Thursday, June 16, 2011

And Muhibbah Comes Crashing Down

One of the hot stock for the wrong reason today is Muhibbah.


The stock last traded at 1.55 down 0.35 sen or some 18.4%.


The selling was rather furious.


The Edge Malaysia carried news on the selldown.
CIMB Research covered the selldown.


And the valuation was interesting because CIMB chose to use the RNAV method. (Why not based on simple PE? )

Its reasoning.


I, then stumbled on K&N Research write-up on Muhibbah. K&N is downgrading Muhibbah from a BUY to a HOLD.


I was shocked with the very first sentence!

What? What? What?

  •  News reported that CIMB Bank is pulling out the financing for APH.
Yes CIMB Bank is the one pulling out the financing deal for APH!

This is massive.

How come CIMB Research chose NOT to mention this fact in its report?

Now the following paragraph from KN was very interesting.


K&N discusses the possibility of Muhibbah being swept into PN17!
  • Potential PN17? The potential losses could lead the company into PN17 status as the severe losses would erode its shareholder’s fund by more than 75% (as at FY10). Nonetheless, we believe this is less likely to be the case as the company may not need to write-down / provide the full amount of RM370m, as we understand that the asset is worth a significant amount and there already are interested buyers.
This is the link to SBT article: CIMB puts Asia Petroleum Hub under receivership

And Business Times broadcasted Bloomberg's short news clip: Muhibbah sinks on Kenanga downgrade
  • Muhibbah Engineering (M) Bhd, a Malaysian builder, tumbled the most in three years after Kenanga Investment Bank Bhd downgraded the stock to reflect concerns of potential writeoffs from a building contract.

    The stock sank 16 per cent to RM1.59 at 12:19 p.m. local time in Kuala Lumpur trading, set for the steepest drop since March 10, 2008.

    The stock was cut to “hold” from “buy,” Kenanga said in a report today. -- Bloomberg
How?

12 comments:

Mun Wai said...

MY DEAR ALEX LU

FINALLY U COME BACK TO ITS FUNDAMENTAL AGAIN, WHY USE FA THIS TIME ? ARENT U TELLING US THAT ONCE IT BREAKS ABOVE 1.83, IT IS ON ITS UPLEG ?

http://nexttrade.blogspot.com/2011/06/muhibah-next-upleg-around-corner.html

SO FAST U CHANGED YR MIND ? WHY ? TECHNICAL ANALYSIS NOT WORKING AGAIN ?

TOO LATE TOO LATE , I AM SURE MY SIFU UNCLE SAM WILL BLOG THIS UP BY THIS WEEKEND , SEE YAH ?

KNOW HOW I KNOW IT ? COZ HE HAS SAID IT IN HIS PRIVATE BLOG THAT HE IS GONNA TO SHOW THE WORLD THE FAILURE OF TAK ADA AKAL METHOD.

THIS WEEKEND U WILL SEE HOW MY SIFU TARUH U ON MUHIBAH.

BTW MAD COW, CAN ALEX BE SAVED BY U ?

snowball said...

Hmm...the people at CIMB always make my day..like to write jokes. How can people that owe you money considered a liability? A company that lose such a huge project relative to their equity have no impact to valuation? These people are CIMB are so smart that I am having a difficulty in understanding them.

One more troubling fact, according to CIMB research report, the receiver was appointed ONE MONTH ago. Don't you think Muhibbah should disclose this fact ONE MONTH ago. Till now, there seems to be no communication from them. Since the amount is material as stated in the Kenanga report, do you think, in a more litigious society like US, this folks at Muhibbah can get sue by the shareholders for failure to disclose material info?

Moolah said...

And did I foget to mention that Muhibbah was ONE of CIMB's stock pick in its June Strategy report?

And apparently from Bursa website, there were some small disposal of shares from its shareholders.

mapsscom said...

again,ur spot on.question is,how are we to rally against poor analysis or rather mila fide analysis or rather cheating n irresponsible analysis?what can we do to hit back at all those brokerage firm n research houses that blatantly "fool"the authorities,investors n the common man?oh man,now i know what due diligence n corporate responsibility really means.thanks a million ze moola.

snowball said...

Wah..lol..like that also can..Malaysia Boleh...

One month, one can do a lot of stuff. Can inform all my kawan to dispose the shares, CIMB can inform previledge clients that some bad things is happening in Muhibbah and CIMB prop desk can theoretically clear their stock position.

All this are speculation, but, it can happen...one month is a long time. If shareholder dispose shares, it is even worst, but, they can always claim that they "didn't know". Another hazard of being small fry..

Mun Wai said...

The portion of debt due to Muhibah which is reclassified as doubtful debt is transferred from Debtors' Account (Receivables) to an account called "Provision For Doubtful Debt Account", which is indeed a liability account.(with the usual b/f bal, addition and c/f bal)

The amount of provision made (addition) is charged against the P/L in the respective month closing.

Moo, have I interpreted it correctly? Yes? No? Moo

ps: I disagree on "no impact on RNAV"

Moolah said...

Mun wai: There's a slight tiny weenie issue here.

Err.... I have not looked into Muhibbah books for a long. Last I look was back in 2009 and I wasn't too impressed then....

And prsent day I just did not had the time to look into its books. (ok - I am lying... lazy. Yup, I'm simply lazy. :P )

And I am not sure if you are aware or not, I am not an accountant. Never studied it before.

Ok... so what's your question again?

:)

TK said...

STILL A TRADING BUY!

POTENTIAL RE-RATING CATALYST!

A BUYING OPPORTUNITY!

TARGET PRICE RM2.75!

TALK IS REALLY FREE!

snowball said...

Hi Moolah,

Posted my reply here. Way too long and attachment and stuff to fit into the comment page.

http://goodstockbadstock.blogspot.com/2011/06/muhibbah-fiasco-how-lousy-disclosure.html

Mun Wai said...

Nope, not at the moment.

T am trying to figure out some other things. I have difficulty in putting them into words.

My england not good.

:-)

Moolah said...

Oooh... the stock is suspended and from Bursa ...

The Company is one of the contractors in respect of the Project known as Procurement, Construction and Commissioning of a Petroleum Hub and Bunkering Facility at the Reclaimed Island Off Tanjung Bin, Johor (APH Project). The receivables for certified work done and related costs amount to RM 370.8 million as at 31 Dec 2010.

With reference to the articles in the Singapore Business Times on 15 June 2011 regarding the appointment by CIMB (the financier of APH project) of receivers and managers for APH, the Company wishes to inform that according to APH, they have identified an investor, and are in negotiations with the investor to fully finance the completion of the APH Project, including making due payments to contractors.

As this is a oil and gas project with a secured business and the said investor due to finalise its financing transaction with APH, there are reasonable grounds to hold that the receivables are recoverable in due course.

So the disputed amount as suspected by KN... is indeed 370 million.

It's huge.. and it could bring the company down... but the company is insisting that the receivables are recoverable.

Soooooooooooooooo..... whoever buying/betting on Muhibbah.. is betting on this issue, eh?

How?

Mun Wai said...

1 hour trading halt :P