Saturday, April 30, 2011

What Do You Look For In A Report? Ms. Sexy Stock?

Sexy story sells! It pushes the stock high up.

LOL! That's probably the under statement, yes?

And get this, once the sexy story is out, the wok is ready, the chef is ready, it's pointless to talk logical sense and logical reasoning. The wheel is in motion and the stock is all a-go-go!

And needless punters, speculators and traders love it to bits!

Hey, who doesn't want to be a billionaire?!

And needless to say, some investors are utterly aghast to see what's happening. They know the report doesn't make much. Some even goes all out and try to warn others about the danger that lies ahead. To these kind hearted, they know it's all a pump-and-dump play in the making.

But alas, the story is simply too darn sexy. And the wok is super hot too!

And the stock flies to the moon.

And the kind hearted? They are like a tortured soul with their warnings.

And perhaps this might be a tortured posting for some too!

Ah.. what's prompting this posting? Well? My soul is definitely not tortured. LOL! How could it be? I am not a too kind hearted soul, to begin with. (I wonder if it does matter). Anyway, there I was reading and glancing through this earnings reports last night. Then I saw the name. That name. I just had to open and have a look at what's happening. And seriously, I was not too shocked at all. And since there were postings on the stock before, I decided to do a do-over posting.

Let's travel back to 6 Feb 2007.

The stock in feature is AsiaEP.

And as clearly seen, AsiaEP was trading below 20 sen for a large period of time back in 2006. Then in Dec 2006, it started climbing and climbing. And by 6 Feb 2007, it closed the day trading at 0.355 sen.

Up so much already woh. And then here come KN with its guns blazing claiming that AsiaEP is our country's "A homegrown Google and Baidu in the making"!

Sounds sexy enough?

In a 8 page report on a relatively unknown Masdaq stock (now ACE stock), KN gave the market an incredible initiation report.

Quantum Leap. AsiaEP Bhd (“asiaEP”) has developed a Specific Community/Vertical Search Engine (“Itah SE”), which offers a simpler, deeper and more relevant search for B2B users. We expect significant B2B traffic to enable the adoption of a highly lucrative Pay Per Click (“PPC”) revenue model.

A homegrown Google and Baidu in the making. Visit the site: and compare Itah SE with Google’s generic Search Engine (“SE”) by typing in keywords that may link to any products, and then check the returned results from the perspective of a businessperson. You will be pleasantly surprised by Itah SE’s search results’ simplicity and high relevancy – just what a businessperson needs. We believe Itah SE has the potential of becoming a popular B2B SE.

The sky is the limit on successful execution. Assuming a mere 0.2% and 0.5% of the FY08 and FY09 global B2B paid search market share would lead to a 184.7% and 115.2% y-y growth in net profit to RM10.1m and RM21.8m, respectively.

When everything is “right”, the share price will likely be “wrong”. Investors have two choices. Buy early if one thinks Itah SE has a reasonably good chance of achieving success. Alternatively, one can buy on earnings delivery later but at likely much higher prices.

STRONG BUY with a 12-month target price of RM0.99, which is based on a FY09 P/E of 10.0x. We believe Itah SE is worth a lot as a technology. Wall Street will not accord Google and Baidu with a market capitalisation of US$149b and US$4.0b otherwise. Moreover, players without a strong presence in the paid-search space, such as Microsoft, EBay and etc., may be willing to pay top dollars for Itah SE once proven.
And of course, as in most reports, the 12-month target is based on a very optimistic future earnings. In AsiaEP's example, the target price hinges on the estimates of what AsiaEP could earn in FY 2009.

And here's the earnings estimate table once more.

So AsiaEP was a company that was making just 3 million. But because of this new project, this "A homegrown Google and Baidu in the making", AsiaEP earnings could soar to 21.8 million.

Oh yes. The company was making just 3 million. And the research report said it can and because it can, it rates AsiaEP to be worth a whopping 99 sen based on the fact that earnings could fly to 21.8 million!

Aha...that's the sexy story told.

And as you know in the market, a stock's future price is based in what it could earn in the future.

That's written in the stone dude and dudettes.

You can NOT re-write what's written.

You can not even argue.

NO. NO. and NO.

It's a like miner. Whether it successfully mine its gold is never important. What's important is what it could mine.

Think about it.

This is the stock market.

It's what the company COULD earn in the future. That's all that's important.

Nothing else matter. Remember that yo!

Err... errr.... yes you cannot be a smartie pants and start suggesting that by making such a stone cast ruling, anyone can just start painting a bright future prospect and the stock could fly to the future and beyond!

No you simply cannot do that.

And what did AsiaEP do after such a sexy report?

Fly it did.

By 26 Feb 2007, the stock was trading at 0.82 sen!

By no one cared about that stock report already.

AsiaEP is simply a darling. No one simply cared about the negative coments posted on AsiaEP.

They certainly did not care about postings such as Update on AsiaEP. Oh yeah, even Goldman got involved in this puny stock. Goldman woh! Don't main-main!

If Goldman buys, then it must be good. ( Duh! LOL! )

Let me re-peat what was written in the posting Update on AsiaEP.

Truly incredible. (Mou Tak Teng!)

On feb 6th, I mentioned AsiaEP in the following posting: AsiaEP

On Feb 24th, the Star Bisweek carried this article: Googling for growth

On March 9th the Edge reported the following: 09-03-2007: Goldman Sachs buys 5.7% stake in AsiaEP

On March 9th, KN came out with their guns blazing and gave AsiaEP a price target of rm1.97 ( the initial TP was just 0.99)

KN calls it the Goldman factor and this is their reasoning:

While our FY07, FY08 and FY09 earnings forecasts remain unchanged (Please refer to our Initiation Report dated 6 February 2007), investors should not under-estimate the positive impact of GSI’s presence in asiaEP for the following reasons:

  • Emergence of GSI as a substantial shareholder in asiaEP could lend Itah SE instant credibility – a big vote of confidence on its business potential;

  • Presence of GSI could enhance deal possibility between asiaEP and other BIG SE players on Wall Street; and

  • Deal potential tends to inflate valuations.

We continue to rate asiaEP a STRONG BUY with a revised 12-month target price of RM1.97 (+99.0%), which is based on a FY09 P/E of 20.0x. Increasing foreign interests, who seem to better appreciate the company’s growth potential, to a large extent, drives the latest re-rating.

........ LOLOLOLOL!

Got the Goldman factor woh.

And naturally, the stock continued to the orbit. Some would say KN's report is damn MTT (Mou Tak Teng!)

See? Don't say I told you so but it's pointless to talk fundamentals. Most important is the sexy stock report and the stock in the wok.

And the buyers, punters, speculators, traders in the stock were so happy.

How could they not be.

And naturally these winners would be rubbing it in to all the troubled souls who had criticised the stock.

All that matters is the stock had reached KN's initial price target. That's all that's important.

The reasoning? What reasoning? Who cares?

Do they care how the stock traded comes Christmas?

Heck no!

Got great profit! Why bother?

They certainly did not care that stock looked like this comes Christmas eve 2007.


To them, this posting is simply an annoyance to the world wide webspace.

It contributes NOTHING positive to the market at all.


And that was 2007.

It's now 2011.

Last night AsiaEP announced its earnings.

Losses of 31.2 million?


Now the losses were explained..

In response to the current volatility of the world economic conditions affecting the local market as a whole, the Management decided to adopt a prudent stance by providing an impairment on the intangible assets amounting to RM28.268 million during the current quarter ended 28 February 2011. This has resulted in the Group recording a consolidated loss of approximately RM31.256 million for the current quarter ended 28 February 2011 (before taking into account the aforementioned impairment, it would have registered a consolidated loss of only RM2.988 million), compared to the corresponding quarter of the preceding year ended 28 February 2010 when the Group registered a consolidated loss after taxation of approximately RM0.942 million. In view of the aforementioned market condition, the Group revenue generated was approximately RM 0.234 million for the current quarter ended 28 February 2011 compared with approximately RM1.633 million as posted in the preceding year crresponding quarter.

An impairment of intagible assets amounting to rm28.268 million?

What is this impairment of intagible assets? What is AsiapEP intangible assets in the first place? Why is this intagible asset that is worth so much?

And the company's balance sheet fundamentals?

Well there's nothing really nothing to talk about! (pun is really intended)

Company does not have any loans but neither does it have cash either. It just have some 548 thousand (yeah thousand!) left in its piggy bank.

But the most important thing is..... a sales revenue of 234 thousand???

Err... company doing business or not?

And then... after all such a long posting already.... I remembered about KN's report. Sorry KN's sexy report on AsiaEP. I wondered how AsiapEP had fared for its fy 2009 earnings. Remember KN said AsiaEP should be earning some 21.8 million!

Here's the link to AsiaEP FY 2009 Q4 earnings: Quarterly rpt on consolidated results for the financial period ended 28/2/2009

Ahem! Ahem! Ahem!

According to that quarterly earnings, AsiaEP lost some 7.46 million for fy 2009!

KN's estimate? An earnings of 21.8 million! ( Does anyone care about this issue anymore? )


And naturally.... the stock now looks like this.


TK said...

What? AsiaEP come back again? :lol:

Choong Wai said...

looks like market is giving a middle finger to investor

solomon said...

Certain biz model does not fit into the consumer demand.

Lately have we seen a few ACE counters in the orbit....does not exclude them?? All u need good salesmen (analyst report) plus convincing forces (foreign institution)...didn't we see perisai as one good example lately??

Moolah said...

LOL! That last oone does look like a middle finger.

panaceaasia said...

These clowns are now pushing Guanchong. Cocoa price collapses, its share price of this cocoa grinder goes up!!

ronnie said...

Yep. Guanchong operator is slimy