Regarding John Master Selling Its Entire Business

I was reading the following comments posted on Star Business. John Master’s ‘retirement’ an eye-opener.

I was confused by some comments.

• Rarely would that scenario be pictured of a still healthy albeit marginally profitable listed company that has basically decided to call it a day on the stock exchange.

I was wondering what 'marginally profitable' meant. Making little money?

Instead of trying to decipher what the writer meant, I decided to do my 'Getting Information From Bursa Malaysia Website'

The first link under Historical records showed was Quarterly rpt on consolidated results for the financial period ended 31/3/2009 - and this was John Master or JMI's Q4 earnings.

I decided to check every fiscal year Q4 earnings reported each May.

Quarterly rpt on consolidated results for the financial period ended 31/3/2009 - fiscal year 2008 lost 2.29 million.

Quarterly rpt on consolidated results for the financial period ended 31/3/2008 - fiscal year 2007 made 2.574 million.

Quarterly rpt on consolidated results for the financial period ended 31/3/2007 - fiscal year 2006 lost 10.474 million.

Quarterly rpt on consolidated results for the financial period ended 31/3/2006 - fiscal year 2005 lost 25.440 million.

Quarterly rpt on consolidated results for the financial period ended 31/3/2005 - fiscal year 2004 made 1.502 million.

Without even using a calculator, it's rather clear that JMI had been lost more money than it made the past 5 years!!!

Would you call this a marginally profitable company???

The JMI chart shown in the Star Business article is rather interesting.

And many would say that JMI is a perfect example why one should not invest long term.

I do not quite agree completely.

Yes, JMI never did recover from the dizzy peak of 10.20 it hit back in 1997. (WOW that must be one heck of a bull run back then eh?).

And yes, holding it long term since 1997 (12 years is rather long, yes?) would have been nothing but disaster for the investor.

But...but... buttttt..... where's the justification to hold it so long?

Was JMI even an investment grade stock?

Look at the recent 5 years quarterly links posted above. JMI was LOSING money during this period!

Surely, one would reasoned that JMI was a rather poor company and that there is no justification in holding JMI long term!

Yes?

And if I scrolled deep down JMI's historical quarterly earnings, JMI was losing money way back in its fiscal year 1999! Quarterly rpt on consolidated results for the financial period ended 31/3/2000 (can see the losses and the previous year losses back in 2000?)

So in this JMI example, holding long term (12 years) in a rather poor company isn't a good wise option yes?

Anyway the Star article continues..

• The company is relatively debt free with only RM5.5mil in short-term borrowings. It has RM43mil in cash, or a cash backing of 35 sen a share.
  
  Most of its assets are in the form of inventories (RM67mil) and receivables (RM39.7mil). Plant and machinery carries a value of RM2.8mil on the balance sheet and land for development is another RM2.4mil.

From it's latest quarterly earnings, one can see that the cash balances was boosted by disosal of property.

• Financially, JMI has hinted that it was treading on water. It says its financial future is uncertain and the prospects for the industry it operates in are tough.
  
  Competition in this business is fierce and there will always be places where it’s cheaper to produce a piece of garment than Malaysia. Economics and profitability will rule and the directors might feel that the company is fighting a losing battle on that front.
  
  It argues those conditions make any future dividend payments doubtful. Even though business conditions are tough and outlook uncertain, there is an offer to bid for the assets of JMI from three directors of the company related to the founder of the company who retired in May last year.

Here's the news article on JMI: John Master to sell entire business