MTouche Reports Its Quarterly Earnings!

Previously blogged: MTouche

Rather amazing if you asked me. In that posting, the company gave a huge reasoning why 2007 was poor. See After a tough year

• In defence of 2007
  
  No doubt, 2007 was a challenging year for the company. Up to the nine months to September 2007, the company recorded net profit of RM5.4mil.
  
  As indicated in its announcement to Bursa Malaysia, the poor results were largely due to higher expenses from its new subsidiaries, provision of doubtful debts and higher depreciation and amortisation of intellectual property.
  
  This is largely in relation to setting up new subsidiaries in Hong Kong, India, and Vietnam.
  
  The group has also spent over RM30mil expanding via acquisitions.
  
  These include a 20% stake in IdotTV Sdn Bhd, 51% stake in Singapore-based Inova Venture Pte Ltd, 30% in GMO Global Ltd, 10% in British-based Cellcast plc and a 70% stake in British Virgin Islands-based Rayson Management Ltd.
  
  Investors with short investment horizons didn't waste time off loading their shares in the company and this resulted in the counter falling off the radar screens of investors through much of last year.
  
  
  Another humbling point – its share price has slid to astounding levels; it is currently trading at 58 sen.
  
  Soon, Mtouche is set to announce its full year results (by mid February) and the picture may continue to look bleak.
  
  Its chief executive officer Eugene Goh however explains that much of the year was spent on keeping its house in order.
  
  “We expanded so fast in 2006 into many markets. So, in 2007, we streamlined our acquisitions. We put in our own people and our own expertise in these countries. It took time to do that.”

And the company even had an article on the Edge: 11 Feb 2008: Corporate: Worst is over, says mTouche

• Yet, business-wise, Goh, who is also the CEO, describes 2007 as a "bad" and "difficult" year. That's no surprise. For one, it has yet to convince Japanese mobile phone companies to buy M-Bit. The same could be said of the company's stock price. From an all-time high of RM4.18 on Nov 15, 2006, investors sold down mTouche's shares to as little as 47 sen late last month, after earnings disappointed most of last year. Its recent rights issue was about 9% undersubscribed despite attracting excessive applications. It remains to be seen if 4Q2007 numbers — tentatively slated for release on Feb 15 — will be any different. Last Monday, the shares closed at 58 sen.
  
  "Last year was a bad year. Some acquisitions did not do as well as expected and I think we were also punished for over-expanding… We streamlined operations last year, took in new people, got rid of unhealthy parts that are not strategic to our growth going forward," Goh says.

Anyway, I just saw MTouche had just reported its earnings: Quarterly rpt on consolidated results for the financial period ended 31/12/2007

Well.. MTouche reported a whopping net loss of 15.7 million for the quarter!

How?

This what the company said in its notes

• For the financial quarter ended 31 December 2007, the Group recorded a LBT of approximately RM18.7 million as compared to PBT of RM1.0 million from the previous quarter. The LBT for the current quarter is mainly due to the competitive market and regulatory environment in which the Group operated in that led to lower market share and lower gross profit margin. In addition, higher expenses incurred, as detailed below, also affected the overall results of the Group:
  
  i) Increased in cost of sales of Rayson Group and project cost over-run in Inova which led to declining margin and subsequently a gross loss of RM1.6 million;
  ii) provision for doubtful debts of RM8.5 million mainly for Inova Venture Pte Ltd (“Inova”), Rayson Management Limited and its subsidiaries (“Rayson Group”) and a Malaysian subsidiary;
  iii) professional fees incurred for due diligence exercise on potential acquisition which did not materialise amounting to RM0.6 million;
  iv) provision for Universal Service Provider Fund of RM0.8 million;
  v) provision for withholding tax of RM0.5 million;
  vi) increase in depreciation and amortisation of RM1.0 million due to a change in estimate as mention in A6 above and new acquisition of intellectual properties;
  vii) unrealised foreign exchange loss of RM0.9 million mainly in respect of the translation of foreign currency denominated Murabahah Loan Notes issued by GMO Limited;
  viii) provision for impairment of goodwill of RM2.5 million relating to investment in the Rayson Group; and
  ix) the Group’s share of loss from its associate company namely GMO Limited of approximately RM1.2 million.

MTouche last traded today at 0.54 sen