. Each bank's exposure to Megan ranges from as low as RM10 million to RM250 million. So the size of the hit will vary," says the bank executive.
5. "For now, it's generally agreed among the creditors that there's no point pulling back credit lines or calling for the company to be liquidated. But some are wary of Citibank because its head office may decide to pull the plug," notes the bank executive.

Tamco: Misleading Article?

Posted on The Edge Weekly:

• 25 Jun 2007: Corporate: Tamco plans sale of core business

The article suggested the following.

• Tamco Corporate Holdings Bhd is mulling a plan to dispose of its core switchgear manufacturing operations to a foreign investor. The deal, if closed, would land it a neat cash pile that could potentially be distributed to shareholders.
  Sources reveal that Tamco may get as much as RM388 million in cash if the deal goes through.
  On a per share basis, if all the cash is distributed, Tamco's shareholders could get up to RM1.50 per share. However, the disposal will leave Tamco without a core business, which means it will have to acquire a new one.

The sources strikes once more!

Now get this, if the reader of this financial news article had no idea how to surf the Bursa Website, how would the reader knows the story is misleading?

This is what Tamco said in its announcement on Bursa.

• We refer to the Exchange's letter dated 25 June 2007 (Ref NM-070625-53228) on its query on the article concerning Tamco which appeared in The Edge, page 21, on Monday 25 June 2007.
  
  We wish to reply as follows:
  
  1. As announced by the Company on 9 May 2007, Tamco has appointed Credit Suisse (Singapore) Pte Ltd and ECM Libra Avenue Securities Sdn Bhd as the Company's advisors to look for prospective strategic partner(s)/investor(s) for the core medium voltage switchgear business of the Company. The Board wishes to inform the Exchange that the process is still on-going and the Board has not received any definitive proposal from potential partner(s)/investor(s). As such, the Board is unaware of how a sale figure of RM388 million (as mentioned in the article) is derived. For the same reason, the Board is also unable to comment on whether a cash distribution of RM1.50 per share will be undertaken.
  
  The Board will make the necessary announcement in due course should the occasion arise in accordance with the provisions of the Bursa Malaysia Securities Berhad Listing Requirements.
  
  2. The Board wishes to inform the Exchange that the Group's accounts for the financial year ended 31 May 2007 are currently being prepared. As such, it is unable to comment on whether the revenue for the Group for the full financial year ended 31 May 2007 will come in at RM445 million as mentioned in the article.

Ahem!

Would you call the financial news as misleading?

Now consider that cash distribution of RM1.50 per share thingee.

Tamco was a share trading around 0.90 sen!

So when the financial news suggests such a massive cash distribution, surely this would have been one heck of a sexy story!

Well have a look at the current stock trading data for Tamco.

Do note how the stock jumped to life a day before the publication was published and note how the stock gained handsomely the day of the publication!

Interview With Mohnish Pabrai

Posted on Value Quest, an interview of Mohnish Pabrai on Bloomberg.

Great Stuff, give it a click here: Bloomberg Interviews with Mohnish Pabrai

What lies Ahead?

Posted by Eric Miller on Bankstocks.com

• Importantly, the economy and the stock market have thrived on cheap credit, but the price and availability of credit has been changing. The question is how large of a change lies ahead.

Great article for a lazy Sunday reading: The Retreat of Complacency

Regarding Bina Puri Article on Star Bizweek

My Dearest JL,

Regarding the article on Bina Puri taps overseas market to grow order book.

Yes, the stock has been on a tear! It is hot!

• The news has piqued investor interest; Bina Puri’s shares have been steadily rising and hit a 27-month high of RM1.18 on Wednesday. Year to date its shares have gained over 70%.

However, there are certain issues in the article that I believe you should address!

• As at end-March this year, the company had as much as RM18.1mil in cash and bank balances while its long-term bank borrowings stood at RM108mil.

That's a rather misleading statement.

Here is the link to that B.Puri's earnings notes as at-end-march (reported on May 2007). http://announcements.bursamalaysia.com/EDMS/annweb.nsf/8b25383a269fcce548256d79001af770/482568ad00295d07482572e9003141f9/$FILE/BPHB-1st%20Qtr%202007.pdf

1. "As at end-March this year, the company had as much as RM18.1mil in cash"

Well, B.Puri has 18 mil more in FD that the article failed to mention. Total cash is 36.386 million.

2. while its long-term bank borrowings stood at RM108mil.



Total group borrowings is 386.034 million.!!!

So let's look at the statement again.

• As at end-March this year, the company had as much as RM18.1mil in cash and bank balances while its long-term bank borrowings stood at RM108mil.

Based on that statement, it would appear that B.Puri is a company with a nett debt of 89.9 million only.

But if i were to account the corrected one, total cash should be 36.386 milllion, whereas total debts should be 386.034 million. Which means that B.Puri is a company with a nett debt of 349.648 million!

Wow!

Total net debts is mis-stated by the reporter by some 259.748 million!

Makes a whole lot of difference, yes?

So, do you think that such business news reporting is misleading?

And what chance does the normal investing public has when our business news are constantly filled with misleading information?

What if the normal investing public does not know how to check from the Bursa website?

Don't you think the investing public, the minority shareholders will lose out in the long run when our local financial journalist continues to publish misleading articles?

The reporter then paints the exciting prospect, the links between B.Puri and tycoon Tan Sri Syed Mokhtar Albukhary and with it the link to MMC Corp and the link to Saudi Bin Laden Group!

• In its notes, which accompany its financials, Bina Puri adds that is also likely to ink jobs in Vietnam, Thailand and the Middle East, which should augur well for the company. Presently, some 35% of Bina Puri’s revenue stems from abroad.
  
  Jobs in the Middle East could also be promising for the company particularly on the back of a commonly held notion that the company is linked to tycoon Tan Sri Syed Mokhtar Albukhary, not least because his flagship company, MMC Corp Bhd has tied up with the Saudi Bin Laden Group for a massive US$30bil project to build the Jizan economic city in Saudi Arabia.
  
  Feisal, largely deemed to be in “Syed Mokthar's circle”, sits on the board of two other companies also believed to be linked to Syed Mokhtar. They are Gula Padang Terap Bhd and Aliran Ihsan Resources Bhd.
  
  Feisal holds a direct stake of 6.5% in Bina Puri. Other substantial equity holders in Bina Puri are its managing director Tan Sri Tee Hock Seng, who has 16.7% shareholding in the company held in his own name and via his vehicle Tee Hock Seng Sdn Bhd, and company director Tony Tan Cheng Kiat with about 11.2%.
  
  The largest shareholder of Bina Puri is privately-held Jentera Jati Sdn Bhd with a 25.2% interest.
  
  According to the company’s annual report 2000, Syed Mokhtar has a 7.3% interest in the company via Vickers Ballas & Co Pte Ltd, while Jentera Jati owns a 18% stake.

That massive US$30bil project to build the Jizan nicely mentioned makes the stock sexy, yes?

And then what amazes me is the last two paragraph.

• For the quarter ended March this year, Bina Puri posted a net profit of RM1.4mil on the back of RM104.7mil in sales, an improvement of some 27% and 5% respectively from a year ago. Kenanga Research attributes the improvement to higher profit contribution from associates and lower tax expenses.
  
  In a recent research report, TA Securities forecasts Bina Puri raking in as much as RM11mil in net profit on the back of RM550mil in revenue for the current financial year – an improvement of about 116% in net profit with revenue gaining by an estimated 10%.

So two research house reports were mentioned by the reporter.

The issue for me is that the reporter highlights TA Securities forecast of 11 million.

Firstly, it's great to see the reporter GOING GREAT LENGTHS and research what's been said and mentioned by research houses.

However, it would be nice if the reporter highlighted Kenanga Research forecast too, right?

Why highlight one without highlighting the other?

So I dig around. Kenanga Research can be found on Bursa website. http://eresearch.bursamalaysia.com/download.aspx?id=5719&type=research

This is what I found.

Kenanga Research forecast for the said current year 2007 for Bina Puri is only 7.5 million!

Yes, profit forecast is never easy nor is it precise but I am left seriously wondering here.

Why did the reporter left out Kenanga's forecast of only 7.5 million and only mentions TA's much higher forecast of 11 million?

I wonder if there is an intent to mislead?

How?

Same if the cash and debts issue, yes? Reporter highlights it BUT understates the total debt by some 259.748 million, and then the reporter chooses to highlight TA Securities net earnings forecast of 11 million, which is just about some 46.7% higher than Kenanga Research forecast!

How?

Here is the link to Bina Puri's last fiscal year Q4 earnings posted on feb 2007. Quarterly rpt on consolidated results for the financial period ended 31/12/2006

Bina Puri earned some 5.2 million for fy 2006 only.

Which means TA Securities earnings forecast of 11 million is rather hugely optimistic, yes?

And just for the record, Bina Puri last traded at 1.26 up 11 sen on Friday 22nd 2007.

And here is the NICE chart of BPuri.

Tip Of the Iceberg??

Them US stocks they didn't do too well, and as reported on CNN, Stocks sold off big Friday, with the Dow industrials sliding more than 176 points, as subprime woes reemerged and investors remained nervous over rising interest rates.

• The dollar hit a 4-1/2-year high against the yen, oil rose, and bonds mounted a mini-rally on a flight to quality.
  
  Stock trading has been volatile in recent weeks due to ongoing worries about whether rising bond yields and mortgage rates would hurt the economy, just as growth seemed to be picking up from a weak first quarter. Those worries returned Friday.
  
  In addition, rumors about more hedge fund problems were hurting the market, according to Todd Clark, director of stock trading at Nollenberger Capital Partners in San Francisco.
  
  "People think there might be another hedge fund that might be in trouble," said Clark.
  
  The rumors came after two Bear Stearns hedge funds nearly folded earlier this week, apparently stung by bad deals in the subprime lending sector. Bear Sterns said Friday that it's bailing out one fund to the tune of $3.2 billion, and is still working on a rescue plan for the other.
  
  News of the bailout spooked investors.
  
  "This is not over yet," said Awad. "We don't know who's involved, who's not. The whole recovery has been built of confidence, leverage and cheap money. This has the potential to be widespread in terms of seizing up capital."

Cheap money is a huge issue isn't it?

Regarding the subprime woes, here is an excellent blog posting posted on The Big Picture. How Might Subprime Issues Unravel?.

And FSO Market commentator, Brian Pretti gives an excellent write on The "State" of Affairs in Mortgage Lending.

And over at Comstock, The Tip of the Iceberg?

The damage estimates

• It is estimated that various institutions own about $6 trillion of mortgage-backed securities of which about $800 billion are subprime. About 13% of subprime mortgages are currently in default, and foreclosure rates on these loans are soaring.

And how the rise in interest rates would hurt them. $2 TRILLION of mortgage securities which could be adjusted to higher rates!

• In addition about $2 trillion of mortgage securities are backed by adjustable rate loans (ARMS) that have been or will soon be reset at higher rates.

And here is the possible danger.

• There are undoubtedly a large number of other hedge funds with portfolios similar to those of Bear Stearns, and it appears that, in the vast majority of cases, the securities have not been marked to market. The big fear is that any auction of the Bear Stearns holdings will expose the true price of all these holdings and result in immense losses with an unknown, but potentially dangerous chain reaction throughout the financial system. The ratings agencies have generally given these securities high ratings and have only recently started to slash their grades. Last week Moody’s cut ratings on 131 bonds backed by pools of subprime loans and are reviewing 247 others, including 111 it had recently lowered. This could force the sale of bonds that were cut to "junk" from "investment grade" and result in significant portfolio write-downs.
  
  The problem is that what we’ve seen to date is probably only the tip of the iceberg. David Viniar, Goldman Sachs CFO, and former head of firm-wide credit risk, stated that "I continue to believe that we haven’t seen the bottom in the subprime market. There will be more pain felt by people as that works through the system." Ara Hovanian, CEO of big builder Hovanian Enterprises said "There isn’t a recovery about to happen." SEC Chairman Christopher Cox stated that "Our concern is with any potential systemic fallout." In our view the potential effects of the falling housing market on both the economy and the financial arena puts the stock market in an exceedingly risky position in the period ahead.

Posted on Bloomberg News. Bear Stearns Fund Collapse Sends Shock Through CDOs

• Pretty Ugly
  Merrill's decision yesterday to accept bids on $800 million of bonds it took as collateral for its loans further stifled trading in CDO securities, said David Castillo, who trades asset- backed, commercial-mortgage and CDO bonds in San Francisco at Further Lane Securities.
  ``Nobody wants to look at the truth right now because the truth is pretty ugly,'' Castillo said. ``Where people are willing to bid and where people have them marked are two different places.''
  The perceived risk of holding Bear Stearns bonds jumped to a three-month high, according to traders betting on the creditworthiness of companies in the credit-default swaps market.

BCT Part II

My Dearest Doc,

Finished the posting BCT late. I do feel that there were stuff I did not mention as I had I did a fairly rush job on it.

Firstly, here is BCT's quarterly earnings so far.



Total earnings for the 3 quarters is some 9.896 million.

Regarding the last two paragpraphs. The comments from HDBS and KN.

Jun 8th, 2007, from HDBS

• Cheap stock. With 3-year CAGR of 40%, BCTT shares are trading at only 5.0x FY08F EPS. We believe it should be worth 8x FY08 EPS or RM1.70/share, which implies a very conservative 0.2x PEG.

Key note for me is 3-year CAGR of 40%.

This means that HDBS is really assuming and expecting an amazing growth for BCT. Have a look at HDBS earnings table posted below.

So, BCT which earned 10.5 million for its last fiscal year ( its current earnings for 3 quarters is 9.896 million) is expected to earn 25.8 million by FY 2008.

And because it is expected to do so good, and based on this expected achievement, BCT is then reasoned cheap by HDBS.

For it's rather optimistic.

Let's compare with KN.

Jun 11th, 2007, from KN

• Maintain BUY with a revised 12-month target price of RM1.56 (+30.0%) based on a FY08 P/E of 10.0x (2-year (FY06-FY08) PEG ratio of just 0.52x). BCTT’s FY07 and FY08 net profit growth of 45.9% and 38.6% y-y remain respectable despite our slight exchange rate driven earnings downgrades. At RM1.03, BCTT shares are trading at highly attractive FY07 and FY08 P/E of 8.8x and 6.6x, respectively.

My opinion? Strange. Cos how could "BCTT’s FY07 and FY08 net profit growth of 45.9% and 38.6% y-y remain respectable" when this is but just a projection. Doesn't BCT has to achieve these targets before being getting its respects?

Anyway, here is KN's earnings table projection for BCT.

KN's net earnings projection for BCT's FY 2008 is 20.9 million. Which is much lower than HDBS projection of 28.9 million!

So for me, it appears to me, that the high target prices are assigned to BCT because both HDBS and KN expects fantastic growth for BCT.

Is this achievable?

For me, this is one of the issue I would address. However, as it is, there isn't much data available but 3 quarterly earnings data from BCT.

rgds

BCT

My Dearest Doc,

History.

June 27 2006. Posted on Business Times.

• MSC-status BCT Tech develops, design and markets mixed signal chip components to manufacturers of products for computer and consumer markets. It develops standard and custom-made chips for areas of power management, power supply and solid state lighting.
  
  BCT Tech is expected to be listed on Mesdaq market of Bursa Malaysia Bhd in the third week of July. It will be the first fabless integrated circuit (IC) company to make a debut on Mesdaq.
  
  The company is making a public issue of 12.2 million new shares of 10 sen par value each at a price of RM1.23 per share. Of the total new shares, one million will be available for public application and 1.2 million for the directors, eligible persons and business associates of BCT Tech and its subsidiaries. The remaining 10 million shares will be placed out to selected investors.
  
  Following the public issue, BCT Tech will be making a one-for-one bonus issue of 60.98 million, with ex-bonus price of 61.5 sen per share.
  
  BCT Tech expects to raise RM15 million from the public exercise, of which RM4.5 million will be spent on research and development, while RM4 million will be allotted for business development and marketing to drive its expansion. Another RM4.7 million will be utilised for working capital.

July 1 2006. BCT to make analogue and mixed-signal chips.

• Chip designer
  
  It appears that intense focus on technology is the main driver of this company’s growth. Over the past three years, BCT has spent more than 27% of its revenue on research and development.
  
  The fruit of R&D has enabled the company to have more than 25 chips in its catalogue, 46 proven analogue and digital intellectual properties. And of course, these figures will continue to grow as the company expands.
  
  Despite the fact that BCT first shipped its products to its clients in 2004, the growth and acceptance of its chips have been pretty phenomenal.
  
  Last year, the company grew by 110% and 527% on revenue and net profit respectively. This was mainly derived from the sales of its products to tier 2 and tier 3 players.
  
  BCT is working with a few tier-1 customers on future chip products currently at various stages of development. With this development, BCT’s chief executive officer and founder Ken Lee expects to continue growing revenue aggressively.
  
  Lee says that accessing tier 1 customers for its application specific standard product (ASSP) products is part of its mid-term plan to leapfrog its growth.
  
  “The average size of the current ASSP customer is between 50,000 and 200,000 units per month. With a tier 1 customer, potentially, you are looking at 300,000 to over 2 million units per month,” he says.
  
  For its financial year (FY) ending December 2006, BCT is targeting to grow revenue 149% to RM50.61mil, while net profit is expected to grow 74% to RM10.42mil.
  
  While one may think that profit margins of 21% might be pretty unsustainable, Lee begs to differ.
  
  “We are not producing “Me too” products. If we were, then we would have to worry about price erosion in our margins. But our chips are high-tech chips with scarce alternatives,” he says.

July 11 2006. Business Times

• BCT Technology stock a fair value at RM1.20
  
  July 11 2006
  
  CHIP design house BCT Technology Bhd, which will soon be listed on Mesdaq, has locked in contracts that could contribute to a 74.6 per cent and 60.9 per cent jump in net profit for this year and 2007 respectively, a research house said.
  
  Kenanga Retail Research said it pegs the fair value of the stock at RM1.20, which implies 95.1 per cent upside over the initial public offering (IPO) price.
  
  BCT Tech’s IPO price is 61.5 sen after a one-for-one bonus issue upon the listing.
  
  “At our RM1.20-target price, BCT Tech shares would be trading at a financial year 2006 and 2007 price earnings of 14 times and 8.7 times, respectively,” Kenanga said in a research note.

July 22 2006, Business Times

• BCT Technology is the first fabless company, producing analogue and mixed-signal chips, to be listed on the Mesdaq market.
  
  Being fabless, it only designs and develops semiconductor chips but does not manufacture them.
  
  BT Technology shares opened with a premium of 15.5 sen, or 25.2 per cent, at 77 sen against its ex-bonus issue reference price of 61.5 sen.
  
  It closed 11.5 sen or 18.7 per cent higher at 73 sen with 18.72 million shares traded.

Jan 13, 2007. BCT Tech is set to meet its ambitious growth target

• Up to the nine months of September 2006, BCT has only achieved cumulative net profit of RM6.52mil on the back of RM28.42mil in revenue. Should BCT achieve the full year forecast, it would mean that its final quarter itself is delivering approximately 40% of its entire financial year.
  
  “We are quietly confident of achieving the RM10mil,” says BCT's founder and chief executive officer Ken Lee.
  
  Adds BCT's fellow founder and executive director YP Chong. “We are preparing the accounts for audit now, and based on preliminary numbers, we are on target for our profit forecast.”
  
  Assuming that the profit forecast is in the bag, then based on BCT's current share price of 79 sen, the stock would be trading at 9 times (x) historical price earnings ratio (PER), which appears rather attractive.
  
  For 2007, K&N Kenanga head of retail research Teoh Cheng Guan appears very positive on this company. He says that essentially locked in contracts will result in a 60.9% jump in FY07 net profit to RM16.9mil.

26/2/2007. BCT announced its Q4 earnings. Quarterly rpt on consolidated results for the financial period ended 31/12/2006

BCT did 10.531 million. This is what the company said in its notes.

• The Group's recorded revenue and profit before tax of approximately RM17.921 million and RM4.015 million respectively for the current financial quarter, which were approximately RM3.530 million or 24.53% and RM1.680 million or 71.95% higher than the immediate preceding quarter. The increases in revenue and profit before tax were mainly due to the increased sales of ASSP products in the current financial quarter as compared to the immediate preceding quarter . The higher profit margin recorded in the current financial quarter as compared with the immediate preceding quarter was mainly contributed by the introduction of new ASIC products that have higher selling price in the current financial quarter. The increased trade receivables of approximately RM 19.775 million as compared to the immediate preceding quarter was in tandem with the increased revenue generated during the period. Inventory levels also recorded an increase of RM 21.751 million to RM22.971 million as compared to the immediate preceding quarter. This includes buffer inventory and raw materials (WIP wafer) committed by the Company to meet the projected sales demand for first half of year 2007.

14/5/07. Quarterly rpt on consolidated results for the financial period ended 31/3/2007

This is what BCT has achieved since listing.

Margin improved but sales revenue was down a lot.

This is what the company said in its notes.

• The Group's recorded revenue and profit before tax of approximately RM9.313 million and RM3.546 million respectively for the current financial quarter, are approximately RM8.608 million or 48.03% and RM0.469 million or 11.68% lower than the immediate preceding quarter. The decreases in revenue and profit before tax were mainly due to the slower sales of ASSP products in the current financial quarter as compared to the immediate preceding quarter due to the longer factory down time during the festive season coupled with the shorter number of business days during the first quarter of the year. The higher net profit margin recorded in the current financial quarter as compared with the immediate preceding quarter was mainly contributed by the sales mixed in the current financial quarter which consists of more products with higher selling price and gross margin. The trade receivables decreased by approximately RM16.865 million as compared to the immediate preceding quarter due to management’s decision to tighten credit control. Inventory levels also recorded a decrease of RM3.734 million to RM19.236 million as compared to the immediate preceding quarter. The Company will aggressively reduce its buffer inventory with the aggressive marketing strategy and timely rolling out of its planned new products for the coming quarter in 2007.

Issue to watch. Dilutions of earnings and note KN.

• BCT TECHNOLOGY BERHAD ("BCT" OR "COMPANY) PROPOSED PRIVATE PLACEMENT OF UP TO 12,196,000 NEW ORDINARY SHARES OF RM0.10 EACH IN BCT REPRESENTING 10% OF THE EXISTING ISSUED AND PAID-UP SHARE CAPITAL OF BCT ("PROPOSED PRIVATE PLACEMENT")
  
  On behalf of the Board of Directors of BCT ("Board"), Kenanga Investment Bank Berhad (formerly known as K & N Kenanga Bhd) ("Kenanga") is pleased to announce that the Company proposes to undertake a private placement of up to 12,196,000 new ordinary shares of RM0.10 each in BCT ("Placement Shares") representing 10% of the existing issued and paid-up share capital of BCT to investors to be identified.

2nd April 2007, HDBS iniates coverage.

• We accord BCTT a conservative price target of RM1.70, which is based on 8x FY08 EPS, and is a 38% discount to comparable stocks in this region. With a 40% 3-year CAGR, the target price implies a conservative PEG of only 0.20x.

Jun 8th, 2007, from HDBS

• Cheap stock. With 3-year CAGR of 40%, BCTT shares are trading at only 5.0x FY08F EPS. We believe it should be worth 8x FY08 EPS or RM1.70/share, which implies a very conservative 0.2x PEG.

Jun 11th, 2007, from KN

• Maintain BUY with a revised 12-month target price of RM1.56 (+30.0%) based on a FY08 P/E of 10.0x (2-year (FY06-FY08) PEG ratio of just 0.52x). BCTT’s FY07 and FY08 net profit growth of 45.9% and 38.6% y-y remain respectable despite our slight exchange rate driven earnings downgrades. At RM1.03, BCTT shares are trading at highly attractive FY07 and FY08 P/E of 8.8x and 6.6x, respectively.

Too little info for me to comment more.

rgds

Do you think that Bursa should take action against misleading reporting? Part II

I read with great amusement of what one forum member had posted on Sahamas regrading my blog posting, Do you think that Bursa should take action against misleading reporting?

Posted by Stockraider1,

• Dear Moolah,
  I read with great amazement on your compilation of Jose Borrock reporting today and suggesting SC to take action.
  
  1)Why SC wants to do that ? Jose had done a great job exposing the rumor and killing it!
  
  2)Just bcos of someone misdeeds(insider) u try to blame it to the reporter ! If u are the reporter is it fair.
  
  3)stopping the reporter from reporting misdeeds (rumor)is wrong is like we preventing catching the robber ? Come on lets bark at the right culprit!
  
  4)Taking out a reasonable efficient solution (query confirmation) without putting up an alternative is a disservice to the capital market.
  
  5)the public or is it the stock operator ? Need to be prudent of relying on sensitive info (rumor) which need verifications-If u want to wait for accurate facts please wait for confirmation b4 committing to buying.If u want to speculate who can stop u ?
  
  6)For those people who wants to invest on pure reasonable good accurate facts my suggestion is to rely on Bursa announcement release every day!

I will not make a reply to these comments but instead I shall leave these comments open and invite everyone to post your opinion on this issue.

Do you think that Bursa should take action against misleading reporting?

Published on Reuters News, Bursa Malaysia may take action against Transmile

• "Bursa will not hesitate to take action against the companies should they be found to have made misleading announcements; and also against the directors if they had caused, aided, abetted or permitted the breach,"

So what about misleading news publications?

What if a reporter continues to publish misleading articles based on unconfirmed sources, time after time again?

This morning, Star Business reporter, Jose Barrock, reported the following, According to Sources: Ranhill Strikes Oil!!!!!!!!

• Monday June 18, 2007
  
  Ranhill Bhd strikes oil
  
  By JOSE BARROCK
  
  RANHILL Bhd and its joint venture partners are believed to have struck oil in the Citarum block off West Java late last Friday, according to sources familiar with the company.

By lunch time, the stock flew up, up and away, rising a whopping 54 sen or 29% just because of that "according to sources" article published this morning!

However, before the market re-opened for the afternoon session, Ranhill made the following announcement, which was reported by Bloomberg.

• Ranhill Bhd., a Malaysian engineering company whose shares surged 30 percent today, denied a report that it struck oil in an area off West Java, Indonesia.
  
  ``There's no commercial oil and gas show as yet,'' Chief Operating Officer Amran Awaluddin, said in an interview in Kuala Lumpur today.

The stock retreated instantly before it was suspended at 2.18, up 37sen, surrendering 17 sen of its gains!

Now this simply left a terrible taste for most market players, investors, traders and punters.

First it was false accounting, now it is false reporting!

What fighting chance does the market player has against such odds?

Here are some comments posted.

1. I saw a denial from Ranhill in Bursa today as well about an article in the NST last Friday where they were supposed to be involved in a consortium to develop a RM 9B project in the ME.These reporters should be suspended and blacklisted.


2. what you have said is very true...that reporter should be called up by SC to investigate who is the so call "source" and whether any money transacted between them to write this piece of rubbish and whether they have profited by this "rumour".Finding hard to read any" truth" news nowaday in the local newspapaer.


3. Moola, have you compiled a list of links to your articles exposing this JOSE's "creative reporting"?

Well, I do have some old stuff!

1.Saturday January 31, 2004

Metro Kajang eyes Lankhorst

BY JOSE BARROCK

PROPERTY development and management company Metro Kajang is aggressively looking to beef up its land bank. One plan being considered towards this end involves the possible reverse takeover of Lankhorst Bhd. The biggest pull for Metro Kajang is Lankhorst's 54,753 sq ft undeveloped land in Shah Alam. The latter also has 14,000 ha land southwest of Seremban.

Details, however, were hard to come by as industry sources say the plan is still in the preliminary stages.

<=> Here is Lankhorst reply. RE: ARTICLE "METRO KAJANG EYES LANKHORST" IN THE STAR NEWSPAPER

• we wish to state that we have not been in any discussion nor are we aware of any discussion held with Metro Kajang for any possible reverse takeover of Lankhorst by the former

But the most incredible thing is this statement.

• In addition we do not own 14,000 hectares land in southwest of Seremban. What we own is 14.164 hectares of quarry land in the Mukim of Jimah, District of Port Dickson, Negeri Sembilan.

Lankhorst denied and stated that they did NOT own that 14,000 hectares of land stated by the reported.

So where did the reporter get the info from? Who is the source?

2. Feb 14th 2004.

• Fountain View in talks to buy Kurnia Setia stake
  
  BY JOSE BARROCK
  
  FOUNTAIN View Development Bhd is eyeing a stake in plantation counter Kurnia Setia Bhd. It is believed that talks between both parties have just commenced and therefore, details are not forthcoming.
  
  Kurnia Setia – a little known main board plantation counter with a market capitalisation of only about RM69.32 million – has some 11,522 ha of oil palm and rubber plantation, and is controlled by the Agricultural Development Board of Pahang with a 45.41 per cent stake in the company.
  
  It is believed that Fountain View Development is looking to increase its presence in the plantation business, especially in oil palm cultivation, capitalising on high crude palm oil (CPO) prices to boost its earnings. The company has been suffering losses since financial years 2001 and 2002.
  
  The financial year just ended may not bring much cheer to Fountain View Development shareholders as well. The company, for the nine months ended September 2003, posted a net loss of RM3.84 million on the back of RM56.32 million in sales.
  
  CPO prices have been on an upward trend since September last year, gaining some 35 per cent to close at RM1,892.50 on Thursday.
  
  “The problem is with the company's property development arm which is based in Johor. A focus on plantations will boost earnings, especially with the current high CPO prices,” the source says.
  
  Fountain View has about 11, 570 ha of plantation land, of which almost 70 per cent is cultivated with oil palm while the remaining are planted with rubber and cocoa. Previously known as Plantation and Development (Malaysia) Bhd, Fountain View was a PN4 counter. Under a restructuring scheme, Plantation and Development became a wholly owned subsidiary of Fountain View after a share swap, capital reduction exercise, issuing of irredeemable convertible unsecured loan stocks and debt compromise.
  
  News of Fountain View's interest in Kurnia Setia has yet to hit the market. Kurnia Setia shares closed at RM1.11, down three sen from its close on Wednesday. It hit its 52-week high of RM1.25 on Dec 8 last year while its low of 63 sen was on Feb 27 last year.
  
  Fountain View shares have risen six fold, since listing at RM1 on Nov 18 last year. The counter closed at RM5.80 on Thursday.

Here is Fountain View reply. ARTICLE ENTITLED : "Fountain View in talks to buy Kurnia Setia Stake"

• The Board of Directors wish to inform that the Company has never been involved in any talks to acquire a stake in Kurnia Setia Berhad and as such wish to deny the following statement :
  
  "Fountain View Development Bhd is eyeing a stake in plantation counter Kurnia Setia Bhd."
  
  In addition, the board have no knowledge as to the sources on the publication of the above-mentioned article.

3. Feb 12 2005.

• Tradewinds breaks six-year losing streak
  
  BY JOSE BARROCK
  TRADEWINDS Corp Bhd (formerly known as Pernas International Holdings Bhd), it is believed, will report profits of about RM100mil for FY04. This represents a marked improvement, breaking a six-year losing streak.
  
  The company is expected to announce its results at the end of the month.
  
  “Tradewinds (Corp) has turned around significantly. It made about RM100mil profit after incurring losses last year. Debt too has been slashed considerably,” says a source.
  
  For the financial year ended December 2003, Tradewinds Corp suffered a net loss of RM73.7mil from RM1.1bil in sales. But the signs of improvement were already evident from the first nine months performance of the company. For the nine months ended September 2004, the company - largely involved in the hotel business, property development and plantations - posted a net profit of RM54.2mil on the back of RM938.5mil in revenue.
  
  Sources say both the plantations and sugar businesses have lent a boost to the company’s earnings.
  
  Tradewinds Corp controls as much as 53% of Tradewinds (Malaysia) Bhd, a company that owns Central Sugar Refinery Sdn Bhd, which controls as much as 40% of Malaysia’s RM1.5bil sugar market.
  
  In the future, more can be expected from Tradewinds Malaysia as the company just strengthened its position in the sugar business via the acquisition of Gula Padang Terap Sdn Bhd, from among others Tan Sri Robert Kuok Hock Nien’s PPB Group Bhd, for RM188mil.
  
  Tradewinds Corp’s hotel business, it is understood has just about broken even, but the prospects seem promising. “There are a lot of improvements ... some of the loss-making hotels have turned around. The Mutiara Pedu (Golf and Lake Resort) in Kedah and the Hilton Batang Ai (Longhouse Resort in Sarawak) have also made progress, things are looking better for the group,” the source adds. The two hotels were previously up for sale with a price tag of around RM100mil.
  
  Tradewinds Corp has managed to cut its debt from RM2.5bil in 2003 to the region of RM1.2bil now which will undoubtedly reduce its finance cost burden.
  
  Year to date, Tradewinds shares have gained 11 sen, having reached a 52-week high of 78.5 sen in late January this year. The counter ended trading on Tuesday at 76 sen.

What was wrong?

1. Tradewinds first 3 quarters net profit only totals 54.2 million. So this source is suggesting that Tradewinds makes a whopping net profit of 100 million for its current fiscal year. Which means Tradewinds will make a whopping 45.8 million (100 -54.2 ) for the last quarter of the year. And how did Tradewinds do? Some 11 days later, Tradewind reported a loss for its remaining quarter of its fiscal year and only ended its fiscal year making some 52.504 million.

2. Debts only 1.2 billion? Badly twisted! Traewinds had a total debts of 1.894 Billion!

Now consider the impact on the stock.

Well Jose Barrock wrote that article on Saturday, Feb 12th 2004. Before that incredible according to sources article was written, TWSCorp (Tradewinds) was a stock trading around the 77 sen and many thanks to the article, TWSCorp went up some 4.8% on Feb 14th. Now after TWScorp hitting a 52-week high on the next trading day, Feb 14th 2005, 8 trading days later, on Feb 24th, TWSCorp closed at 63 sen!!!

4. November 19, 2005

• Saturday November 19, 2005
  
  China boost for Salcon
  
  BY JOSE BARROCK IN LINYI, CHINA
  
  WITH a large contract in the booming Chinese market under its belt, and the possibility of inking more lucrative deals, there appears to be a steady flow of positive news for water treatment specialist Salcon Bhd.
  
  ...
  
  For the first six months of its financial year, Salcon posted a net profit of RM570,000 on the back of RM112.6mil sales. The company’s earnings per share during the period was 30 sen, while its net tangible asset per share stood at 52 sen.

Terribly misleading! Salcon EPS at that time was only a mere 3 sen and not 30 sen!

5. 21 Jan 2006. Courting AV Ventures

• Courting AV Ventures
  
  By JOSE BARROCK
  
  SECOND board counter, AV Ventures Corp Bhd (formerly Autoindustries Ventures Bhd) may have a new controlling shareholder pretty soon, sources familiar with the company say.
  
  Datuk Amanullah Mohamed Yusoof, who is a non-independent, non-executive director of the company, is currently the majority shareholder with 28% equity or 12.1 million shares in AV Ventures.
  
  He is believed to be looking to cash out of AV Ventures to focus on his oil and gas business currently held under a private company Pivotal Achievement Sdn Bhd.
  
  BizWeek was told that several parties have expressed interest to take up his stake in the company, one of whom includes Tan Sri Syed Mokhtar Albukhary.
  
  Syed Mokhtar’s interest in AV Ventures, which manufactures automobile parts, such as wiper arms, car window regulators, horns and other parts for the auto industry, it seems stems from his shareholding in another automotive player, conglomerate DRB-HICOM Bhd in which he acquired 15.8% equity last year.
  
  The tycoon is believed to have sent his feelers out and made an offer to Amanullah via merchant bankers CIMB Bhd, offering RM1.20 a share, which works out to a total of about RM14.5mil for Amanullah’s shares.
  
  The RM1.20 per share offer is a steep premium to AV Ventures close of 66 sen on Thursday and its net tangible asset peer share which at end September stood at 27.5 sen.

Massive rumours! An offer of 1.20 for AV Ventures was simply sexy because AV Ventures was just trading at 66 sen then!

Here is AV ventures reply yo Bursa. AV VENTURES CORPORATION BERHAD ("the Company" or "AV Ventures") ARTICLE ENTITLED "COURTING AV VENTURES"

• Reference is made to the enquiry by Bursa Malaysia dated 23 January 2006 with regards to the above article in The Star, Bizweek on Saturday 21 January 2006 and on the following particulars:-
  
  (1) Datuk Amanullah Mohamed Yusoof.... is believed to be looking to cash out of AV Ventures..."
  
  (2) "...several parties have expressed interest to take up his stake in the company, one of whom includes Tan Sri Syed Mokhtar Albukhary."
  
  (3) "The tycoon is believed to have...made an offer to Amanullah via merchant bankers CIMB Bhd, offering RM1.20 a share; which works out to RM14.5 million for Amanullah's share"
  
  The Company, after due and diligent enquiry with all its Directors, major shareholders and all such persons reasonably familiar with the matters for this disclosure, wish to inform the following:-
  
  Question 1
  Dato' Amanullah Bin Mohamed Yusoof confirmed that he is not looking to cash out of AV Ventures. However, as an entrepreneur, Dato' Amanullah may be open to any offers which may benefit the shareholders of AV Ventures.
  
  Question 2
  Dato' Amanullah has confirmed that several parties have expressed interest to take up his stake in the Company, but did not receive any offer from Tan Sri Syed Mokhtar Albukhary.
  
  Question 3
  Dato' Amanullah confirmed that Tan Sri Syed Mokhtar Albukhary did not make any offer

How? 3 strikes in one article?

Some more recent stuff.

6. December 2, 2006 ( TM eyes Time dotCom )

• TM eyes Time dotCom
  
  By JOSE BARROCK
  
  THE board of Telekom Malaysia Bhd (TM) is expected to deliberate on a proposal this week, one that it has been mulling for some time now. Sources say the state controlled telecommunication giant is considering a plan to acquire a 42.7% stake in Time dotCom Bhd from its parent Time Engineering Bhd.
  
  BizWeek understands that the offer price for some 1.1 billion Time dotCom shares, although yet to be finalised, may be in the region of RM1 and RM1.20 per share. A decision is expected to be made soon

Here is the reply.

• We wish to inform the Exchange that the above statements are inaccurate and misleading and they were not attributed to any sources from Telekom Malaysia Berhad (TM). We further wish to state that TM has no plan currently to acquire a stake in Time dotCom nor Time Engineering Berhad and that there is no Board of Directors meeting scheduled this week as erroneously reported.
  
  For the record, TM Group owns the largest network of fibre optic cables in Malaysia totaling more than 220,000 core kilometers.

7. Dec 9 2006. Dialog Group to list unit in Singapore Stock Exchange

• OIL and gas player Dialog Group Bhd is planning to list one of its units on the Singapore Stock Exchange. The plan, if it materialises, may involve a sweet surprise for shareholders as the group may distribute special share dividends in the Singapore-listed unit.
  
  “The plans are looking good. The listing is likely to be pursued,” says a source close to the group.

Dialog's denial.

• We wish to clarify that in line with its business expansion regionally and globally, Dialog has continuously explore various options to fund these expansion. However, at this point in time, the Board of Directors has not made any decision in regards to a listing of any one of its subsidiaries on any stock exchange nor has appointed any consultant or adviser.

Fast forward.. too long... more recent stuff.

8. April 21st 2007. ( Syabas shake-up in the pipeline? )

• By JOSE BARROCK
  
  IT is understood that Kumpulan Perangsang Selangor Bhd (KPSB) is looking at acquiring Puncak Niaga Holdings Bhd's 70% equity interest in water supply services player Syarikat Bekalan Air Selangor Sdn Bhd (Syabas). Kumpulan Darul Ehsan Bhd (KDEB), the Selangor government's investment arm, owns the rest of the Syabas shares.
  
  KDEB is also KPSB's parent company, with a 55% shareholding. KPSB intends to buy the 70% stake at the present market value, according to a source, who declines to disclose any figures.
  
  Syabas has a 30-year concession, which commenced in early 2005, to supply water to Selangor, Kuala Lumpur and Putrajaya.
  
  KPSB is considering the share purchase so as to allow the State Government to firmly control the concession.
  
  There is also likely to be synergy between Syabas and KPSB's existing water businesses. Says a source, “It's about accountability”.
  
  “At present, the accountability for the water supply lies mainly in the hands of a listed company controlled by an individual. This will change when KPS takes over the helm,” the source adds.
  
  “At present, the accountability for the water supply lies mainly in the hands of a listed company controlled by an individual. This will change when KPS takes over the helm,” the source adds.
  
  Executive chairman Tan Sri Rozali Ismail is the face of Puncak Niaga. He has a 41% stake in the company, both directly and via Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd.
  
  KPSB is no greenhorn in the water sector. It has 55% equity interest in Titisan Modal Sdn Bhd, whose subsidiary, Konsortium ABASS Sdn Bhd, operates a water treatment plant in Selangor. KPSB also has an associate stake, to the tune of 30%, in Syarikat Pengeluar Air Selangor Holdings Bhd, another supplier of treated water.
  
  At press time, it is not clear how KPSB plans to finance the acquisition.
  
  After a loss-making 2005, the main board company rebounded last year to post an unaudited net profit of RM17.8mil on the back of RM351.3mil in sales.
  
  As at December, the company had RM271.3mil in deposits and cash balances, while its trade receivables stood at about RM561mil.

According to sources and misleading info! Reporter highlights the cash balances without stating KPS's loans which totals more than 1.2 billion!

4 days later, KHSB lost 0.165 or some 17% since that article was published.

9. Saturday June 9, 2007 ( Tie-up in the offing? )

• Tie-up in the offing?
  
  By JOSE BARROCK
  
  PROPERTY developer Equine Capital Bhd may see the entry of a new major shareholder in the form of the Employees Provident Fund (EPF), or a company controlled by the pension fund – Malaysian Resources Corp Bhd (MRCB).
  
  The plan for the retirement fund to acquire a stake (speculated to be 30%) in Equine, says a source, is related to the potential development of a new airport in Penang that is being mooted by Equine Capital.

MRCB posted these set of comments on Bursa Malaysia.

• We refer to your letter dated 11 June 2007 and to the article which appeared in the Star Bizweek, page BW4 on Saturday, 9 June 2007.
  
  We wish to confirm that we are not aware of the alleged proposal reported by Star Bizweek in its article on 9 June 2007.

Equine Capital, on the other hand made the following set of comments.

• The Company wishes to advise that it is not aware of the speculated acquisition of a 30% stake in ECB by Employees Provident Fund ("EPF") or Malaysian Resources Corporation Bhd ("MRCB"). Todate, it has not received any notification from EPF or MRCB of this speculated acquisition. Further, it has no knowledge of the speculated re-development of the existing Penang Airport land nor the building of a new airport at Batu Kawan.

10. Same day! Saturday June 9, 2007 ( Interest in DNP fuelled by privatisation talks )

• Interest in DNP fuelled by privatisation talks
  
  By JOSE BARROCK
  
  Since April this year, the counter has risen almost three fold. Last Wednesday, the company’s shares breached the RM3 mark in intra day trading.
  
  Market chatter has it that the interest surrounding DNP Holdings stems from the major shareholder of the company, Wing Tai Holdings, planning to take the company private.

Well.. I could go on and on! Really! But I do think this is more than enough!

How?

Do you think that Bursa should take action against such misleading reporting?

According to Bloomberg: Ranhill Denies!

Posted this morning. http://whereiszemoola.blogspot.com/2007/06/according-to-sources-ranhill-strikes.html

Well, I was alerted by my dearest cousin, Tucows about a news clip posted on Bloomberg. (here )

• June 18 (Bloomberg) -- Ranhill Bhd., a Malaysian engineering company whose shares surged 30 percent today, denied a report that it struck oil in an area off West Java, Indonesia.
  
  ``There's no commercial oil and gas show as yet,'' Chief Operating Officer Amran Awaluddin, said in an interview in Kuala Lumpur today.
  
  Ranhill shares jumped after the Star newspaper reported today that the company and its partners have found oil after drilling 6,000 feet, beating earlier projections.

How?

Ranhill was up a whopping 54 sen or 29% just because of that "according to sources" article published this morning!!!!

If Ranhill tanks later, how?

Now tell me, what do you think of that news article published this morning?

Should SC investigate the reporter and his sources?

According to Sources: Ranhill Strikes Oil!!!!!!!!

Posted on Star Business: Ranhill Bhd strikes oil

• Monday June 18, 2007
  
  Ranhill Bhd strikes oil
  
  By JOSE BARROCK
  
  RANHILL Bhd and its joint venture partners are believed to have struck oil in the Citarum block off West Java late last Friday, according to sources familiar with the company.

Are believed! According to sources!

How about publishing who these sources are?

• It is understood that the top brass at Ranhill are pretty upbeat with the prospects at the Citarum block, with the company having struck black gold after only some 6,000 feet of drilling, which substantially beats earlier projections.
  
  StarBiz understands that Ranhill may make an announcement pertaining to the discovery of oil as early as Wednesday to the Bursa Malaysia.
  
  “It’s quite a big oil field, possibly in the region of 350 million barrels, which is almost five times what was initially estimated.
  
  "It’s also quite promising in that the find comes after only about a month of drilling,” a source familiar with the ongoings at Ranhill said.

Now Ranhill is now UP a whopping 28 sen because of this news based according to sources!

So if this news is DENIED by Ranhill, then how?

Another thing, why is our news reporter reporting before Ranhill Bhd?

If this story is admitted by Ranhill, then we need to address who are these sources leaking this news to the newspaper.

And also if these sources is able to obtain such stock market price sensitive information, then shouldn't we address the issue of what if certain parties had obtained these info and profited from them? Doesn't this constitute insider trading?

How?

Bumi Armada Sailing Again???

WOW!

What a horrific and disgusting news on a Monday morning. Bumi Armada set to sail back to Bursa

• BUMI Armada Bhd may raise funds from an initial public offering in Malaysia as it needs to spend RM1.2 billion to buy 17 ships and service the deepwater oil and gas industry.
  The firm, owned by tycoon T. Ananda Krishnan, may also borrow part of the money needed to finance the two-year initiative.

Yeah, now they need the investing public money again. So they want to seek listing!

A couple of years ago, they delisted their listing, because they felt that there is MUCH MORE money for them if Bumi Armada was privatized!

• Bumi Armada would complete its circle if it returns to Bursa. Ananda, through Objektif Bersatu Sdn Bhd, had taken the company private in 2002.

See this posting http://whereiszemoola.blogspot.com/2006/09/pirates-which-siezed-armada.html

Ms. Claire Barnes of Apollo Investment Management wrote the following (here )

• To go back to the merits of the shares: in the five years since we first bought Bumi Armada, revenue has tripled. This corresponds to growth of 25% per annum, which is perhaps slightly higher than the growth in other aspects of the business, but broadly reflective. In purely qualitative terms, before thinking about valuation, this is one of the gems of the Malaysian market. It has an excellent service record, it has good relations with its customers in the offshore oil and gas sector, and apart from 1997, when it recorded unrealized FX losses on an appropriately matched loan book, it has sustained returns on equity of comfortably over 20%. It is highly cash generative, and when the Land & General stake was overhanging the market we put forward an MBO-and-buyback proposal which would have seen the debt paid down in short order while generating phenomenal growth in earnings, net assets, and cashflows per share. This opportunity was not taken, but delisting aside, the shares would remain attractive; the offer is far from generous, and clearly includes no premium for privatisation. We didn't sell at RM8.00 two years ago, and Mayban Securities on Friday published a buy recommendation valuing the shares at RM12.20, which is arguably conservative.
  
  Bumi Armada reported earnings per share of RM1.01 for 2002, with an upbeat assessment of outlook for the year ahead, so is on a current-year PE of 6-7 - perhaps half that of the market, despite better-than-average business characteristics and growth prospects, although some discount is normal for illiquidity. In its recent announcement, it has however cut back on operational background, provides no details of major contracts, and omitted any final dividend despite its earnings growth. (This last has particularly incensed some minority shareholders who are surprised 'that Ananda Krishnan should be involved in such a deal'.) This reticence is unfortunate given the conflicts of interest involved.
  
  In the event of a forced delisting, we believe that there would be a legal case against the directors and the controlling shareholders for oppression of the minorities, but costly and time-consuming legal action is a last resort for investors in any jurisdiction.
  
  We were pleased to see that Mayban remains optimistic about Bumi Armada's prospects, but admit to being surprised by the timing. Maybank, its parent, was amongst those which originally jumped at the RM7. This must be proof of their Chinese walls - or of the different thought processes of bankers and investors. We are more impressed by this than by the role of RHB Sakura, which also agreed to sell its Bumi Armada shares in August, and wonder whether it was already advising the company or the buyer: as far as we know, the invitation was extended only to Malaysian banks, and not to a single foreign bondholder. Bondholders who expressed a desire to participate immediately after the deal became public were told that it was already too late - which is presumably lawful, but was certainly discriminatory, and not the sort of thing to make foreign investors think they are on a level playing field.
  
  If an offer is mandatory, it is not necessary to have bureaucrats review the decision. In this case, the controlling shareholders have to pay RM7, but they only have to pay it much later to minorities than to the favoured few. In other cases, it might suit a cash-strapped acquirer very well to avoid a general offer altogether; again, why should officialdom help him? (To avoid any confusion, we would like to be absolutely clear: if a shareholder acquires control, there should be a general offer at the same price, but minority shareholders should be free to refuse.)
  Information flows are important, and much more troublesome than they should be in the era of electronic communications. International investors frequently cannot obtain announcements and circulars through the global custody network in time to consider them adequately; frequently they arrive too late to meet corporate action deadlines. Listed companies should be required to copy the local stock exchange and international wire services with all announcements relevant to investors - such as announcements to Euroclear. This responsibility should not be left to companies: they respond when it suits them, and forget when it doesn't.

So Bumi Armada was highly rated. Growth of over 25% per annum, excellent service record, return of equity of over 20% and great cash flow.

Then out of the blue, Barmada (Bumi Armada), as Claire described "has however cut back on operational background, provides no details of major contracts, and omitted any final dividend despite its earnings growth."

And then it decided to announce to delist with an offer of 7.00! When Mayban conservatively valued it at 12.20.

Me? Honestly, I thought the share should have been worth at least 18.00!

And the rest of was history. Many was simply appalled at the manner Barmada was delisted.

Now let's refer back to Claire's original pirates article which was written back in 2003.
Pirates attempt to seize whole Armada: pitfalls of investing in Malaysia

Read her opening statement again.

• There are many attractions to living in Malaysia, but we cannot muster the same enthusiasm for investing here (a change from July 99, when we were defending our decision to hold; our major investment then as now was Bumi Armada). Our recent experience has been far from encouraging, and it seems timely to provide an update.

So Bumi Aramada seriously plans to list again, eh?

Well, this is another extremely sad day in the history of stock exchange.

How could foreign investors, like Claire, be enthusiastic about investing in our stocks when our corporates has utter no respect for the minority shareholders?

When there is value in the company, the seek delisting. When they need your money, they seek listing again.

Oh, life is never fair, it has been said.

How true!

However, let me add this, life is never fair if in the future, the investing public shuns our stock market due to stunts like this!

Oh and for Bumi Armada, if it lists, I would AVOID the stock like plague! How could I safely know that I would ever be fully compensated for taking the investment risk in investing their company? What if the pull the same stunt and delist at a cheap valuation again?

Oh, life is never fair!

Aliran Ihsan: What's Up Doc?

Posted on the Star Business on the 14th June 2007. Aliran Ihsan price surge leads to talk of takeover

• Aliran Ihsan price surge leads to talk of takeover
  
  By C.S. TAN
  
  PETALING JAYA: Shares in Aliran Ihsan Resources Bhd (AIRB) rose 36 sen to RM1.09 while its loan stock, AIRB-LA, climbed 10.5 sen to 99.5 sen in active trading yesterday.

Highlighting a hot stock? Ok, the reporting is perhaps trying to give an idea what's happening to the stock.

• That led to market talk the company could be taken private by its major shareholders, which are reportedly linked to Tan Sri Syed Mokhtar Al-Bukhary.

Market talk? That's pure speculation, yes?

And as usual, such speculation published on our local financial news is denied by the company mentioned.

• We refer to the query from Bursa Malaysia Securities Berhad dated 14 June 2007, pertaining to an article appearing in the Star, Starbiz Section, page B3, Thursday, 14 June 2007.
  
  After making due enquiries with all the Directors and major shareholders of the Company, we wish to inform that the Company is not aware nor has any knowledge of the proposed exercise as stated in the said article.
  
  This announcement is dated 15 June 2007.

So for whom does such reporting serves?

Are we now living in a society in search of hot stocks that we condone news based on "market talk" or as highlighted in blog postings, More Reporting Woes: Surely They Are Unaware! and If Accounting Woes is Bad, what about Reporting Woes? , financial news based on baseless SOURCES?

Back to Aliran Ihsan.

Article was published on June 14th.

Have a look at Aliran Ihsan stock market data below.

On the 13th, this stock came alive. Up a whopping 36 sen.

Now thanks to the article, the stock SURGED to its all time high of 1.35!

The stock chart depicts the impressive flight of Aliran Ihsan.

Last evening, AS EXPECTED, Aliran has denied this MARKET TALK.

How?

If Aliran Ihsan tanks on Monday, how?

And what about the role that the reporter has played in all this? Did that news report helped propel Aliran much higher?

So do you think that it is right that a news report should be used to help promote and help propel a stock higher?

How?

Eighty Seven and Two Zero Zero Seven

Today's FSO Market Wrap is a must read for all. Market commentator, Ryan Puplava has written a wonderful piece called, Revisiting the '87 Crash

• All of the events in 1987 (Japanese and US stock bubble, higher commodity prices, cheap bonds creating high interest rates, falling dollar) created the market crash in 1987. I would say the highest contributor had to have been a US government bond yield of 10%. How does the 1987 market crash resemble our current market today? You’re probably already linking some of the traits I see in the market today: over-exuberance in the Chinese stock market, rising commodity prices, a falling dollar, and rising interest rates.

Spooked? Ryan's closing remarks.

• All the buzz this week has been about falling bond prices. The higher rates caused by the fall in bond prices have helped shake stock investors a little and propped the dollar higher. Bond prices are oversold and a rally is a high probability from here. The head and shoulder pattern in the 30-year US treasury bond has resolved itself with a price target of 105 from the neckline at 110. Even with a yield over 5% in both the 30-year and the 10-year bond, we’re in a period of relatively low interest rates. The problem, of course, is that the U.S. is a lot more susceptible to a housing market decline with a lot more double mortgages and a lot more adjustable rate mortgages today than in 1987.
  
  The trend thus far this year has been an economic environment consisting of explosive growth in the Chinese stock market, rising commodity prices, falling dollar, and falling bond prices. Some of that looks to be reversing this month as the Chinese market has weathered a second significant correction. In addition, commodity prices (except for energy) have corrected and interest rates have made a break for higher ground. I feel that it’s too soon to make any bearish or bullish predictions over stocks, commodities, or bonds. It does look however, that China’s government is taking steps to apply the brakes to speculation in their stock market, and those steps could reverberate through commodity and stock prices.
  
  Mark Twain said that history doesn’t repeat itself, but it does rhyme. While today may not be repeating the ’87 crash, this year is starting to rhyme like it.
  

Journalist grilled over ‘creative reporting’

Caught this local news article.

• Journalist grilled over ‘creative reporting’
  The police have recorded a statement from a reporter with an English daily for “excessive creative reporting” in the case of the landlord who fixed spy cameras in a house he rented out to female students.

Are you thinking of what I am thinking?

Aren't you utterly fed-up of so-many cases where our local listed companies denies news from our local financial news journalist who reports business news based on 'un-named sources'?

A Lecture With Francis Chou

Enjoy!

http://www.bengrahaminvesting.ca/Resources/Video_Presentations/Chou_Video_01.wmv

Rates Rally Gives Bounce to Markets

The Dow had a nice day as the Bulls fight back and FSO Market Commentator, Chris Puplava notes that the Interest Rate Rally May Be Over Short-Term, but Ripple Effects Will Only Worsen Housing Situation.

• The bond sell-off that began last month with the 10-year UST rising from a low of 4.602% on May 11th to a high of 5.316% yesterday may have reached a short-term top with the RSI near 90, the highest level seen in more than 20 years. Readings over 70 have marked peaks in interest rates previously (as marked below), and the current reading near 90 hints at either a pause or a pullback in rates.
  
  
  

Lastly, do give Ms. Claire Barnes, of Apollo Investment Management made the following remarks.

• Some commentators were reassured that US first quarter reporting passed without financial disaster, and concluded that new age financing had painlessly dispersed systemic risk. My suspicion, on the contrary, was that market-fundamentalist accounting is postponing the emergence of problems: judgment is no longer required to be exercised in provisioning, and prudence is deemed old-fashioned - instead we have "fair value", relying either on a mechanistic marking-to-market, by reference to last trade. The nature of niche markets is that when problems emerge, they first become illiquid (and even more easily manipulated); only later when other options have been exhausted can a single distressed-seller cause prices to fall off a cliff. I then discovered that US accounting rules require holders of CDO paper to value it with reference to questionable models (such as the aptly-named Monte Carlo simulations) from the far-from-disinterested rating agencies. 'I knew it was bad but...' says John Succo (must read). 'The levels at which investors are carrying [mortgage-backed securities] paper is not reflecting underlying reality as the holders simply hold their collective breath and the rating agencies ignore a worsening environment.'
  
  Before buying a money market fund or structured product, remember the old maxim:
  
  'More money has been lost reaching for yield than at the point of a gun.'
  
  And before assuming that a money market fund will be liquid when you need it, consider the Paper Chase.

TWSCorp

One of the hotter stocks today was Tradewinds. And my oh my, cows certainly can fly! (13-06-2007: Tradewinds surges 27% in early trade )

• Tradewinds Corporation Bhd’s share price surged as much as 27% or 41 sen to RM1.89 in very active trade on June 21 after a foreign research house re-rated the counter.
  
  It opened at RM1.51, up three sen. Within the first two hours, there were 38.33 million shares done at prices ranging from RM1.51 to RM1.89.
  
  At 11am, it was trading at RM1.78, up 30 sen.
  
  The company reported net profit of RM7.86 million in the first quarter, compared with a net loss of RM23.61 million a year ago.
  
  Earnings per share was 1.28 sen versus 3.79 sen loss per share. Its net assets per share was RM2.18.

Guess what? I do have a copy of that foreign research house (Merrill Lynch).

• Trading at attractive 0.7x historical book
  With the profit turnaround in the various key divisions, we believe the group is well on track to achieve a net profit of RM118mn in 2008, from a loss of RM11mn in 2006. At the current price, the stock is trading at a decent FY08E P/E and FD P/E of 7.8x and 13.9x, respectively. Even more interestingly, TWC is only at 0.7x historical P/BV and we expect the rationalization of group assets will re-rate this multiple. Our RNAV of RM3.06 is 107% above the current share price. Meanwhile, the major shareholder’s entry price is RM2.10, 42% above the current share price.

It's a turnaround story. From a 118 million losses recorded in its fy 2006, Tradewinds is supposed to recover and achieve a net profit of 110 million by fy 2008!

Hugely optimistic!

But why am I against the possibility of a company turning around?

Is it NOT possible?

See Merrill Lynch analyst is suggesting a turnaround in 2 years! 2 long years!

And me? I do remember this stock. See this posting, Where is the Integrity of Our Financial Press?

Let me paste what was said then here so that we can stay focus on the issue of Tradewinds.

Flashback...... Feb 12 2005.

• Tradewinds breaks six-year losing streak
  
  BY JOSE BARROCK
  TRADEWINDS Corp Bhd (formerly known as Pernas International Holdings Bhd), it is believed, will report profits of about RM100mil for FY04. This represents a marked improvement, breaking a six-year losing streak.
  
  The company is expected to announce its results at the end of the month.
  
  “Tradewinds (Corp) has turned around significantly. It made about RM100mil profit after incurring losses last year. Debt too has been slashed considerably,” says a source.
  
  For the financial year ended December 2003, Tradewinds Corp suffered a net loss of RM73.7mil from RM1.1bil in sales. But the signs of improvement were already evident from the first nine months performance of the company. For the nine months ended September 2004, the company - largely involved in the hotel business, property development and plantations - posted a net profit of RM54.2mil on the back of RM938.5mil in revenue.
  
  Sources say both the plantations and sugar businesses have lent a boost to the company’s earnings.
  
  Tradewinds Corp controls as much as 53% of Tradewinds (Malaysia) Bhd, a company that owns Central Sugar Refinery Sdn Bhd, which controls as much as 40% of Malaysia’s RM1.5bil sugar market.
  
  In the future, more can be expected from Tradewinds Malaysia as the company just strengthened its position in the sugar business via the acquisition of Gula Padang Terap Sdn Bhd, from among others Tan Sri Robert Kuok Hock Nien’s PPB Group Bhd, for RM188mil.
  
  Tradewinds Corp’s hotel business, it is understood has just about broken even, but the prospects seem promising. “There are a lot of improvements ... some of the loss-making hotels have turned around. The Mutiara Pedu (Golf and Lake Resort) in Kedah and the Hilton Batang Ai (Longhouse Resort in Sarawak) have also made progress, things are looking better for the group,” the source adds. The two hotels were previously up for sale with a price tag of around RM100mil.
  Tradewinds Corp has managed to cut its debt from RM2.5bil in 2003 to the region of RM1.2bil now which will undoubtedly reduce its finance cost burden.
  
  Year to date, Tradewinds shares have gained 11 sen, having reached a 52-week high of 78.5 sen in late January this year. The counter ended trading on Tuesday at 76 sen.

Ok, IT WAS THE SAME BASED ON SOURCES reporting from the very same reporter mentioned Some mumblings and More Reporting Woes: Surely They Are Unaware!. Yes, same style, same end result.

Anyway, can you see the same resemblance?

The very same 100 million turnaround was mooted by so-called sources back on Feb 2005.

It's now 2007!

Back to that blog posting.

Let's do some digging. Tradewinds last reported quarterly earnings was on 30th Nov 2004. And this is what the company management said in its notes.

• But the signs of improvement were already evident from the first nine months performance of the company. For the nine months ended September 2004, the company - largely involved in the hotel business, property development and plantations - posted a net profit of RM54.2mil on the back of RM938.5mil in revenue.

Hmm... so TWSCorp has indeed managed to post a net profit of 54.2 mil, but this is not that accurate since this earnings performance was aided by an extra-ordinary gain of 25.991 mil as stated in TWS financial report.

Anyway, Tradewinds announced its 2004 Q4 quarterly earnings on 25th Feb 2005. It lost 1.746 million for its 2004 Q4 earnings. And only ended its fiscal year making some 52.504 million ( which was aided by an extra-ordinary gain of 25.991 mil ).

And the next fiscal year, Tradewinds lost some 46 million. ( see Quarterly rpt on consolidated results for the financial period ended 31/12/2005 )

And the next fiscal year? Tradewinds lost some 9.8 million. ( see recently announcement on Feb 2007 Quarterly rpt on consolidated results for the financial period ended 31/12/2006 )

So if you look back at that very fateful article posted on Feb 2005, saying that "Tradewinds breaks six-year losing streak", and less we forget the article itself suggested that Tradewinds will earn some 100 million, Tradewinds Corp has lost money 7 out their last 8 fiscal years.

So tell me, do I reckon that this projection is way too optimistic?

Snapshot of earnings table from Merrill Lynch.

And here is a nice chart to show you how nicely TWSCorp has been performing.



Nice to hear Merrill suggesting TWSCorp at such a wonderful price!

Some mumblings

Yesterday evening, I blogged about More Reporting Woes: Surely They Are Unaware! . Hence, this article Beware of Stock Spam Promotion in Major Financial Publications certainly caught my attention.

Seriously, since the Star Biz so-called reporter keeps publishing financial news based on unconfirmed sources, shouldn't one ask if he is running some sort of stock spam promotion? Yes, is he a stock promoter? And for whom?

And what them equity research? In this week's Businessweek, the question of What's Next? is asked.

And what Time? Me? I Loved that classic song, Time from Pink Floyd!

• And you run and you run to catch up with the sun, but its sinking
  And racing around to come up behind you again
  The sun is the same in the relative way, but you're older
  Shorter of breath and one day closer to death
  
  Every year is getting shorter, never seem to find the time
  Plans that either come to naught or half a page of scribbled lines
  Hanging on in quiet desperation is the English way
  The time is gone, the song is over, thought Id something more to say

Time is the friend of the wonderful business, the enemy of the mediocre, says Warren Buffett.

However, what about investment and time? Would time also be the enemy of the mediocre investment? Saw this blog posting.

• Often we get caught in a pattern of poor investment. Over time, the benefits fade away and what remains is mostly negative, but we keep doing it out of habit. This can be avoided by periodically analyzing our behavior. Is it still a good investment, or is it time to make a change?

Interesting yes? And if you love investment quotes, then Tilson funds, Value Investor Insight May Issue has a bunch of great investment quotes. ( here )

I like this one.

• There’s a clarity that comes with great ideas: You can explain why something’s a great business, how and why it’s cheap, why it’s cheap for temporary reasons and how, on a normal basis, it should be trading at a much higher level. You’re never sitting there on the 40th page of your spreadsheet, as Buffett would say, agonizing over whether you should buy or not.
  Joel Greenblatt, 10.31.06

Yes, it's great to see our investment providing fantastic returns but what about those investments that offer high yields? Have a read at this article from Bankrate.com, Investors looking for high yields should use caution

Professor Partha S. Mohanram is quoted on the NYTimes saying that to Pick Winners, Start by Weeding Out the Losers! Me? I always believe that is always good to learn about Spotting Them LOSERS!

And lastly, Fred Korbik of American Association of Individual Investors, lists out the Secrets of Picking Great Growth Stocks.

More Reporting Woes: Surely They Are Unaware!

Yes, surely they are unaware!

MRCB posted these set of comments on Bursa Malaysia.

• We refer to your letter dated 11 June 2007 and to the article which appeared in the Star Bizweek, page BW4 on Saturday, 9 June 2007.
  
  We wish to confirm that we are not aware of the alleged proposal reported by Star Bizweek in its article on 9 June 2007.
  
  We assure Bursa Securities that MRCB 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.

Equine Capital, on the other hand made the following set of comments.

• We refer to the letter from Bursa Malaysia Securities Bhd ("Bursa Malaysia") dated 11 June 2007 on the above article that appeared in Star bizweek, page BW4, on Saturday, 9 June 2007.
  
  The Company wishes to advise that it is not aware of the speculated acquisition of a 30% stake in ECB by Employees Provident Fund ("EPF") or Malaysian Resources Corporation Bhd ("MRCB"). Todate, it has not received any notification from EPF or MRCB of this speculated acquisition. Further, it has no knowledge of the speculated re-development of the existing Penang Airport land nor the building of a new airport at Batu Kawan.
  
  The Company wishes to draw attention to its announcement made on 7 June 2007 that it has no corporate development relating to the Group's business and affairs or any material information that have contributed to the unusual market activity. As part of its core business, the Company is continuously looking for business opportunities in the property industry and will ensure that appropriate announcements be made if and when any of these business opportunities materialize and they fall within the ambit of the Listing Requirements of Bursa Malaysia.
  

Let's have a look at that said article, Tie-up in the offing? ( Same reporter as mentioned here, If Accounting Woes is Bad, what about Reporting Woes? )

Let's have a peep at what was written.

• PROPERTY developer Equine Capital Bhd may see the entry of a new major shareholder in the form of the Employees Provident Fund (EPF), or a company controlled by the pension fund – Malaysian Resources Corp Bhd (MRCB).

Truly incredible! A new phrase, "may see".

I wonder where the reporter or is it the fantasy news author, got this idea from!

Ah, yes sir me! The so-called reporter got it from the infamous SOURCE!

• The plan for the retirement fund to acquire a stake (speculated to be 30%) in Equine, says a source, is related to the potential development of a new airport in Penang that is being mooted by Equine Capital.

Come on, Bursa.... let's query this reporter and ask him to show us his source!

Surely this cannot continue forever, can it?

Come on, where is the INTEGRITY of our financial news?????

Surely these two listed companies got more productive work to do than to answer such terrible and awful news reporting!

And guess what? That's not all. In the same weekly financial news publication ( I wonder if I can call it a financial news publication when the articles are so baseless!), there was this other article, Interest in DNP fuelled by privatisation talks

Guess who wrote it?

Yup, you got it, the very same reporter.

• Market chatter has it that the interest surrounding DNP Holdings stems from the major shareholder of the company, Wing Tai Holdings, planning to take the company private.
  
  BizWeek understands that Wing Tai has already been accumulating the company’s shares and is looking to make a general offer of between RM3.30 and RM3.50 per share to take the company private

Market chatter? BizWeek understands?

My oh my! New phrases. Stylish!

No matter what, the result was the exactly the same!

DNP made the following announcement.

• We refer to your letter dated 11 June 2007 with reference no. RS-070611-44602 pertaining to an article ("the article") appearing in The Star, page BW3, Bizweek Section on Saturday, 9 June 2007.
  
  We wish to inform that after making due enquiries with all directors and major shareholder of the Company, the Company is not aware nor has any knowledge of the proposed exercise in the article.

How?

Can a reporter keep reporting such articles every single week?

One week, two times?!!!

My, life is simply grand!

Buffett Time!

First of all, here is the link to Whitney Tilson's notes to Berkshire Hathaway 2007 Annual Meeting notes: here

And here is a neat little timeline of what Warren Buffett has achieved: A Chronological History of the Oracle of Omaha: 1930-1956

Enjoy!

Update on YLI Holdings

My Dearest Doc,

Here is an update to the YLI Holdings posting.

Today's Business Times reported the following, Syed Yusof buys 30pc stake in YLI

• Syed Yusof buys 30pc stake in YLI
  
  June 9 2007
  
  TAN Sri Syed Mohd Yusof Tun Syed Nasir, a prominent property developer, has bought 30 per cent of YLI Holdings Bhd, a pipe maker for an undisclosed sum.
  
  Syed Yusof bought 29.6 million, or 30 per cent, of YLI on June 7, the company said in a statement to Bursa Malaysia yesterday.
  
  On the same day, the same number of shares were sold by Loh Yok Yeong, the major shareholder of YLI. This means that Syed Yusof is now the single biggest shareholder of YLI.
  
  Loh held some 40 per cent of YLI as at June 30 2006, its annual report showed.
  
  Shares of YLI were up 10 per cent to RM3.20 yesterday.
  
  Syed Yusof, who made a small fortune from the takeover of Southern Bank Bhd by Bumiputra-Commerce Holdings Bhd, had told Business Times that he was looking to buy shares of undervalued companies.
  
  In August last year, Syed Yusof sold his shares in Landmarks Bhd to Genting Bhd, presumably for a tidy profit, after he threatened to make a bid for the firm.
  
  Then, he was unhappy because the incumbent shareholders wanted to dilute his stake and tighten their grip on the company.
  
  It is unclear what he intends to do with YLI. The pipe maker reported an 8 per cent rise in net profit to RM14 million in fiscal 2007. It also has a clean balance sheet: about RM50 million in cash and zero debt.

I just realised that I had a copy of OSK report in my mail box on YLI too!

• Given that the new shareholder may significantly boost sales going forward, we have fine tuned our earnings projection by 14.1% and 15.3 for the next 2 years. On top of that, the news may also uplift market sentiment for YLI and thus we are upgrading our recommendation to TRADING BUY. We have applied a more aggressive valuation parameter based on 5 year average peak PER of 20.7x FY08 EPS that translate into fair value of RM4.18 or 43.6% upside potential.

A Mammoth Issue

My Dearest Totomaster,

• u think the GO on COURTS @ RM1.02 is fair? seems like the NTA stands @ RM1.79 as of last quarter....

Firstly let's go back in time.

The warning sign that Courts business was failing was there as early as in 2004. So from an investing point of view it was a rather NO BRAINER to AVOID this stock like plague. And if one had taken the early warning on 1st Sept 2004, price of Courts then was at 1.95.

On that day, Courts had just announced its earnings. It was terrible.

• Net profit for the first quarter ended June 30 had fallen by almost half to RM5.8mil from RM10.7mil in the same quarter last year.

That was the first warning sign. And from a investing point of view, one would have considered the issue of the poor financial performance of its parent company, Courts UK. And in fact Courts UK went into administration in Nov 2004 to avoid bankruptcy.

Now with Courts Uk going into administration, it was a rather an open secret that the management had gotten KPMG to engineer a buyout.

Here's a news clip back in early 2005.

• Saturday January 29, 2005
  Business as usual at Courts
  
  BY ERROL OH
  FOR SALE: A majority shareholding in a listed Malaysian retailer with about 80 stores nationwide. Well established and professionally managed. Comes with an Indonesian subsidiary that offers good growth potential. To enquire, contact KPMG Corporate Recovery, London.
  
  We will never see this advertisement in any publication, but it is likely that something similar will be out there later this year, perhaps as soon as six months from now.
  
  There has been much speculation that Courts Mammoth Bhd will get a new controlling shareholder because parent company Courts plc, which has a 50.1% stake, is ailing, and asset disposals are an obvious solution to the latter's debt woes.
  
  On Nov 30, the UK High Court appointed Mick McLoughlin and Chris Laverty of KPMG Corporate Recovery as administrators of Courts plc. According to a press statement from KPMG, the British retailer has suffered from losses over the past two to three years, and has not been able to complete a restructuring of its operations.
  
  However, the appointment of administrators affects only the Courts business in Britain. “The Courts overseas operations have separate boards, management, suppliers and funding, and will continue to trade as normal,” adds KPMG.

Price of Courts then? 1.39.

RHB then jumped into the speculative bandwagon and wrote the following piece.

• 8 April 2005
  RHB Highlights
  
  Courts Mammoth Berhad (RM1.45) : Courting A New Controlling Shareholder? MARKET PERFORM
  
  Having attended a recent meeting with the management, we muse on the possibility of Courts Malaysia having a new controlling shareholder. The misfortune surrounding Courts UK, which has been taken into administration since 30 November 2004 to avoid bankcruptcy, may prompt Courts plc to sell its 50.27% stake in Courts Malaysia. Courts UK was the biggest contributor to Courts plc’s earnings.
  
  Would EPF, Courts Malaysia’s second largest shareholder with a 7.65% stake, be interested to acquire Courts plc’s block? We doubt it given EPF’s estimated investment cost of RM2.45/share in Courts Malaysia and that the organisation may not be keen to further average down its investment cost.

Yes, EPF, our money is involved!

And RHB made the following reasoning.

• Nonetheless, having said that, Courts Malaysia is not without attractions from both business and share price perspectives:
  
  i) With Courts UK gone, Courts Malaysia now reigns as possibly the second most profitable Courts chain worldwide after Courts Jamaica (see Table 3 for performances of public-listed Courts), covering not only Malaysia, but also the vast and lucrative Indonesian market, which is still largely untapped.
  
  The potential for growth in the size of credit accounts in Indonesia is massive given the republic’s estimated number of households of 60m, comparatively much larger than Malaysia’s 4.8m as at December 2003. Presently, there are only 130,000 credit accounts in Indonesia, compared with about 360,000 in Malaysia.
  
  ii) For all that, the stock is trading at an estimated FY03/06 PER of only 10.3x. .
  
  iii) Also, the share price is trading at 24% discount to NTA, which stood at RM1.90 as at end-3QFY03/05.

Price of Courts then was 1.45.

Now this buyout did not materialize. If one had purchased Courts based on a takeover speculation, this strategy based on this stock, simply failed.

And as it has been said, TIME IS THE ENEMEY OF THE TERRIBLE BUSINESS.

Courts fundamentals deteriorated. For its fy 2004, it earned some 39 million. A year later, it earned 26 million. And in fy 2006, it earned just 1.1 million. Last month it reported a net loss of some 35 million for its fy 2007. TIME is definitely the enemy of the terrible business.

And just as its fundamentals deteriorated, so did its stock price. The clear downtrend in the stock price can be clearly seen.

Courts hit a low of 0.475 on Oct 17th 2006.

If one had purchased Courts in 2005 based on a takeover speculation, then clearly by June 13th 2006 this strategy of buying based on a takeover DID NOT WORK as Courts fell below the 1.00 mark and closed at 0.93.

And then the sell-off in Courts accelerated.

So I wonder, during this time, there isn't much rational in buying more of Courts is there?

The fundamentals by now, has worsen. The stock price was declining and the speculative takeover just wasn't happening!

However, in late 2006, there was some indication of life in the stock. The stock broke its dramatic and long, long downtrend. And according to some trading buddies of mine, there was trading opportunity late 2006.

So perhaps, despite the clear decline in its fundamentals, Courts was still a company who had assets worth some 1.80 per share. Perhaps there was some justification for some to invest/speculate/trade based on a takeover again. But the bet is never quite the same bet. Price of a possible entry? 0.85.

On the 8th June 2007, the takoever buyout becomes a reality.

• Takeover offer for Courts Mammoth
  
  June 8 2007
  
  COURTS Mammoth Bhd said it has been served a multi-million-ringgit cash takeover offer by a group of private equity funds.
  
  Newly-incorporated Malaysia Retail Group Ltd yesterday made the conditional cash offer through AmInvestment Bank Bhd.
  
  The offer was for the entire equity in Courts, comprising 282 million shares of 50 sen each.
  
  Malaysia Retail valued each Courts share at RM1.02, bringing the total cash offer to RM287.64 million.
  
  The company does not own any Courts share at present.

WOW! 1.02???

Isn't this simply too low?

Here's Alliance research reasoning.

• Indicative fair value of RM1.41
  
  Despite the losses, we strongly believe Courts is worth more than RM1.02. This is because after attaching a 20% discount on its short-term receivables of <1> 1 year of RM193.9m, the RNAV works out to be RM1.30. Valuation will be even higher taking into account its franchise and controlling stake value.
  
  Present a good trading opportunity
  
  Given the low offer price and high fair value, investors should reject the offer unless the price is raised. Trading opportunity presents as high possibility of better offers from other bidders.

How?

For me, such strategy, there are a couple of key issues in such a strategy.

1. Will it happen?

In Courts case, it did happen!

2. How long are we talking about?

Courts thingee simply took too long. Idea was mooted back in 2005. It is now mid 2007.

For me, the valid reason to buy was back in April 2005. Courts despite some declining earnings, was still profitable. And Courts at 1.45 was still trading at 24% below its NTA of 1.90.

Would I buy at 1.00? The reasoning is there but the risk had accelerated. The bet simply wasn't the same bet anymore. The takeover reasoning based on a high NTA value was still valid but we are talking about a company who is now losing money like crazy. Not quite the same bet.

3. Will the GO price be fair?

Without a doubt, the person or the group making the GO, needs to make money. Else it simply made no sense for them to issue a GO.

But we are we.

We need to address the issue if the GO price reprsents a fair price for ourselves.

In Courts case, it's in my opinion that the GO price is simply terribly low!

rgds

What's Left of Megan?

Yesterday there was this late announcement posted on Bursa Malaysia. Additional Information for Public Release (07/06/07)

Attached is an excel file.

Have a look at their PL.



Ok, let me zap out and erase those adjustments. Why? I Want to see what's left of Megan after erasing out them so-called fictitious amounts.

Have a look.



See Megan would have reported a loss of over 5.8 million.

Their biggest handicap is their financial cost of over 16.724 million!!! Which is way above their operating profits.

Summer is here?!

CNN Money website reported the following in their market wrap.

• The Dow Jones industrial average (down 198.94 to 13,266.73 ) tumbled nearly 200 points, or about 1.5 percent, bringing its three-day loss to 413 points, or about 3 percent.
  
  The broader S&P 500 index (down 26.66 to 1,490.72) sank nearly 1.8 percent, or 3.2 percent for the three-day period. The tech-driven Nasdaq composite (down 45.80 to 2,541.38) fell around 1.8 percent Thursday and has lost roughly 3 percent for the three days.

So summer is here?

• "This is the summer correction everyone's been looking for," said Tim Hartzell, CIO, Kanaly Trust Company.
  
  He was referring to expectations on Wall Street that the rally was due for a bit of a pullback - and the seasonal tendency for summer to bring sub-par stock returns, due to low trading volume and more volatility.
  
  Hartzell said the rally had been vulnerable to this kind of a retreat in mid-May, but then got recharged by "the speeding car that is private equity." He said that after the summer, he still expects to see the classic fourth-quarter stock market run-up.

Remember yesterday posting about FSO market commentator, Chris Puplava making the following comment about the US Interest Rates issue? Hence, its not surprising at all to read Mr.Bond master, Bill Gross making the following comments.

• Legendary bond investor Bill Gross expects strong economic growth worldwide to push up global interest rates and put a damper on the Treasury market.
  A long time bond market bull, the PIMCO manager says he's now a "bear market manager" and has raised his forecast range for the benchmark 10-year U.S. yield to 4 percent to 6.5 percent. That's up from last year's forecast range of 4 percent to 5.5 percent. (click here for the rest of the article at cnn)

And Mr.Gary Dorsch, FSO new market commentator makes the following commentary, Bank of Japan Signals Summer Rate Hike.

• The Bank of Japan has kept global bond yields depressed with its super easy money policy. But in this latest episode, it was the ECB’s rate hike campaign that initially led the German bund yield to break-out above its Inflection point, followed by higher Aussie, US Treasury, and finally higher Japanese bond yields. If Japanese and US T-Note yields move above their August 2006 highs, it could signal a major upsurge in long-term global bond yields, wreaking havoc on stock markets.

So what is this divergence all about between the Global Bond and the Stock Markets? Mr. Dorsch has an excellent commentary here.

Blogger Kirk sums it up nicely.

• That was an ugly day. They bulls tried their best to rally us in the final hour but that effort fell dead flat. Increased volume, technical breakdowns, and the failure to rally not far from the lows were not comforting. ( Click here )

Trader Mike has a more detailed write-up here. Do give it a read. I would like to highlight the section of the Worden report, he highlighted.

• Yesterday was a bad day. Today was far, far worse. Every one of the Important Averages was down more than one percent. In fact, only one was down less than 1.5% — namely, the Dow, which was down 1.48%. All of the breadth groupings were overwhelmed in a deluge of declines. As an example, the Dow had zero advances. Only 47 Russell-3000 stocks rose at least half a point, while 1304 fell over half a point.
  
  The SP-500 is the weakest of the Majors. It was down 1.76% today. As of yesterday, it is no longer trading in new-high territory. It’s well below the 2000 closing high. The Dow is at least still in new high territory. It took out the 2000 high (11,722.98) last year (I think it was October). As I’m sure most of you remember, the Nasdaq Brothers have never come close to all-time highs in this bull market.
  
  The leading Price-Volume relationship in the Russell-3000 was Price-Down with Volume-UP (1725 stocks). Second was Price-Down with Volume-Down (874 of them). In total, only 242 stocks rose.
  
  There’s really only one practical question you can ask at a juncture like this. Could the market tumble this fast with volume increasing at this pace without being oversold? Yes, it could. A market can never be so oversold that it can’t become more oversold. But common sense tells us that we are probably not too far from an oversold bounce. But what good does knowing that do you? Are you really thinking of plunging into a conflagration like this? Smart investors spend most of the time waiting.

And finally Dr.Brett raises the following issue Are Rising Interest Rates Taking a Toll on the Stock Market?

• Rates have risen from a low of approximately 4.6% to the current 5% over the past 20 trading sessions. I note that, as of Wednesday, only 434 stocks across the NYSE, NASDAQ, and ASE were making 20 day highs against 1001 new lows. My Demand indicator stands at 23 vs. 165 for Supply. That tells us that stocks with significant downside momentum (those closing below their short- and intermediate-term moving averages) outnumber those with significant upside momentum by about 7:1. It does appear that the rising rates are taking a toll on stocks.

So is summer here?

Megan, do you think that it's so scandalous?

Putting aside the issue of whether one should have never invested in Megan, do you reckon that it's so scandalous?

Look at the announcement made.

• MTSB appears to have created fictitious trading creditors and debtors to overstate purchases and sales
  
  MTSB appears to have financed the payment of fictitious trading creditors through bank debt and recycled the cash through other entities to appear that repayments were being made by fictitious trading debtors
  
  The IA's site visits to the supposed trading locations of the trading debtors and creditors shows that they are fictitious
  
  Ultimately, all trading creditors were paid (payments were actually made to other parties than that shown in the accounts), allowing cash to be paid out of MTSB and the trading debtors remain outstanding and are unlikely to be collectible at all
  
  MTSB's payment of a deposit of RM211 million for 13 production lines also appears to be fictitious
  
  The report also set out a Net Realizable Value which indicates that MTSB has potential shortfall in assets of RM456 million. Further, value of MTSB's fixed assets of RM585 million requires further investigation and the realizable value is unknown.

Fictitious this, fictitious that. WOW. Everything IS FICTITIOUS!!!!!!!!

So what is real?

Tell us what is real?????

What I know is real is that Mr. Yeo Wee Siong has sold the majority of his shares! ( see here and see this blog posting: http://whereiszemoola.blogspot.com/2007/05/look-who-is-selling-their-shares-in.html )

• The company's substantial shareholder and founder George Yeo Wee Siong sold down his stake to 1.97% in February from 11.2% in August last year before Megan Media's financial problem surfaced.

How?

Isn't this so bloody scandalous?

Seriously, if you think that fraud has been committed, why don't you sign your name here?

regards

Past postings:

1. Megan
   
2. Megan: Part II
   
3. Megan: Part III
   
4. Megan: Part IV
   
5. Megan: Part V
   
6. Megan: Part VI
   
7. Megan: Part VII
   
8. Megan: Part VIII
   
9. Megan: Part IX
   
10. Megan: Part X
    
11. Megan: Part XI
    
12. Megan: Part XII
    
13. Megan: Part XIII
    
14. Megan: Part XIV
    
15. Megan: Part XV


16. What about Megan?


17. Auditing Megan


18. Reply to Auditing Megan


19. Re: Megan again


20. The Receivables Issue And Megan


21. First Strike Call For Megan Media


22. Megan And MJC


23. How now for Megan?


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


25. Were There Warning Signs For Megan?


26. Strong Sell on Megan Media


27. Answers to Questions On Megan


28. Strike Two For Megan


29. Megan Media


30. Strike 3 for Megan

Strike 3 for Megan

This is as bad as it can get!

• Further to Megan Media Holdings Berhad's ("the Company") announcements on 4th May 2007 and 9th May 2007 pursuant to Practice Note 1/2001 and Amended Practice Note 1/2001 and following the Company's meeting with its Creditor Banks on 11th May 2007, the Company, at the behest of its Creditor Banks, had appointed Ferrier Hodgson MH Sdn Bhd as its Investigative Accountant ("IA") for its wholly owned subsidiary, Memory Tech Sdn Bhd ("MTSB") on 17th May 2007.
  
  The Company has now received a preliminary report from its IA dated 6th June 2007. The following are critical findings presented in the report:-
  
  · There are substantial irregularities in the MTSB's financial statements, leading to its financial position having been materially misstated
  · MTSB appears to have created fictitious trading creditors and debtors to overstate purchases and sales
  
  · MTSB appears to have financed the payment of fictitious trading creditors through bank debt and recycled the cash through other entities to appear that repayments were being made by fictitious trading debtors
  
  · MTSB has grown its "trading" business over time but particularly in the 2007 financial year and at an increasing rate during the year
  
  · The IA's site visits to the supposed trading locations of the trading debtors and creditors shows that they are fictitious
  
  · Ultimately, all trading creditors were paid (payments were actually made to other parties than that shown in the accounts), allowing cash to be paid out of MTSB and the trading debtors remain outstanding and are unlikely to be collectible at all
  
  · MTSB's payment of a deposit of RM211 million for 13 production lines also appears to be fictitious
  
  
  The report implies that there are related party transactions which have not been disclosed
  
  The report also set out a Net Realizable Value which indicates that MTSB has potential shortfall in assets of RM456 million. Further, value of MTSB's fixed assets of RM585 million requires further investigation and the realizable value is unknown.
  The report refers to the current situation with regard to license fees due to Koninklijke Philips Electronics N.V. ("Philips") and the threat to the manufacturing of CD-R and DVD-R. The Company is in the midst of its endeavours to resolve the outstanding amounts due to Philips.
  
  The IA has set the next steps which include further investigations to determine what has occurred. The final report from the IA is expected within 6-8 weeks.
  
  The Company and Creditor Banks are meeting this week to discuss on the course of the investigation and the appropriate steps in terms of restructuring the Company.
  
  The report indicates that MTSB has sufficient short term cash flow based on its current modus operandi. Further, the Board believes that with the cessation of its trading business, the Company can now focus on its legitimate manufacturing business. All business with respect to manufacturing is being carried out as normal and the Company is continuing to fulfill purchase orders from the manufacturing customers.
  
  The Board will continue to update the shareholders on the progress of the investigation, its discussions with Creditor Banks and other critical matters relating to the business.

All I can say is that you guys have been warned far too many times!

The Gambling Culture In China And Suggestions for its Market

Mr. Hugh Young, the Managing Director of Aaberdeedn Asset Management Asia, has a nice piece published on FT.ocm titled, Gambling culture fuelling China’s market

The following suggestion made by Mr. Young on how China could improve its market is certainly extremly interesting.

• In terms of economic controls, the obvious thing to do would be to raise the cost of borrowing, but this would have ramifications across the economy, attracting further speculative inflows and putting more upward pressure on the currency. The suspicion is that Beijing doesn’t want to see its retail investors shouldering large losses if its actions caused the market to plunge.
  
  Perhaps the Chinese government should look to increase supply by having more initial public offerings of state businesses. One option is to accelerate the listing of H shares (Hong Kong Stock Exchange) on the A share (Shanghai stock exchange) market, which would mop up some liquidity (and improve the standard of listed companies on the mainland). But right now the government is more interested in encouraging flows the other way. It has reduced barriers to domestic investors investing overseas, which is sensible, but investors are disinclined to diversify when they think returns will be better in their own market.
  
  Whether the government takes radical action and succeeds in cooling the stock market, or whether it ends in tears for local investors, the impact on the wider economy, as with Taiwan, may be limited. There has been a flurry of IPOs but many businesses and industries are still state-owned, somewhat immune from fluctuations in bourses. Furthermore the government has the saving reserves to invest if capital from the stock market dries up. Depending on the degree of the fall, economic growth may slow – no bad thing, as it would ease the inflationary pressures in some parts of the economy.
  
  We would welcome a slowdown in China’s stock market and economic growth as we have been concerned for some time about the rate of its rapid expansion. However, it is unlikely to prompt us to change our strategy on capitalising on China’s undoubted potential. As long-time (and long-term) investors in China, we’ve always been more comfortable investing via Hong Kong, including H shares. In general, companies there are of better quality and better regulated than on the mainland. (That said, at least we are now seeing profit margin improvement on the mainland and real earnings growth.) So they provide a more prudent way of gaining exposure to China’s growth.
  
  It’s worth highlighting that the mainland exchanges are in effect off limits. (China is still largely a closed economy for investment purposes.) We are disinterested observers, because we do not have any holdings there. That will change in time as market access and company fundamentals improve. But there’s no screaming urgency for us to plunge into the mainland while we see better quality at its edges.
  
  

The US Interest Rate Issue

In today's FSO Market Wrap, Market Commentator, Chris Puplava addresses the interest rates issue. Wall Street Reconnects With Main Street

• The current equity slide may continue as Wall Street readjusts to Main Street reality amidst a rising interest rate environment and continued housing slump despite CNBC constantly suggesting a possible bottom. It’s anyone’s guess how far and long the markets will correct. But one thing has remained constant over the past year, and that is the market's ability to surprise to the upside. Private equity deals and M&A activity may put a floor under the markets, but this is less likely to be the case with rising interest rates that reduce their profit projections by raising the cost of borrowing debt to fund their deals. It seems as if all eyes have now turned from watching the Fed and China to watching interest rates, and movements in the Treasury markets may be the key indicator to determine when the correction in the markets may subside.

If Accounting Woes is Bad, what about Reporting Woes?

If the accounting woes mentioned in the posting, The Danger of These Accounting Woes, represents an imminent danger to the well-being of our market, what about our reporting woes?

Yes, what about the countless FINANCIAL news articles based on sources which are denied by the listed companies?

Where is the integrity of the Press?

Where is the integrity of our Market?

Who are these sources?

Why do the reporters keep reporting in such a tasteless manner?

Was there an intent to deceive the public by publishing news based on unconfirmed sources, which turns out to be baseless speculations?

Was there?

Take the case of MOLAccessPortal. ( refer to this posting here )

Sources rule again on StarBizweek! Plans to take MOL AccessPortal private

• If market speculation is correct, there may soon be another company that may join the list; this time it may involve Mesdaq-listed MOL AccessPortal Bhd.
  
  According to sources, there is a plan that is currently being considered to take the company private.

MOLAccessPortal denied this baseless speculation!

• We refer to Bursa Malaysia Securities Berhad's ("Bursa Securities") query letter dated 4 June 2007 in relation to the above news article appearing in The Edge, front page, on Monday, 4 June 2007 and in particular pertaining to the following sentence :-
  
  "…MOL Access Bhd will be taken private."
  
  The Company wishes to announce after due and diligent enquiry with all the directors, major shareholders and all such other persons reasonably familiar with the matters about which the disclosure is to be made, it is not aware of any plans by any common major shareholders of MOL.com Berhad ("MOL.com") and MOLAccess with regard to any intent to extend a general offer for MOLAccess shares as reported in the said news article.
  
  The news article inter-alia, speculated that the general offer for MOLAccess will benefit MOL.com which is presently a PN17 status company……."and help it out of a delisting. "
  
  The Company wishes to highlight that based on MOL.com's announcement dated 25 April 2007, MOL.com already has an enhanced regularization plan to regularise its financial condition.
  
  This announcement is dated 5 June 2007.

So don't you think that the SC query the reporter and ask him who is the SOURCES? I wonder if they even exist!

Is this a one-off incident?

No way!

Check this posting out. http://mootaktrade.blogspot.com/2007/04/news-and-us.html

Now MOLAccessPortal ( MOLACS ) closed 2 sens higher at 55sen!



With the denial by MOLacs, I wonder what would happen to the stock today!

Stick to What We Know

Here is a fantastic posting at Morningstar.com, A Visit with an Investing Legend

Three great learning points for me in that post.

1. Understanding the weak, negative points in any investment!

• Know the "Bear Case"
  
  Simpson repeatedly stressed the importance of understanding the negatives associated with a potential investment or, as he put it, knowing "why not to buy something." This, he felt, was one of the keys to validating a given investment idea, as it confers a much deeper understanding of the underlying businesses concerned.
  
  There's not only a refreshing humility to this approach--demonstrating, as it does, a willingness to consider even the views of those you've trumped in the past--but also more than a whit of common sense in it. Uncertainty, Simpson clearly realizes, is as much a failure of will as imagination or insight. Thus, he forces himself to consider the flaws or holes in his logic like few other investors, scrubbing his investment thesis as he goes. Should an idea withstand such scrutiny, Simpson's process culminates with a high-conviction pick that he can add to the portfolio without reservation.

2. Stick to what we know the best! Understand the business before we invest!

• Stick to What You Know, But Never Stop Learning
  
  Simpson referred numerous times to the prudence of staying within what he called his "circle of competence." For instance, he steers clear of most technology-related stocks for the simple reason that he has trouble understanding these businesses. Similarly, while a number of Geico's holdings operate overseas, Simpson has generally been reluctant to invest directly in companies that are domiciled abroad. The reason? He feels that he doesn't know these firms as well as their domestic counterparts.
  
  Not that he's resting on his laurels. For instance, Simpson recounted a fact-finding trip he'd recently taken to India in order to learn more about that fast-developing economy. In addition, he sits on the board of technology firms SAIC SAI and VeriSign VRSN , positions that no doubt afford him the opportunity to deepen his knowledge of that particular field.
  
  Taken together with Simpson's aforementioned advice to seek opposing points of view, a fuller portrait emerges. Even in his eighth decade, Simpson remains every bit the student of his craft. He seeks out chances to learn (even if they take him halfway across the globe), and probes a diversity of viewpoints in order to arrive at investment decisions in the most circumspect way.

Last but not least, Patience! The big money is always in the waiting! Wait for the opportunity my friend!

• Patience Is a Virtue
  
  Simpson bemoaned the short holding periods of many professional investors, observing that there seems to be a clear link between time horizon and investment outcome; the longer the time horizon, the better performance is likely to be, and vice versa.
  
  This, too, makes good sense. For instance, once Simpson sinks his teeth into a particular stock, it can take him years to let go. Why? Given the sheer amount of legwork that Simpson does to validate an idea, and the voluminous knowledge of the underlying business that he accrues, he need not flee at the first sign of trouble like so many investors (many of whom fixate on the short term). Instead, if his thesis holds, Simpson simply bides his time. Consequently, the Geico portfolio's turnover ratio is a fraction of the typical stock mutual fund's.
  
  The upshot isn't that investors should trade less frequently. It's that they should perform the sort of rigorous, fundamentals-based research needed to foster deep conviction in an idea. In that context, low portfolio turnover is simply the hallmark of a strong process.
  
  

A Made in China Global Depression?

I shivered as I typed the title of this blog posting.

Give this posting at Prudent Bear a read, Why A Chinese Monetary Tightening Could Be Followed by a Global Depression

Mr.Thomas Au made the following bold prediction!

• I believe that China is setting a massive tightening of the global money supply in progress, and that this tightening could soon be followed by a global depression. Either event may happen or ultimately fail to happen. But in either case, it is basically out of America’s control. Like a lot of other goods that Americans now import, the modern 1929 (or a somewhat better outcome), will have been “Made in China.”

Made In China!

WOW!

Over-Valued or Under-Valued?

FSO, Market Commentator, Mr. Rob Kirby, posted an interesting commentary, Anecdotal Asides and Questions Begging Answers.

In the commentary Mr. Kirby compares the stock market capital capitalization of China and US and compared them both to their respective GDP.

For China, Rob Kirby made the following remarks.

• While the notional value [U.S. 500 billion] is very dated – it’s the percentage of GDP that I would like to draw everyone’s attention to – namely and explicitly, the market capitalization of the Chinese Stock Market as a percentage of GDP – 30%.
  
  Now, let’s consider that Chinese GDP data are “suspect” – owing to their arbitrarily and, as some would argue, artificially [manipulated] low currency “peg” to the U.S. Dollar – and as a result – Chinese GDP data are, in fact, under-reported.

And for the US, Mr. Kirby made the following comments.

• With U.S. GDP running around 13 Trillion, we can CLEARLY see that stock market valuations [combined NYSE and NASDAQ] are running at 26 Trillion – or 200% of U.S. GDP!

So he asks, "So whose stock market is over-valued now?"

What say you?

The Danger of These Accounting Woes

Posted on Reuters, Malaysian accounting woes could hurt market surge - Reuters

KUALA LUMPUR, June 4 (Reuters) - Malaysia leads the pack in a rally of Southeast Asian stock markets, but concern over a rash of accounting irregularities at some listed firms could hurt sentiment and thwart further gains, investors say.

• "Transmile was a highly credible company with a credible board and credible shareholders that was doing very well and all of a sudden, this happens," said Abdul Wahab Jaafar Sidek, chief of Malaysia's Minority Shareholder Watchdog Group (MSWG)
  
  "This affects not just the credibility of the company and its directors but also Malaysia's capital markets."
  
• State-controlled Bumiputra-Commerce Holdings Bhd (BUCM.KL: Quote, Profile , Research), Malaysia's second-largest lender, was in the spotlight after it commissioned a review of the 2005 financial statements of its newly-bought Southern Bank Bhd unit.
  
  The review showed up inappropriate accounting treatment that resulted in an overstatement of Southern's net assets by some 160 million ringgit.
  
  Last week, Bumi said the offending statements had been corrected by June 30, 2006, and no more amendments were needed.
  
• Small technology firm Wimems Corp Bhd (WIME.KL: Quote, Profile , Research) recently said its external auditors had quit, it wanted more time to submit its 2006 accounts and that its financial sponsors, CIMB Bhd (BUCM.KL: Quote, Profile , Research), had resigned.
  
  As in the case of Transmile, shares of Bumiputra and Wimems took a beating. But unlike Bumiputra, shares of Wimems haven't staged a fight back: mired at 12 sen a share, the firm is worth just a fifth of the value of its October high.
  

What I would really like to know is the issue intent!

Was there an attempt to deceive the minority shareholders?

If so.. logically speaking, who wants to invest in companies one cannot trust?

I do hope that those who were found guilty of wrong doing to be prosecuted!

YLI Holdings

My Dearest Doc,

Regarding YLI Holdings. I used to own this stock.


YLI Holdings, which specializes in ductile iron pipes and fittings, had a spectacular track record then. The company earnings growth was spectacular since 1997 and its net profit margins were impressive.




However things changed in fy 2004. The delay in water projects, coupled with higher cost of steel scraps and other raw materials hit the company.


On 26th Feb 2004, the company announced the following set of earnings. Quarterly rpt on consolidated results for the financial period ended 31/12/2003

The quarterly earnings disappointed me terribly. The delay in the water projects was the deciding factor for me to exit this wonderful investment. The business economics had indicated a change in the company's competitive advantage. With the delay in the water projects, for me, the company has lost its wonderful edge.





The above table showed how poor its poor 04 Q3 earnings was. Net profit margins slumped to a mere 14.04%. A year ago, its net profit margins were over 23%. And a net profit of only 2.849 million was terribly low compared to recent quarters.



That was then.

The above table showed how YLI has fared since.

In my opinion, the water projects issue remains an issue. So is the higher cost of steel scraps and other raw materials. The competitive edge that YLI had during 2000-2003 is gone.

Last fiscal year, saw some improvement from YLI where its net earnings increased from 12.8 mil to 14 million. Is this the start of YLI glory days? I am not sure.

Here is YLI's stock performance.

rgds

How a 1400 Year Old Business Ended

Kongo Gumi, a Japapanese temple builder, a great story about a family business that lasted 14 centuries. Yes 14 centuries! Kongo Gumi unfortunately folded in 2006. Here is the story told in Business Week, The End of a 1,400-Year-Old Business .

Here's some interesting points.

The key to their success.

• So if you want your family business to last a long time, the story of Kongo Gumi says you should mingle elements of conservatism and flexibility—stay in the same business for more than a millennium and vary from the principle of primogeniture as needed to preserve the company. The combination allowed Kongo Gumi to survive some notable hard times, such as when it switched temporarily to crafting coffins during World War II.

How it ended.

• First, during the 1980s bubble economy in Japan, the company borrowed heavily to invest in real estate. After the bubble burst in the 1992-93 recession, the assets secured by Kongo Gumi's debt shrank in value. Second, social changes in Japan brought about declining contributions to temples. As a result, demand for Kongo Gumi's temple-building services dropped sharply beginning in 1998

And the lessons to learn from this.

• To sum up the lessons of Kongo Gumi's long tenure and ultimate failure: Pick a stable industry and create flexible succession policies. To avoid a similar demise, evolve as business conditions require, but don't get carried away with temporary enthusiasms and sacrifice financial stability for what looks like an opportunity. These lessons are somewhat contradictory and paradoxical, to be sure. But if sustained success came easy, then all family businesses would have a 1,428-year run.

More reading article: Built to last

Spotting Them LOSERS!

In light of what happened to TransMile and Megan Media, I would recommend the following articles again.

http://articles.wallstraits.net/articles/1061

Most investors look for the following telltale signs of concern to determine if a particular stock might become a 'loser':

• Declining sales quarter-to-quarter and year-to-year
• Rising debt levels
• Declining profit margins
• Rising inventory levels
• Changes in regulatory or legal environment
• Emerging competitiors or technologies
• Rising interest rates
• An emerging overall bear market
• Events that negatively impact future earnings
• Mergers and acquisitions
• Management changes
• Institutional or insider selling
• Dividend cut or elimination
• Concerns over accounting procedures

And the best articles I have ever read about the issue about Financial Shenanigans was posted on Wallstraits.com. Know how NOT be cheated via accounting numbers!

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

Southern Bank, MOL Access Portal and TransMile

Posted on Star Biz. PwC finds SBB net assets overstated by RM160m

• PwC confirmed that there was inappropriate accounting treatment of certain transactions. That included inappropriately valuing certain derivative financial instruments, not writing down in full the collateral value and wrongly writing back specific provisions made on certain foreclosed properties and not expensing certain costs.
  
  The financial effect of the overstatement in the 2005 accounts of about RM160mil, before tax effects, was about 2.4% of the purchase price of RM6.7bil paid by BCHB for SBB.
  
  “PwC has confirmed that these inappropriate accounting treatments have all been corrected as at June 30, 2006 in the books of BCHB and that no further amendments or corrections are required,” BCHB said.
  
  ( Stocktube comments on it! Southern Bank Overstated But Its Ok With Commerze )

Sources rule again on StarBizweek! Plans to take MOL AccessPortal private

• If market speculation is correct, there may soon be another company that may join the list; this time it may involve Mesdaq-listed MOL AccessPortal Bhd.
  
  According to sources, there is a plan that is currently being considered to take the company private.

Sigh! The weekend speculative news strikes again!

• Last week the company’s stock (MOLAccess) hit its historical high of 60 sen and the rise could have been fuelled by speculation that it may be taken private.
  
  Notably however, year to date, the share price has risen two fold.

MOLAcess at 56 sen is valued at a market capital of 51.682 million!

Cash balances of 1.128 million and has total loans of 2.108 million.

• However its financials have been stretched as well. For the nine months ended March this year, MOL AccessPortal posted a net profit of RM562,000 from RM17.3mil in revenue.

MOLAcess to be taken private? Yes, please do!

Transmile. See headline news Hard landing and Credibility quagmire.

Sal wrote the following blog, Transmile, Nasioncom: Good Or Bad For KLSE

• The handling of Transmile could have been better by the SC and the Bursa, but still not too bad. The allowed trading period for Transmile during days when there is no concrete information was not good at all. Billions were wagered, won and lost based on hearsay, rumours and pure speculation. However, if the big guys were to stop trading for a very long time, some might question the validity of a long suspension - investors need to move in and out. Its a difficult balance but I'd rather the Bursa and SC suspend the stock, even for 2 or 3 weeks pending the results of the new audit, that would have been better, because we are talking about a material matter.

Some decent comments were posted in that posting. ( Click here ) Or you can follow this forum posting ( http://sahamas.net/forum10/4147.html )

Ye Chiu Metal

My Dearest CB,

Ye Chiu Metal Smelting Sdn Bhd is a scrap metal smelter. Some old news, 14/10/2003 , posted on The Edge.

• Ye Chiu is primarily involved in the manufacturing and trading of aluminium alloys which, in turn, is mainly supplied to producers in the automotive, home appliance and information technology industries. Its stock, which had once traded at a high of RM5.60 in 1996, now trades in the region of RM1.50 per share.
  
  Some time in 2000, Ye Chiu had planned to expand its manufacturing operations from its current factory premises in Pasir Gudang to Tanjung Langsat, Johor, where it had planned to purchase a 35-acre piece of land.
  
  The expansion was aimed at increasing its production capacity from 6,000 tonnes per month to 14,000 tonnes per month. However, the economic slowdown and the problem of labour shortages that followed forced the group to re-evaluate its plans. It eventually acquired a much smaller 15-acre piece of land in Tanjung Langsat. As China offered both an abundant labour force and the opportunity to tap into a vast market, Ye Chiu shifted its attention there and deferred its Tanjung Langsat plan.
  
  Its first venture into China was in 1999, when it acquired a 23 per cent stake in Jouder Precision Industry (Kunshan) Co Ltd, a precision metal parts manufacturer, for about RM2.1 million. While management does not plan to raise its investment here, Jouder was meant to provide a potential future avenue for more value-added products in the metal-related industry, RAM explains in an October 2002 rating rationale report.
  
  In April 2001, Ye Chiu established Ye Chiu Metal (Taicang) Co Ltd and Ye Chiu Recycling Resources (Taicang) Co Ltd in China. By 2002, it had started construction of its factory. It was expected to incur a total investment cost of RM26.6 million and have a total production capacity of 36,000 tonnes per annum, RAM says.

3/18/2004, from Recyling Today Magazine, the following article was posted: Asian Company Plans on Being Largest Scrap Smelter in World

• To date, Ye Chiu Metal has invested $10 million on its existing Shanghai plant, which was completed last June, with a production of 6,000 metric tons per month. Its plant in Johor also has a capacity of 6,000 metric tons a month.
  
  “After completion of our (new) plant in China by 2006, we will be the biggest scrap metal smelter in the world,” Huang told reporters after a ceremony to mark its transfer to the Main Board.
  
  The company’s Shanghai plant now has an operating rate of 33 percent with a production of about 2,000 metric tons a month, while the Johor plant has an operating rate of greater than 80 percent with a production of about 5,000 metric tons per month.
  
  Huang expects the price of aluminum alloy to increase by a further 30 percent this year from about $1,500 per metric ton due to the escalating copper price of $3,000 per metric ton from US$1,800 per metric ton last year.
  
  The smelting company sources 30 percent of its raw materials locally and 70 percent from the Asean region. It exports aluminum alloys to countries in the region, Japan and Taiwan. Its largest market is China, which accounts for about 50 percent of its sales.

So how has Ye Chiu fared?

Decent growth since 2003 but terrible margins!

See this old news. Ye Chiu keeps hopes high for aluminium ingot industry

It highlights the problems in the scrap metal business!

• Goh said hikes in fuel and scrap metal prices were among the main problems, adding they might affect the company’s operations.
  
  He said the company would work out some strategies to overcome the problems but declined to give details.
  
  Goh said the company was also facing a shortage of supply of scrap metal.
  
  “Demand for the raw material has increased, especially with the improvement in the electronics and electrical and automotive sectors,” he said.
  
  Goh said the company procured its supply from the United States, Europe and Asian countries such as Indonesia, Japan, the Philippines and Vietnam.
  
  To make matters worse, he said, the surge in demand for scrap metal from China had prompted many international suppliers to focus on that country.

As can be seen, it's a tough business and in a tough business, the balance sheets don't look too great!



Here is how Ye Chiu is faring in the market.