And what about Pentamaster?

Saw this article published on the Edge, 30-04-2008: Major profit discrepancy in Pentamaster’s results

• Petaling Jaya: Pentamaster Corp Bhd’s audited net profit for the financial year ended Dec 31, 2007, of RM3.6 million turned up 61% lower than its unaudited net profit of RM9.2 million announced earlier.
  
  The company did not elaborate on what caused the discrepancy when announcing its audited results to Bursa Malaysia yesterday.
  
  In February, Pentamaster announced that its unaudited FY2007 net profit was down 13% to RM9.2 million compared to FY2006, due to additional provisions and write-offs made in FY2007. It said the additional provisions and write-off on inventories and debtors amounted to RM5.8 million and RM492,000, respectively, in 4Q FY2007.
  
  Pentamaster provides automation solutions for the semiconductor industry. The stock closed flat at 48.5 sen yesterday.

This was the announcement posted on Bursa. DEVIATION OF MORE THAN 10% OF THE UNAUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007 RELEASED ON 26 FEBRUARY 2008 AND THE AUDITED RESULTS OF THE GROUP

Seriously, such explanation simply isn't enough, not when the audited accounts deviates by a whopping 61%.

This company should at least have the decency to explain to everyone what is happening.

Wouldn't you agree?

Manchester United 1 Barcelona 0

The starting line-up gave me shivers.

No Rooney and no Vidic.

And United had not played well all season when Wayne Rooney did not start. And on the back of some rather lackluster performance lately, it simply looked so massive!

All the great games United played this season would count for nothing if they did not win this match.

And like in Nou Camp, the game started off with breakneck pace. And within 50 seconds, my heart sank because it looked like Paul Scholes made one of his reckless and clumsy challenge on Messi inside the penalty box. Luckily the reply showed that the foul occurred just outside the box.

This was the night Cristiano Ronaldo showed the world he is very good team player. And the game he played last night, Wayne Rooney would have been proud.

He attacked Barcelona on the right, on the left and right down the middle. And his duel with Zambrotta on the left wing was simply epic.

And not only he chased after every single ball, he defended. Made couple of fantastic tackles and his defending in the set pieces was fantastic.

And the goal Scholes scored was fantastic enough to win any Cup final.

Yes, it was a horrendous mistake from Deco who gifted the ball to Scholes but the finish from Scholes was simply fantastic.

Well done Scholes!

Teves and Park were fantastic. Full of energy throughout the whole game. Both of them looked like two Eveready bunnies who could go on and on all night long!

Rio who skippered the team was magnificent again and Hargreaves played well as right back.

Wes Brown played much better in the center of defence but he's still lacking.

Nani, full of energy but his final ball was terrible again. He needs to learn a lot more from Ronaldo.

Patrice Evra was fantastic again but perhaps at times his eagerness to bomb down the left flank left United open a couple of times.

What a fantastic night for United!

Well done guys!

Tan Teng Boo Declares Warren Buffett to be a lousy Economist!

I was given the following a screenshot of ICapital's latest commentary.

My oh my, what a huge statement!

I wonder why some people want to write things like this!

(My oh my... KLCI long term target is 2000 points? Why did ICapital dump rm50 million of shares during the last quarter then?)

Anyway, Warren Buffet was the main feature last night and he had several interesting comments.

And yes, Warren Buffett do admits that this field (economics) is not his specialty!

• "This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.
  
  "I think consumers are feeling gas and food prices," he added, "and not feeling they've got a lot of money for other things."
  
  He was not immediately available for further comment. Known for his frugality, the 77-year-old Buffett has lived in the same 10-room Omaha, Nebraska, house for a half-century, despite being worth an estimated $62 billion.
  
  On Wednesday, the U.S. Commerce Department is expected to say how fast the economy grew in the first quarter. Economists on average have projected that gross domestic product grew at an annualized 0.2 percent rate in the quarter.
  
  Two quarters of declining GDP is a traditional indicator of recession. That last happened in 2001. Economists expect the U.S. Federal Reserve on Wednesday to cut a key lending rate for a seventh time beginning last September.
  
  Berkshire is a $197 billion conglomerate best known for its insurance holdings, such as auto insurer Geico Corp, but it owns more than 70 businesses.
  
  Many of those businesses are tied to the housing market, including Acme Brick Co, insulation maker Johns Manville, and the real estate brokerage HomeServices of America Inc.
  
  Others depend on consumers to spend more on discretionary items, such as Ben Bridge Jeweler and Borsheims Fine Jewelry.
  
  "In the retail businesses ... if anything, they've gotten a little worse," Buffett said. "Of course, things connected with housing, whether it's in brick or whether it's in carpet, those businesses have shown no uptick at all. Jewelry had a bad Christmas ... and it stayed that way."
  
  Buffett sees no respite from the housing slump.
  
  "I think this is going to be fairly long and fairly deep, but who knows," he said. ( source of article: here )

How now my dearest MooMooCow?

Is It That Difficult to Spot A Potential PN17 Stock?

Posted by Blogger Dali, Smells & Look Like ...

• Countering The BS: Really hate it when people speak and they bypass their faculties. People think I say mean things, no, I just like to put idiots in their place or else idiots will be running riot. I can be an idiot too, just call me on it when I do stupid stuff. This is the Remisiers association, and their advice to Bursa is to appoint or talk to an investment bank first before putting a company to PN17 ???? I am sure the view is NOT shared by the majority of remisiers.
  
  The Bursa has clear guidelines on when a company goes into PN17, it is not arbitrary or without warning... (do read rest of his wonderful posting here.

What was initially published on Bernama was indeed truly shocking.

• The Remisiers Association of Malaysia (Persama) has urged Bursa Malaysia to consult investment banks before putting a company under Practice Note 17 (PN17) status, said president Sam Ng Soon Lee.
  
  “We (Persama) would like to suggest that next time Bursa Malaysia wants to put any company under PN17 status, they need to consult an investment bank first. This will protect investors and it will be fair to the listed company,” he said after the association's AGM on Saturday.
  
  PN17 refers to a company in financial trouble because successive losses have eroded its shareholders' funds or the company has ceased its business operations. A PN17 company is required to regularise its condition within a certain timeframe, failing which the stock would be suspended from trading and face delisting procedures.
  
  According to Ng, more than 100 companies have been delisted. On the outlook for the local bourse, he said: “It is positive provided that the policy on PN17 is amended. PN17 policy has affected investor confidence.”
  

That set of comments were truly shocking. I mean, is it really that difficult to spot a poor performing stock?

Hmm... one of the newest entry into this sector is Liqua Health.

Let's have a quick look at this stock.

From klsetracker:

Look at the massive amount of losses posted by this company.

Surely, one could easily tell that the quality of this stock is lacking.

And this is Liqua's most recent reported quarterly earnings: Quarterly rpt on consolidated results for the financial period ended 31/12/2007. Liqua reported total net losses of 11 million. Accumulated losses are more than 108 million!

The below is the screenshot of Liqua's Balance sheet then.

Again, is it difficult to conclude that the quality of Liqua as a stock is lacking and that massive risk will be involved if one decides to 'invest' in Liqua?

Is it?

And I fully agree with Dali on the following point.

• Putting more companies into PN17 does NOT rob the market of its confidence, if anything it restores confidence to the maketplace as regulations are properly imposed and carried out, not just wishy-washy rules being skirted or never used in reality. In fact, I still feel companies are still not being delisted quickly enough even now. You want 600 decent companies rather than 1200 so-so companies. The longer these dying companies stay around, most will end up being syndicated plays on their last legs - only if you want that scenario to dominate the local markets, then by all means prolong the PN17s.

Yes Dali, I do smell the stench!

More Rumblings On Tan Teng Boo's ICapital's Disposal Of Shares

Blogged previously, What Do You Think of ICap's Recent Disposal Of Shares Held?

The main issue in the posting was that in the quarterly earnings report ended Feb 29th 2008, ICapital had disposed some 50 million worth of shares.

Some find it truly amazing because it was just in Jan 2008, ICapital's Mr.Tan Teng Boo had been quoted on the daily news paper that he had been bullish on the Malaysian equities.

See Jan 5th 2008 article Corridors of catalysts and Jan 19th 2008 article Analysts and fund managers weigh in on scope of Dow’s impact and as mentioned by Mr.Tan.

• The KLCI is resilient as it is not over-valued with sectors such as palm oil, which is doing well. The KLCI would continue to perform despite a slowdown in the US.

And my point was rather simple. I have nothing against his selling or whatever.

My point is why he is telling everyone he is BULLISH on the market when deep underneath it all, he is a huge seller?

Now, I had received some interesting feedbacks that I thought deserves to be highlighted. One reader, madcap had said that I had simply been insinuating someone to be deceitful with flimsy assumptions is wrong.

Here are his comments:

• Moolah, you have always pride yourself in looking beyond the obvious. In the quarter ending Feb 2008, when do you think ICap sold? Don't you think it is naive to assume that ICap was a consistent net seller in a month from the fact that it was a net seller in a quarter? The first article says he is a net buyer at that time. Was that an outright lie? Fact is, you assumed from the fact that ICap sold in that quarter, that he must be a net seller in January. Could he have sold in February? Honestly, I don't know that.
  
  Was TTB advising on long term trend or was he giving advice on short term market timing? Look at his reasoning and tell me if he is implying that markets will go up in the next month. If TTB is bullish long term, does this mean that he should not trade in the short term? Is he implying that people who listen to his advice should not trade?
  
  The insinuation here is that the man is deceitful, not that he gave bad advice - that he was selling when he gave bullish comments - and I think that it is unsubstantiated.
  
  Finally, you quoted March 8. Take a look at KLCI from March 8. If I took his advice, I would probably be making money. So, do you think he continued to sell in March?
  
  His long term call has yet to be proven right. You can challenge him on that. But to insinuate someone to be deceitful with flimsy assumptions is wrong.

Madcap, many thanks for your feedback. I am not here to degrade Mr.Tan's ICapital capabilities and performance and neither do I want to challenge his long term calls. And let me repeat again, I have absolutely nothing against his selling of shares. What amazes me is what has happened while he was selling the shares!

So, in this reported quarter ending Feb 29th, he could have sold in December, January or February.

Looks like the issue is now focused on when exactly he sold.

If he had sold in December or January, then how would one interpret his two massive comments on January stating that the KLCI is not over-valued and that the KLCI would continue to perform? Now, that wouldn't have been nice and it would NOT make sense, would it? Well sell when he thinks the market is not over-valued?

Yes, he could have changed his mind and decided to sell in February.

Possible. However, to suddenly sell 50 million worth of shares alone in one month, in February would have been incredible.

I am wondering, did something happen in February to spook him?

Can it be the US economy or the US market? Well it can't be because in early March, March 8th, the day of our elections, Mr.Tan had another lengthy interview in the Star Biz, stating that he was still bullish in the US Market, Dare to be contrarian .

And in our local market, the one and notable market event was Gamuda's market led selldown.

And mind you, he did make a commentary on this issue in February 2008!

Feb 23rd 2008, published on BizWeek, Market expected to recover with bargain-hunting.

• While most people are gripped by fear over US taking a one-way street to Recessionville, i Capital.biz managing director Tan Teng Boo maintains an extremely bullish view on the US economy while he holds on to the view that the world economy has decoupled from the US economy.
  
  Tan says that without the strong US export growth in 2007, especially in the China market, the US economy would have been in a recession 6 to 9 months ago. The export-oriented Asian economies have all seen their currencies appreciate.
  
  Tan welcomes the present panic-selling as it allows many equity markets to undergo meaningful corrections. He sees the current fall as a panic attack, based partly on an eagerly waited, long anticipated correction. He expects market volatility to eventually subside.

Still bullish and he publicly said he welcomed the panic selling in February 2008.

Now I am confused, if Mr.Tan welcomes this panic selling in February, did he also sell some 50 million shares during this period too?

Well, madcap, like you, I honestly do not know if ICapital shares were sold during this February time frame but if it did happen during this period, I find it incredible, really.

And more so, early March 2008, Mr.Tan was quoted to say the following,

• If there is a contrarian view currently playing out in Malaysia in relation to the prognosis of the US economy, it’ll have to come from and not surprisingly, the frank and candid Tan Teng Boo – a man with a wealth of experience on equities who currently heads Capital Dynamics Asset Management Sdn Bhd.
  
  And it is for that reason that while many market pundits have written off Asian equities for the time being, he remains unabashedly bullish.
  
  His take is largely premised on the fact that the US is not faced with a doomsday scenario but a slow-paced softening in economic conditions that is easier to stomach for the rest of the world.
  
  “Firstly, the subprime problem remains just that – subprime. Secondly, while many large financial institutions have been badly hit, the central banks have successfully averted a credit or liquidity crunch scenario. Thirdly, the US economy is certainly slowing down but a recession is only a possibility, and not certain.” (do read rest of the lengthy article here )

Anyway, blogger Seng, from Fusioninvestor, had this to say.

• I would like to add my 2 sen worth here, since this topic was discussed at length in my chatbox.
  
  madcap, as john mentions here, "(TTB) has always been bullish". There are many times where he publicly declares that he is bullish. Usually made in a very confident, sometimes, arrogant manner, almost always with no qualification that he has always been bullish.
  
  Now, we must remember that TTB has a wide following. He is looked at as a leader in the local investing world. His words carry significant influence. Many people will take that with confidence and act on it.
  
  At the same time as he is making bullish pronoucements in an almost arrogant fashion, he silently sells. $50 million. This selling is only reported a few days ago from the QE Feb 2008 Quarterly Report.
  
  The amount of selling is not small. Nearly 20%. It is his largest selling yet.
  
  Of course you can try to confuse the issue by saying he is a trader and we don't know exactly the exact timing, he has the right to silently change his minds, etc.. But that's not the impression he gives to the world when managing ICAP. The impression is that he is a Buy and Hold Value Investor. Most people would assume that.
  
  So, it is this inconsistency - almost lack of integrity - that when he maintains his bullishness repeatedly, he sells behind the scene. That is what Moo is trying to point out here. Not other things.
  
  Now, why can't he tell the world that he is "generally" bullish, but will consider/not hesitate to take profits when he feels it's over-priced? Or tone down the arrogance to allow for exceptional cases when some pockets might be overpriced (and thus justify selling)? Wouldn't this be a better and more accurate approach to make? I for one would prefer to see him tell it realistically, rather than maintaining his almost arrogant bullish stance but selling significantly and silently.
  
  Don't get me wrong - one behaviour doesn't make the man. I still have high respects for Uncle Tan especially his investing skills. But my concern is if this gets repeated, that behaviour might become habitual, and one day, you could see a man with a totally different character than the old TTB we thought we knew before.
  
  And of course, if you are the owner of ICAP, then, you would be pleased that he practices sound and prudent money management. But this is NOT the issue here. The issue is the discrepancy between Talk and Action. Some people calls it lack of integrity.

In which madcap replied,

• I must say I am quite disappointed to read your response, Seng. If you tell people that you believe Parkson to be fundamentally sound and you are bullish on Parkson's prospects ("TTB has always been bullish"), but you continue to trade Parkson based on your read of market trends and charts (TTB net seller in last quarter, buying back in this quarter), are you being deceitful?
  
  You have claimed "fusion" investment strategies. And TTB cannot do the same?
  
  TTB gives the impression that ICap will be buy and hold? People assume so? Now they see that he also sells. And he is deceitful? Note your words - "gives the impression", "assume". I remember reading somewhere someone being surprised at the amount of buy and sell he found in TTB's portfolios in the past. As you have pointed out, ICap investors will probably be happier to discover that he applies trading techniques to enhance their fund (like Seng discovering the power of trading).
  
  If TTB says in January that he believes KL markets is still sound. Sells in February. Buys back in March. He is deceitful? I don't know if this is what he actually did. But neither do you know that he sold in January and February. Right? So don't say I am trying to confuse the matter if I say so.
  
  I think TTB is arrogant. I also think that he has a hard time acknowledging his bad calls. Perhaps that is the quality of an adviser of trends and analysis. (I am not even interested in defending him. I am just pointing out bad analysis and judgement here.) You may even say that you think he is a bad advisor. But arrogance is not deceit.
  
  But I don't see evidence of deceit. And I think it is wrong to pressure BB (in your chatbox) to come to this conclusion when the evidence is flawed by a time frame mismatch.

How? What say you?

I do invite more feedbacks on this topic.

-------------------------------------------
Updated: 29th April 2008.

The Wanderer, posted a screenshot of what ICapital said in its January 25th write up!




Quote: .. ICapital and its CEO have been singing a very different BULLISH song....

Chelsea 2 Manchester United 1

You get what you deserved.

You came looking not too lose and such negative strategy never works!

It has happened many times before and it would continue to happen!

Manchester United lost their three points lead over Chelsea in the premiership when they lost 2-1 at Stamford Bridge.

Manchester United used the same tactics as they had in Nou Camp, playing not to lose. And the end result was again disappointing, although it must be said that there were several twists in yesterday match.

Manchester United had always been a team built to play attractive, attacking football. Sitting back and defend is never their bread and butter. Such negative tactics had brought poor results and last night was no exception.

Chelsea played quick, direct decisive, attacking football and they totally dominated the first half and truly deserved their lead. Being down 1-0 at the half, was rather fortunate in my opinion.

In the second half, Sir Alex finally changed the tactics. And the end result was all to see. Playing a more attacking game, the score for the second half was 1-1.

Ok, the penalty decision was ludicrous but for me, United played the folly for their negative tactics in the first half.

End of story.

And worse of all, Chelsea wasn't all that good last night. If not for Michael Essien and Michael Ballack, Chelsea was simply ordinary and in my opinion, they could be beaten if only United had tried.

Tuesday looks too near.

Would Sir Alex Ferguson realised that United cannot sit back and defend on big matches? Why can't United play to their strongest form, which is to attack, attack and attack?

United has 3 matches left to correct their season and they have to win all of them. No buts.

Sigh!

Random Musings: Plantation Stocks, Food And Man United vs Chelsea

With the crude palm oil enjoying one of the most insane bull run in its history, I was most interested to have a look at the quarterly earnings report from the planters

The first to report was Rimbunan Sawit

I certainly wasn't impressed at all with Rimbunan Sawit despite the flashy headlines, the Edge published on their daily publications; Rimbunan Sawit profit triples to RM22.6m in 1H08

Year-to-year comparisons showed the massive good fortune brought to the planters from this insane bull run.

As seen above, current year-to-date earnings of 22.6 million triples the previous year same period earnings.

However, if on a quarter-to-quarter comparison, the quarterly earnings mentioned was rather shockingly poor! I mean, by logical reasoning, in an extremely hot commodity market, earnings should be surging and not declining, yes?

From the Edge article, Rimbunan Sawit profit triples to RM22.6m in 1H08

• “The unfavourable result is mainly due to decrease in production of fresh fruit bunches by 22%, despite a favourable variance of increase in CPO price of 7.6% during the quarter,” the company said in notes accompanying its unaudited accounts.

( This issue was posted in the following posting at Sahamas here )

Next to report its earnings was Chin Teck Plantations, a stock which I had blogged before, Hidden Gem In The Plantation Sector

And of course, like Rimbunan Sawit, its year-to-date comparisons were extremely impressive.

And the press was quick to highlight it, Chin Teck Q2 earnings up 215%.

However, if you look at the quarterly performance, ChinTeck's performance like Rimbunan Sawit was lacking, in my opinion. See the table below. The increase in earnings was so razor thin!

The management said the following in its notes.

• Revenue in the second financial quarter under review improved marginally by 0.23% from the preceding financial quarter due mainly to an increase in the average selling prices of crude palm oil and palm kernel even though the production of fresh fruit bunches, crude palm oil and palm kernel were lower.

Kinda disappointing isn't it?

As mentioned earlier, in an extremely bullish commodity markets, average selling prices should be increasing and this should bring more profits to the companies.

However, the early indicator, as seen from these two stocks, the quarterly earnings is not showing growth.

Would this be an early tell-tale sign on the sector?

Moving on, food is an issue, yes? Dali had two blog postings on this issue, Food, Glorious Food and The Food Train Wreck.

There is an interesting article from Ms.Teresa Lo, Agricultural Stocks Go To Harvest

It's interesting because the fundamentals reasoning is suggesting that agricultural stocks should be moving higher. I would assume that too.

Here are some links posted by Teresa. (I blogged on one of postings before Regarding the Dry Bulk Shipping Sector )

• Dramatic spike in cost of flour will drive food prices higher, manager warns[Editor: This can only happen in Vancouver, where a loaf of bread is ALREADY $5.00] A dramatic spike in the price of flour over the past two months has led to a dire warning from a Vancouver food store manager. “It’s just going up, going up. Pretty soon you’ll be paying $10 for a loaf of sliced bread,” said Tina Rua of the First Ravioli Store on Commercial Drive yesterday. “Our supplier has told us we might end up getting our deliveries in a Brink’s truck. All our prices have gone sky-high.”
  Skyrocketing rice prices has Sam’s Club limiting salesThe store will limit customers to four 20-lb. bags of jasmine, basmati and long-grain white rice, the company said in a statement. Its restriction mainly will affect businesses that buy rice in bulk, but the company said “a typical Sam’s Club Business Member does not buy more than 80 pounds of rice in one visit.”
  Food Rationing Confronts Breadbasket of the WorldAn anonymous high-tech professional writing on an investment Web site, Seeking Alpha, said he recently bought 10 50-pound bags of rice at Costco. “I am concerned that when the news of rice shortage spreads, there will be panic buying and the shelves will be empty in no time. I do not intend to cause a panic, and I am not speculating on rice to make profit. I am just hoarding some for my own consumption,” he wrote.
  Food Price Surge Could Mean ‘7 Lost Years’ in Poverty FightZoellick said the poor spend as much as 75 percent of their income on food. “In just two months, rice prices have skyrocketed to near historical levels, rising by around 75 percent globally,” he said. The price of wheat has risen 120 percent over the past year, he added. Over the past three years, food prices overall have risen 83 percent, the World Bank estimates.

As noted by Teresa,

• A great example is the across-the-board collapse of many agriculture and related stocks yesterday. The news said one thing, but the prices did something else. Momentum investors are now caught in a bind typically found after the enthusiasm phase of the investor sentiment cycle, much as there were caught in the dry bulk shipping mania

Interesting? See how the prices and the fundamentals 'diverged'?

Last but not least, I am reminded by dear old John, that the kick-off will be early! I am not to fall asleep! LOL!

Lost at what I am talking about?

Well, I am talking about footie. Chelsea will host Man United later this evening. Chelsea is unbeaten at home and despite all the Grunt-ing issues, they are still in chance to win the Premiership and Champions League double.

Yes John. I know John. If United plays the same way it did at Nou Camp, the draw should be enough for United to secure the title again.

But seriously, that's simply a disgusting manner to play footie and I would rather be knitting man!

Can United beat Chelsea?

Yes, I believe that they can and they will. I reckon Ronaldo to score too!

And wouldn't it be nice for your beloved Liverpool if United thumps Chelsea this evening? I bet you would simply love it!

:D

The Trade Receivables In MaeMode

Early this year, I made ceveral postings on the stock MaeMode. A look at MaeMode again , Mae, I hope I am not WRONG! , Reply to Mae, I hope I am not WRONG! and MaeMode Again

MaeMode reported its earnings last night.

Naturally I was interested to see what is happening.

My main concerns back then as posted in the posting, Reply to Mae, I hope I am not WRONG!

• 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.

And I posted the following table.

The company's net debt and receivables issue was most alarming back then. It was so Megan like. See The Receivables Issue And Megan

Those were the two main issues.

Before I begin, I was aware that MaeMode had a rights issue ( see here ), so I was expecting some sort of boost in its balance sheet.

So the first thing I look for was the cash flow statement.

Net proceed from this rights issue was 12.639 million.

But look at the end result!

Cash and cash equivalents at the end of the period was 13.222 million. Another cash outflow of 27.183 million!

And here is the updated table for MaeMode.


The company's net debt has increased to 178.473 million.

The company's trade receivables increased by a whopping 37.117 million from the previous quarter to an insane 308.390 million!

Just how insane is this? Well just consider the fact that the company made only 6.567 million for the current quarter. And the trade receivables soared by 37.117 million. Man, this is no way to manage a business in a profitable manner.

Don't they know that a sale is not a sale until the cash is in the bank?

How?

And do remember when all these receivables issue becomes doubtful, they will have to be written off and given the current size of the receivables, if and when this happen, the losses should be massive!

What Do You Think of ICap's Recent Disposal Of Shares Held?

I would like to focus on Mr. Tan Teng Boo's market views here.

Posted Jan 5th 2008, Corridors of catalysts

• Capital Dynamics Asset Management managing director Tan Teng Boo, who is presently a net buyer of equities, opines that equities should fare well: “The CI performance should be good. The investment exposure in Malaysia is slightly different. We have palm oil that is doing well, and you don't get palm oil in any other part of the world.”
  
  He adds: “The success of palm oil will filter down to society, to the Felda settlers first for instance, and then to the consumers. While consumers will feel the pinch from high oil prices, on a net basis, private consumption should be resilient,” he says.
  
  Crude palm oil futures recently rose to a historic high of RM3,097 per tonne on Dec 27, spurred by the spike in crude oil prices to US$97 a barrel mark.
  
  Rising consumer spending
  
  Last year, there was an estimated 12.6% growth in consumer spending – the strongest since the 13% growth recorded in 2000. This was also on the back of a recovery in passenger vehicle sales since mid-2007.
  
  Tan adds that wages are also rising, and this is one reason why oil prices have held at current levels.
  
  Consumer's disposable incomes have risen, and that is why oil prices have held. If those incomes did not rise, oil prices would not be sustainable, and we would have seen a slowdown in the economy,” he says.
  
  Aseambankers Research economist Suhaimi Ilias says the slow pace of the 9MP implementation has turned out to be a blessing. Presently, less than a third of the RM200bil development spending allocated have been utilised.
  
  “With robust private expenditure growth in 2007, the Government had the luxury to refrain from over-stimulating the economy. Given the higher downside risks to growth as we enter 2008, the Government can therefore use its outlays as a counter measure. In addition, there is the expected rollout and commencement of more major infrastructure projects from 2008 onwards,” he says.
  
  In addition, the Government has unveiled three major economic regions – the Iskandar Development Region, Northern Corridor Economic Region and Eastern Corridor Economic Region with total development expected to exceed RM640bil over the next 13-18 years.
  
  Corridors of catalysts
  
  Tan says that if the corridors are implemented efficiently, it can be a strong catalyst for the market.
  
  “The Iskandar Development Region (IDR) looks good on paper, especially with some of their ideas, for example allowing qualified foreign professionals to come into the IDR without passports. That would make the IDR very attractive.”
  
  The main issue here is when the Government will actually start the spending. “Will it take another year, maybe 2009 or would all end-up in 2010?”
  

Posted Jan 19th 2008: Analysts and fund managers weigh in on scope of Dow’s impact

• Tan Teng Boo
  Managing director
  Capital Dynamics Asset Management
  
  Whether the Dow would continue to fall or rally depends on the Fed, which should be more aggressive in cutting the interest rates. The continuous fall in the Dow currently is due to weak investor sentiments as a result of poor economic fundamentals and expectations of more interest rate cuts.
  
  The KLCI is resilient as it is not over-valued with sectors such as palm oil, which is doing well. The KLCI would continue to perform despite a slowdown in the US.
  
  We expect China and India to continue to grow despite the US issue and help sustain other world markets.

Posted on March 8th 2008, Dare to be contrarian

• If there is a contrarian view currently playing out in Malaysia in relation to the prognosis of the US economy, it’ll have to come from and not surprisingly, the frank and candid Tan Teng Boo – a man with a wealth of experience on equities who currently heads Capital Dynamics Asset Management Sdn Bhd.
  
  And it is for that reason that while many market pundits have written off Asian equities for the time being, he remains unabashedly bullish.
  
  His take is largely premised on the fact that the US is not faced with a doomsday scenario but a slow-paced softening in economic conditions that is easier to stomach for the rest of the world.
  
  “Firstly, the subprime problem remains just that – subprime. Secondly, while many large financial institutions have been badly hit, the central banks have successfully averted a credit or liquidity crunch scenario. Thirdly, the US economy is certainly slowing down but a recession is only a possibility, and not certain.” (do read rest of the lengthy article here )

So Mr. Tan does sound rather bullish on the market, yes?

And since Mr.Tan's I-Capital has a massive following, I was rather interested in its quarterly earnings announced last night.

The below is a snapshot from their earning notes.

Oh my. ICapital during this period, has disposed securities worth 50.999 million!!

Do not get me wrong here. As a closed end fund, there is nothing wrong with ICapital selling securities at all.

However, don't you think these action simply contradicts, as everyone in the market knows that Mr.Tan is a rather bullish on Malaysian equities and he's been quoted so many times in the media.

So don't you think it's rather strange that he tells everyone he is a bull but on the other hand, he's been a seller?

How?

Do you like what you see?

Barcelona 0 Manchester United 0

My Dearest John,

Missed my posting?

Sad to say but I slept well the other night and strangely I did manage to catch my sleep well, hence I missed that match between Liverpool and Chelsea. Unfair as it is, that away goal will be massive. Caught the replay and in my opinion Chelsea was rather very poor, Cech made couple of top class saves and of course Riise.

Last night I was up for it. Who wasn't?

As in two years ago, Sir Alex Ferguson has let me down again. My darkest fear came true as Fergie opted to play not to lose in the away tie. The team formation he put up was simply beyond my understanding but the team did not let him down. They defended the spaces well and Barcelona never did look like scoring at all. Oh yes, Ronaldo penalty was a shocker.

And thanks to Fergie, he killed whatever romance and spectacle this match could offer at Nou Camp.

It was damn boring.

If Manchester United played footie like this and win the Champions League, I would not have been proud at all.

It's simply terrrible and utterly horrible.

And if United continues to play like this, perhaps it's time to kick the footie away and I might as well continue on my knitting instead!

This Barcelona team wasn't great at all. Manchester United could and should have won this match, only if they tried.

Now? I hope Fergie won't live to regret his decision in playing such dreary footie!

Sigh!

Next week, I believe that the massive away goal would be a massive advantage for Chelsea. What more, Liverpool has a terrible record at the Bridge. And I am afraid that Manchester United failure to score that crucial away goal might be a massive factor against United. I do hope I am wrong!!

More On Melewar's RM2.2Bil MonoRail Bid

I got a copy of OSK's report on the Construction sector.

Here is what they said.

• Fears Coming True
  
  Yesterday, it was mentioned on the Business Times and Bloomberg that Malaysian Prime Minister, Ahmad Badawi said that some infrastructure projects under the 9MP may be delayed due to escalating costs. He also commented that on the casualty list is the 2 nd Penang Bridge. Factors in which he cited that had delayed the bridge’s construction include (i) getting the required land, (ii) need to ensure that the given design is most suited and (iii) the issue of escalating costs. According to some sources, the delay would last for about 9 months.
  
  In other news, it was mentioned on the Financial Daily that proposed bullet train linking Kuala Lumpur and Singapore by YTL Corp has been shelved by the EPU. The reason cited for their decision was because the financial model submitted would involve significant costs to be borne by the government.
  
  COMMENTS
  
  From uncertainty to reality. Previously we had highlighted 2 key sector risks associated with the recent political change namely, delay risk and non commencement risk. This recent announcement is testament that the former is becoming an inevitable truth. Rewinding back the clock, the 8MP saw 35% of its projects being carried forward to the 9MP. Rising costs, political risks and poor execution provide us minimal reason to argue why history will not be repeated.
  
  Other projects also at risk. Based on recent media reports, it can be said that the 2 nd Penang Bridge is one of the few key projects that both political parties have agreed on its necessity. Despite this mutual view, possible delays have already been highlighted. This implies even greater risks for other projects where mutual views are not shared. Various media sources have stated that the initial RM3bn bridge could now cost > RM4bn due to escalating costs. In our view, rising costs could also see an alteration in the bridge’s design (e.g. removing the 2 view decks). We continue to maintain our view that the NCER has the highest political risks amongst the 5 corridors and investors should avoid the NCER play. We think the SCORE provides a safer exposure to Malaysia’s growth corridors.

How?

It makes me wonder about Melewar's rm2.2bil monorail proposal.

Melewar Bids for RM2.2 Billion Monorail Project!

Published on Star Biz on June 7th 2007.

• Thursday June 7, 2007
  
  Melewar’s investment in Aussie miner’s shares up seven-fold
  
  By C.S TAN
  
  PETALING JAYA: Melewar Industrial Group Bhd’s investment in an iron ore mining company in Western Australia has turned into a “gold mine”.
  
  The company made an initial investment in Gindalbie Metals Ltd in 2004 and subscribed to more shares last year. Its average cost in Gindalbie is 10 Australian cents a share and the price has surged seven times, or a seven bagger in stock market terminology. Gindalbie closed at 79.5 Australian cents on the Australian Securities Exchange yesterday.
  
  Gindalbie's price received a boost after the company signed on Monday a share subscription agreement with China’s Anshan Iron & Steel Group Corp (AnSteel), which would subscribe to a 12.9% stake in the Australian firm, Melewar chief operating officer Datuk K. C. Lim told StarBiz yesterday.
  
  Gindalbie rose from 70 cents on the news early this week. AnSteel is reputedly the second largest steel producer in China. The news may also be a reason for the recent interest in Melewar shares.
  
  It is not widely known, however, that there is a Malaysian listed company that has a substantial interest in an iron ore mining firm in Australia.
  
  Currently, Melewar is Gindalbie’s single largest shareholder with a 17.2% stake although that would be diluted to about 14.5% after the mining company makes a placement of shares to AnSteel.
  
  Melewar’s stake in Gindalbie is worth about RM165mil. That, in turn, works out to be worth 72 sen a share in Melewar, which closed at RM1.19 yesterday.
  
  It also means Melewar shares were valued at just 47 sen each for the rest of its businesses which include wholly-owned subsidiaries Melewar Steel Tube Sdn Bhd and Melewar Steel Mills Sdn Bhd, and stakes in listed companies, namely 52.4% of Mycron Steel Bhd and 21.5% of M3nergy Bhd.
  
  Melewar stated in its annual report last year that its steel manufacturing division had net assets of over RM380mil. The reason investors overlooked the value in Melewar could be its uneven track record and their focus on larger steel companies.
  
  The group has started to get noticed. M3nergy shared surged to limit up on Tuesday afternoon. Following a query from Bursa Malaysia, M3nergy said yesterday there were no material developments.
  
  The interest in M3nergy could be investors’ discovery that the company is rich in oil and gas (O&G) assets. It owns a floating, production, storage and offloading (FPSO) facility; a floating, storage and offloading (FSO) facility; and net cash of more than RM54mil. M3nergy had net assets per share of RM3.30 against its share price of RM1.44 yesterday.
  
  It is unusual for the shares in an O&G company to trade below its net assets. Besides its assets, M3nergy has agreements for production sharing contracts to develop marginal oil fields in Indonesia and India.
  
  The FPSO and FSO facilities have been profitable from day one of M3nergy's investment. The company’s operating profit from O&G services amounted to RM30.8mil for the 15 months to March 31, 2007.
  
  Melewar COO Lim said the company's directors decided three years ago to invest in Gindalbie when they saw steel prices rising. Eventually, it is intended the Gindalbie shares would be sold. “We’re not mining experts,” he said.
  
  As to the timing of sale, he said: “It has not reached our target price.”
  
  Gindalbie was exploring for gold when it discovered a lot of iron ore deposits on a small section of its land. The company has not started to produce iron ore yet but the A$39mil (RM109mil) to be raised from the share placement to AnSteel would ensure that it has sufficient funds to develop the mine.
  
  The Australian miner would start to bring up the iron ore at the end of the year or early 2008. “We should see a better value in the Gindalbie shares at that time,” Lim said.
  
  Furthermore, Gindalbie could become a takeover target of the global mining giants.

Such bullish comments made on the stock surely had huge positive impact on the stock. And rallied it did.

• 10-07-2007: Melewar hits 52-week high
  
  Melewar Industrial Group Bhd's share price closed 15 sen higher to a 52-week high of RM1.67 yesterday, rising in tandem with its Australian investment Gindalbie Metals Ltd, which rose 17.5 cents to A$1.37 (RM4.05).
  
  The share prices and trading volumes of Melewar Industrial and Gindalbie have risen sharply since a report last Friday that Melewar's stake in the Australian outfit was worth RM165 million. Melewar owns 17.2% of Gindalbie.
  
  Yesterday, there were 12.77 million Melewar shares traded on Bursa Malaysia. Gindalbie saw 15.29 million shares done on the Australian Stock Exchange. TA Securities Research maintained its "buy" on Melewar with a target price of RM2.70, adding that its Gindalbie investment, based on last Friday's closing of A$1.20, was worth RM266 million or RM1.17 per share.
  
  "The group is committed to 50% payout of its net profit as well as 50% dividend received from listed subsidiaries or associates. Based on our earnings estimates, we are looking for the group to declare a gross dividend per share of 12 sen in FY08, which translates into a dividend yield of 7.9%."

December 13th 2007, Melewar, Putera Capital bid for Penang monorail project

• Melewar, Putera Capital bid for Penang monorail project
  
  The monorail project is believed to be worth more than the estimated RM1.6 billion for the previous proposed monorail job
  
  By Hamisah Hamid Published: 2007/12/13
  
  A CONSORTIUM comprising Melewar Industrial Group Bhd (MIG) and Putera Capital Bhd last month submitted a bid to design, build and operate the Penang monorail system.
  
  The bid was submitted on the closing date of the tender, November 14.
  
  The monorail project is believed to be worth more than the estimated RM1.6 billion for the previous proposed monorail job.
  
  MIG managing director and chief executive officer Tunku Ya'acob Tunku Abdullah said the RM1.6 billion was the estimated cost for the proposed loop system.
  
  "The loop involves one line only, so it is cheaper. Now the project involves longer route and double-track. Of course, it will be more than RM1.6 billion," he told a news conference after the signing of a strategic cooperation agreement between MIG's wholly-owned subsidiary Melewar Metro Sdn Bhd and Putera Capital in Kuala Lumpur yesterday.
  
  Also present were Melewar Integrated Engineering Sdn Bhd chief executive officer Uwe Ahrens, Putera Capital chief executive officer Wan Azman Wan Salleh and Putera Capital director Kamil A Rahman.
  
  The signing of the memorandum of understanding is a prelude to cooperation between both parties in the proposed Penang monorail project. Melewar Metro submitted its bid through Melewar Metro (Penang) Sdn Bhd (MMP).
  
  Both parties have also agreed to sign a share sale agreement later on the acquisition of a stake in MMP, where Putera Capital would acquire 20 per cent of MMP.
  
  The previous proposed Penang monorail project was based on private funding initiative. This time around, the government, through Syarikat Prasarana Negara Bhd, will provide the funding, and the private sector has been asked to submit tenders as contractors of the project.
  
  Steel maker MIG and civil and structural expert Putera Capital are confident that their consortium would win the bid for the Penang monorail job.
  
  However, they were tightlipped about the cost of their proposed bid.

Do note that Putera Capital does not have a good track record (here is Putera's latest Quarterly rpt on consolidated results for the financial period ended 30/11/2007 ) and is a PN 17 stock. Hard to imagine that Melewar could pull a billion dollar project off with Putera Capital.

And then came trouble. Uncertainty looms over Melewar’s pledged shares in Aussie miner

• KUALA LUMPUR: Melewar Industrial Group Bhd could be negatively affected by the collapse of Australian stockbroker Opes Prime.
  
  Melewar’s wholly owned subsidiary Melewar Steel Ventures (MSV) had pledged 35.1 million shares or 6.8% Gindalbie Metals Ltd (“Gindalbie”) to Opes Prime Stockbroking to secure a loan from the latter. Now that receivers have been appointed for Opes, the status of the Gindalbie Metals shares is uncertain.
  
  In October last year, MSV took out an A$24 million (RM69.77 million) loan from Opes, of which A$11.1 million are still outstanding.
  
  MSV is Gindalbie’s largest shareholder with a 14% stake in the iron ore miner and has a representative on the board. Melewar acquired the Gindalbie shares in 2004 for an average cost of a mere A$0.10 per share. Thanks to strong iron ore prices, Gindalbie’s shares have risen since then, even hitting a high of A$1.82 last September. At its last traded price of A$0.71 per share, Melewar’s block of pledged Gindalbie’s shares has a market value of A$25 million (RM72 million).
  
  According to Melewar’s statement to Bursa, Opes had appointed a voluntary administrator to look into the affairs of Opes. It was reported in Australia’s Herald Sun yesterday that Opes Prime Group, Opes Prime Stockbroking, Leveraged Capital and Hawkswood Investments were placed in the hands of receivers Chris Campbell and Sal Algeri of Deloitte Corporate Reorganisation Group last Thursday after trading “irregularities” were uncovered.
  
  Following the appointment of the voluntary administrator, Melewar said a secured creditor ANZ appointed receivers and managers in respect of the Opes Group while the Australian Securities and Investments Commission has also formed a special team to investigate whether there are any potential breaches of the Corporations Act by the Opes Group.
  
  Melewar said it is seeking legal advice on this matter.
  
  Gindalbie said in a release to the Australian Securities Exchange on Monday that it was seeking clarification of Melewar’s position and requested for a trading halt for 48 hours. It will be open for trading tomorrow. The stock was down 8.97% to A$0.71 when it last traded on Friday compared to the day before. Melewar’s stock is down 7% to 96.5 sen yesterday compared to RM1.04 on Friday.
  
  Reports in Australia have indicated that Opes is known for its willingness to accept collateral in the form of shares of non-blue chip companies.
  
  According to the Herald Sun, the receivers and managers of Opes say they are not in a position yet to advise the clients of Opes as to whether any money will be returned to them. “The position regarding Opes Prime Stockbroking Ltd client accounts remains unclear and will take some time to reconcile,” the receivers were quoted as saying in the Australian daily newspaper.

Of course, Melewar felt unjust.

• Melewar gets court order to stop Opes stake sale
  
  Published: 2008/04/03
  
  MELEWAR Industrial Group Bhd has obtained a court order to stop a creditor of Opes Prime Stockbrocking Ltd from selling part of its shares in an Australian iron ore miner.
  
  The hearing has been fixed for April 10, it told Bursa Malaysia yesterday.

What this means was..

• 03-04-2008: Melewar faces RM38m potential loss
  by Joyce Goh
  
  KUALA LUMPUR: Melewar Industrial Group Bhd said yesterday it could suffer a potential RM38 million loss, should it fail to recover a block of shares in Australian-listed Gindalbie Metals Ltd that it had pledged with Opes Prime Stockbroking Ltd.
  
  Opes is facing liquidation and a secured lender to Opes is planning on selling the holdings of Opes, which include 32 million Gindalbie shares that Melewar’s unit Melewar Steel Ventures (MSV) had pledged to Opes last year for an A$24 million (RM69.67 million) loan.
  
  The potential RM38 million loss was arrived at after taking into account the fact that MSV had already drawn down more than half of that loan.
  
  MSV had pledged a total of 35.1 million Gindalbie shares with Opes but its secured lenders are only claiming 32 million of those shares.
  
  “…should MSV incur the loss, MSV would have the right to claim for the loss from Opes,” Melewar added.
  
  To protect its interest in the Gindalbie shares, Melewar has also obtained a temporary court injunction to stop the secured lender to Opes from selling the pledged Gindalbie shares. The hearing for the case is fixed for April 10, 2008.
  
  Yesterday, four other borrowers of Opes had filed for injunctions seeking to stop secured creditors of Opes from selling shares they also had pledged to Opes.
  
  MSV is Gindalbie’s largest shareholder with a 14.6% stake in the iron ore miner. Melewar acquired the Gindalbie shares in 2004 for an average cost of a mere A$0.10 per share. Thanks to strong iron ore prices, Gindalbie’s shares have risen since then, even hitting a high of A$1.82 last September. The stock is now trading at A$0.72 after resuming trading following a two-day suspension in light of the Opes crisis.
  
  According to Gindalbie, Melewar has no intention of selling its remaining 7.6% stake in Gindalbie. Melewar has yet to respond to queries from The Edge.
  
  The total book value of the entire Gindalbie shares held by MSV recorded in the latest audited accounts of Melewar for the financial year ended June 30, 2007, is approximately RM123 million.
  
  For FY2007, Melewar’s capital gains from its Gindalbie shares was recorded in the former’s stellar profits. The Gindalbie capital gains contributed a whopping RM140.1 million in profit. Melewar stated in its 2007 annual report that the board was happy to report these gains but added that it “prudently highlights that these gains have not as yet been realised, through the sale of Gindalbie shares

On Saturday, April 19th 2008

• Saturday April 19, 2008
  
  Court rejects Melewar’s appeal
  
  PETALING JAYA: Melewar Industrial Group Bhd’s attempt to stop the sale of its shares in Gindalbie Metals Ltd suffered another setback after its appeal was rejected by the Court of Appeal in Sydney yesterday.
  
  The company had filed an appeal against a ruling made by the Supreme Court in Sydney on Wednesday, which had dissolved its injunction against ANZ Banking Group Ltd. The injunction was to prevent ANZ from selling Melewar's shares in Gindalbie.
  
  The company had on March 31 announced that a wholly-owned subsidiary had pledged a 6.8% stake in Gindalbie against an outstanding loan of A$1.1mil from Opes Prime Stockbroking Ltd (OPS).
  
  However, ANZ, a secured creditor of Opes, appointed receivers and managers for the Opes group.
  
  Melewar said in a filing with Bursa Malaysia yesterday it would file a claim against ANZ for the return of the 32 million Gindalbie shares to the company.
  
  Melewar also said the failure to recover the 32 million Gindalbie shares pledged with OPS would result in the loss of about RM38mil.

And today, Melewar made a huge statement on the press, Melewar submits RM2.2b monorail plan

• Melewar submits RM2.2b monorail plan
  
  By Marina Emmanuel Published: 2008/04/23
  
  The proposed system for George Town, Penang, will boast a 12-car train of monorail and can move 17,600 passengers per hour
  
  MELEWAR Industrial Group (MIG) Bhd has presented to the Penang state government a proposal for a RM2.2 billion monorail system for George Town.
  
  The proposed ultra-light loop monorail system covering a 52km track is set to operate on a single line and run on three different loops from locations like Gelugor, Farlim in Air Itam and Gurney Drive into the city.
  
  “The focus of the main link will be the centre of George Town and we strongly believe that the federal government and state government will work together in bringing a monorail system to Penang,” Melewar Industrial Group’s managing director and chief executive officer Tunku Datuk Yaacob Tunku Abdullah told reporters after presenting the proposal to Chief Minister Lim Guan Eng and members of the state executive council yesterday at Lim’s office.
  
  He said the proposed system, which is aimed at moving people from point-to-point into the city, will boast a 12-car train of monorail and can move 17,600 passengers per hour.
  
  Tunku Yaacob said the company can take 28 months to complete the system which would feature steel structures.
  
  “Land acquisition can also be kept to a minimum because the monorail will be running on road dividers,” he added.
  
  When asked to comment on concerns from Penangites that a monorail would mar the charm of George Town’s historic inner city which is vying for a listing on the World Heritage List, Tunku Yaacob said:
  
  “We will not bring the monorail to heritage buildings ... we will not run it in front of the buildings but behind them.”
  
  However, an artist’s impression of the proposed monorail system for Penang provided by Melewar showed the system running alongside historic structures in the city.
  
  On postings in blogs that Penang should bring back its tram system instead of introducing a monorail, he described the tram concept as an interesting one but pointed out that the trams had not been successful.
  
  Last November, Melewar Industrial Group Bhd unit Melewar Metro Sdn Bhd (MMSB), which is vying for the estimated RM1.2 billion monorail project in Penang, announced that it had formed a consortium with Putera Capital Bhd to cooperate to jointly secure the project.
  
  Melewar Group had said in a statement that the consortium was formalised with the signing of a memorandum of understanding between MMSB’s wholly-owned subsidiary Melewar Metro (Penang) Sdn Bhd (MMP) and Putera Capital. MMSB made the proposal for the monorail project to the government via its subsidiary.
  
  Melewar is one of several parties which participated in a tender exercise for the development of a monorail system for Penang on November 14 last year which was called by Syarikat Prasarana Negara Berhad (SPNB).
  
  In January this year, SPNB awarded a letter of intent for the project to Malaysian Resources Corporation Bhd (MRCB), which has formed a consortium with Penang Port Sdn Bhd and Scomi Engineering Bhd.

WOW!

So it's now NO longer a 1.6 bil bid but a 2.2 bid.

And one cannot stop wondering the timing of it all. Just on Saturday it announced it lost a court appeal which means it will result a loss of 38 million to the company.

By the way, here is Melewar last reported earnings, Quarterly rpt on consolidated results for the financial period ended 31/12/2007.

Below is the snapshot of Melewar's balance sheet.

Time deposit: 3.509 million. Cash and bank balances: 26.733 million. Total: 30.242 million.

Short term borrowings: 322.373 million. Long term borrowings. 94.076 million. Total: 416.449 million.

Now this is where I am wondering. With such a balance sheet, if Melewar wins this BID, would it be able to finance this massive rm2.2 billion project?

Now what is even more interesting, this stock used to be known as Maruchi Steel Tubes. And this is one of the last quarterly earnings before the company was sold to Melewar Group. here

Look at he balance sheet.

What a nice balance sheet Maruichi had back then!

GIC: Worst Recession In 30 years!

This could be the worst recession in 30 years, so says Dr. Tony Tan, the deputy chairman of Government of Singapore Investment Corp (GIC).

Published on TODAYonline, Worst recession in 30 years: GIC

• Dr Tony Tan calls for urgent action by policymakers
  
  Christie Loh
  christie@mediacorp.com.sg
  
  Just weeks before global financial markets were first sucked into a vortex last August, Dr Tony Tan (picture) was sounding alarm bells about "dark clouds", which had already prompted the Government of Singapore Investment Corp (GIC) to cash out of some of its multi-billion-dollar investments.
  
  Yesterday, GIC's deputy chairman was back with an even more harrowing prediction. "We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years," he said.
  
  Dr Tan delivered this warning during his opening speech at the fund's inaugural staff conference yesterday, the only part of the one-day programme open to the media.
  
  GIC, which manages over US$100 billion ($135 billion) of Singapore's foreign reserves, has spared itself some of the pain.
  
  In the third quarter last year, it sold some of its equities before financial markets nose-dived. This helped provide the funds for GIC to pump a total of about US$16 billion into sub-prime-hit Citigroup and UBS over January and December, in exchange for bonds convertible into shares.
  
  Since then, Citi and UBS have unveiled more losses and writedowns, causing their share prices to fall about 7 per cent and 38 per cent respectively.
  
  But Dr Tan said yesterday that GIC believes the two "long-term" investments will bring "good returns when markets stabilise and economic conditions return to more normal levels". Until then, however, these one to two years will be "extremely nervous and volatile".
  
  He revealed yesterday that GIC had set up three group committees to oversee risks, organisational issues and investments.
  
  The group risk committee, which will be chaired by chief risk officer Sung Cheng Chih, provides oversight and guidance for the development and implementation of policies and practices for the entire group.
  
  Lack of oversight has shown up as a major weakness in the financial industry since the collapse of United States' sub-prime mortgage market, as certain banks and investment firms have only recently discovered the extent of complicated, high-risk instruments on their balance sheets.
  
  As banks continue to reduce lending activities and cause the credit supply to contract, the world economy is fraught with "considerable downside risks", said Dr Tan, adding that "a period of extreme uncertainty" is afoot.
  
  However, he said a sharp turnaround in sentiment and the markets could take place if policymakers in the US and elsewhere respond "strongly and appropriately".
  
  On the other hand, "if such actions by the authorities are not taken within the next three to four months, it will be left to the market forces of supply and demand to stabilise the US housing market before we can see the light at the end of the tunnel", said Dr Tan.
  
  "This will be a considerably more painful and long drawn process."
  
  He told some 500 staff in the audience: "The next few years may well be among the most challenging years for GIC since our establishment in 1981. We have to brace ourselves for trying and difficult times, but we are well prepared."

Link: http://www.todayonline.com/articles/249657.asp

Interview With the Man Who Paid $650,100 for Lunch With Buffett!

Mohnish Prabai is the man who won the auction for that special lunch date with Warren Buffett.

And the latest Smart Money article has one fantastic interview with Mohnish.

And Nicole Bullock wrote a nice introductory on Mohnish.

• IT OFTEN SEEMS like every hedge-fund manager is reading from the same playbook about how to look, work and behave. Neatly pressed khakis; thumbs glued to a BlackBerry; slick digs in Greenwich or Manhattan staffed by number-crunching research drones. But apparently, Mohnish Pabrai never got his copy. He wears shorts to his Southern California office, keeps e-mail to a minimum and almost never misses his 4 p.m. nap. And forget goosing returns with fancy computer models or using complex derivatives: Pabrai doesn't even sell stocks short.
  
  About the only thing slick about this 43-year-old investor is his market-trouncing track record — annualized returns of nearly 25% since he set up shop in 1999, enough to earn him a growing cult following. His "secret"? Probably the most documented investment strategy around — a bare-bones, Warren Buffett style of stock picking. While that description may inspire yawns — sometimes it seems like everybody claims to be a Buffett disciple — Pabrai takes it to an extreme. His office houses an impressive Buffett mini-museum: a wall covered with photos and articles he's amassed over the years.

Click here for the rest of the article: Looking Up to Warren Buffett

I do enjoy his way of reasoning in buying Pinnacle Airlines. Which is incredible because it's an airline stock!

• SM: What stocks do you like now?
  
  MP: Pinnacle Airlines. Depending on how things work out, it's anywhere from a double to five or six times return in the next two or three years.
  
  SM: An airline?
  
  MP: It's a regional jet company. The large airlines, like Northwest (NWA: 9.06, -0.63, -6.50%) and Delta (DAL: 8.20, -0.55, -6.28%), outsource the small planes to Pinnacle. Many of the reasons why airlines are so terrible — load factors, price wars — don't matter. The revenue is the same whether there is one passenger or the plane is full and whether Northwest charges $200 or $2,000 round-trip. The contracts are long-term, usually 10 years, and will hold up in the event of a merger. So you can estimate what their cash flows will be many years into the future.
  
  SM: What's the investment case?
  
  MP: Pinnacle has more than $10 a share in cash on the balance sheet. In the next few years, free cash flow will be $3 to $6 a share, depending on how much more business they get. With a simple 10 or 15 multiple on those numbers, you end up with $30.
  
  SM: Why are the shares so cheap?
  
  MP: One overhang is that they have a past-due contract with pilots. But not a lot of Wall Street analysts follow Pinnacle, and the business itself is changing. The evolution away from hub-and-spoke and toward more nonstop flights is driving demand for their services. When you connect one small city to another directly, you aren't going to run a jumbo or a 737

And of course his reasoning why he doesn't short a stock.

• SM: Pabrai is a hedge fund, but you don't short. How come?
  
  MP: Because it's a stupid bet. The maximum you can make is double, if the stock goes to zero. The maximum you can lose is infinite. Let's say a stock is at $10, and you short it and it goes to $100. You are down about 1,000%. The extent to which the stock can go up is unlimited.
  
  

Has anything really changed?

I do read a lot of local blog postings and one of the local blog I like is simply called TradingMalaysia.com

Reason I am highlighting this blog is because DirtyDog has penned another wonderful article, called the The waiting game...

• It is just so amusing to hear all the research reports coming out now touting shares again, when 3 or 4 weeks ago we did not hear so much as a pip out of them. What has changed between now and then? Absolutely nothing. Except that prices seem to have stopped going down. If you feel that your analyst or broker has just started to make recommendations again only because prices are more stable, then be careful because if they had any conviction in their recommendations they should have advised you to buy when the prices were on their way down, not on their way up.

Although the article was written more than a week ago, I do agree very much with what's said.

And my oh my, how the market has rallied recently.

• It’s important to take a step back sometimes and not get sucked into bear rallies thinking that we have reached a bottom and I am just not sure whether we have or not.

How?

As DirtyDog said, let's take a step back.

The main concerns that drove the markets down still remain a concern, yes? Has anything really changed?

On Saturday, Star Bizweek featured an article called Time to Buy? (I added some comments in blue italics)

• Saturday April 19, 2008
  Time to buy?
  By TEE LIN SAY
  
  THE economic decoupling between the US and the rest of the world is becoming all the more glaring. That the US is slowing, but the rest of the world is growing is becoming increasingly apparent if one were to pay attention to the release of economic data.
  
  Nonetheless, caution still drapes its sombre veil and following the herd mentality, the world continues to focus on the downside. With that, it's been a rocky road for financial markets with scorched investors sitting pretty on their dwindling cash holdings and the occasional write off by a large institution providing the almost mandatory amount of cardiac arrest for the market.
  
  But are things really all that bad? China, despite the frightful winter weather and the global credit turmoil, posted a strong economic growth of 10.6% for the first quarter of 2008. This lends credence to the comforting notion that China will make up for the slack of the slowing US economy. That being the case, has the Malaysian market reached a bottom?
  
  Some investing experts are beginning to believe so.
  
  Mid-week, Citigroup's equity research unit shot out a note that the market is indeed bottoming out and therefore suggests, one start buying. Setting out a year-end index target of 1,449 points, its research head Choon Wai Kee, says a lot of bad news (such as the global equities meltdown and the general election results) is already in the price. “In an illiquid market like Malaysia, we urge investors to start positioning ... as the index can't fall much more,” the report added.
  
  “Some local institutions are seeing their cash levels rising to over 20%. We see buying activities picking up imminently. The upcoming 2009 budget could stir buying interest as investors expect an expansionary budget to shore consumer confidence,” says Choong, adding that valuations wise, Malaysia is also trading at discounts relative to the region and its historical valuation benchmarks.
  
  Crisis near end?
  
  In a Bloomberg Television interview Thursday, Templeton's emerging market guru Mark Mobius says that the global credit-market crisis that has caused billions of dollars in losses at banks and brokerages worldwide is near the end. (What Irony! I had just posted Mobuis comments on the previous day: Some Rather Bullish Comments On the Malaysian Markets )
  
  Mobius says he has been buying shares of banks including Bank of China Ltd and Industrial & Commercial Bank of China Ltd because their valuations have fallen.
  
  “Most of the bad news is already in the market ... Malaysian equities are also becoming more and more attractive while the dollar is not going to revive anytime soon,” he says during the interview.
  
  Mobius says energy stocks are his biggest investment because of rising oil prices.
  
  “We like the general developments in Malaysia and the political debate that, hopefully, will result in a more vibrant economy,” says Mobius, in an email query to BizWeek.
  
  Meanwhile, data released worldwide is relatively encouraging.
  
  In the US, the latest March ISM (Institute for Supply Management) rose to 48.6 compared with February's reading of 48.3. This indicates that the manufacturing sector is still contracting but at a very gradual pace.
  
  Capital Dynamics Asset Management managing director Tan Teng Boo says that for the overall economy to contract, the ISM index has plunge to the 41 - 42 level, which is not the case.
  
  “So even as the global financial turbulence continued into the month of March, the world economy led by China, has continued expanding and benefiting the US economy. This trend is expected to persist throughout 2008,” says Tan.
  
  “Exports from Korea jumped in March. Business sentiment in France and Germany in March had unexpectedly improved. West Germany's unemployment continued to fall, even as late as March.... Even the US, the mother of all sub primes, was able to generate decently reassuring economic numbers for March as evidenced by the ISM index,” he says.
  
  “The biggest market is the global economy. The biggest market is still consuming and expanding. This is why exports from almost every country are growing. If the global economy is not expanding strongly, how can every country be reporting good exporting numbers even as late as February and March?” asks Tan. (Yes, but how much of this global expansion is inflated due to the insane bull run in the commodity markets?)
  
  More an internal issue
  
  CMS Asset Management Sdn Bhd chief investment officer Scott Lim says Malaysia is now facing its own set of internal problems due to the uncertain political scenario.
  
  “I don't see any breakthrough until a political decision is made. What I would watch out would be whether the regional markets get re-rated. Foreigners may consider Malaysia part of the region, and hence, we get pulled up along with the region.” (Yes, has anything really changed?)
  
  Lim says the aggressive monetary policy announced by the Federal Reserve in the US will take at least 6 months before effects start showing.
  
  “I think the big money will be watching how the second quarter unfolds. If there are expectations that the economy has bottomed, then the market will run ahead of expectations. This will be an indication of a better third quarter.”
  
  “If however the market doesn't bottom in the second quarter, we may see the true bottom in the second half,” says Lim.
  
  Still adopting a cautious outlook is Alliance Investment Bank director and head of equity capital markets Sherilyn Foong. However, she says, strategy wise, long-term investors may want to accumulate quality high-yielding stocks such as the blue chips at reasonably lower entry prices.
  
  She adds that Malaysia's unique comparative advantages include the oil & gas and plantation sectors, which can be viewed as both defensive yet blessed with growth attributes. She too agrees that Bursa Malaysia's present valuation levels are comparable to its regional peers. (Yes, the incredible commodity bull run has brought immense fortunes especially to our planters. However, take the planters, the CPO is now way off from the highs already. And considering the fact that the current prices are still insane, who's to say that perhaps we might see more correction in the CPO? Having said that, since we are still in an incredible bull run for the CPO, I would not discount the return of the bull either!)
  
  “This type of volatile market that is characterised by shrinking volumes and heightened risk is not for the faint-hearted, short-term traders nor momentum players. In a bear market, stock-picking is key to out perform,” she says. (Stock picking is forever important. Not only in a bear market! )
  
  In Malaysia, Lim says it is more important to look at companies that are tied to global trends. As the global economy is more integrated than ever, whatever happens outside of Malaysia will eventually unfold domestically.
  
  On this note, Lim says many construction stocks have bombed out.
  
  “Companies like IJM Corp Bhd and Zelan Bhd have half their order books coming from the overseas market and are extremely well managed. I wouldn't look at Malaysian companies that rely only on the domestic market. Political risks have multiplied the risk of investing in these companies. Companies have to either play offensive or die as a defensive player,” says Lim. (Oh yes, political risks and also rising material costs is a also a massive risk for the builders!)
  
  Choong's strategy is to add beta and be less defensive. The high beta stocks would include SP Setia Bhd, KLCC Property Bhd and UEM World Bhd. Citigroup further reiterates its bullish view on SapuraCrest Bhd and TA Enterprise Bhd.
  
  Schroders Head of Retail Sales Josephine Lip says that despite the challenging market environment, there can still be pockets of opportunities out there for eagle-eyed investors.
  
  “An asset class that tends to do well in periods of rising inflation and uncertainty is commodities. Many commodities performed strongly when the sub-prime mortgage market woes were at their peak last year. As the period of heightened volatility is likely to extend over the near term, this strengthens the positive outlook on commodities,” she says. (Yes, commodities are the key performers. Hey, it's a bull, yes? Having said that, isn't it perhaps too late to go gung-ho on commodities, now? Isn't it a bit too late for the party? On a side note, I was amazed to see folks like CIMB launching commodity funds now, CIMB unit launches 2 Islamic commodity funds . )

Review Of CME Group

Dedicated to Unker TK again.

CME Group,is listed on Bursa Malaysia Second Board.

Earnings Track Record

As you can see from the table above, CME's earnings has been utterly terrible from 2000-2007.

However, things turned around in an utmost amazing manner for CME. It's simply stunning to say the least.

And the following is the most recent 4 quarters performance from CME.

And as a penny stock, the earnings and the cash per share will simply make one go goo-ga-ga over this stock.

Earnings of 13.801 would equate to an earnings per share of 34 sen and the current net cash balance of 32.371 would equate to an amazing 80.7 sen per share.

And when I blogged about this stock previously, it was only trading at 63 sen!

Yes, the stock did not have the best ever earnings track record but the earnings are showing us that things are turning around in a wonderful manner for CME Group.

So would this be a buy of the century?

Well, if one invests based on numbers and yardsticks, surely one might jump right in, right?

However, how about one understands the business we are investing in?

Like understanding why CME was doing so terribly from 2000-2006 and why the sudden turnaround in 2007. Would the turnaround be sustainable?

The following article posted on the Edge in Dec 2006 helps: 4 Dec 2006: Corporate: CME's fire is back

• Little-known CME Group Bhd has not had much to rejoice about over the past five years. More precisely, its business has seen little activity during this period

Five years? How about 7 years of bad performance?

• The Shah Alam-based company designs and manufactures various types of fire-fighting equipment, including fire engines, aerial access ladders, cranes and fire-fighting and rescue vehicles. So naturally, its main customer is Malaysia's Fire and Rescue Department (FRD). Since 1988, it has sold about 500 fire and rescue vehicles, about 408 units of which were to the department. CME's other clients are port and airport operators, oil and gas companies and the Ministry of Defence.

So CME is a fire-fighting equipment specialist. And it's niche was to supply to Malaysia's Fire and Rescue Department (FRD).

• Hence, when the FRD did not place any orders in the last four years, CME's activities slowed significantly, with revenue falling from RM50 million in 2002 to only RM2 million in 2004. By keeping its operation costs low, CME was able to minimise its losses. For example, it only has 50 full-time staff. From 2002 to 2005, its total net loss was RM10.2 million.

Without any orders the last 4 years equated to a terrible performance the past 7 years (if you look at the tables above, CME performed terribly from 2000-2006)

• However, things have begun to look up for the company. Its chief operating officer Datuk Lim Soo Kok says the FRD placed the largest order ever with CME on Oct 17, after it was allocated some RM500 million under the Ninth Malaysia Plan to purchase fire and rescue vehicles and equipment. The RM211.20 million contract involves the delivery of 200 fire and rescue vehicles over the next 23 months. "Our business is cyclical because it depends on orders from the FRD," Lim tells The Edge.

This is very interesting.

With this new order, CME fortunes turned around drastically.

There are two things for me.

One, the remaining contract is to supply 200 fire and rescue vehicles over the next 23 months. A contract value of rm211 million. Which means the next year or so, things will still be rosy for CME. However, what's next then for CME? Surely this concern has to be addressed, right?

Secondly, what do you think of such business? Enduring 7 years is one mighty task. Most other companies would probably have folded but CME did not. Credit to them here. Yes, on one hand, this is one bumper year for CME and so might be the next. However, it's not that profitable is it? Consider these numbers. From 1999-2007, total earnings for CME in this period is only 3.134 million! And if you minus out fiscal year 1999, CME would still be losing money in this decade. CME lost 1.996 million in this period.

So, if you consider from an investing point of view, surely you would be concerned, yes?

And last but not least I noticed that the stock jumped an incredible 22 sen. Closed at 85 sen. WOW!

But, hang on a minute here. Look at it below.

Volume done was only 1 miserable lot. And volume done in this 10 trading period was also 1 miserable lot!

Yup, this is one hell of an illiquid stock. A dead stock.

And last but not least, it has the nonsensical 1 into 10 Stock Split!!

How?

Do you really want to invest in a stock like this?

Some Rather Bullish Comments On the Malaysian Markets

Posted on Bloomberg News: Templeton's Mobius Says Credit Crisis Is Near End

Yes, Mr. Mark Mobius of Templeton Asset Management Ltd reckons that the credit-market crisis that's caused $245 billion of losses at banks and brokerages is "near the end.''

What struck my attention was what the following statement.

• The fund manager, who oversees $47 billion in emerging- market equities, said he has been buying shares of banks including Bank of China Ltd. and Industrial & Commercial Bank of China Ltd. Malaysian equities are also becoming ``more and more attractive,'' he said in a Bloomberg Television interview today.

And in his brief explanation, he reasoned that

• Malaysia's Kuala Lumpur Composite Index on March 10 plunged 9.5 percent after the government suffered its worst election result in almost 50 years. The gauge has lost 13 percent in 2008.
  
  `Good Impact'
  
  Prime Minister Abdullah Ahmad Badawi last month vowed to proceed with infrastructure projects to promote growth and pledged measures to help the poor, seeking to reassure investors after the government's narrow poll victory.
  
  Malaysian stocks are ``becoming more and more attractive as a result of these political changes,'' Mobius said. ``There has been re-awakening so to speak, reassessing that Malaysia should be doing well and prosper. I think that's good news and that could have good impact on the market.

More and more attractive as a result of the political changes?

Some might argue against these wind of changes in the politics scenes are only in the beginning stages and many uncertainties lies ahead.

Nevertheless, in another report published on Business Times, Citi: Start buying as KL mart is bottoming out

• On its stock pick, the research house puts SP Setia, KLCC Property and UEM World on the top buy list
  
  
  IT is time to buy into the Malaysian bourse as the market is bottoming out with banking, plantation, telecommunications, utilities and gaming sectors taking the lead, said Citi Investment Research yesterday.
  
  “A lot of the bad news (global equities meltdown and shocking 12th general election results where the ruling coalition government lost the two-third majority) are already in the price. In an illiquid market like Malaysia, we urge investors to start positioning,” it said in its research paper released yesterday.
  
  Besides, Citi Investment said, investors would eventually be tired of speculating on the outcome of such negative events and re-focus on basic investment fundamentals.
  
  On the converse, it said, the Kuala Lumpur Composite Index (KLCI) is domestic-centric and hardly any sector is directly exposed to the outside world.
  
  “The only sector that is directly exposed to the external environment is the plantation sector which accounts for 17 per cent of the KLCI weighting.
  
  “Banking accounts for another 23 per cent, while utilities and telecommunications make up a further 16 per cent,” it said.
  
  Citi Investment, which is a division of Citigroup Global Market Inc, said its bottom-up index target suggested a 15 per cent upside for KLCI.
  
  “We now expect the KLCI to hit 1,499 points by year-end,” it said.
  
  The KLCI ended 2.9 points higher at 1,256.54 yesterday.
  
  Citi Investment said some local institutions are seeing their cash levels rising to over 20 per cent and, “we see buying activities picking up imminently.”
  
  It said huge pent-up demands are waiting to re-enter the market and the 2009 Budget is expected to stir up buying interest as investors expect an expansionary budget to shore up consumer confidence.
  
  “The 2009 Budget can boost next year's gross domestic product growth, spending and confidence to levels back to the 1990s,” it said.
  
  On its stock pick, the research house put SP Setia, KLCC Property and UEM World on the top buy list.
  
  “We continue to like IOI Corp, KL Kepong and IJM Plantation in the plantation sector but are dropping Sime Darby from the list.
  
  “Listing Telekom Malaysia's mobile unit can add more interest in the telecommunications space.
  
  “DiGi is also expected to continuously deliver strong earnings growth and cash flow,” it said

How now my dearest MooMooCow?

Would you agree with what Citi is saying here? Or do you reckon that the comments made are far too optimistic in general?

Welli: Charged with Cooking Their Books

Published on Business Times: Charged with cooking books

• Charged with cooking books
  
  Published: 2008/04/16
  
  The Securities Commission says two former Welli Multi directors, the Ang brothers, falsified company accounts in the 2005 annual report and quarterly reports for 2006
  
  THE Securities Commission has charged two former directors of Welli Multi Corp Bhd with falsifying company accounts, about 10 months after it first took action against the palm kernel crusher.
  
  The regulator has sued Ang Sun Beng, 62, the former managing director of Welli and his younger brother Ang Soon An, 58, who was also a former executive director.
  
  "Upon conviction, the accused persons are liable to a fine not exceeding RM3 million or to imprisonment for a term not exceeding 10 years, or both," the SC said in a statement released yesterday.
  
  They were charged with falsifying accounts in its 2005 annual report where Welli posted a revenue of RM573 million and a net profit of RM5 million.
  
  They were also charged with manipulating the numbers for the first three quarters of fiscal 2006, which ends on December 31.
  
  In addition, the SC has fined Welli's former executive director and chief executive officer, Tan Chin Han, RM100,000 for authorising the submission of the 2006 third quarter accounts.
  
  The Ang brothers have claimed trial to the charges.
  
  Judge Rozana Ali Yusoff imposed bail of RM150,000 with one surety on each of them and ordered them to surrender their travel documents. She fixed May 9 for mention.
  
  In February, the SC told the Business Times that it may take legal action against those who cooked the books at Welli. It had said that investigation was at an advanced stage.
  
  Initial investigations revealed a number of bankers acceptance notes were issued by the company to "questionable" companies.
  
  In June 2007, Welli was told to withhold releasing quarterly accounts and the annual audited accounts for the period to March 31 2007.
  
  This was to verify the authenticity and recoverability of some RM113 million worth of trade receivables.
  
  The Penang-based palm kernel processor, listed on the second board, was instructed to rectify and re-issue its accounts.
  
  Welli then re-issued its accounts up to the period ended December 31 2006 in February this year, reporting a net loss of RM17.61 million.

Well, it's really great to read about all this happening.

Another thing, here's another example to pay attention to them trade receivables in the balance sheet.

Remember the old saying, a sale is never a sale until the money is collected!

CME Groups's 1 into 10 Stock Split

Dedicated to Unker TK again. :D

I was just reading this article, 15-04-2008: CME proposes 1-into-10 share split

• 15-04-2008: CME proposes 1-into-10 share split
  
  KUALA LUMPUR: CME Group Bhd has proposed a one-into-10 share split towards increasing the liquidity of the stock.
  
  As at Dec 31, 2007, CME’s paid-up capital stood at RM40.11 million comprising 40.11 million shares of RM1 each. CME said yesterday it would submit an application to Bursa Malaysia Securities for its approval of the proposal within one month.

Ok, the stock is said to have no liquidity.

And if I use my Bursa Station toy, I can see where the issue of no liquidity is coming from. Look at the daily volume chart for CME for the past 3 months.

And if you look at the recent 5 year data, it's no different!


There is simply no volume at all!

And the below is the 5 min tick chart for the past one month for CME.



This simply is a dead stock!

And I guess a 1:10 stock split kinda make sense.

But.... but.... but.... but..... but if you look at the last traded stock price, the stock last traded at 63 sen.

Sixty Three sen.

OMIGOD! A 1 into 10 split for a penny stock trading at 63 sen!!!!!!!!

Is this a world first that a penny stock is doing a 1:10 split?

Speach-less or speach less???

And yeah, Simon would ask after such nonsensical corporate proposals from its listed members, if our market even relevant anymore?

Sigh!

Understanding My Investment Risks

Investing in any stock(s) is risky.

There is no investment which carries absolutely zero risk.

Which is why before I make any investment decisions, I always, always weigh out all the pros and cons.

Investment should never be about investing based on yardsticks and numbers. As mentioned before a low PE stock does not the stock a good stock. It simply means that the stock is traded cheaply in comparison to its earnings.

Do you see that it is so common that most tend to equate a LOW PE stock as a great investment? And the whole biasness is based on the fact that it's a lowly traded PER stock.

Which I feel it's so badly twisted.

One should invest in a GOOD QUALITY stock that a cheap price. However, it does not mean that all cheap stocks are GOOD QUALITY stocks. Some stocks are cheap because of the risk within the stock. You cannot use the cheapness in the traded stock price to justify that the stock is good!

Too confusing?

Flip it the other way around.

How about them high PE stocks? Does a high PE stock make the stock a lousy stock? Does it? I don't think so. It only means that it's an expensive stock and from an investing perspective it only means that our chances of being rewarded in such an investment is rather slim. ( Dali had also written recently on PER and here is his take, PER – simple but limited )

Anyway, back to the pros and cons of the stock.

And because I tend to consider all the concerns and risks within a stock, folks tend to consider myself a critical cynic.

But my reasoning is simple, if we don't know and we don't consider all the risks and concerns within a stock, how can we fully justify the risk in our investments?

Should the fact that the stock trades at a low PE overweighs all risks?

Well, if that's the mindset, then I have one great example, Megan Media. It showed clearly the risk when one gets fixated on the investment yardsticks and ignores all the risk.

Understanding the business model and the economics of the business is so very important, yes?

What's the driving factor that's driving the current earnings? Could this driving factor be sustainable? Is it cyclical? These are issues that need to be considered, yes?

And about management issue?

If ever you doubt the management or the owners of the business, how could one invest in the company?

Take HaiO case. Back in 2003, it declared to the press it was cash rich and debt free but when one digs further, one discovers that the cash free is derived from a recent rights issue!

So in this given example, won't you doubt this management?

In real life, say you meet this crazy bugger and he asks you to be his business partner in a barnyard business. But this bugger is sort of a whacko because he tends to go bonkers and whacky in the afternoons. Too much smokes I guess. So in such a situation, surely you have your doubts, right? And common sense should suggest to you to forgo this barnyard business opportunity.

Perhaps my example is not the best but shouldn't one have the same type of mindset as an investor? When one have doubts about the management of a company, why should one invest in the company then? Aren't we ignoring our investment risk?

Of course when we get to adversely focused on the risk, one can miss some winners.

Firstly, missing out on a winner is no crime but losing money because one ignores the risk is a crime for me.

For example, take the stock VADS. It was a stock market winner but I chose to ignore it because I simply could not comprehend the risk involved in investing in the stock. VADS is a stock in which its majority shareholder is also the main and only customer for the business. Such a model simply did not make sense to me. Hence, from an investing perspective, I had chosen to give it a pass.

Remember missing out on a winner is never ever a crime.

But some form of greed is always within every one of us and greed can play tricks on our mind. Sometimes we only focus too much on the pros of a stock investment. One only sees the opportunity within the stock and dismisses all possible risks.

Ah, yes, its exactly like my favourite postings before back in 2006: Our Eyes Seeing What We Want to See

Let me reproduce here again.

---------------------------
In the Show Me the Money column, Ms. Teh Hooi Ling, wrote an incredibly interesting piece titled "Meeting management a waste of time?".

The article was based on James Montier's 100-page report on the seven sins of fund management last year, the third sin is: Why waste time listening to company management?

Here is what she wrote. My comments will be in purple.

==>>

He puts forth a number of reasons why he thinks talking to management does not help investors make better investment decisions.

First, managers are just as biased as the rest of us, he says. He quotes the Duke Survey of chief financial officers in support of this claim. The survey is carried out every quarter and covers around 500 of America's major companies. The average company has sales of US$2.3 billion and half are listed.

One of the questions the CFOs are asked is how optimistic they are on the economy and on their own companies. According to Mr Montier, in every case, managers were more optimistic about their own company than they were about the economy as a whole. 'This is a classic case of illusion of control driving overconfidence,' Mr Montier says. (How true isn't it? Let's not talk about these officers. Talk to the owners of any local listed stocks. Asked them about their share and they would always give their utmost optimistic views. Would one call it bias? Or is this just pure natural human behavior? )

In the earlier days of the Duke survey, CFOs were asked if they thought their stock was undervalued by the market. On average 63 per cent thought so, while 32 per cent thought their stocks were correctly valued. And - get this: At the peak of the Internet bubble, nearly 90 per cent of CFOs of tech companies were of the opinion that their stocks were undervalued. ( Even investors. People like you and me. if anyone asks us about the current potential of our stocks in the current optimistic market, surely we would give a slightly biased optmistic views of our stocks right? )

The problem does not just lie with the corporate managers. It's with us as well. Human beings have a tendency to look only for information that happens to back up their current view. Not only do we look for information that agrees with our belief, we also pretty much see all information as consistent with our prior beliefs. (We had a chat at http://sahamas.net/ with fellow blogger JamesBull regarding the dangers of reading too much into 'news media' where one could fall into the danger of our eyes seeing what we want to see syndrom. How true isn't it? )

.. Ms. Teh then continues....

'This is the power of authority ... the more god-like the management, the easier it will be for them to influence analysts who cover the stocks,' says Mr Montier.

After having to watch out for our own psychological flaws, there is still one more hurdle. Can you tell the truth from a lie?

If management is intent on lying to you, can you tell?

(hmmm..... extremely interesting point isn't it?)

In another experiment, students were given training in the most common methods of deception detection. The findings: confidence increased with training and experience but accuracy did not.

Indeed a friend who has abundant dealings with top management of companies said she has been 'smoked many times before' and that despite her experience, she has yet to master the skill of telling whether someone is telling the truth.

So where does this leave us?

'Given that we can't easily correct these biases, perhaps company meetings are best avoided,' says Mr Montier.

(Yeah so where does this leave us?? How, Brown Cow?)

here is Ms. Teh's opinion...

Well, I still believe there is value in meeting management.

For one thing, you can understand from a manager the industry his company is in. Then you listen to his strategy and what he plans to do as part of his strategy. From there, you can then critically assess if you think the strategy is workable in the context of the industry and what competitors are doing.

And I believe that one can get 'vibes' - be they positive or negative - from a person through face-to-face interactions. Your life experiences will tell you if you are a good judge of character or not. Of course nobody can be 100 per cent right about a person 100 per cent of the time. But if you are right 80 per cent of the time, that's already not a waste of time.

So perhaps based on the biases mentioned above, someone who is very grounded and not carried away by how smart or good he or she is, someone who has great intellect and a little - but not too much - cynicism, someone who has a little rebellious streak, someone who is able to pick up only the relevant information, someone who has an open mind, and someone who is a good judge of character would make a good analyst.

That's a tall order, and chances are if a person has all the above qualities, he or she wouldn't be recognised as a 'good analyst' in the market. He wouldn't believe that he is able to see the future better than others, and would not be confident enough to have a 'buy' call with a target of $3 with the stock at 50 cents. And without such bold calls, the broking firm that employs him cannot earn commissions, and he will soon be out of job.

Perhaps he might be able to do better in a traditional or hedge fund or managing his own money.

(Me? I tend to agree with Ms.Teh here. The danger of seeing what our eyes want to see will persist in every situation, in regardless if we meet the management or not. The danger exist when we read the news article, believing what we want to believe. The danger also exist when we read a recommendation from an investment house which has a good track record. (Reasoning here is a fund manager with an excellent track record might not necessarily give one a honest investment advice). This is why sound reasoning is so very important. Sound reasoning should remove this biasness issue.)

Ms. Teh then concludes her article by stating the following...

Meanwhile, Mr Montier's other six sins of fund management are:

• Our insistence on relying on forecasts when it has been proved time and again that we simply cannot forecast.
• The illusion that more information is better information.
• Thinking that you can outsmart everyone.
• Being short-term focused.
• Believing everything you read.
• Believing that group decision-making is better.

So ultimately, if one were to start questioning everything - what management says, that one's own forecast cannot be trusted and that one cannot outsmart others - then the only logical investment choice would be to buy into an index, which incidentally is a good option.

As for the stock pickers among us, the list then acts as a reminder to constantly check against our own biases.

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

And for me? I do hope I do not fall in the trap of being too bias towards the concerns and risks of any given stock!

Just a reminder for myself.

Manchester United 2 Arsenal 1

Manchester United was extremely lucky to beat Arsenal last night. Arsenal played good.

Anyway what can you expect when United played against a 12-man Arsenal team!

Oh no, I am not talking about a biased referee or the crowd. I was talking about Arsenal having an extra player, Wes Brown!

Did you not see his defence splitting pass in the fifth minute to Cesc in the penalty box? Thank goodness Cesc blasted over.

And what about his wonderful attempt at United's goal late on in the second half. United was lucky to have the post to block out Brown's incredible attempt on goal.

Thank goodness Manchester United got lucky and came out 2-1 winners.

Seriously, Manchester United needs a new rightback next season!

Read some comments from Myles Palmer

From Myles Palmer...

• When RVP put in one good cross, somebody shouted "Keeper's!" and Rio left it and Ade put his arm up to protect his face because he thought Edwin would come out and whack him- and the keeper stayed at home and the ball went in off Ade's arm and......nobody appealed for handball ! The keeper and the defenders didn’t see it.

Ah, the evidence from your sports CSI team!

See RiO's reaction?

Gosh, wasn't he like telling himself NOT to go anywhere near the ball? Or is that how some sissies play footie?

And what's Carrick doing? A new dance on tip toes?

And was Van der Sar doing some Kung Fu or boxing movement? (If you ask me, I do agree with Myles, Edwin was indeed trying to whack Ade! The evidence said so!)

And then there's Ade-Samson-Bayor! LOL! Tell me, is that a new swan-lake header or what?

:P

Some extra highlights from the match.

So they swapped...

( Waa... Roo's looking slim, eh? :P ) (Was Cesc trying to slap Rooney's chest? oO! )

Ok... it's time to leave the pitch....

Something then slipped!

Hey Cesc! You dropped something!

And obviously Cesc heard nothing!

And did you wonder what Van Persie was clapping for??

LOL!

More On HaiO

TK said:

• I was initially interested in Hai-O. However, I do not like the 50 Mil investment in property.
  
  Pu-er tea, Moo Moo, this tea, as far as I know, once being 'goreng' & some cost few thousands ringgit a kati hoo.... dun play play... There are people who buy this tea to keep (investors?), the value will goes up according to its age if it is properly kept.
  
  Re the herbs, Hai-O looks like improving in its marketing (outlet design, product packaging). I think its competitors will be 'Yu Yan Sang' I was shocked when I see the price of 'Tong Chong Chow' RM400-RM800 per pack.& I beiieve that chinese herbs business is a fat profit margin business.One of my classlmate drove Merz after joining their MLM while I was still in college. But thats before Hai-O listed... How?

Many thanks Unker TK for sharing what you know.

BullBear posted on FusionInvestor chat:

• HaiO is selling at a low PE (based on ttm-eps). It earns >25% on equity and its net profit margin >10% of its revenue. The arguments centred on its management and its business franchise. IF HaiO continues to perform, those who invested into it would have a return of x% (?5%, 10%, 30%, 50%, 100%), if it unperforms, one might lose y% (?5%, 10%, 30%, 50%, 100%), . Works out the odds (x/y), and see if you like the odds.
  
  Peter Lynch: "The very best way to make money in a market is in a small growth company that has been profitable for a couple of years and simply goes on growing." The key objective of the investor should be to avoid a major loss, the occasional huge winner will offset a number of small losses." "When the news seem terrible, that's when you make the big money in the market."

My dearest BullBear,

A low PE stock means only one thing and that is the stock is trading on a lower valuation compared to what it is currently earning.

Some simply consider that what is happening is the stock is being ignored in the market despite its impressive earnings.

Why?

The market could be wrong and that perhaps this is a stock that's an ignored gem. Yeah, the classical hidden gem and if this is the case, investors who invests in the stock could be rewarded for their stock selection.

However, on the other hand, sometimes the market could be right and that they do sense something is not right within the stock.

And because of this reasoning, I have always realised that a low PE stock does not make a stock a QUALITY stock.

It just means the stock is trading 'cheaply'.

It could be a bargain but it could also be a trap.

In this instance, HaiO is obviously trading cheaply compared to its current earnings.

Now, yes I've raised the concerns on the management and business model.

In every investment reasoning I always evaluate my pros and cons in any investment opportunity.

Yes, HaiO is making tons of money but what's the concerns? What's yours? Well mine are the two simple issue, management and business model.

Main issue here is, are the concerns that I raised legitimate?

Are you comfortable with a MLM business model? Would you invest and buy-and-hold for the long term in such a business?

The issues I raised about the management. Well, did it not happened? Was it not legitimate?

Review Of Hai-O

Dedicated to Unker TK.

All data is compiled by myself from Bursa Malaysia website. ( I am liable to make an error and if I do make an error on any numbers, do let me know)

Background.

HaiO sells herbs, health suppliments, health tonics and tea. Here is the company website: http://hai-o.com.my/

Hai-O yearly earnings track record.

Numbers are always extremely interesting and can always be interpretated in many, many ways.

For example, using the bigger picture perspective, one can see from the above table that, HaiO's performance from 1999-2006 was poor. FY 2006 showed HaiO earnings 10.1 million which is a fantastic improvement from its fiscal year 2005's earnings of 5.5 million. However, I would base it on the bigger picture and would consider the fact that for its fy 1999, HaiO was already earning some 11 million. Hence the huge jump in earnings in 2006 should rather be discounted and that HaiO's earnings only turned around in 2007.

So from a bigger picture perspective, one can argue that so far, HaiO has only fantastic year which is fy 2007 and also judging from its ttm (trailing twelve months) earnings, HaiO should have another grand earnings for its current fy 2008.

Now here's another way to look at it where I can make HaiO look like one incredible growth stock!

Let me take out the FY 1999 to FY 2003 earnings. And let's look at the earnings below.

This is now looking like one incredible growth stock eh?

Firstly, here's a site for you to calculate your CAGR (Compounded Annual Growth Rate): http://www.moneychimp.com/calculator/discount_rate_calculator.htm

Let us see if we calculate the CAGR from 2003, we would get the following:

Which looks simply superb! A company growing at an annual compounded growth rate of 57% for its most recent 5 years!

And it's so good that the company has this chart on their website. (see http://en.hai-o.com.my/new/investor_financial_highlights_profit.asp )

However, if the time frame is switch to focus on HaiO's performance from 1999 to 2003, see the results below.
And the CAGR would show a terrible result.


Point is one should understand that numbers can tell different stories depending on how and where you want to look at it from.

For me, I would merely note that HaiO had a fantastic fy 2007 and this year, it should have another fantastic fiscal year.

Would I boldly declare HaiO as a fantastic growth stock? Would you?

Some would simply argue that two great years do not make a growth stock.

Some would simply argue that in HaiO's case, one should look at the bigger picture. From 1999 to current, one has a 10 year time frame, and out of this decade, HaiO has probably performed terribly for 7 years! Although the current 2 years, HaiO is performance is fantastic.

Hey, don't stare at me. I already said that it's so subjective on how one looks at a set of numbers, didn't I?

Hai-O's Current Quarterly Earnings

If you look at the table above, basically HaiO's change of fortune happened since its FY 2007 Q3 earnings.

Balance Sheet

Balance sheet is looking great lately. However, from the quarterly earnings table do note that SI denotes Short Term Investment.

And I never do like to see stuff like this in our local stocks. For me, a listed company should just concentrate and maintain their focus on the company's core business ( Did HaiO failed in this area before?) and not dabble into short term investments. Any excess cash should be simply returned to their shareholders.

From HaiO's website, from their 2007 Annual Report (634 KB) (see page 115) it states that this short term investments is in Unit Trusts!

As of the recent quarterly earnings reported last month, short term investments stood at 22.850 million. Now isn't that an awful lot of money to put into Unit Trust?

Broker Coverage

Affin, OSK and RHB Research covers the stock. So does I-Capital.

RHB in its latest report:

• Corresponding to the change in our FY04/08-10 earnings projection, indicative fair value is upgraded to RM4.64 from rm4.04 based on unchanged target PE of 19x CY08 EPS, which is at 40% discount to our CY08 target PE of 16x for the consumer sector, to reflect the smaller earnings base and market capitalisation. Maintain Outperform.

Note: I see CY08 earnings net profit forecasted by RHB is at 38.1 million. (ttm earnings indicates a net earnings of 37.6 million)

OSK in its latest report:

• Maintain BUY. Having taken into account on the current stock market condition and our downgrading in the GDP projection from 6.2% to 5.8%, we are now more conservative thus assuming the lower band of the PE and P/BV of the retail sector. Notwithstanding, our target price revised higher following the earnings revision; and rolling our numbers to FY09. We peg a target price of RM5.00 (previously RM4.60) by applying the composite of 10x (previously 12x) over FY09 EPS of 50.6 sen and P/BV of 2.6x (previously 3x). We reiterate our BUY recommendation on Hai-O.

Note: I see OSK is basing HaiO value on its estimation of HaiO's FY09 earnings, which is estimated at 42 million.

The reports can be be downloaded here: Hai-O Robust earnings driven by MLM division, Hai-O 3QFY04/08 Results Boosted by MLM and Hai-O Amazing Performance

Pros

1. Earnings have been absolutely fantastic the past 2 years or so.

2. Balance Sheet is looking fantastic. Its cash flow is simply awesome!

Concerns

1. Is this a flash in a pan?

What's driving this success for HaiO? Last June, the following article was published on Star Business: MLM and pu-er tea to drive Hai-O sales. The following section is worth noting:

• The sterling performance was due to the MLM division, more intensive sales promotions by the retail division for its royalty customer programme and additional sale of pu-er tea.
  
  Revenue contribution from the MLM division grew 84% while the wholesale segment jumped 119% in FY07.
  
  In addition, the company’s profit margins had improved, thanks to the ringgit appreciation, which lessened import costs and it saved RM1.5mil from a waiver of rental costs and reimbursement on certain expenses for leasing of a shopping complex.
  
  Higher investment income also added to the profitability, Hai-O said.
  
  In keeping to its promise to pay 50% of after-tax profit to shareholders, Hai-O has declared a final dividend of 13 sen per share, bringing the total dividend for FY07 to 18 sen a share.
  
  “We’re proud to be able to sustain our growth since we’ve been around for 32 years now,” Tan said, adding that by carrying only premium products, it was able to fetch better margins.
  
  The MLM model was also seen as sustainable as Hai-O had an average of 1,000 new recruits every month, he noted.
  
  Hai-O has started opening retail outlets in high-traffic shopping malls, such as 1 Utama, Queensbay Mall (Penang) and Pearl Point (Old Klang Road), he said, adding that previously it was focused on shoplots.
  
  Next year, another outlet is targeted to open in Mid Valley Megamall.

From a PURE investing perspective, serious consideration has to be made on the sustainability of HaiO's impressive earnings. In short, is it a flash in a pan.

As stated, pu-er tea and aggressive MLM is driving in the earnings.

Is there a sustainable long term competitive advantage in these two factors?

For example, pu-er tea. How many people you know really drinks this tea? Is it a fad? Is there a substitute equivalent? How much do you really know about this tea?

And then you have the MLM issue, all which is so highly debatble of course. Some believe strongly in such marketing strategy, while some don't because they believe that MLM simply don't last! ( The following recent article is interesting too: Top Hai-O agents earn RM1mil a year - wow, so lucrative?)

How? Would you rate this as a concern at all?

2. Is there a risk to HaiO strong cash balances?

I like to look at the past. It gives an idea what the company has done before and I used it as a rough indicator. For example, in the case of HaiO's strong cash balances, the main concern is what if the company squanders the cash by spending in an extravagant manner? Would this not be a legimate concern? After all, we are talking about investing (buy-and-hold long term) in this stock?

Back in 2003, there was an interesting article on HaiO.

(The above screenshot of the article is clickable for a larger and clearer image or u can see the same article here: http://www.hai-o.com.my/cms/layout/Printer.asp?ProductID=62 )

The following section of the article was very interesting for me:

• On why Hai-O was venturing into the IT sector, he said: “We are debt free and cash rich as we have RM8mil in fixed deposits, RM4mil in our current account, and RM20mil in overdraft facilities. Therefore, we will venture into any business if it can bring us some benefit.”

I didn't like how and what's been said. Rather arrogant in my opinion.

Firstly, HaiO then was a simple Chinese herbs player. That it wanted to venture into IT was a shocker! A shocking diversification if you asked me. And the manner it talked about its cash balances to the media was rather so arrogant!

And what's more shocking is the following table below.

As one can see from the above table, for its fy 2003. HaiO had a total cash of 13 mil. And note that the above table indicated a huge jump in the number of shares in HaiO.

And when I dig deeper, I noted that HaiO had a Rights Issue in 2003.

Now how? This gives a whole meaning of being cash rich company, yes? See, their debt free and cash rich was not via the company's hard work but this net cash resulted from a rights issue!

And what happened next was interesting.

Now if one look at its 07 Q4 quarterly earnings (Quarterly rpt on consolidated results for the financial period ended 30/4/2007), one would note..

• On 18 April 2007, the Company disposed of the entire 100% equity interest in Hai-O Informtech Sdn Bhd , comprising of 2,000,000 ordinary shares of RM 1.00 each for a total cash consideration of RM 280,000.

Invested 2 million.. sold for 280,000. What about the extras spend during this period? Remember the inital plan was to spend as much as 10 million!

And if one refer back that April 18th announcement: DISPOSAL OF SHARES IN HAI-O INFORMTECH SDN BHD (533171-D)

• 3. EFFECTS OF THE DISPOSAL The Disposal is not expected to have any material impact on the issued and paid-up share capital and shareholding of the major shareholders of Hai-O. The Disposal is also not expected to have any material impact on the net assets and earnings of Hai-O Group for the current financial year.

No material impact?

Take 2007 numbers. It said that it earned a net earnings of 22.114 million. Take this investment of 2 million. Sold at 280k. This is a loss of 1.716million. Yes it's small. BUT do compare 1.716 million to its net earnings of 22.114mil. Well that's about 7.7%.

And strangely, I do not see where and how HaiO accounts for this loss.

Anyway would you call that as an example of past extravagent spending?

Fast forward to present day.

Hai-O buying land in Klang for new facilities (See also: New warehouse to contribute positively to Hai-O in 2009 )

• Hai-O buying land in Klang for new facilities
  21 Dec, 2007
  Source: New Straits Times
  
  HAI-O Enterprise Bhd, a wholesaler and retailer of Chinese herbs and medicine, is spending RM50 million to buy a plot of land and build new facilities in Kapar, Selangor.
  
  The company will pay RM45 million to Bata (Malaysia) Sdn Bhd for a 11.2ha site, and spend another RM5 million to set up a new factory and a warehouse there, senior officials said.
  
  It has yet to finalise the building plan and manufacturing output, they added.
  
  Managing director and chief executive officer Tan Kai Hee said the company would use its reserves to pay for the land and build new buildings to expand its manufacturing output. It may also consider a private placement to raise the fund.
  
  "We are cash-rich, generating RM10 million to RM15 million annually to our reserves," Tan told reporters at the signing of a sale and purchase agreement on the Kapar land in Kuala Lumpur yesterday.
  
  Financial controller Hew Von Kin said Hai-O would use about 6.8ha of the land to build new facilities, while the balance of 4.4ha would be leased back to Bata for handsome fees.

Oh oh.

Where did I read this statement, "We are cash-rich, generating RM10 million to RM15 million annually to our reserves" before?

Dejavu again?

Some view an investment into a stock as being a business partner of the company. Now as a business partner of this business, how do you feel if your partner keeps telling the whole world that they are cash-rich?

And what about this 50 million land purchase again?

Tell me, am I biased or is the sum of this purchase simply way too extravagant? Isn't it simply excessive?

Isn't it like back in 2003. Company had no expertise in IT but yet it went in big time. And now spending 50 million to buy land.

Instead of trying to justify this so-called investment, let's focus on the size instead.

50 million is a lot of money!

Why can't this company spend 10 million instead?

Seriously, can the company not buy land and built a factory with 10 million? No other land in Malaysia?

Ok, if 10 million is not enough, how about 20 million?

Surely 20 million is enough, right?

So why 50 million?

( Note: Hai-O secured RM20m loan to finance property buy )

How? Does one see concern and risk to HaiO's strong cash balances?

And do note, HaiO has been actively buying back the company shares in the open market. And that HaiO's management has promised to return back 50% of its earnings back to the shareholders as dividends and not forgetting that it's rather active with their unit trusts investments. So much plans, eh?

And it all seems to hinges on this pur-tea and MLM earnings.

How would you evaluate your risk in such an investment?

Would you invest in this company?

Review of Bursa Station - Day 3

Today I decided to test Bursa Station ability to provide me with information from an investor perspective.

And since I had been chatting a lot on every one's favourite 'investor', bullbear, from FusionInvestor chatbox, I decided to make this a posting with dual purpose: A review of HaiO and A Review of Bursa Station.

First I add Hai-O into my Stock list.

With the cursor clicked on HaiO, I made a right click. A new window pops up and I chose Financials.


My immediate attention was where I drew the arrow. See how it states as 2008 Q3 and the previous quarter indicated 2007 Q2. An error?

So I decided to look at my other feeds.

The above was from RHB and the bottom was from Kenwealth, who uses KLSE tracker software.


And it would appear that everyone is following what's published from HaiO on Bursa website. Quarterly rpt on consolidated results for the financial period ended 31/1/2008 - indicated 2008 Q3 while Quarterly rpt on consolidated results for the financial period ended 31/10/2007 - indicated 2007 Q2. But since Hai-O had already reported its FY 2007 earnings, the quarterly earnings reported by Hai-O in Dec and Sept were wrongly labeled. ( I would not fault Bursa Station here)

Moving on, I scroll down the financial pop-up from Bursa Station on Hai-O.

Neat. The first line indicated a drastic increase of the number of shares and checking Bursa Malaysia website, this increase was caused by a 1:5 bonus issue back in Aug 2007. And as explained by Bursa Station the figures shown are extracted directly from company announcements without any adjustments.

However, as an user, if Bursa Station was to be my one and main financial portal that has everything, then perhaps Bursa Station should come out with a better layout and design that provides the user better flow of information. Remember, as it is, I had only looked at 2 pages, and already I had to make clicks to other websites for better understanding of what's happening here.

Next, I noticed there is no indication of the total cash and total borrowings. Not sufficient! This would mean that I would have to dig out the information myself.

On another note, as an investor, note the investments line on HaiO's balance sheet.

The next page is I see when I scrolled down is the cash flow.

And then at the end is the financial ratios below.


Comments on the EPS line.

Yeah, so many ways to interpret EPS, makes you wonder why folks use PE as a main criteria

Anyway, as it is now, HaiO has some 82 million shares. Last year few years, it had only around 68 million shares. So what Bursa Station is doing here is it calculated all the previous years earnings per share based on a share base of 82 million shares. Yes, it's an adjusted eps figure. Some might like this setting but some might not.

Actually I find it lacking but for many, these information on Bursa Station should probably be enough.

And while right clicking on the stock quote on Bursa Station, I discovered that Bursa Stations offers tick charts!

Two windows opens up. One empty window and one the tick charts. (I am puzzled at the empty window!)

Of course, the main issue here is why a different charting within Bursa Station?

Anyway, it looks messy.

The lower two windows draws the ROC and MACD. I do not like it and I removed both of them via the drop down boxes on the top left. I then took out the Moving Averages too by clicking on the small SMA boxes.

A much cleaner look yes?

The colors of the candles and all of their indicators can be adjusted.

The min ticks offered are the 1, 2, 3, 4, 5, 10, 15, 10, 30 and 60.

So with this tick charts, all my early grouses on Bursa Station were answered except for price adjustment. For example, the below chart shows HaiO on a one year time frame. And the massive gap down in the chart on Sept 2007 is caused by the bonus issue. Again, perhaps Bursa Station should offer the option of having an adjusted price chart and a non-adjusted price chart.

Review Of Bursa Station - Day II

This morning I decided to test out the charts functions on Bursa Station.

Opening the chart is slightly faster than others.

To open the chart, I laid my cursor over my selected stock, Bursa, and then I clicked on Interactive Chart and a pop up window of the chart appears.

The charts options are clear and neatly laid out.

My first impressions. The chart appearance is rather plain, too plain in fact with no options to change the layout with colors. The only adjustable is the fonts setting which I thought was rather pointless. The chart is provided by ShareInvestor.

Now to play with it.

The chart comes with a duration setting. And I am impressed that it has a 20 year option. Which means that the chart can be viewed right from the start.

So I decided to click on the 20 year option for Bursa, despite knowing the fact that the stock did not exist so long ago.


I then change the option to a six month view.

On the right, there is a view option and the default option shows a daily time frame. The very first option is the 5 min tick charts. And the default option is 2 days. I opted for a 30 day view of the 5 min tick chart.

Next, I chose the 1 week 5 min tick chart for this stock.

The other options it has for the min tick charts are the 5, 10 and 30. No 15 mins ticks. And then it offers hourly ticks for the 1, 2 and 4 hours.

Next I decided to use the comparison charts function.

Firstly, I change candlesticks option to simple line chart. Then under the drop down option, I decided to compare Bursa versus Public Bank.

Here is the 6 months comparison view.



The blue line would represent Bursa, while the red line represents Public Bank.

I then chose the 5 year comparison chart since Bursa did not exist earlier than this time frame.


Looking ok so far but I have one major grouse.

On most other live interactive charts, when the user mouses over the candles on the charts, the charts displays that day trading stats, like the day's trading highs and lows and opening and closing day prices. Bursa Station chart does not offer this option.

Another thing is the user does not have the option to zoom into a particular area within a time frame. Other charting portals have this option.

Next, the biggest concern for users of charts is the accuracy.

I then decided to see if Bursa Station's charts adjusts for stock splits and bonus issues.

One that had a bonus + rights issue was AZRB.

As can be seen on the chart above, this charting software shows a non-price adjusted chart. Some likes it because it shows clearly the exact stock price before the stock is adjusted for the bonus and rights issue. And since AZRB had a bonus issue first, there was an initial huge gap at the 3.00 region and then it had a rights issue, which caused the other gap at around the 1.80 mark.

However, some would prefer the adjusted stock chart and Bursa Station does not offer one.

That's all for now.

(Day 2 connection - the portal started off smoothly. No hitch and so far, connection is stable.)

More SC action!

Published on Business Times: SC probe widens

• FRESH from filing its landmark legal suit, the Securities Commission (SC) is probing share trades of more companies for possible price manipulation activities, it was learnt yesterday.
  
  Business Times was told that the regulator is monitoring the situation before deciding if there are enough grounds to justify a full-fledged investigation.
  
  In an e-mail reply to questions sent, the SC said it proactively monitors trading activities on Bursa Malaysia to ensure a fair and orderly market, and that "firm action will be taken where there is evidence of wrongdoing".
  
  Apart from firms linked to Global Trader Europe Ltd, a UK fund, it is believed that the regulator has widened its scope to include Liqua Health Corp Bhd and Welli Multi Corp Bhd.
  
  The Global Trader probe is on possible insider trading. In late February, several counters had brutal limit-down crashes, timed with the UK fund's selling of pledged shares, with margin shortfall.
  
  The latest probe, meanwhile, is on possible manipulation in the trading of Liqua Health and Welli Multi shares. Sources said a senior dealer was interviewed last week on trading related to shares of Liqua Health.
  
  Both companies, with possible accounting irregularities rap hanging over their heads, closed at their lowest level on March 19.
  
  However, some 10 trading days later, shares of Welli Multi and Liqua Health surged by some 400 per cent and 200 per cent respectively.
  
  Liqua Health, which was also linked to the Global Trader probe, announced on Wednesday the appointment of chartered accountants Baker Tilly Monteiro Heong to do a forensic audit on transactions worth RM15 million.
  
  Welli Multi has had a roller-coaster 12 months, with a slew of expired memoranda of understanding on changes in ownership and expansions into China and Indonesia under its belt.
  
  On April 1, it signed a conditional subscription agreement with GEM Global Yield Fund Ltd and GEM Investment Advisors Inc, for the two US-based funds to buy under five per cent of the company for about 50 sen a share.
  
  On further prodding from the stock exchange, Welli Multi said it doesn't know who is behind the fund or its intentions.

Now I do understand that perhaps SC could have done much more than dishing out civil suits. Postings and the comments made on Dali's blog is certainly worth reading SC files landmark civil suit and Cat Out Of The Bag

Could SC done much better? Probably.

Are you happy to see what's happening?

Don't you think that SC by taking these actions indicates that perhaps finally we might see some changes in the local market for good? At least there is hope for a better future, yes? Or is this simply wishful thinking?

Or are you afraid that these actions would ultimately hurt the already fragile market sentiments? Some would argue by saying 'Aiyoh, Malaysian markets needs these buggers around mah and without them, how to cari makan?'

How?

Review of Bursa Station - Day One

Using Bursa Station - Day One.

Let's start building a stock watch list.

This initial step is confusing because the very first stock search is a rather long-ish process. I use the same process to create my watchlist (which can also acts as my portfolio!)

Say I want to add the stock, Bursa.

Here are the steps.

1. Click on the Watchlist.
2. Choose a folder, I choose and click on Folder 1.
3. A new tab appears (see below)

4. Right click in the middle of the screen.
5. Add a new counter.
6. And you then build your list.

Rather long-ish eh? (They should have created a short cut right from the start on the active stock list page)

Upon completion, it would look like this below.

See the long black arrow on the picture above. It points to a TAB.

So my Bursa Station now has 2 tabs. An Active stock list tab and a Folder 1 tab.

I will add another tab now. The Indicies tab by clicking on the Channel button, then mousing over Bursa to the right, I will see the Indices option.

** My complaint on the indices is that Bursa Station does not show the main stock components in each sector. Others portals, such as RHB, allows the user to gauge which stock is gaining or losing within a given sector. **

After selecting it, my screen will now look like this.


See the black arrow? It points at a NEW TAB, Indices, has been made.

Ok, so what's the use of doing all this?

Well, click on Windows and the Tile it Vertically and viola...

I now have a 4 column view!

Now the folder 1 or the watchlist acts as your portfolio manager!

No joke!

One can record one's buy/sell transactions and over time, it should like what they had stated in their user guide. See below.

Now I entered a simple trial transaction.

I click the Buy button and when I finished it would like this below. Very simple.

To view my portfolio, I then click on the View Portfolio!

And then there is a button to check the Direct Business Transactions. See Below.

Rather nifty eh?

How?

So far, for my first day of usage, downloaded since 12pm, it has been rather pleasant.

Oh, after installing, to run the Bursa Station, one just clicks the desktop icon created after installation, and then Bursa Station would start within 10 seconds and it recalls your exact last view, which is very nice.

Now this is much faster than opening a window explorer and then clicking on your broker's website and then signing in.

And that's all for today.

Review Of Bursa Station

My friend suggested to me to have a look at Bursa Station and register for a free 7 day trial here

So I did.

After registration, I was given a link to download of the latest version of Bursa Station Professional.

Download and installation was fast. I am using a Vista machine.

A user guide pops up after running Bursa Station (see picture on the ride) and it lists out in an extremely neat manner of their new features and existing features.

For example:

Real-time data
• Streaming stock quotes
• Intraday Time & Sales
• Trade Summary Matrix
• Quote Movements
• Market Depth
• Bursa News
• Buying In Market
• Direct Business Transactions
• Dow Jones News (Optional)

Fundamentals
• FactSheet
• Company Financials (Optional)
• Insider Trades (Optional)


Charting
• Interactive Chart
• Intraday Charts
• Volume Distribution Charts
• Tick Charts (Optional)

Monitoring
• Stock Alerts
• Watchlist & portfolio tracking
• Price Spread Calculator

And what's extremely useful was all of the above links are clickable and it gives the user a clear indication of what's available. (the above picture shows what I saw when I clicked on the Financials link. )

Also included is a navigational instructions on the left side. Extremely handy. It tells you what is what when you look at the Bursa Station.

Here is the screen shot below:

Knowing what to expect, I was all eager to experience my trial Bursa Station. I then proceeded to close my user guide window.

From the above picture, I did not want the Channel Navigator on the Bursa Station. So I closed it by clicking on the x.

I then moved my mouse over to Gamuda and I double clicked on it.

And this is what I get. See below. And do double click on the picture below to see the larger picture.

Firstly, remember I had Gamuda highlighted by double-clicking on it.

Did you enjoy the Stock Frame on the right?

The top box shows the classic time/sales transaction. The next one shows Volume Distribution Chart and then Trade Summary Chart and the very bottom one shows the Intraday Chart. Note the Stock Frames are customable and you can add or remove any of the charts.

On the bottom left, we have the Dow Jones snippets.

Very neat!

On the top we have the following set of buttons.

See the arrow pointer on the picture above? Clicking it brings me to a ticker mode! And if the stocks in your stock watchlist will then appear on this ticker! This means you can be kept an eye on your stock price every single second will doing another task! Handy!

The button the right of Watchlist on the above table is called the Factsheet button.

Clicking on it, opens a new window!

Boy, this is the best part I reckon!

See following samples below.

Lot's of information right at your fingertips!

Ok, the original set-up color looks rather plain and dull.

Now if one clicks on the options button right on the top, one really has the option to make the Bursa Station layout really nice. (You need to click on the Appearance tab!)

Let me show you.


I clicked on the Office 2007 theme. And if I click on the color options, another window will pop up and I will have all the colors to play with!

So far, I left it on the Office 2007 theme.

Now with the stock Gamuda being clicked, I can right click for more options. Yes, by right clicking, I get short cut to all features Bursa Station has!

And then that grayish chart on top of the price quotes (It's next to the green candy on the picture below). Clicking on it gives me an instant access to the Intraday Composite Chart.

How?

I like this new toy so far. I really do.

Right now, this portal looks featured packed to the max.

However, if one is a trader, speed and reliability of the system are so much more important. I will be testing on these two issues for the next couple of days.

Meanwhile, if you are excited by all this, here's where to click for a free trial: http://www.bursastation.com/users/register.pl

( Disclaimer: This is an independent review. I am NOT associated with Bursa Station and neither is this a paid review!)

Update on Litrak's Capital Repayment!

Blogged earlier: Christmas Is Indeed Here for Litrak!

I wrote the following:

Which brings me to this other issue on Litrak's capital repayment. I blogged on this on March 18th 2008. See Litrak may return RM1 per share!

My grave concern was how come Aseambankers research team was bang on the money on this capital repayment issue?

• According to a research note by Aseambankers, Litrak has a total debt of RM819 million as at December 2007. Assuming the entire sukuk programme was drawn up, analysts estimated that Litrak would have a cash surplus of RM726 million, which could potentially be returned to shareholders.
  
  “However, we believe that the maximum surplus amount of RM726 million may not be returned to shareholders in full, with some to be kept for future investments. Ultimately, a capital repayment of at least RM1 per share (or RM492 million in total) is more likely,” it said

Embarking on a sukuk program to incur more debts and then to give a huge chunk back to its shareholders requires extreme imagination!

So why and how did Aseambankers come out with this incredible and insane suggestion in the first place?

Did they know?

Did they?

I was alerted by Seng on an interesting fact:

LINGKARAN TRANS KOTA HOLDINGS BERHAD (“LITRAK” OR THE “COMPANY”) (I) PROPOSED CASH DISTRIBUTION OF RM1.00 TO THE SHAREHOLDERS OF LITRAK BY WAY OF CAPITAL REPAYMENT ON THE BASIS OF RM0.93 CASH (“PROPOSED CAPITAL REPAYMENT”) AND SINGLE TIER INTERIM DIVIDEND OF SEVEN (7) SEN CASH FOR EVERY ONE (1) EXISTING ORDINARY SHARE OF RM1.00 EACH HELD IN LITRAK; AND (II) PROPOSED AMENDMENT TO THE MEMORANDUM OF ASSOCIATION OF LITRAK PURSUANT TO THE PROPOSED CAPITAL REPAYMENT

And if you open that link you will see the following statement:

• On behalf of the Board of Directors of Litrak (“Board”), Aseambankers Malaysia Berhad (“Aseambankers”) is pleased to announce that the Company wishes to distribute RM1.00 cash for every one (1) existing ordinary share of RM1.00 each to the shareholders of Litrak by way of the following:

Now how about that??!!!!!!!!!!!!!!

Aseambankers is the banker!!!!!!!!!!!!!!!!!

How now my dearest MooMooCow?

Is this simply disgusting?

============

Update:

I got a copy of Aseambankers report just now.

And this is what they wrote:

• As expected! Litrak’s proposed capital repayment of 93sen per share is within expectations. The capital repayment proposal came hot on the heels of a debt restructuring exercise approved by the authorities early this month – a Sukuk Issuance Programme to raise up to RM1.545b to refinance existing debts (RM819m as at Dec 07). Litrak will distribute a maximum of RM462m cash based on its current paid-up of 492m shares and assuming all 4.7m ESOS are exercised. In addition, Litrak will also pay a 7sen single tier interim dividend for FY08 (ex-date not fixed), lifting immediate payout to RM1.00. This is Litrak’s second capital repayment after an earlier 25sen per share in May 2006.

As expected???

My oh my!

How????

Christmas Is Indeed Here for Litrak!

Read the following article: Windfall for Litrak shareholders

• SHAREHOLDERS of Lingkaran Trans Kota Holdings Bhd (Litrak) will get at least a RM462 million windfall under the company's capital repayment and dividend plans announced yesterday.
  
  Shareholders will be paid RM1 for every share they have, in the form of 93 sen cash under a capital repayment, and another seven sen in a single-tier interim dividend for the year ended March 2008.
  
  The 93 sen per share repayment - involving a payout of up to RM462 million - will be done via a reduction of the company's share capital and share premium.
  
  "(Consequently) the share capital and share premium account will be reduced by up to RM397.42 million and RM64.58 million respectively," Litrak said in a statement to Bursa Malaysia.
  
  Litrak said the capital repayment reflects its continuous effort to achieve an efficient capital structure and to reward its shareholders.
  
  "The proposal is expected to enhance the consolidated return on equity of the Litrak Group, which in turn is expected to have a positive impact on shareholders' value."
  
  However, the capital repayment will reduce its interest income.
  
  "Based on the average gross return on short-term deposits of three per cent per annum, the proposal is expected to result in a decrease of interest income by RM13.86 million per annum," it said.
  
  The exercise is expected to be completed by the third quarter of 2008.

Oh no!

Another sad day for corporate Malaysia!

I had blogged before on this issue: Incurring Debts to Return to Shareholders

Here are my reasonings again.

• In this example, one needs to look at the justifications of raising debts just to return to the shareholders.
  
  I am not saying that all debts are negative. Some debts are indeed productive if the company manages to use the debt as a means to finance capital expenditure exercises that creates the opportunity for the company to generate more returns in the future.
  
  However, not all debts are good. And the more debts issued by a firm, the higher the risk premium for the company.
  
  And in this case where debts is incurred to repay shareholders, these debts incurred does not generate any returns for the company for it is GIVEN back to the shareholders. And sooner rather later, these debts would have to be repaid, which means future profits generated by the company would have to be used to repay these debts and not forgetting the interest cost.
  
  Clearly this is but one sure insane and ludicrous manner to manage a company.

Which brings me to this other issue on Litrak's capital repayment. I blogged on this on March 18th 2008. See Litrak may return RM1 per share!

My grave concern was how come Aseambankers research team was bang on the money on this capital repayment issue?

• According to a research note by Aseambankers, Litrak has a total debt of RM819 million as at December 2007. Assuming the entire sukuk programme was drawn up, analysts estimated that Litrak would have a cash surplus of RM726 million, which could potentially be returned to shareholders.
  
  “However, we believe that the maximum surplus amount of RM726 million may not be returned to shareholders in full, with some to be kept for future investments. Ultimately, a capital repayment of at least RM1 per share (or RM492 million in total) is more likely,” it said

Embarking on a sukuk program to incur more debts and then to give a huge chunk back to its shareholders requires extreme imagination!

So why and how did Aseambankers come out with this incredible and insane suggestion in the first place?

Did they know?

Did they?

Sigh!

Another sad day for corporate Malaysia!

On one hand, I was overjoyed reading the case on Iris. However, this Litrak incident has taken everything away!

Sigh!

SC Takes Action!

Oh yeah, what a lovely way to start the day. (MU won 1-0 helped too!)

Posted on Star: SC files suit against Repco Low, 9 others over Iris share fraud and on Business Times: SC files landmark suit and posted on the SC website here:

• From September 2005 to May 2006, the price of Iris shares rose by 17 times from RM0.08 to a closing high of RM1.36 per share on the back of very strong demand with an average of 200 million shares being traded daily.
  
  The SC’s investigation found that the manipulation was carried out through a complex layering of the origination of the orders and transactions via foreign intermediaries in several jurisdictions.
  
  The investigation further revealed that the defendants had collectively used numerous trading accounts which contributed to the strong demand for Iris shares during the material period. The foreign defendants and their representatives worked closely with the Malaysian defendants in creating an artificial demand for Iris shares.
  
  The SC was able to unravel the defendants’ activities through painstaking and careful analysis of trading data of more than 100 trading accounts at 15 local and 16 foreign brokers, records of various communication modes between the perpetrators including more than 200,000 e-mail messages, and recording of statements from witnesses locally and overseas.

And fellow blogger Dali commented the following:

• About time we brought some of these leeches to court. The SC should be applauded for having the political will to bring this on. I am sure many people would have put up obstacles and muscle in with their connections to prevent this from eventuating. Is this thanks to the new political landscape? I hope so, the winds of change are blowing through, and the winds of betterment are also best reflected in the way independent oversight bodies conduct themselves, without fear or favour. Plus protecting the minority shareholders and maintaining integrity within the financial system. Hugs and kisses all around. ( http://malaysiafinance.blogspot.com/2008/04/sc-files-landmark-civil-suit-marking.html )

Well it's really about time isn't it?

Manchester United 1 Roma 0

Was I worried about this quarter final 2nd leg clash at Old Trafford?

Hell yes!

No Vidic and Rio probably woud not start.

Yes, United had a 2 goal advantage which meant that Roma needed to score 3 times to progress.

However, it's not as easy as said. All Roma needed to do was score twice to force the tie into extra-time and penalty kicks.

Anything could happen and United without both their center backs could be in an extremely dicey situation.

And boy was I surprised when the line-up was announced.

Rio partners Pique in the center of defence with Brown and Silvestre on the flanks.

However, no Ronaldo and no Rooney!

And a midfield combination of Hargreaves, Carrick, Park, Anderson and Giggs with Teves as a lone striker.

Oh oh, it looks like Sir Alex Ferguson had set up stall to defend the lead.

Let me say this United played really well right from the start. Defended extremely well when they did not have the ball and they even actually looked good going forward and had ample scoring opportunities.

And Roma had an extra player in Wes Brown!

In the eight minute, he had an open goal staring at him from a Ryan Giggs corner. And somehow I guess he must have decided that he was Roma's defender and he headed the ball over. How ironic! Last weekend, when he was to head the ball clear, he messes up his clearance and it lead to Boro's second goal.

And at the half hour mark, he did one better.

He gave away a penalty. Grrr... he's really not one of United's better player this season!

A right decision in my opinion.

I was like, oh no, this could be it.

However, luck was on United side and luck was on my side. The big guy above probably knew I had problems sleeping!

Up step De Rossie and he blasted the ball into the orbit!

Phew!

Luck man!

Dare I say anything else?

And midway in the second half, Roma had two more chances. A long range effort from Vucinic was spilled by Van Der Sar and Cassetti was probably inches away from the rebound.

And then Taddei had a shot which looked a goal until Silvestre did an incredible dive at the ball and somehow his body blocked the ball right on the goal line.

Incrediblely lucky or what!

And then Teves stepped up the plate and scored United's only goal when he scored off a diving header from a Owen Hargreaves cross from the right wing. It's been a long time since United scored such a goal.

And that was it.

Game over.

Gary Neville made his long awaited return on the last 10 minutes.

Some afterthoughts. Hargreaves and Anderson were magnificent in midfield.

MaeMode Again

Read the following article on MaeMode today, MAE's planned Dutch stake buy gets thumbs-up

• OSK Research Sdn Bhd gave the thumbs-up to Malaysian AE Models Holdings Bhd (MAE)'s planned purchase of up to 40 per cent in Netherlands-based Van Riet Equipment BV (VRE).
  
  MAE, via wholly-owned subsidiary Matromatic Handling Systems (M) Sdn Bhd, had recently signed a Memorandum of Understanding with VRE for the purchase, with an option to buy the remaining 60 per cent stake via a share swap.
  
  The purchase price is to be determined following due diligence. MAE makes material handling systems like conveyor belts and conveyor rollers, among others.
  
  OSK Research said MAE management had indicated that the investment is expected to generate a return on investment of 24-26 per cent.
  
  The price tag is said to be at a price earnings ratio (PER) of about five times, "which is relatively cheap compared with MAE's forward PER of seven times".
  
  "Should the acquisition materialise, MAE will be able to strengthen its core business and to leverage on the technology knowhow of VRE, while VRE could rely on MAE's available manufacturing facilities for its own products," the research firm wrote in a report yesterday.
  
  The deal will be funded by internal funds and bank borrowings.
  
  "We expect the contribution from the acquisition to be mini-mal in fiscal year 2008 and will only start contributing to earnings in fiscal year 2009 by generating an additional RM50 million to RM70 million worth of sales," OSK Research said, maintaining its "buy" call and target price of RM1.84.

Firstly, I would like to reflect what I had written on Maemode before, Reply to Mae, I hope I am not WRONG!, Mae, I hope I am not WRONG! , A look at MaeMode again , MaeMode III, MaeMode Part II and MaeMode

My stance on MaeMode remains. My initial posting MaeMode I had stated the following: "One of the stock earnings that caught my eye was Malaysian AE Models."

Earnings were indeed good but I certainly did not like what I saw inside the company.

For me, using a business-like investing perspective, I saw the debt built-up since April 2007. Back then it was in a net debt position of 157 million.

Two months ago, on Feb 2008, I wrote on the stock again.

I noted the following:

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.

And here is the table of what I saw.

So despite all the earnings, underneath it all, this company doesn't look fundamentally strong at all.

So now this Dutch VRE deal.

Firstly, I am shocked not to see no price tag mentioned in the article. Yes, on hand, this deal should probably generate more earnings for MaeMode so I decided to check Bursa website.

MALAYSIAN AE MODELS HOLDINGS BERHAD ("MAE" or "the Company") -MEMORANDUM OF UNDERSTANDING BETWEEN MATROMATIC HANDLING SYSTEMS (M) SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF MAE, AND VAN RIET EQUIPMENT BV

• 1. INTRODUCTION
  
  The Board of Directors of MAE is pleased to announce that Matromatic Handling Systems (M) Sdn Bhd ("MHS"), a wholly-owned subsidiary of the Company, had on 2 April 2008 entered into a Memorandum of Understanding (“MOU”) with Van Riet Equipment BV (“VRE”) for the purchase of up to forty per cent (40%) of the enlarged share capital of VRE.
  
  2. THE MOU
  
  2.1 Information on Van Riet Equipment BV
  
  VRE is a company incorporated in the Netherlands having its registered address at Groningenhaven 2, 3433 PE Nieuwegein, Utrecht, Netherlands. VRE's main business activities are in the business of materials handling systems integration, especially on the software and designing of the Logistic Distribution Centre and high speed sortation systems.
  
  2.2 Salient Terms of the MOU
  
  (a) Purchase Consideration
  
  The purchase price to be determined by due diligence carried out by an Independent Accounting Firm to be mutually agreed upon by both parties and subject to the terms and conditions hereinafter contained. The results of the Independent Accounting Firm will be presented to the shareholders of both parties for their respective decisions.
  
  (b) Mode of Payment
  
  MHS shall pay to VRE upon issuance of the new share certificate by VRE.
  
  (c) Shareholders Agreements
  
  This MOU will be superseded by a Sale and Purchase Agreement, a Shareholders Agreement between all new and existing shareholders of VRE and a new Shareholder Agreement between VRE and Aemnic Corporation (M) Sdn Bhd. All these documents will have to be formalised and agreed upon between both parties before the transfer of the shares can be effected. All parties will endeavor to execute all these documents within 2 months or such other date as may be mutually agreed upon by both parties.
  
  (d) Governing Law
  
  This MOU shall be governed by the laws of Malaysia and its validity, construction and performance shall be interpreted in accordance with the laws of Malaysia.
  
  
  3. CONDITIONS OF THE MOU
  
  The MOU is not subject to the approval of the shareholders of MAE or any relevant authorities.
  
  4. DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTERESTS
  
  None of the directors and/or substantial shareholders of MAE or persons connected with them has any interest, direct or indirect, in the MOU.
  
  5. STATEMENT BY DIRECTORS
  
  The Board of Directors of MAE is of the opinion that the entry into the MOU is in the best interest of MAE group.
  
  6. COMPLIANCE WITH THE SECURITIES COMMISSION’S POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES (“SC GUIDELINES”)
  
  The signing of the MOU does not fall within the ambit of the SC Guidelines.

Rather lacking in details yes?

And more worrying, as OSK mentioned, this deal would be financed by internal funds and bank borrowings.

Currently, as can be seen in the tables above, MaeMode does not have tons of cash. Instead it had tons of borrowings.

And now it wants to borrow more.

How?

Not a good way to manage a company in a profitable manner, yes? Can a company continue to borrow and borrow and borrow?

Would I give this deal a thumbs-up?

Would you?

Liverpool 4 Arsenal 2

Did not sleep well, hence I decided to switch on the TV to watch the Champions League match between Liverpool and Arsenal.

Sixty minutes had been played and the score flashed Liverpool 1 Arsenal 1!

WOW!

Another 1-1? 4 times in a row?

Could it be?

The stats flashed that Diably had opened the scoring before Hypia equalised for Liverpool.

Less than 10 minutes later I was rewarded with a superbly taken goal. A route-one clearance from Reina bounced deep into the Arsenal terrority. Why wasn't the Arsenal defenders attacking (defending) the loose ball and worse still the ball was headed towards the Spanish tornado, Torres.

I counted four Arsenal defenders around Torres and I immediately thought it was yet another typical movement where they had Torres chasing after loose balls. What a waste of talent I thought.

Boy was I wrong.

Swiveling and checking back in one movement, Torres struck an incredible shot past Almunia!

Liverpool 2 Arsenal 1. Game over, I thought!

A couple of minutes later Adebayor was put through and on a one-on-one situation, he sliced the ball wide. Ade-Samson-Bayor, oh boy, you should not have cut your beautiful hair!

But then came redemption.

Of a corner, Gerrard had a chance to riffle in a long range shot but Theo stole the ball from him. I thought Gerrard was looking out of sorts then. Theo broke out. From his own half, Theo sprinted right for the Liverpool goal. For a a minute I thought I was watching Thiery Henry. Theo rode four challenges and I actually thought he might finished his incredible move by scoring. But no, he laid the ball across for Adebayor to get a chance for redemption. And Adebayor duly replied by tucking the ball neatly into the Liverpool net.

Liverpool 2 Arsenal 2!

That goal should have been good enough to win any matches, especially in a pulsating match like this.

But no. Life is never kind, for Arsenal at least.

Straight from the kick-off, Liverpool attacked Arsenal left wing again. That was sensible move because Arseanl was missing Sagna, who I thought was their better players this season. Kolo Toure playing at right back was simply clumpsy as he clearly barged Ryan Babel down in the penalty box.

And Gerrard put Liverpool ahead again by striking home the penalty.

Game over.

No way Arsenal could recover and a couple minutes later Babel scored Liverpool fourth of the night.

What a match.

Liverpool will now play Chelsea again in the semis.

Notes: From the match reports I read, Arsenal had an incredible start of the match and I guess things changed when Flamini left the match in the 40th minute due to injury!

Will Bintulu Port pay out rm400m??

Published on Business Times: Bintulu Port can pay out RM400m: Kenanga

• BINTULU Port Holdings Bhd has the potential to pay shareholders up to RM1 a share or RM400 million in total, due to its strong balance sheet, a research house said.
  
  The company, which operates the world's largest liquefied natural gas (LNG) export terminal, has cash of some RM470 million as at December 31 2007. It has zero borrowings.
  
  "Strong balance sheet also provides room for capital management," Kenanga Investment Bank Bhd said in an initiation report dated March 31.

I am simply NOT happy with such insinuation at all.

Yes, this stock might have the cash but there is NO written guarantee that it will share its excess cash.

Ok, talk is too cheap. How about an example of a cash rich company NOT sharing its excess cash? Well try look at UAC.

Think about that!

Credit Suisse has a target price of rm7.30 on Gamuda!

Saw this article, US-based fund buys 4 million Gamuda shares, on Star Business.

The last set of comments was rather interesting.

• The latest recommendation was from JP Morgan, with an “underweight” call and target price of RM3.30 yesterday. However, Credit Suisse, in its recommendation issued last Thursday, had an “outperform” call on Gamuda with a target price of RM7.30.

Always love such wild differential in target prices from brokerage houses.

Here we have JP Morgan with a target price of rm3.30. Too pessimistic?

And then we have Credit Suisse with a target price of rm7.30. Grossly optimistic??

But... but... but... wait a minute it's Credit Suisse!

And CS is blogger Dali's favourite!

Here are two postings from Dali on Gamuda and CS:

1. Bull, Bullocks & Their Derivatives

• Let me give you a real definition of "accidental result": placing a humungous chunk of Gamuda to supposedly smart foreign investing professionals, just because you have them around your little fingers, and then doing a Britney "oops, I did it again" - and when the share tanks 20% a couple of days later, that's a fucking accidental result

2. Dissecting Gamuda's Demise

• Credit Suisse team ill-advised Lin on the placements. CS team mis-read the market's probable reaction. The deal was structured poorly. The PR machinery on the 18 month lock up was useless in light of the size of the placement and the size of the remaining shares. A better way would have been to break up the deal into 3 tranches. Announce that 1/3 is placed out now, another 1/3 12 months later and the remainder for lock up.
  
  Even if Lin was the one wanting to sell the stake, CS should have advised otherwise. There is really no valid reason to dump so much Gamuda, after all, Lin reputedly already has a couple of hundred million ringgit in the bank, and need not really sell down any more. Estate planning - you can very well give Gamuda shares as inheritance... I thought Gamuda shares were excellent medium term and long term investments??!! At least that's what Lin said during his last roadshow a couple of months back. You mean, Gamuda shares are not good enough to leave to your kids?
  
  Maybe there was something else which caused Lin to sell. Maybe something happened with regards to "contracts disbursements and allocations" which pissed him off. Maybe he wanted to dump the shares to show the other minority but substantial shareholders what he thought of the situation. If that was his point, it was very well made and had the desired effect.
  
  CS team was overly aggressive to think they can do such a placement with a stock that has such a high free float. CS team probably couldn't care less as they made their cut and placement fees. Clients should punish CS by not dealing with them for a long period. How to take future placements from CS as you can never be sure what kind of shallow thought-process they went through. A classic case of slash-n-burn'em team. It would have been worse if they were not the slash-n-burn'em type cause that would mean they are just incompetent.

And now Credit Suisse comes up with this rm7.30 price target for Gamuda!

How my dearest MooMooCow?

Mems Technology Again!

Wrote about Mems and how it's still unable to produce quarterly earnings!last night.

I'm disgusted, really.

Here are some interesting facts.

1. Company that was plagued by accounting issues, in which MEMS net earnings were overstated by a whopping 26.8%. Net profits were reduced from 21.47 million to just 13.45 million!!

2. Overstated amount was 8.02 million only.

3. Let's consider the impact of the overstatement of the overstating of the earnings. Without the overstatement of the earnings, there would have been zero growth for this stock. And without growth, the stock would never be able to command a high earnings multiple trading price.

4. Using the peak done in July 2007 (on an adjusted basis, Mems actually traded as high as 1.05 in Jan 2005 but since that was early days of its listings, I would not use that figure) of 81 sen Mems had a market valuation of 531 million.

5. At that moment time, based on the OVERSTATED earnings of 21 million, Mems had an eps of 3.3 sen or an earnings multiple of 24.5x. However, given a previous year growth of 55% based on these OVERSTATED earnings, perhaps there were justifications for the stock to trade at 81 sen.

6. And given the fact the impressive growth caused by the OVERSTATED earnings, the market were pricing in earnings expectations of 34-37 million for coming fiscal year.

7. Now the growth is gone. Earnings were overstated. Which means eps is only 2 sen an zero growth.

8. Based on an eps of 2 sen, that 81 sen stock price would have meant that Mems was trading at a whopping 40.5x earnings. For a stock with zero growth that was insane.

9. Mems last traded price before it's suspended is 14.5 sen. Market capital is now only 95 million.

10. So by overstating its earnings by a mere 8 million, based on market capital, Mems managed to value itself 531 million. And if compare to the present value market value of 95 million, this overstating of earnings caused the company to be over valued by as much as 436 million!!!

How?

Overstate your earnings by a mere 8 millions and the stock market could reward you by valuing it an extra 436 million!!!

How?

And not forgetting last night announcement saying that Mems cannot produce its quarterly earnings for the 2nd consecutive quarter!

See why I am so disgusted?

And the following picture shows the trail of destruction of market wealth!

MEMS Tech: Still Unable to Produce Quarterly Earnings!

Mems Technology announced the following statement:

• As announced, the Company failed to issue its Audited Financial Statements for the financial year ended 31 July 2007 (“Audited Financial Statements”), Unaudited Quarterly Report for the first quarter ended 31 October 2007 (“First Quarterly Report”) and Annual Report for the financial year ended 31 July 2007 for public release within the stipulated timeframe pursuant to Rule 9.22 and 9.24 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) for the Mesdaq Market (“MMLR”). Further, the Company’s securities had been suspended since 3 March 2008 due to the fact that the Company has not issued its Audited Financial Statements by the due date pursuant to Rule 9.24(b) of the MMLR, i.e. 29 February 2008.
  
  The Board of Directors of MEMS (“the Board”) wishes to announce that the Company is also unable to issue its Second Quarterly Report for public release within the stipulated timeframe pursuant to 9.22 of the MMLR which was due on 31 March 2008 (the Audited Financial Statements, First Quarterly Report, Second Quarterly Report and Annual Report shall hereinafter collectively referred to as “the Outstanding Financial Statements”).
  
  The Board noted that in the event the Company fails to issue the Outstanding Financial Statements within the timeframe pursuant to Rule 9.26(6) of the MMLR, i.e. by 31 May 2008, in addition to any enforcement action which Bursa Securities may take, de-listing procedures shall be commenced against the Company.
  
  However, as announced, the Company is now in the final stages of finalising the Audited Financial Statements with its external auditors.
  
  The Board will use its best endeavours to ensure that the Company issues the Outstanding Financial Statements as soon as possible.
  
  This announcement is dated 4 April 2008

What's going on?

How hard is it to announce its quarterly earnings?

This is simply disgusting, isn't it?

Bottom or No Bottom for US Financial Markets

Posted on CNBC, Credit Crunch to Drag On Despite Efforts by the Fed, the interesting comments was the last bit of the article, which featured some comments from George Soros.

• In an exclusive interview to be broadcast on CNBC on “Closing Bell” Wednesday, billionaire investor George Soros told Maria Bartiromo that the markets have hit a significant but temporary bottom.
  
  “I don’t think we are halfway through the fallout because to think what happens in the financial markets doesn’t affect the real economy is nonsense,” Soros said.
  
  If this credit crunch, as some have claimed, is indeed the greatest financial crisis since the Great Depression in the 1930s, then Fed will continue to cut interest rates – perhaps to as low as 1 percent. The federal government is probably not though either. Lately, there appears to be a growing inevitability to a broad government bail out of troubled homeowners and even mortgage lenders.
  
  “A lot of air has been let out of the balloon, but we don't know how much more there is “ says Resler of Nomura International. “This whole crisis underscores the conceit of many in the markets that we can pretend to understand the properties of complex asset structures when they have cyclical sensitivities and we have not experienced those since they were created.”

And the following article from Times certainly agrees with what's said. Bank Write-Downs: No End Yet

• And despite the stock market's most fervent hopes, there are few signs that the write-downs are anywhere near finished. In a March 25 research note, Oppenheimer analyst Meredith Whitney predicted an additional $13 billion for Citigroup in the first quarter, $4 billion for Bank of America, nearly $3 billion for JP Morgan, and $1.5 billion for Wachovia. An April 1 report from Morgan Stanley and the consultancy Oliver Wyman estimated that investment banks alone have $60 to $100 billion more to go in 2008.
  
  All of which raises the question: why is this taking so long and when will it stop?
  
  At the heart of the issue is the unendingly discussed fact that house prices continue to fall after their long and unsustainable run-up. In January, home prices in 20 U.S. metropolitan markets fell for the 13th consecutive month, according to the S&P/Case-Shiller home-price index. And as much as the federal government may try to help pressure or legislate mortgage lenders into rewriting the terms of home loans that have gone bad, that sort of action will likely help individual homeowners exponentially more than the financial system as a whole.
  
  Part of that is because the value of mortgage-backed assets has largely decoupled from the value of mortgages themselves. As credit markets around the world have seized up — in all sorts of lending, not just home loans — investor perceptions have taken an outsized role in valuing these sorts of securities. "It's less important if people are paying their mortgages back, and more important if the market thinks they'll pay them back in the future," says Nick Studer, who runs the corporate and institutional banking practice at Oliver Wyman and co-authored the study with Huw van Steenis of Morgan Stanley. The more people worry, the less they're willing to pay for assets, and the less they're worth in the market — which is what counts in accounting. Eventually, Studer says, we'll start seeing write-ups, as securities valuations more realistically align with their underlying worth.
  
  But don't hold your breath. Charles Morris, a lawyer, former banker, and author of the impeccably-timed The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash, says even once banks work through revaluing their subprime loan assets, there will be plenty of other mark-downs to be had. Financial outfits have moved on to marking down securities backed by slightly-better-than-subprime Alt-A and jumbo home loans, but beyond that are still securities tied to commercial mortgages, take-over debt, credit cards and auto loans. Deflating home prices don't come into play there, but the general paralysis of credit markets worldwide, not to mention the specter of recession, does. "It's like Chinese water torture," says Morris. "Drip, drip, drip."
  
  Why not just get it over and done with all at once? If banks tried to do that they would, as Morris says, "not have any equity capital left." And so we are left with what we have seen since October: a wave of write-downs, encouraging the notion that the worst may be behind us, and then another wave. Beyond the balance sheet, that means months, and even years, of profits that banks booked are being erased.
  
  In between bouts of write-downs, banks do what they can to shore up their funding, like procuring cash infusions from sovereign wealth funds abroad and other investors. On March 31, Lehman Brothers raised $4 billion by selling new convertible preferred shares of stock; UBS made a similar move to the tune of $15 billion. Then there is the Federal Reserve, which has started lending directly to investment banks (which have very happily borrowed) in order to instill confidence in the system. And if the federal government will take mortgage-backed paper as collateral, how bad could it be, really?
  
  The answer, it seems, is worse.

However, some are rather optimistic, UBS, Lehman Raisings May Signal Rout Is Nearing End

• While investors agree that more writedowns and share-price swings are inevitable, Kevin Rendino, who runs the $6.5 billion BlackRock Basic Value Fund in Plainsboro, New Jersey, found cause for encouragement.
  
  ``You want to get all the bad assets off the balance sheets, and the banks are in the process of doing that,'' Rendino said in an interview. ``You're seeing the write-offs, the charges and the replenishment of the balance sheets, so all that's good.''
  
  The U.S. Federal Reserve cut its main lending rate on March 18 by three-quarters of a percentage point to 2.25 percent. The central bank also started a lending program for brokers, which is similar to the so-called discount window used by commercial banks, after the run on Bear Stearns.
  
  ``You can't ignore what the Fed has done,'' Rendino said. ``It's been a game-changing set of events over the last couple months. It doesn't make the bad assets worth more, but it's going to be good for banks and it creates a better environment for financials going forward.''

And here is Bill Gross investment paper for April 2008, When I'm Sixty-Four
and the following is his comments regarding the great Bear bailout in which regulators are strongly defending the rescue package by saying that low prices were sought for The Bear Sale

• No Bailouts?
  Politicians – especially those on the Republican side of the aisle – are adamant about not using taxpayers’ funds to bailout Wall Street or housing speculators, or whoever the current devil may be. The public seems to nod in agreement while at the same time not noticing that their watch is being lifted or their pocket being picked. Let’s see: Twelve months ago the yield on your money market fund was 5%+ but your next statement will probably feature something closer to 2%. Did your money market fund (which in aggregate approaches 3 trillion dollars) experience any capital gains in the process? Absolutely not. So it looks like your (the taxpayer’s) contribution to the bailout of banks, or Florida condominium speculators can at least be quantified: 3% foregone interest per year on whatever you own. In addition, as pointed out in a previous section, the reflationary (inflationary) implications of all this suggest your contribution to the bailout will be even greater, since you’ll likely wind up paying higher prices for many of the things you’ll buy.
  
  Ah, government sometimes works in mysterious ways. There’s more than one way to have taxpayers bailout Wall Street!

Englotechs

Posted on Sept 27th 2007, Englotechs Trade Receivables

I just noted that MARC has downgraded Englotechs, on rating watch

• KUALA LUMPUR: Malaysian Rating Corporation Bhd (MARC) has downgraded its rating on Englotechs Holding Bhd’s RM50 million Murabahah medium term notes (MMTN) programme to BBB-ID from BBB+ID and placed on a negative watch.
  
  In a statement yesterday, MARC said the downgrade reflected continued deterioration in Englotechs’ financial risk profile.
  
  It said the company was in breach of its finance to net tangible assets ratio (FNR) covenant and was at risk of a further covenant breach in relation to its obligation to restore the finance service reserve account (FSRA) balance to its minimum required level.
  
  Englotechs, which is required to restore the FSRA balance by April 4, 2008, makes cotton gloves, primarily industrial work gloves for the manufacturing industry. Its manufacturing facilities are located in Padang Meha Industrial Estate, Kedah and Lianyungang, China.
  
  MARC said tough operating conditions in 2007 stemming from intense competition pressures from China’s low cost cotton glove manufacturers resulted in a precipitous decline in credit protection measures and a subsequent breach in its FNR covenant.
  
  It said as at June 2007, Englotechs’ FNR deteriorated to 1.45 times, exceeding the covenanted cap of 1.35 times. MARC said although Englotechs obtained indulgence from noteholders to remedy the breach, the covenant breach remained unresolved.
  
  MARC said Englotechs had not been able to remedy the breach within the specific time period by March 17, 2008.
  
  It said since MARC’s downgrade of Englotechs rating to BBB+ID from AID in Sept 19, 2007, the company’s liquidity position had deteriorated further.
  
  MARC said Englotechs on March 26, 2008 was unable to meet its semi-annual coupon payment of RM1.72 million from its profit service reserve account (PSRA) and consequently, funds in its FSRA were used for the profit payment.
  
  As provided under the terms of the MMTN issuance, MARC said Englotechs was in the midst of seeking an extension of time, beyond the April 4 deadline to restore the FSRA to its minimum required balance.
  
  "Noteholders are in a position nevertheless to declare an event of default and accordingly, declare the entire facility due and payable. No EOD has been called to date," it said.
  
  MARC said resolution of the MARCWatch Negative and the maintenance of the rating depended on Englotechs’ success in obtaining appropriate waivers from noteholders and to eliminate near-term liquidity concerns.
  
  The stock fell 0.5 sen yesterday to close at 14.5 sen.
  

EB Capital Again!

Today saw the following market event: EB Capital shares close 57% lower

• Thursday April 3, 2008
  
  EB Capital shares close 57% lower
  
  PETALING JAYA: Wireless broadband and telephony service provider EB Capital Bhd's share price closed 57%, or 15 sen, lower at a five-month low of 20 sen ahead of its suspension on April 9.
  
  It opened at 11 sen, down 24 sen from Tuesday's closing price of 35 sen. At the close, there were 500,700 shares traded at prices ranging from 9.5 sen to 20 sen.
  
  The fall in its share price yesterday erased RM11.66mil in its market capitalisation, reducing it to RM15.54mil.
  
  On Tuesday, Bursa Malaysia refused to grant an extension of time for the company to submit a regularisation plan.
  
  Bursa had warned the company that trading in securities would be suspended at 9am on April 9 after it failed to submit its regularisation plan by the extended timeframe of March 31.

Not surprising because I had blogged on this stock before. See EB Capital, eB Capital: III ( Aug 16th 2006: Stock last traded 1.23. On May 18th 2006, the stock was trading as high as 1.70. Peaked at 2.00 on 5th June 2006!!) eB Capital II and EB Capital.

Well yet another destroyer of market wealth! Makes you wonder, how they got listed in the first place. (EB Capital was listed in 2005!)

As Roma 0 Manchester United 2

The match started with AS Roma being rather defensive. They chose not to be too adventerous and since this was an away match for Manchester United, Sir Alex Ferguson set up his rather defensive formation with Wayne Rooney playing the lone forward up front.

United packed the midfield with Michael Carrick playing the holding midfield position with an option to spray some long passes aka quarterback style.

Paul Scholes took on the playmaker role reviving his paring with Carrick which had been rather so successful last year.

This time, Sir Alex Ferguson has young Anderson in his disposal and he employed Anderson as his front midfield role giving him the instructions to hurry and hassle the opposition midfield as much as possible. And Park Ji Sung was given the surprise starting position and he did a very similiar job to what Anderson was doing.

And it was no surprise that AS Roma could not do much in the first half as United defended the spaces extremely well when they did not have the ball.

This match was all about Rio, Roon, Ronnie and Scholesy!

Rio had probably his best ever match for United. He was simply awesome.

Scholesy was simply superb.

Ronaldo, the goal he scored, was simply awesome.

Rooney in a central forward movement had no where to go. To his right was open. Scholes, in a rare forward movement, was moving into that open field. Rooney overhit his pass to Scholes and for a second, the opportunity looked past. Scholes, however, brought the ball into control and hit a hanging cross into Roma box. And in came Ronaldo, the rocket. Speeding into the box, he struck a header so powerful that it almost broke the net.

AS Roma 0 Manchester 1.

Roma started the second half strongly and decided to attack United. However, Rio was simply superb in the absence of Vidic, who suffered a first half injury.

And Rooney. The second goal was a gift. Rooney really did not know where the ball was a split second before he poked the ball home after the Roma keeper failed to hang on to a simple cross from Park on the left.

AS Roma 0 Manchester United 2.

More on Timber Sector

The following article, Timber firms hit by slow demand was published on 29th Feb 2008.

• PETALING JAYA: The slowdown in Japan's housing construction sector has taken a big toll on the earnings of Malaysian timber companies.
  
  The profits of WTK Holdings Bhd and Lingui Developments Bhd fell sharply last year against that reported in 2006 due to poor demand for timber products from Japan, the key export market for Malaysian timber companies.
  
  However, the timber industry may be coming out of the woods, as there are nascent signs of recovery in demand, which has in turn pushed up prices.
  
  “The orders for plywood products picked up in February and prices are recovering.
  
  “But we don't expect a big jump in prices. It will be a gradual climb,” Ta Ann Holdings Bhd chief executive officer Datuk Wong Kuo Hea told StarBiz yesterday.
  
  According to him, the price of structured plywood increased to US$410 per cu m (month-on-month) compared with US$370 per cu m, the lowest level recorded in August-September last year. Prices peaked at US$560 per cu m in 2006.

Yesterday, RHB had a research report, saying that they reckon that perhaps the worst could be over.

• The worst could be over. Japan's imports of plywood have grown at an average of 6.5% p.a. over the last two consecutive months. This is due to the beginning of a gradual recovery in housing starts in Japan.
  
  Plywood prices are set to grow. YTD, concrete panel and floor-based plywood prices have declined 30% and 32% respectively. However, prices are expected to rise in April given some speculative purchases on the back of the recovery in housing starts.

So the key would be the gradual recovery in housing starts in Japan, yes?

If the Japan housing starts do not recover, then the chances of recovery for the local timber sector would be slim, yes?

Today, there's an article posted on Star Biz again, Japan housing starts fall at slower pace

• TOKYO: Japan's housing starts declined at the slowest pace in eight months in February, a sign that the world's second-largest economy is recovering from the building slump driven by a change in construction regulations.
  
  Ground broken on new homes and condominiums slid 5% from a year earlier after falling 5.7% in January, the Land Ministry said in Tokyo yesterday.
  
  A recovery in starts, which plunged to a four-decade low last year, may help Japan weather the fallout from the slowdown in the US, its largest export market. The housing slump wiped more than 1 percentage point from the nation's 3.5% annualised growth last quarter.
  
  “This confirms housing starts will stop damaging the economy,'' said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute here. “That's one big reason why Japan will probably avoid a recession.''
  
  The declines have been easing since September's 44% drop, which was the biggest since the government began keeping comparable figures in 1965.
  
  On an annualised basis, builders broke ground on 1.15 million new homes and condominiums, yesterday's report showed.
  
  Housing starts have mostly recovered, the government said in its monthly economic report for March.
  
  “We expect the economy to expand gradually with exports on a rising trend and the effect of the revised Building Standards Law having run its course,'' the government said.

How?