The said article on Mems

Here's the link to the said article posted on the Edge Weekly: 11 Feb 2008: Corporate: Special audit on MEMS completed

• 11 Feb 2008: Corporate: Special audit on MEMS completed
  By Risen Jayaseelan
  
  For the first time since accounting problems emerged at MEMS Technology Bhd, new information has surfaced indicating that the company may soon get out of the quagmire it is in.
  
  The much-awaited special audit report, which was commisioned by MEMS and done by Atarek Kamil Ibrahim & Co, has been completed and presented to MEMS' external auditors KPMG.
  
  According to MEMS' chairman and controlling shareholder Datuk Ahmad Kabeer Nagoor, the (external) auditors have some queries on the report. He says these are being discussed by MEMS' independent committee. Ahmad Kabeer declined to elaborate, saying that more details will be revealed soon.
  
  Once touted as a company on the cutting edge of microelectronics, MEMS shocked the market when it announced late last November that it was hit by accounting problems. Just last week, it said its stock may get suspended if the company fails to furnish its audited figures for FY2007 ended July 31 by Feb 29 and 1Q2008 ended Oct 31 by March 31.
  
  This is no doubt a grim prospect for shareholders of MEMS. "It has been a while since the problem surfaced but the company has chosen to remain silent on it. This is very troubling for shareholders who need to know how deep the problem is," notes a disgruntled shareholder.
  
  Investors have sold down MEMS shares since the company announced its accounting problems on Nov 27 last year. The stock is now trading at 13.5 sen, which is a far cry from its heyday of RM1.04 on Jan 18, 2005. However, MEMS shares were hovering at 40 to 60 sen just before it was announced that the company had overstated its accounts. This was partly because investors had expected better earnings from MEMS since its listing in August 2004.
  
  To recap, on Nov 27 last year, MEMS' board of directors said the company was not able to issue its audited financial statements for FY2007 ended July 31 because its auditors had "expressed concerns over certain transactions relating to revenue and property, plant and equipment".
  
  The board said in the light of this, it had resolved not to recognise the revenue of RM19.72 million. As a result, MEMS' unaudited consolidated revenue and profit after tax for FY2007 were revised to RM53.7 million (from RM73.4 million) and RM13.45 million (from RM21.47 million).
  
  Some insiders reckon that it was a case of auditors over-reacting to a technicality relating to the licensing of one of MEMS' factories. One possibility is that the licence was still pending approval from the authorities and would have been given eventually. If this is the case, the market has punished MEMS unnecessarily, with investors treating the stock like another Megan Media or Transmile.
  
  But can they be blamed? With little information coming out of the company since its announcement of accounting problems, investors were naturally rattled.
  
  "What's there to say that it is not worse than that?" asks a shareholder.
  
  Whatever the case, the fact remains that MEMS is a fast-growing manufacturer of microelectro-mechanical system-based products, such as pressure sensors, accelerometers, thermopiles, binary lens, thermopile arrays, application-specific integrated circuits and silicon microphones. It operates out of its facilities in Singapore and Johor and has been described as the most technologically savvy of Malaysia's listed companies. It has supply contracts with major multinational corporations and is operating at close to full capacity. It also owns a string of patents. Companies in this sector tend to fetch high value in mergers and acquisitions.
  
  It is arguable that at its current price, MEMS' valuation is not demanding. Market capitalisation stands at RM88 million and the stock is trading at a historical price-earnings multiple of 6.75 times (using the revised earnings figure). But with the accounting problem hanging over the company, investors will want more clarity on what really happened at MEMS before they decide to buy again.
  
  When such information finally comes out, MEMS' story could take one or two turns. It could be that MEMS' problems are deeper than thought (think Transmile) or not that deep, in the sense that the "missing" earnings could kick in at a later date. Still, the sooner MEMS' woes are resolved, the better for the company, and Ahmad Kabeer.
  
  He is a controlling shareholder in four listed companies — AKN Technology Bhd, AKN Messaging Technologies Bhd, MEMS and AWC Facility Solutions Bhd — and a substantial shareholder in Scicom MSC Bhd. In 2004, Ahmad Kabeer had a net worth of RM340 million, based on his shareholdings in his stable of listed companies. However, his paper worth had eroded to only around RM45 million as at the end of last year.
  
  So, what transpires at MEMS in the end will weigh heavily on Ahmad Kabeer's fortunes.