Saturday, July 24, 2010

Flashback: CCB's Special Dividend.... in 2003

Dedicated to bonny b who said the following in the posting Will We See A Special Dividend From CCB?

  • A company which is still in biz giving all its cash back to shareholders can only mean 2 things, 1. its major shareholders are dry and thirsty, and 2. it doesn't know how to develop the company anymore.In which case, future investors be forewarned.

I made the following reply:

  • Honestly? I believe I said... almost the same thing back in 2006 but obviously, if my memory fails me not, I said it in a much more crudely. :P

I was digging through some of my personal old stuff and then I realise I really need to correct myself for it wasn't 2006 and more interestingly the events that happened then, is worth repeating once more.

It started back on 20th November 2003, to be precise. Special Dividend

Then, there existed this investment advisory company called Surf88. They made the following comments:

  • C&C Bintang – A nice New Year present?
    By: Surf88
    Date: Friday, November 21, 2003
    Time: 8:11:39 AM

    C&C Bintang (CCB) (RM6.10, stock code 2925) indeed handed out a nice present for shareholders as it declared a special net dividend of RM3 per share, which will go ex on 17 Dec and be paid on 29 Dec, just in time for the New Year. The special windfall amounted to about half of its share price, which incidentally jumped 40 sen yesterday on fairly active volume.

    Surf88: Although a special dividend payout from CCB has been rumoured for sometime, we are still surprised by the generosity. Indeed, the dividend payment of up to RM304M has exceeded CCB’s net cash balance of RM209M as of end-Sep 2003, inevitably raising some eyebrows as to whether it is prudent to incur debt for dividend purposes.

Yes, I was amazed like everyone else. CCB announced it was going to pay a special dividend amounting to rm 304 million, which was much more than CCB had in its balance sheet.

On Feb 2004, I and everyone else, got the answer. Quarterly rpt on consolidated results for the financial period ended 31/12/2003 (CCB lost 2.44 million for that quarter)

The excel file attached in that earnings report was most interesting!

Yes they DID it!

They accepted a revolving credit and bankers acceptance from their kind bankers to 'reward' their shareholders!

Incredible yes?

And bonny, did you know what I wrote down?

Err... T.U.G.

Well T.U.G stands for .......


Yeah, I went ballistic! I thought it was an act of insanity from their management. How could they pay/reward shareholders with money that they did NOT have? Surely it wasn't prudent! And what made me crazier was they reported quarterly losses in that quarter and the yearly earnings for that fiscal year was only 24.304 million, which represented a massive drop from its previous fiscal year earnings of 57.4 million. And to make it even much more crazier, on that very day, 18th Feb 2004, CCB gave another
Final Dividend!

I was like... how could I possibly 'invest' in a company whose management does appear to be prudent with its money management?

That was exactly what I noted in my notes back in 2003/2004.

And yeah... as much as I hated what was happening... somehow this company survived, despite the apparent lack of prudency and this stock, CCB, turned into a massive winner for its investors.