Sunday, February 28, 2010

Review Of Mieco's Earnings

Blogged previously: A Good Long Look At Mieco Chipboard Again

Mieco Chipboard announced its earnings and it did not register a loss. In fact, it registered a profit of 3.489 million. A turnaround in the making? Time to have a look again, yes?

Company said the following in its notes.

  • Group revenue in the final quarter of 2009 fell 28% to RM47.8 million from RM66.1 million a year ago due to lower selling prices and sales volume of particleboard and related products, though partially mitigated by favourable sales mix.
    Although sales were lower, the Group registered a pre-tax profit of RM2.2 million as compared to a loss of RM25.1 million a year ago mainly due to reduced raw material prices and operational costs. In addition, the Group incurred RM7.2 million allowance for doubtful debts and RM5.9 million loss on disposal of plant and equipment in the last quarter of 2008.

Doubtful debt allowance of 7.2 million....

Back in Nov 2009, I noted the following:

  • Nov 2009, yesterday. Mieco announced its earnings. It lost 1.574 million. Cash is now only 6.221 million. Total loans is now 177.792 million.

Let's look at the cash balances.


Cash is now only 5.137 million and loans is 178.058 million.

How?

Thursday, February 25, 2010

Fima Corporation Again!

Posted on 14th November 2009: A New Look At Fima Corporation

Fima Corp then was 3.24. Fima Corp today is at 3.22. LOL!

Fima Corp announced its earnings last night. Did you see? Did you like what you see?

http://sahamas.net/forum54/4549-4.html

Well that's it. LOL! Such a quality-less posting.

Wednesday, February 24, 2010

LCL Hit With 334 Million Losses!

LCL reported its earnings. It wasn't pretty!




Flashback:

In the posting,
More Comments On LCL, I highlighted LCL's receivables.

  • Trade receivables - 221.436 million
    Amount due from customers for contract works - 154.107 million
    Amount due from related companies - 41.641 million

Assuming and having faith that all these receivables are in order, I would be concerned which of these figures are from its work done in Dubai.

As the sum is rather substantial and with Dubai World current debt issue, surely one has to ask if the debts cannot be collected. And if they cannot be collected, these debts would have to be re-classified as bad debts, which would equate to losses.

And last but not least, given LCL's current financial position, can LCL afford any more delay in its collection of debts?

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

Company said the following in its notes:

  • Compared to the cumulative preceding year corresponding quarters, the Group’s revenue decreased by 33.3% to RM309.8 million as compared to RM465.0 million previously recorded. This is mainly due to the lower progress billing for most of the on-going Dubai projects which are close to completion by 4th quarter 2009. The Group has also recorded a loss before taxation of RM392.2 million as compared to profit before taxation of RM4.2 million as compared to the preceding year quarter. The losses were mainly attributed to the delay in the projects resulting in cost overrun arising from the prolongation of projects, additional costs incurred in down-sizing our operations in Dubai, ie retrenchment, logistics and pre-mature termination of accommodation arrangement, impairment of assets, writing down of contracts (work in progress) and allowance of doubtful debts.

From the company's balance sheet:


113 Million in provision of doubtful debts and 170 million write down of contracts!

And this again highlights why the trade receivables are so important. When the receivables snow balls so high, it usually means the company has a problem in collection of debts and when collection of debts cannot be made, provision is a must and the company earnings will be hit big time!

So how deep in trouble is LCL now?

Total loans is still high at 398.464 million!


And here are LCL's current asset.


The amount due from customers for contract works is now wiped clean to just 87 thousand as LCL wrote down some 170 million worth of contract works. Receivables are still high at 121 million.

Company's cash flow.





LCL paid some 24 million in financial costs!

How?


Do you think LCL can make it through this extremely tough patch?


On Star Business:
LCL posts higher loss on lower progress billings

  • Wednesday February 24, 2010

    LCL posts higher loss on lower progress billings

    PETALING JAYA: LCL Corp Bhd incurred a sharply higher net loss of RM334.72mil for its fourth quarter ended Dec 31 from a net loss of RM17.39mil in the previous corresponding period.

    Revenue for the quarter fell to RM66.11mil from RM115.89mil previously while basic loss per share was 233.85 sen against a loss of 12.15 sen before.

    For its financial year ended Dec 31, the company had a net loss of RM393.35mil compared with a net profit of RM9.35mil previously while revenue for the period fell to RM309.83mil versus RM464.98mil.

    In a filing with Bursa Malaysia yesterday, the company said the results were mainly due to lower progress billings for most of its ongoing Dubai projects.

    “The losses were mainly attributed to the delay in the projects resulting in cost overrun arising from the prolongation of projects and additional costs incurred in downsizing our operations in Dubai,” it said.

    LCL Corp said its classification as a PN17-status company, and the appointment of a receiver and manager to LCL Furniture Sdn Bhd, a major contributor to its operations, “had severely hampered the operations of the group on an ongoing concern basis.”

    “The board of directors is of the view that without the meaningful recovery of our debt from our customers and the success of the debt-restructuring scheme with all our lenders and creditors, the prospects of the group remain uncertain,” it said.

    Due to the fallout from the Dubai financial crisis, LCL Corp, which has several projects there, has been struggling to recoup its outstanding bills from its Middle East customers.

    As at Dec 31, it said the group had credit facilities from financial institutions totalling RM455.27mil which are guaranteed by LCL Corp.

    Accordingly, LCL Corp was contingently liable to the extent of credit facilities utilised by the subsidiary companies amounting to about RM269.67mil, the company said.


Tuesday, February 23, 2010

OilCorp Cannot Publish Its Earnings Due To Staff Shortage!

Totally shocking, really!

I just cannot believe what I am reading here.

  • OILCORP Bhd said it would not be able to publish its unaudited fourth quarter results on time, which is due by February 25, because of a shortage of staff.

    Its request for more time was rejected by Bursa Malaysia
    and its shares will be suspended from trading on March 8.

    It will only be able to release its quarterly results after the full year numbers are audited.

    It expects to issue the audited full year numbers and the outstanding fourth quarter results on April 30, it said in a statement to Bursa Malaysia.

Just totally unreal!

Here we have, a public listed company, telling everyone it cannot publish its earnings due to shortage of staff!!!!!!!!

OMIGOSH!

Surely they could have come out with a much better excuse than this.

Are they (OilCorp) attempting to turn Bursa Malaysia into a circus with excuses like this? I guess the threat of having their shares suspended by Bursa Malaysia matters not for this company!

Now this is one stock that I had blogged many times before.

1. 17th July 2007: OilCorp

OilCorp was listed via a RTO of Abrar Corp back in 2003. And its early years, OilCorp was rather aggressive in the local media. Always giving rather optmistic outlook. They once even told the press that they were bidding rm 1 billion worth of contracts! Yeah, as some would say, talk is always cheap. Then came the bombshell on March 2005: PRESS RELEASE ISSUED BY SECURITIES COMMISSION

OilCorp was ordered to re-state its fiscal 2003 year earnings. How ironic. OilCorp was also listed in 2003. As Errol Oh of the Star said:

  • If the extraordinary items were reclassified, Oilcorp's operating profit of RM20.9mil for 2003 would become an operating loss.

Couple of months later, it struck 'gold' and the shares soared when it announced its fishery offer: Offer to Lead the Formation of the Konsortium Perikanan Nasional Berhad (''KPNB'') by the Ministry of Agriculture and Agro-Based Industry (''MOA'')

2. 20th July 2007: OilCorp II

OilCorp - the stock became hot. It started talking about listing its property arm in London AIM!

I, of course, was not impressed.

  • Will OilCorp property arm be able to list on AIM next year? I have no idea but that's OilCorp's aim and yes it's always great to have a goal in each company but as it is, this property arm of theirs simply does not have a good track record, yes?

    And yes OilCorp share has been rising.

    All I can say is do not confuse a lousy share with a bull market!

    In a hot market any share does stand a possibility of rising.

    However, to use fundamental reasoning as a reason to buy this share is simply a pure insult to all investors!

Here's an update! Feb 13th 2010.

  • Saturday February 13, 2010

    Oilcorp cancels unit’s London listing proposal

    PETALING JAYA:
    Oilcorp Bhd has resolved to abort the earlier proposed listing of its property division, the company said in a filing with Bursa Malaysia yesterday.

    It had earlier planned to list its wholly-owned subsidiary, D’Tiara Corp Sdn Bhd, on the alternative investment market of the London Stock Exchange.

As expected, the listing proposal made in 2007, is now cancelled!

Rather shambolic, yes?

3. 26th July 2007: OilCorp III

I explained why the postings were made.

  • Full agree with what you are saying here. The reason why I blogged about OilCorp was because there were a series of postings attempting to promote this stock at Sahamas. ( See this forum posting thread here at Sahamas: Oilcorp. ) I find it truly incredible for they were attempting to suggest OilCorp as a good buy based on fundamental reasoning. I was appalled because the events that surrounded OilCorp since its listing was incredible.

    In the first blog posting,
    OilCorp, from day one, there was the 'talk was simply cheap because supply is more than demand' syndrome. Huge boasts of billion dollar oil projects was suggested from the company since 2004. Till today, where's the projects?

4. 10 December 2008: Regarding The Plunge Of OilCorp Shares Today!

  • OilCorp (3697.KU) hits limit down threshold, down 38.5% to 48 sen on requotation; stock suspended since May 20 pending reaudit of company's accounts for 2008 after discovery of discrepancies. Clarifies audited group PATAMI for FY07 is MYR3.975 million vs unaudited result of MYR15.41 million. Deviation of more than 10% between the two figures attributed to adjustments made to various costs and "adjusting events." Oilcorp also submitted yesterday 2007 annual report and quarterly results up to period ended Sept. 30, 2008. For 9-month period ended Sept 30, Oilcorp posted loss of MYR2.3 million from MYR262.4 million in revenue vs revised net profit of MYR11.9 million from revenue of MYR277.1 million in previous year. "The selldown is not surprising. Investors are just looking to conserve whatever cash they can. There's just way too much selling pressure after so many months of suspension," says dealer

Back in 2005, there were already issues with OilCorp's accounts. It happened again 2008!

Unreal, isn't it?

And what was most glaring for me was the 498.257 million in trade receivables!!!!

Yup, again the trade receivables issue!

5. 11 December 2008: OilCorp and Its Trade Receivables

I explained why I thought the receivables were an issue for me. Of course, I could be wrong.

Of course, I made a rather nasty prediction in that posting.

  • And if you are interested, this stock even tried to do the nonsensical 1 for 10 stock split when the stock was trading at 1.30 (see forum posting: here at sahamas )
    Well now the stock is now around 40 sen.
    Pretty soon it 'might' get its wishes to trade around 13 sen!

    LOL!
    Ok, that was nasty on my behalf!

6. 24th Sep 2009: And OilCorp Comes Crashing Down Once More!

  • PETALING JAYA: Spooked by the spectre of Oilcorp Bhd slipping into Practice Note 17 (PN17) status, investors sold down the stock yesterday, loping as much as 20% off the share price before the counter closed at 26.5 sen, a fall of 5 sen or 15%.

    Last Friday, Oilcorp said it had failed to make an interest payment of RM1.6mil because it did not have sufficient funds due to the delay in collecting certain large receivables.

The warning about the recivables came true! OilCorp starts defualting on interest payments!

7. 26th Sep 2009, a summary of OilCorp is posted again: Regarding Oilcorp

8. 17th Oct 2009. How Much Do You Really Care About OUR Stock Market?

  • mydreamgetgold: Since our Securities Commission, the Star and NST are all sleeping, Malaysia Today should run a report of possible insider trading by Oilcorp Bhd directors. Recently, Oilcorp was slapped with the PN17 status and its shares tumbled. But before the announcement, its directors had been selling off their holdings relentlessly. Isn't that clear indication of insider trading? Look at the declaration published by Bursa.
The directors HAD BEEN SELLING OFF THEIR HOLDINGS RELENTLESSY!

HOW?

9. 31 oCT 2009: Another Default In Payment By OilCorp

.............................

It's now 2010. And OilCorp is telling Bursa Malaysia it cannot publish its earnings due to staff shortage!

Another proud day!

Sigh!

ps: OilCorp last traded at 9 sen!!

Monday, February 22, 2010

More Losses Recorded By Swee Joo!

Blogged previously:

Swee Joo announced its earnings. Again it was not pretty at all!

Investing In A Stock For Its Dividend Yields

Mr said...

  • Dear Mr Moolah,

    Sorry, but I don't know how to reach you and so, I am doing this here.

    Would like to seek your expert opinion on High Dividend Yield stocks to invest in Bursa.

    I am a 43 year old family man with a very busy full time job, and no time nor interest to monitor the stock market. A long time ago, a very successful and elderly friend of mine urged me to invest in a basket of High Dividend Yield stocks, and just collect its dividends over the years. Sadly, he passed on recently.

    I am now at the stage where I am struggling what to do with my funds. Savings accounts only pay 0.5% p.a. Fixed Deposits only pay 2% or 2.5% for 12 months. This is very, very small. How to survive on this?

    What do you think of PBBANK? A friend of mine swears by it. Can you recommend a few high dividend yield stocks for me to consider? And what prices would be a good price to enter? I plan to start with RM50k, and invest in 5 stocks with RM10k each. I can only monitor the stock market maybe once or twice a month. I do not know about trading, and plan to invest in these stocks for a very long time. My goal is to collect the dividends, hopefully, it will grow with time to beat inflation and fixed deposits. Things keep getting more expensive by each year due to inflation.

    I have also asked Mr Dali about this. So, please feel free to publish my query. I may check in again in a couple of weeks time.

    Would sincerely appreciate your thoughts. I know the final responsibility to invest is mine and mine alone.

    Thanks and kind regards,
    Mr Teoh

Mr. Teoh,

Do realise that I am not an investment advisor. Hence, whatever you read on this blog, do take it with some massive pinches of salt. Simple reasoning is that I could always be wrong.

However, this morning, I am willing to share some opinions or two on the issue of high dividend yield stock.

A dividend yield is a simple. It's basically the dividend paid divided by price of the stock you paid.

But strangely I find that many do not explain the risk involved in such an investment. This is not a risk free investment. The fact the dividend paid is never constant. As much as the dividends go increase, there is always a possibility that it could always shrink! And not forgetting the fact that any given stock can go up or DOWN at any given day. Meaning to say, there's no divine right stating that high dividend yield stocks cannot go down! It could go down as much as it can go up!

Let me use an REAL example on this stock called Uchi Tech. Why? Cos I had blogged on it couple of times before. So data to the stock is easily referred to.

Take 2007.

So what was UCHI's dividend history?

In 2006, it paid the following:

If my data collection and counting is not wrong, that's 20 sen paid in dividends.

So this company pays good dividends. And how was the company? Was it making good money? Last year, on 26th Feb 2009, I wrote Would You Buy Uchi For Its Dividends? The company's earnings track record is tabled here

Now in 2007, the stock was trading between 3.42 and a low of 2.40.

Uchi usually announces its dividend payment dates for its yearly first batch of dividends in April.

Now I will make 2 assumptions. Firstly, a buyer for Uchi its dividends in 2007 will be in between Jan to April 2007. Lowest traded price of Uchi then was 2.98. I would use simply use 2.98 as a reference point. With a past dividend yield of 20 sen, at 2.98 one would be looking at a yield of 6.7%. The second assumption is a purchase price 2.40 based on the lowest price for 2007. That would be a yield of 8.3%.

In 2007, as per another posting , Reply To Would You Buy Uchi For Its Dividends? Uchi paid the following.

Note: the buyer at 2.40 (lowest price was recorded in Nov 2007) would have missed the first 3 dividends.

21 sen total. More than what it paid in 2006!

In 2008, Uchi paid the following.

Only 16 sen paid in 2008!!!!!

The dividends shrank!

In 2009, Uchi paid the following.

The dividends shrank again!!!!

Let's add up for the dividends paid since 2007 for the buyers for a dividend yield at 2.98. Total dividends received since 2007 is 46 sen. Price of Uchi now is only 1.29!!! Which means this dividend yield investor is now sitting on a net current loss of 1.23 (2.98 - (0.46+1.29)) or an investment loss of 41.2%!!!

And for the buyer at 2.40. Total dividends received are 35 sen. Which means a current invest loss of 0.76 sen (2.40 - (0.35+1.29)) or an investment loss of 31.6%!!!

How?

See how investing for dividends can fail?

Is this a one off example?

How about this stock called ?

In 2007, I made the following posting, Review on Yi-Lai. Yi-Lai then on 11th Sept 2007 was 1.20. Yi-Lai today is 0.74!!

Of course, these are 2 examples where investing a stock for its dividends failed. My point? Simple. I am not saying such an investing would not work and I am pretty sure many could provide me with full data where investing a stock for its dividends are proven successful. However, all I am saying is the investor should be careful. There are many incidents where such an investing can fail! The sustainability of the company's earnings is just as important. The reasoning is simple, without sustained earnings for the company, how could the company afford to continue paying so much dividends?

Hope these second opinion helps and do note that I could always be wrong.

Friday, February 19, 2010

Whitney Warns On Bank Profits

On CNBC: Bank Profits Ready to Tumble, Stocks to Fall: Whitney

  • The US banking system will lose 30 percent more than consensus estimates as shrinking loan portfolios squeeze profits, analyst Meredith Whitney told CNBC.

    While increased governmental regulations will restrict the industry somewhat, Whitney said that the decline of up to 20 percent in lending portfolios will enact far more damage on bank balance sheets.

    "Your good borrowers don't want to borrow, and your bad borrowers you're trying to kick out of the system," she said. "
    So on average lending portfolios are down 4 to 20 percent and we think they're going to be down another 10 to 15 percent for all the big banks this year."

    Whitney's call comes amid a fairly strong round of financial earnings reports from the banks as well as nearly 80 percent of all companies on the Standard & Poor's 500. Financials comprise about 20 percent of the S&P.

    This year could be different, though, as banks have to find another way to make money.

    "Big banks made all their money from fixed income currency and commodity trading last year," Whitney said. "
    It's a very different story this year, so they're not re-equitizing themselves."

    Of the banks she rates, Whitney said Bank of America comes in as the "least worst" of the group even as the group as a whole could lose 10 to 15 percent off their share value.

    She said regionals aren't safe anymore and could come under pressure for acquisitions as the year progresses.

    "You may start to see some arranged marriages in the regional bank space, and that's not going to be good for equity holders of those regional banks," she said.

    As for regulation, she said the final shape of the Washington clampdown on financials is yet to be seen but most certainly will involve an emphasis on less risk.

    "They will separate the risk that's on Wall Street from that which is associated with consumer deposits," Whitney said. "It's going to be a tougher environment."



Thursday, February 18, 2010

Dr. Marc Faber: China Will Drag Down US Stocks By 20%

On CNBC:

  • ... Specifically, Dr. Faber is concerned about the way in which Beijing’s decided to slam the brakes on growth -- via a sharp reduction in lending.

    That he says, will drag down any and every company that soared higher during the recent China boom.

    "I would not buy Chinese stocks here," Faber tells the Fast Money desk.

    If you agree with Faber’s thesis you might want to short ACH or some of the refineries in China, adds Tim Seymour.

    But it's not just China-based companies that will get hit.

    "I would be careful of any asset that benefited greatly from the China boom in 2009 because (their earnings) are not sustainable," he tells Fast Money.

    That includes a slew of US multi-nationals.

    And to make matters worse, Faber thinks as growth slows in China "we will see a lot of excess capacities," and as a result the market could be flooded with excess supply. "Industrial commodities have become quite vulnerable."

    Faber expects to see the Dow and S&P “fall 20% from the January highs” in the near-term and perhaps more than that as developments unfold.














Friday, February 12, 2010

So What Did Green Packet Say About It's 94.5 Million Losses

Posted this last night: Green Packet Sudah Potong?



  • Green Packet lost another 94.5 million!!!

    Which means Green Packet has now lost some 231.4 million for the last 8 quarters!

    Nice business eh?

    Yeah, company still trying to sell its future prospects. Hmmm.... meanwhile it's losing tons and tons of money and burning cash.

    Hmmm... sounds familiar?

So for a company that lose some 231.4 million for the last 8 quarters, which is equivalent to losing some 231.4 million the last 2 fiscal years, I was VERY interested in what the company would say to the press.

On the edge Financial Daily: Green Packet 4Q loss widens to RM95m

  • KUALA LUMPUR: GREEN PACKET BHD []'s net loss widened to RM94.54 million in the fourth quarter (4Q) ended Dec 31, 2009 from RM37.33 million a year earlier, which the company attributed to higher provisions and marketing expenses.

    Revenue for the quarter jumped two-fold to RM73.54 million from RM24.53 million, while loss per share stood at 15.80 sen versus 11 sen previously.

    In a Bursa Malaysia filing today, Green Packet said
    it made additional provisions for impairment of long-term investments, investments in associates and inventories of approximately RM26 million in the quarter.

    It also
    registered higher amortisation and depreciation and increased subscriber acquisition costs, which led to substantially higher mass marketing expenses.

    For FY0920, Green Packet's net loss widened to RM176.29 million from a loss of RM55.24 million in FY2008, despite revenue increasing to RM234.53 million from RM87.49 million.

    Net loss per share for the year stood at 39.2 sen, up from 17 sen in FY2008.

Higher provision and marketing expenses.

That's about it.

And because of this two issue Green Packet lost some 94.5 million!

If you are an investor, would you be happy? Would you? Seriously?

And the rest of the article, the CEO just mumbles on and on and on the company's prospects.

  • At a media briefing yesterday, Green Packet group managing director CC Puan said during the last quarter the group shifted its WiMAX operating business strategy by focusing its investment on expanding network infrastructure.

    "It is paramount for any service provider to invest in customer retention as we regard our customers as key asset of our business," he said.

    "I am proud to say that we are currently the world's no 3 WiMAX modem vendor with 15% global market share, and the top connectivity management solutions provider in Asia Pacific."

    Green Packet deploys WiMAX broadband through its unit Packet One Networks Sdn Bhd (P1).

    WiMAX broadband contributed substantially to Green Packet service provider group's revenue, which increased to RM138 million from RM66 million in 2008, he said, adding that P1's customer base expanded 17% in the final three months of 2009 to 140,000 subscribers.

    Looking ahead, Puan was upbeat about Green Packet's performance this year with P1 expected to double its network infrastructure and subscriber base by year-end.

    "Our focus last year was on coverage rollout, while this year we will strive to be Ebitda-positive. This will be done by doubling our existing 650 sites.

    "In addition to that, the solutions group would continue to make profit from the sales of WiMAX devices. Only next year we are anticipating net profit after tax," he said.

    Puan added that
    Green Packet would be investing slightly more than RM500 million in capex over the next three years to broaden its WiMAX coverage, including Sabah and Sarawak.

    "Last year, we invested about RM500 million. We will invest RM250 million this year with RM250 million to be invested between 2011 and 2012," he said.

    Puan said the capex would be used to increase its network coverage in Malaysia by 65% by 2012.

    Meanwhile, P1 chief executive officer Michael Lai said the company achieved average revenue per user (ARPU) of RM83, a figure that it hoped to maintain by providing good customer service.

    Puan added that the recent launch of its fixed voice services would be an additional avenue for P1 to maintain its ARPU.

    "In addition to that, we will also be releasing our mobile voice service by the second half of next year," he added.

What's your impression?

A good salesman isn't it?

Despite the losses, the boss just rambles on the future prospects.

World's number 3 Wimax vendor was boasted. Er, so what? What's the big deal if the company ain't got the profit to show for?

Strive to be ebitda positive? Remembrance of the go-go Internet era of the past. EBITDA positive? Sorry but I have to really laugh on this!

Anyway they are only anticipating to be net profit after tax next year!!

LOL!

Sorry but I really had to laugh again!

In short the company only 'assumes' it can make a profit the next year!

Common sense thingy... surely the company can see for themselves what is happening!

It was just back in 2005, it was 'making' some 55 million a year. Now? The last 8 quarters or the equivalent of 2 years, Green Packet has now lost some 231 million. And it only 'anticipates' to make money the next year.

Meaning another 4 quarter of losses could be likely.

And we don't even know what kind of profits too!

And how much has been invested?

They said they invested 500 million last year! And they want to invest another 500 million the next 3 years!

LOL! LOL!

Sorry to be cynical but where's their common business sense? Shouldn't they take a really good look at themselves and say "Hold on a minute, we are spending 1 billion in this investment, what's the return of investment"?

Yeah, what's the return of investment????

And if you are a minority shareholder, you really needs to ask yourself this. Where's the return?

And yeah.. I wonder if the boss is paid handsomely for running such a company??!!!

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

Edit:

  • Richard Cranium said...

    Mr Moolah

    They have spent a lot of money. But much of this cost of money is flogged off to their vendors. or should I say, their vendors are being flogged?

    Cash never really left their coffers[yet]. But soon. Its an accident waiting to happen.

    I wonder how much are their payables this time?



Here's a screen shot from its latest earnings report. The payables are highlighted.





Since it was Green Packet's Q4 earnings, the comparisons versus the same quarter last year on the balance sheet simply says it all!!!!

And here is the previous quarter earnings reported in Nov 2009. Quarterly rpt on consolidated results for the financial period ended 30/9/2009





The surge in trade payables are very much a concern, yes?

Thursday, February 11, 2010

Green Packet Sudah Potong?

Blogged previously: P1 Wimax: Honey Have You Cut It? Part II

  • From earnings 55 million in 2005 in 2006, the company has now lost some 136.9 million for its last 7 quarters!!!

Green Packet just announced its earnings.




Green Packet lost another 94.5 million!!!

Which means Green Packet has now lost some 231.4 million for the last 8 quarters!

Nice business eh?

Yeah, company still trying to sell its future prospects. Hmmm.... meanwhile it's losing tons and tons of money and burning cash.

Hmmm... sounds familiar?

Oh, don't you love the recent 'Sudah potong' ads?

Wednesday, February 10, 2010

Are You Impressed With Maybank's 35% Increase In Earnings?

Maybank announced its earning. Needless to say market seems happy with its results.

On the Edge Financial Daily:
Update2 Maybank 2Q net profit up 35.3% to RM993.5m

  • KUALA LUMPUR: MALAYAN BANKING BHD [] posted a strong second quarter net profit of RM993.50 million, up 35.3% from the RM734.56 million a year ago on improved loan volume and it declared an interim dividend of 11 sen per share.

    Revenue was marginally lower by 1.22% at RM4.67 billion from RM4.73 billion a year ago. Earnings per share were 14.04 sen compared with 13.35 sen, the bank said in a statement issued on Tuesday, Feb 9.

    According to its financial statements, the higher earnings were due to higher non-interest income (RM1.22 billion vs RM832.18 million a year ago), lower allowances for losses on loans, advances and financing (RM243.55 million vs RM321.1 million) and lower impairment losses on securities, net (RM9.83 million vs RM22.56 million).

    For the six months, Maybank's net profit rose 43.5pct to a record of RM1.88 billion underpinned by higher revenue of RM9.23 billion from RM8.46 billion a year earlier.

    Commenting on the half year financial results, Maybank president and chief executive officer
    Datuk Seri Abdul Wahid Omar said the banking group was especially pleased with the performance seen at its international operations, particularly Singapore and Indonesia.

    "We have set our sights for more dynamic growth in the years ahead and are confident of exceeding our key targets set for the year," he said.

On Star Business: Maybank Q2 earnings up 35% to RM993mil

So how impressed are you with a 35% increase in earnings?

Surely all should be happy with a 35% growth yes?

However not all are impressed!

Firstly, flashback: Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!

First thing. From that posting:

  • Maybank share base before the rights issue was 4,881,123 million shares. After rights issue, Maybank shares would balloon to 7,077,628 million shares!!!!

Now IF one is a long term minority shareholder, it was a 9 for 20 rights issue, which meant one had to add in additional investment of 44.9%.

Maybank's BII Deal was initally proposed back in Oct 2008. Do correct me if I am wrong.

Let's have a quick look at how Maybank was doing before Oct 2008.

Yeah that table looks a bit small, do click on it for a larger view.

Anyway, as you can see from the table above, if you take out the two extremes, on the average, Maybank was earning around 730 million per quarter.

Today Maybank earned some 993 million.

An improvement of 263 million or some 36%.

How?

As a minority investor, remember, one had forked out an additional 44.9% capital to participate in the rights issue. Today, Maybank only generate some 36% increase in earnings. Is this enough? Does it justify the rights issue?

Ok, maybe a bit difficult to understand.

Before the rights issue, an earnings of 730 million based on 4881 million shares. That would equate to an EPS (earnings per share) of around 14.9 sen!!!

Today, Maybank has 7077 million shares. An earnings of 993 million would equate to an EPS (earnings per share) of 14 sen only!!!!

How????

Are you impressed with Maybank's 35% increase in earnings?

Denials Over Greek Bailout!

Highlighted yesterday: More On The Greece Crisis

Yesterday the markets recovered. Everything hinged on Greece. On CNBC:
Stocks Close Up Broadly On Hopes for Greece and on Edge Financial Daily: Wall St gains on reports of help for Greece

Is everything A OK now?

On Times Online:
Storm over bailout of Greece, EU's most ailing economy

  • Angela Merkel tried to calm fevered speculation in financial markets yesterday that Germany was preparing to lead a bail-out of Greece amid a split in the EU on how to handle its most ailing member.

    The German Chancellor denied reports that her Finance Minister was conducting secret talks with Jean-Claude Trichet, head of the European Central Bank, and with other capitals on an EU rescue fund for Athens.

    Mrs Merkel has staunchly resisted suggestions that the EU must swallow its pride and turn to the Washington-based IMF for a solution to the growing economic turmoil in Greece, with fears that its troubles in international finance markets will trigger a domino effect, toppling other weak members of the eurozone such as Ireland, Portugal, Spain and Italy.

    But last night there were signs of a developing European split over calling in the International Monetary Fund, a move also strongly opposed by Brussels, with suggestions from Sweden’s Finance Minister and other officials that this might be better than the EU programme outlined last week.

    Mrs Merkel has repeatedly rejected the idea that the 16-nation eurozone would need to look to the IMF, which is already overseeing recovery efforts in Latvia and Hungary — both EU members outside the single currency. Her insistence that the eurozone can keep its own house in order led to market speculation yesterday that an EU bail-out was imminent.

    There were also reports yesterday that Wolfgang Schäuble, the German Finance Minister, was working bilaterally and at the European level on putting together a package to help Athens.

    A strong rally on Wall Street went into reverse when a spokesman for Mrs Merkel said flatly that this was “wrong”.

    The crisis in Greece that is putting the euro under its biggest strain in the ten-year history of the single currency has forced its way on to the agenda of an economic summit for the 27 EU leaders in Brussels tomorrow. It is the first extraordinary meeting called by the new EU President, Herman Van Rompuy, and was supposed to be a relaxed day of long-term thinking about job creation over ten years. Instead, the prospect of a Greek default triggering a wider crisis in other weak economies such as Portugal and Spain will hang over the leaders.

    The split emerged when Anders Borg, the Swedish Finance Minister, said that “the IMF has the technical knowledge” to resolve the Greek economic crisis, breaking the careful EU public consensus that the eurozone can cope. Mr Borg insisted that discussion of an IMF role in resolving Greece’s crisis should not be ruled out.

    An EU official added: “There have obviously been discussions going on at an EU level about what the options are. There is a feeling that the IMF could offer a better course of action. The IMF has precedents or doing this, it has a system with measures in place.”

Denials, denials and more denials!

But Houston, they do know that the problems are real, clear and presently undeniable, yes?

So what exactly is EU going to do about it?

BUT what about Spain?

Here's Paul Krugman's editorial written a day earlier on NY Times. Anatomy of a Euromess

Euromess? Cute but precise! (DO click on the above link to see the charts posted!)

  • Most press coverage of the eurozone troubles has focused on Greece, which is understandable: Greece is up against the wall to a greater extent than anyone else. But the Greek economy is also very small; in economic terms the heart of the crisis is in Spain, which is much bigger. And as I’ve tried to point out in a number of posts, Spain’s troubles are not, despite what you may have read, the result of fiscal irresponsibility. Instead, they reflect “asymmetric shocks” within the eurozone, which were always known to be a problem, but have turned out to be an even worse problem than the euroskeptics feared.

    So I thought it might be useful to lay out, in a handful of pictures, how Spain got into its current state. (All of the data come from the IMF World Economic Outlook Database). There’s a kind of classic simplicity about the story — it’s almost like a textbook example. Unfortunately, millions of people are suffering the consequences.

    The story begins with the Spanish real estate bubble. In Spain, as in many countries including our own, real estate prices soared after 2000. This brought massive inflows of capital; within Europe, Germany moved into huge current account surplus while Spain and other peripheral countries moved into huge deficit:

    These big capital inflows produced a classic transfer problem: they raised demand for Spanish goods and services, leading to substantially higher inflation in Spain than in Germany and other surplus countries. Here’s a comparison of GDP deflators (remember, both countries are on the euro, so the divergence reflects a rise in Spain’s relative prices):

    But then the bubble burst, leaving Spain with much reduced domestic demand — and highly uncompetitive within the euro area thanks to the rise in its prices and labor costs. If Spain had had its own currency, that currency might have appreciated during the real estate boom, then depreciated when the boom was over. Since it didn’t and doesn’t, however, Spain now seems doomed to suffer years of grinding deflation and high unemployment.

    Where are budget deficits in all this? Spain’s budget situation looked very good during the boom years. It is running huge deficits now, but that’s a consequence, not a cause, of the crisis: revenue has plunged, and the government has spent some money trying to alleviate unemployment. Here’s the picture:

    So, whose fault is all this? Nobody’s, in one sense. In another sense, Europe’s policy elite bears the responsibility: it pushed hard for the single currency, brushing off warnings that exactly this sort of thing might happen (although, as I said, even euroskeptics never imagined it would be this bad).

    Am I calling, then, for breakup of the euro. No: the costs of undoing the thing would be immense and hugely disruptive. I
    think Europe is now stuck with this creation, and needs to move as quickly as possible toward the kind of fiscal and labor market integration that would make it more workable.


Tuesday, February 09, 2010

More On The Greece Crisis

Back on 14th December 2009, the following posting was highlighted: Could Greece Crisis Turn Deadly?

On the UK Telegraph:
Greek crisis: Stiglitz urges attack on speculators

  • Suspicions that the Greek crisis could give way to a full-blown attack on the euro have been reinforced as it emerged that currency speculators have increased their bets against the currency to the highest level since its creation.

    Contracts on the Chicago Mercantile Exchange (CME), a closely-watched speculation barometer, showed that in the past week net short positions against the euro rose from 39,500 contracts to 43,700 – worth €5.5bn ($7.5bn). Greek prime minister George Papandreou has characterised the behaviour of capital markets, which have put a rising premium on interest rates to his government, as part of a broader speculative attack on the currency.

    The CME figures will spark fears that, much like George Soros in the early 1990s, hedge funds will lay siege to the single currency. Since Greece, Portugal, Spain and Italy, all of whom are facing similar issues, cannot devalue or inflate their way out of the crisis, economists suspect that they will have to receive assistance from other euro nations to avoid inflicting cuts of unprecedented ferocity on their economies.

    Economist Joe Stiglitz, who is advising the Greek government, last night denied that the country would require a bail-out, and urged national authorities to intervene in markets to "teach the speculators a lesson". Likening the situation to the Asian financial crisis, in which even healthy economies were targeted as hedge funds and investors withdrew from the region, he told the Sky's Jeff Randall Live show: "The speculators will always look for the weakest link. What they're doing now is a version of the Hong Kong double play in 1997 /1998.

    "What Hong Kong did in response was to raise interest rates and intervene in the stock market. They burnt the speculators and Europe needs to do the same thing."


How Lousy Was That Lousies Cut And Paste Posting?

Jan 6th I posted the following posting: Lousiest Cut And Paste Posting Of The World.

Now the reason for making that blog posting was the arrogant comments made to the posting made on 30th December 2009, Eric Sprott Reckons SP 500 Could Plunge. Now here is a guy, Eric Sprott, has a track record has been pretty darn fantastic, gives his opinion why he reckons the market could plunge. Without even looking and understanding the reasons mentioned, the typical mind less open just brushed the posting by declaring it as the lousiest cut and paste posting of the world.

Look at the global markets now.

I do wonder if that posting remains the Lousiest Cut And Paste Posting Of The World??

Sometimes it is so freaking sad that folks simply can't understand that opinion always differ. And as mentioned before, this is rather so shallow and tasteless, if you ask me, is the need to bad mouth the opposing views.


Isn't it so true?

Saturday, February 06, 2010

Fountain View's Share Manipulators Caught And Fined!

On Business Times:


  • Fountain View ex-director, ex-remisier fined

    Published: 2010/02/06

    FORMER director of Fountain View Development Bhd, Datuk Chin Chan Leong, was fined RM1.3 million or in default of 13 months' jail as well as sentenced to serve one day in prison for manipulating the share price of the company seven years ago.

    Chin pleaded guilty yesterday to the offence committed between November 18 2003 and January 20 2004 for creating a misleading appearance of active trading of Fountain View shares on Bursa Malaysia through at least 20 CDS accounts.

    These accounts were beneficially owned by the accused through the companies that Chin controlled.

    Hiew Yoke Lan, a former Avenue Securities Sdn Bhd remisier, was also fined RM1 million or 10 months default jail sentence for abetting Chin in the offence. Hiew was responsible for executing and relaying orders for the sale and purchase of the shares during the material time to various stockbroking firms.

    In a statement issued yesterday, the Securities Commission (SC) said this is the second conviction for market manipulation which it has successfully prosecuted.

    The regulator said it has been proactively pursuing this and other market misconduct cases such as manipulation, market rigging and insider trading because such activities severely undermines investor confidence and tarnishes the reputation of the Malaysian capital market.

I remember this one.

Anyway, let's have an idea on what happened. "A misleading appearance of active trading of Fountain View shares on Bursa Malaysia through at least 20 CDS accounts".

The offence was committed between November 18 2003 and January 20 2004.

From yahoo finance, these are the historical stock prices I am looking at for Fountain View.

http://finance.yahoo.com/q/hp?s=6335.KL&a=10&b=18&c=2003&d=00&e=20&f=2004&g=d

During this period, Fountain View had a low of 1.99 and a high of 6.15!!!!

And here is the nice handy work.


Now consider this also. Fountain View has 444.940 million shares. Currently, Fountain View is suspended at 22 sen. At 22 sen, Fountain View carried a market cap of 97.8 million.

Back in Nov 2003, at a low of 1.99, Fountain View carried a market cap of 885 million.

And at the peak of this share manipulation of around 6.15, Fountain View carried a market cap of 2.73 billion!!!

Which meant that some 1.845 billion in market cap was created via the share manipulation!

How?

The fine today is only 1.3 million!!!!!!!!!!!!

Yeah, I did blog on Fountain View before. See That Fountain View Again.

Let me side track a bit. Do you know that back on 14 Feb 2004, there was this news clip involving Fountain View.

  • Fountain View in talks to buy Kurnia Setia stake

    BY JOSE BARROCK

    FOUNTAIN View Development Bhd is eyeing a stake in plantation counter Kurnia Setia Bhd. It is believed that talks between both parties have just commenced and therefore, details are not forthcoming.

    Kurnia Setia – a little known main board plantation counter with a market capitalisation of only about RM69.32 million – has some 11,522 ha of oil palm and rubber plantation, and is controlled by the Agricultural Development Board of Pahang with a 45.41 per cent stake in the company.

    It is believed that Fountain View Development is looking to increase its presence in the plantation business, especially in oil palm cultivation, capitalising on high crude palm oil (CPO) prices to boost its earnings. The company has been suffering losses since financial years 2001 and 2002.

    The financial year just ended may not bring much cheer to Fountain View Development shareholders as well.
    The company, for the nine months ended September 2003, posted a net loss of RM3.84 million on the back of RM56.32 million in sales.

    CPO prices have been on an upward trend since September last year, gaining some 35 per cent to close at RM1,892.50 on Thursday.

    “The problem is with the company's property development arm which is based in Johor. A focus on plantations will boost earnings, especially with the current high CPO prices,”
    the source says.

    Fountain View has about 11, 570 ha of plantation land, of which almost 70 per cent is cultivated with oil palm while the remaining are planted with rubber and cocoa. Previously known as Plantation and Development (Malaysia) Bhd, Fountain View was a PN4 counter.
    Under a restructuring scheme, Plantation and Development became a wholly owned subsidiary of Fountain View after a share swap, capital reduction exercise, issuing of irredeemable convertible unsecured loan stocks and debt compromise.
    News of Fountain View's interest in Kurnia Setia has yet to hit the market. Kurnia Setia shares closed at RM1.11, down three sen from its close on Wednesday. It hit its 52-week high of RM1.25 on Dec 8 last year while its low of 63 sen was on Feb 27 last year.

    Fountain View shares have risen six fold, since listing at RM1 on Nov 18 last year. The counter closed at RM5.80 on Thursday.

And this was Fountain's reply to Bursa in 2004: ARTICLE ENTITLED : "Fountain View in talks to buy Kurnia Setia Stake"

  • The Board of Directors wish to inform that the Company has never been involved in any talks to acquire a stake in Kurnia Setia Berhad and as such wish to deny the following statement :

And which company benefited from such news article? See the jump in Kurnia Setia after such news reporting:

http://finance.yahoo.com/q/hp?s=5193.KL&a=01&b=10&c=2004&d=01&e=20&f=2004&g=d





See the jump in volume and share price for Kurnia Setia? Nice eh? The power of the press using words like 'it is believed' and 'according to sources'.

On 31st May 2005, there was this article on the Weekly Edge.

  • 31st May 2005

    Cover Story: A wake-up call for bursa malaysia
    Stories by Lim Ai Leen, M. Shanmugam & Cindy Yeap

    Banks and stockbrokers continued to cut their credit lines on selected stocks last week, sending investors scurrying for cover yet again as prices tumbled.

    In the latest line-up of stocks to bite the dust were Gula Perak Bhd and SAAG Consolidated Bhd. By last Friday, both companies had seen their value reduced to a third of what it was when the trading week began.

    It's been a month since Fountain View Development Bhd started this selldown snowball rolling, and the stock market is still suffering the effects.

    There is talk of financial executives being axed for breaching internal risk management and control procedures. "A large securities house is investigating a number of its executives for owning cars and properties beyond their means," says one market watcher.

    Retail participation is low, as spooked banks and stockbrokers review their exposure to so-called speculative counters, stop credit lines on these stocks and slash their positions. Forced selling has exarcerbated the price plunge, with few buyers willing to dip their toes in to stem the cascade.

    Market talk is that the selldown has affected quality stocks too, as these are sold to make up for losses on the speculative counters. And even though there are punters who believe that the sold-down stocks have been beaten way below their fundamental values, the herd instinct to stay away still holds strong.

    "There is still value in these companies. Unfortunately, lenders have a policy of forced selling to cut their losses. If there was measured selling, then the drop wouldn't be so drastic," observes an industry veteran.

    This state of affairs is raising questions about the integrity of the Malaysian bourse. Should market regulation be stepped up? Do these incidents reflect the poor quality of listed companies? Is the share margin financing facility to blame? Why are syndicates still loose on the stock market?

    Equity market participants are grappling with the answers, even as the stockbrokers lick their wounds over their losses and the regulators go about their business of investigating. But there's no doubt that measures must be taken quickly, before the stock market loses its credibility.

    "It's a wake-up call," says Yusli Mohamed Yusoff, CEO of Bursa Malaysia.
    No one is kidding themselves that this is a new problem. It's just that this time around, the losses have hit the institutions, and not retail investors as much. Also, the speculation has had a contagion effect on other stocks and is taking place in a damp, bear market, not a hot, bullish one.

    "This is not a new feature of the market; these guys [price manipulators] have been around the market for years," says Yusli matter-of-factly. Which raises the question of why they have.

    No quick fix is at hand. The long-term solution, it appears, lies in a whole host of issues, from fundamental analysis to brokers' risk management systems to information sharing. It also depends highly on cooperation amongst a long line of people that spans investors, intermediaries, regulators and the judiciary.

    Speculation versus manipulation
    The instinctive reaction when artifically high share prices and volumes come crashing down is to call for regulators to rid the market of manipulators. But every healthy stock market needs a good dose of speculation to generate volume and interest.

    A common refrain in financial circles is that it's a thin line between speculation and manipulation. Where does a healthy risk appetite end and an unhealthy greed for the quick buck at any expense begin? And how is the lender or investor supposed to tell the difference?

    According to Yusli, the line is drawn where collusion begins. "It's difficult for these speculators to do it [keep prices artificially high] on their own. They need the cooperation and support of other market participants," he says.

    Which means manipulation can be nipped in the bud if "everyone starts toeing the line and is that much more careful." Retail investors can refuse to buy on rumours. Lenders and stockbrokers can refuse to extend credit.

    And how is a potential investor or lender to know whether the price quoted on the exchange is reflective of a stock's value?

    Self-defence would seem to be the best offence in this case. Investors and financial intermediaries can arm themselves with more in-depth knowledge of a particular stock. And valuation tools like fundamental analysis will alert them as to whether a stock is trading at unusually high levels.

    "There has to be some form of benchmarking of share prices, which compares real-time PE (price-earnings) ratios, NTA (net tangible assets) per share and dividend yields, for example. Otherwise, people can get away with selling Protons for the price of Mercedes Benzes," remarks Datuk Ali Abdul Kadir, ex-chairman of the Securities Commission and a well-known car aficionado.

    Enforcement and prosecution
    There is little doubt that manipulators continue to prey on the local bourse and have been doing so for years. But why have their activities continued all this time, apparently unhindered?

    The regulators say they have to walk the fine line between regulating the market and interfering with its development. The intermediaries say the regulators need to be more on-the-ball and market savvy. And the lawyers say manipulation is a tough offence to prove.

    "You can't have a policeman on every corner of the street. There should be reasonable policing, and you wait for informants under the whistle-blowing provisions [Section 140 of the Securities Commision Act protects the identity of informants]. The idea is to let the market develop, but where there is manipulation, the regulator goes in with a big stick," says Ali.

    Though this stick may have more bark than bite.

    The thin line between healthy speculation and deliberate manipulation means that buyers and sellers are free to invest and divest any way they want, as long as they do not collude with each other to distort prices or volumes. Most prosecutions, says a litigation lawyer, fail when it comes to proving that a series of trades was manipulation, and not normal speculation.

    "The hardest part is to prove the mens rea, or the intention to create a false trade or manipulate prices," says the lawyer. "If someone didn't mean to create a false trade, it's a defence to the charge."

    If, however, the SC can prove that the buy and sell accounts all belong to one person via his or her nominees, then the burden of proof shifts to the defendant to show that he was not manipulating prices.

    "These syndicates are highly skilled at their game. It's tough to try and catch them with their hand in the cookie jar," says Yusli.

    Another hurdle, says the lawyer, is the general lack of understanding of securities laws and manipulative trading practices amongst the judiciary. This shortcoming may be addressed once a special court is set up.

    "... the Chief Justice has approved the SC's proposal on the establishment of a dedicated court for capital market offences, which is expected to expedite the disposal of such cases. In support of SC's commitment, the Attorney General also appointed three of the SC's senior enforcement officers as Deputy Public Prosecutors," says an SC spokesperson in an e-mail reply to The Edge.

    In the absence of hard evidence, it would seem that the exchange and the commission will rely less on the legal system, and more on warning bells and preventive measures.

    One such tool is the Bursa Malaysia query to companies regarding the unusual trading activity of their stock. The standard form, non-informative responses from these companies, which seem to be accepted by the exchange without further question, have, however, turned this exercise into a meaningless ritual.

    "We query these companies when we think there is some indication that some parties have been acting in concert. We do investigate further after the companies reply. The market should take our query at face value [that we suspect some manipulative activity], but we will do more to publicise why the company is being queried. Also, we have to be careful about unnecessarily alarming the market," explains Yusli.
    A common complaint is that the exchange and the SC are not seen to be investigating or coming down hard on these speculative companies.

    Tengku Zafrul Aziz, group managing director of Avenue Capital Resources, says: "I feel that the relevant regulators have to come in early and be stringent with any counters that they feel are being manipulated. I know this is easier said than done given the vested interests of the brokers and their clients. The monitoring mechanism must be in place so that brokers can be informed of certain 'red flag' counters."

    Ali says what's lacking is "on-the-spot fire-fighting". He also believes that the regulators could benefit from having more "market-savviness".

    Information sharing
    "It may be difficult to prove actual price manipulation, but we would like to see regulators who are more on-the-ball, who know what's happening in the market before it ends up in this sort of situation," said one stockbroker, when the Fountain View selldown started to affect other stocks a few weeks ago.

    The SC seems to be taking steps in this direction. "It has asked the brokers to submit weekly reports for counters that it specifies," says the CEO of a local stockbroker. "It wants to be proactive." This request was made at the meeting between the brokers and the SC on May 16 — a meeting convened to discuss the Fountain View affair and losses of hundreds of millions of ringgit said to have been borne by banks and stockbrokers.

    At this meeting, which the CEO described as "sobering", the SC also proposed better information sharing among the brokers, Bursa Malaysia and itself. "This could help reveal weaknesses in credit and margin-financing practices," he explains. In particular, players will be able to see what sort of credit exposure the entire market has to a specific stock.

    Margin financing
    Is slashing credit lines purely a knee-jerk reaction to the recent selldown? Or are margin financing facilities a contributing factor to plunging share prices?

    According to Yusli, margin financing in itself is not the culprit. "Margin financing is a great way for banks and stockbrokers to earn healthy profits, without having to extend these facilities to shady characters. The rules are in place. Everyone who takes in shares will have to decide how they want to conduct their business — in a volatile way or in a steady, fundamental manner," he says.

    But these internal systems and controls can be enhanced further, says Tengku Zafrul, with better information at hand. "... it's all about having adequate internal systems and controls... Different brokers have different risk appetites and will thus take different risks when it comes to margin financing. Therefore, we should let market forces dictate what risks each broker wants to take when it comes to giving lines. However, brokers would be better off if we had access to better information of the client's credit exposure relating to his securities with other brokers and with other financial institutions."

    But there are also those who think that the days of brokers relying purely on margin financing and transaction fees as main income-earners are over.

    David Chua, managing director of ECM Libra, believes that financial intermediaries should start trading up their skills. "Intermediaries need to match up to more educated and affluent investors. It's not just about providing prices; they have to improve their value-added services," he says.

    Quality of companies
    What is worrying investors now is, how many more companies out there have shareholders who prefer to make their big bucks from ramping up the share price instead of from growing the company's business?

    "It's unfair to say that this is reflective of the whole market," stresses Yusli. "There are honest people out there who want to make decent returns from investing in a sound market. But it's the few bad apples who are out to make a quick buck at everyone else's expense, without a business plan, without growing the business like normal, healthy companies. These people are taking a short cut and are looking for victims."

    The stock market abounds with stories of companies that list and tank soon after — for example, KSU Holdings Bhd and YCS Corp Bhd. Fountain View itself only listed in 2003, via a reverse takeover of Plantation and Development (M) Bhd.

    But the regulators say that the domestic listing requirements are not too blame.
    Ali believes that the listing requirements have been set high enough to separate the wheat from the chaff. "You can't reject them once they meet the rules," he says.

    "It's not so much the quality of the companies that we list but the intentions of the people behind them," observes Ali. "Unfortunately, there are those who want to make money by exiting when the company lists. I would advise them to build up the business once it's listed. The returns to the controlling shareholder comes from capital appreciation and dividends when the business grows."

    Looking ahead
    These suggestions and measures will take time to show results. In the meantime, anecdotal evidence suggests that industry professionals continue to scan the market for potential selldown candidates.

    Though, there are those who believe the shakeout is over. "It's gone past the worst now. Most of the bad apples have fallen off the tree," says the CEO of a local stockbroking firm.

    Yusli believes that market confidence will return "once everyone comes to their senses and invests in prudent fundamentals. There are still many good companies that don't participate in speculative kinds of activities."

    Savvy investors, meanwhile, are out bargain-hunting. "They threw the baby out with the bath water. There are quite a few pickings amongst these counters," says the industry veteran. He is obviously betting that market confidence will return — and soon. Hopefully, this time it stays

Comments On Asia's Budget Carriers

Interesting article and comments on Asian budget carriers: Crowded skies squeeze Asia's budget carriers ( posting is for personal references)

  • SINGAPORE: Asian airlines, particularly budget carriers, may be taking off on a high-risk strategy -- ordering hundreds of aircraft to offer new routes and more flights, just as growth in low-cost travel is seen slowing, according to Reuters.

    Over the next five years, budget carriers from Malaysia's AirAsia to Singapore's Tiger Airways will take delivery of over 500 planes, meaning a capacity increase of 15 percent a year -- double what some observers are forecasting.

    The real prospect that some budget carriers, and the full-service airlines they compete with, may not survive the dogfight could, in turn, mean billions of dollars of cancelled orders for Boeing and Airbus.

    Asia has become the largest market for the two big planemakers
    , accounting for a third of outstanding orders.

    "Not all airlines will survive," said Terence Fan, assistant professor at Singapore Management University. "
    Mid-double-digit growth is a lot to achieve, and the aviation industry has had a lot of ups and downs."

    "We're already seeing Thai Airways, for example, reduce its short-haul flights from Bangkok because of competition from low-cost carriers," Fan added.

    Fan, who last year published a paper on Europe's passenger airline industry, noted around 130 airline start-ups there in the 10 years to 2006. Only about 50 survived, and that number has since fallen further.

    While Ryanair and Easyjet have thrived and become major players in Europe, others such as SkyEurope, described by consultancy Skytrax as the best low-cost carrier in Eastern Europe, have gone bankrupt, Fan said.

    Asian low-cost carriers have grown rapidly over the past decade and now account for 14 percent of intra-Asia travel, according to Airbus estimates.

    Indonesia's Lion Air, for example, has outstanding orders and options for over 100 Boeing 737-900s, each with a list price of around $80 million. AirAsia will boost its Airbus A320 fleet to 175 planes by end-2015 from 70 now.

    SLOWING GROWTH

    But, while budget carriers achieved compounded growth of 38 percent between 2001-09, the overall intra-Asia market expanded at just 6 percent, Airbus figures showed.

    Boeing said this week it expects new orders for commercial aircraft to fall short of deliveries, with no increase in demand until 2012.

    Boeing had gross orders from airlines for 263 planes last year, but net orders of 142 planes after cancellations. Airbus had gross orders of 310 planes and net orders of 271.

    Alex Glock, Asia Pacific managing director for Brazilian planemaker Embraer, said the golden years for low-cost carriers ended with the global financial crisis, when many suffered falling demand, much like the full-service airlines.

    In the last two years, the number of low-cost carriers in Asia Pacific fell to 17 from 20, and the number of flights dropped to 11,956 from 12,034.

    Glock sees regional demand growing at an average annual rate of 7 percent, following a spike in the next two years as traffic returns to pre-recession levels.

    "Even though low-cost carriers grew more than the regional average, the growth spurt has passed," he said.

    Many of Asia's budget airlines are also losing money.

    In India, a host of low-cost and conventional airlines have emerged to challenge state-owned Air India and Indian Airlines and, in Macau, Viva is seeking financial assistance from the government to stay afloat.

    Even so, analysts expect low-cost carriers to do better than the overall industry by opening new routes and picking up market share from second-tier flag carriers such as Indonesia's Garuda.

    "This sector will continue to gain market share particularly in Asia's emerging economies. The region is dynamic, has huge populations with vast physical distances and enjoys rising incomes," said Tan Teng Boo, CEO of Malaysian-based Capital Dynamics, which manages $300 million.

    But Tan said he does not own airline shares.

    "The airline business, though glamorous, is very tough. The industry has loads of players and airlines don't have pricing power. It's essentially a commodity business with very high capital requirements and low margins." - Reuters