Friday, February 01, 2008

Reply to Mae, I hope I am not WRONG!

Here's a reply to Hsunl comments posted on the posting Mae, I hope I am not WRONG!

  • BTW, i hope i can share something different here. I hope you dun mind this. //Knowing people and trusting people is an art//

    Dato' Koh Kin Lip

    Dato' Koh Kin Lip , a Malaysian citizen, aged 58, was appointed as the Non-Independent Non-Executive Director of NPC on 13th July 2007. He received his early education in Sabah prior to his pursuit of higher education in Plymouth Polytechnic, United Kingdom.
Hsunl, thanks for your attempt in sharing. I am well aware of his purchase of shares in MaeMode, as stated in one of the many announcements posted on Bursa Malaysia (Changes in Sub. S-hldr's Int. (29B) - Dato' Koh Kin Lip )

Yes, knowing people and trusting people is an art and it's important to know the integrity of people in the company that one wants to invest in. However, I strongly believe that this is should never be the deciding factor in one's reasoning.

Take a look at MaeMode and let's ask ourselves rationally what we have.

First, let me reproduce the brief table that indicates what MaeMode has done in recent years.

As can be seen, the company has decent, impressive earnings growth but as mentioned the fundamentals behind the company is so rather weak. Let's look at the issues.

1. The net profit margin is declining. When sales and profit growth is achieved at the expense of profit margins, is this not a reason to be concerned?

2. The company net debt position is on an increasing trend.

3. Trade receivables is increasing on an alarming trend.

Now if you put these 3 points into consideration, you see the possibility that this company management is achieving their sales and profit growth via massive capital expenditure which is incurring more debts. And the profit margin was sacrificed. And when you throw in the trade receivables, some do reckon that this is a rather reckless manner to run a company.

So based on these facts, what's the rational investing decision?

Ok, you have pointed out that someone has bought the shares in the company big time. Is mimicking someone's investments an intelligent investment strategy? I could point out that folks like this can make investment mistakes. Take Transmile for example. Someone made the investment mistake in that company but it looks like they can afford such an investment mistake but can we, the minority investor?

So the point is this, you see someone buying big time into the stock. Yes, he could be correct but he could also be wrong. And should one be basing one's investment on whether someone else is correct in their investment(s)? Why doesn't one make one's own reasoning to invest based on the issue(s) presented?

Well, I can NOT answer all these questions for you. This is not my investment decision to make and I cannot make that for you.

And last but not least, if you think MaeMode is really a decent investment, let me say again, go ahead, do not fear what I have written.


hsunl said...

Thank you Moo...
very interesting ...
i like the way you analyze this counter :-)
wish me good luck :))

Btw, you did scare me when i've read you comments on rubber glove. TopGlov! Very Informative !!