I can't believe this issue is even brought up.
Look, why was the quarterly earnings introduced?
Why? It improves transparency. It gives the investor 'some' whatever small insight to what's happening to the company that they have vested interests in. By knowing what's happening, it helps protects the minority investor against accounting fraud.
It also provides much information to the prospective investor.
That's my simple reason why the quarterly earnings reporting must be maintained.
I do not believe in just theories. Let's take a real example and see if quarterly earnings helped.
I take the simple one, Kenmark., a stock that had collapsed due to financial shenanigans and was delisted on 31 Dec 2010.
Was there any news coverage on Kenmark until Kenmark's MD and Deputy GM 'resigns', Share Plummets Big Time!!!? Answer: NO.
If there is no news coverage, what else can the minority investor depend on? Isn't the quarterly earnings the best source of info left? If you take that away, the minority shareholder is only left with the half yearlies.
Ok, let's look at the quarterlies, and see if it helps.
May 2009: Quarterly rpt on consolidated results for the financial period ended 31/3/2009
Sales 38.775 million Net LOSS 0.084 million Receivables 163.773 Million Cash 2.222 million Total borrowings 144.574 million
Aug 2009: Quarterly rpt on consolidated results for the financial period ended 30/6/2009
Sales 57.686 million Net Profit 1.013 million Receivables 207.584 Million Cash 2.202 million Total borrowings 144.463 million.
Nov 2009: Quarterly rpt on consolidated results for the financial period ended 30/9/2009
Sales 35.334 million Net Profit 3.718 million Receivables 225.317 Million Cash 2.298 million Total borrowings 143.354 million.
Feb 2010: Quarterly rpt on consolidated results for the financial period ended 31/12/2009
Sales 101.441 million Net Profit 4.769 million Receivables 248.662 Million Cash 2.210 million Total borrowings 142.203 million.
Ok.. the next one... June 2010 was reported AFTER all hell broke loose..... I will just state it anyway.
June 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010
Sales 18.762 million Net LOSS: 146.552 million Receivables 152.339 Million Cash 0.440 million Total borrowings 139.043 million. ( Why the huge loss? Do read this old posting: Kenmark Finally Discloses In Detail Why It Suffered 146 Million In Losses But... )
Looking at the info above. Wasn't it so crystal clear that something was not right in the accounts? Let's look at Aug 2009 report and compare it versus the May 2009 report.
Look at how the receivables 'suddenly jumped' to 207.584 million. Last quarter, receivables were 'only' 163.773 million.
What on earth is happening???
Sales only improved some 18.911 million, from 38.775 million to 57.686 million.
But receivables jumped some 43.811 million!!
Unreal isn't it? Pure insanity! How on earth can any company run a business in such a fashion? A cash balance of only 2.2 million and total debts of 144.463 million? Was there any way possible such a business could survive????
And all this simple concerns were easily spotted right there and then, WITH THE HELP OF QUARTERLY EARNINGS REPORTING.
It gave the investor a rather clear and precise warning that things weren't right in this company.
Consider this. Half yearly earnings means every six months, meaning we will skip one set of quarterly earnings.
For Kenmark's case above, could the minority shareholder enjoy the luxury of skipping one set of the quarterly earnings?
Which set of quarterly earnings do you suggest we skip?
And without that set of quarterly earnings, and without news coverage on the stock... what chances is there for the minority shareholder to survive?
I can run though other examples. Take the fall and the accounting fraud in Megan Media. Did quarterly earnings helped alert the investor? Take the recent plunge of Hai-O. Did the quarterly earnings helped? Did the quarterly earnings helped the investor make the correct decision? Did the quarterly earnings gave sufficient warning to the investor that Hai-O's growth was clearly over and that the best course of action was to sell? Or the recent slowdown in glove makers earnings? Did the quarterly earnings help the investor make the correct decision?
Or the minority shareholders just isn't important? Yeah, the minority shareholders is just there waiting to be screwed???!!!!
Or how about a more current/live issue?
Take Muhibbah's current APH issue. We all know the concern is whether Muhibbah can collect payment from APH and also we want to know how Muhibbah's balance sheet is faring. We want to know the state of Muhibbah's receivables. Is it improving or is it worsening? Yes?
Now assume we are on a half yearly reporting. The last reported earnings was on May 2011.
Muhibbah came crashing down on June 2011.
This would mean that the investing public needs to wait until Nov 2011 to be updated!
Is this acceptable?
With the quarterly earnings, the investing public can be updated by Aug 2011.
Which is better?
How now brown cow?
Quarterly earnings is a must. And if the listed company thinks that it's a waste of time, then the listed company should not waste the stock market's time being a listed entity.
We all want a fair and fully transparent stock market!
ps: snowball had his say too! http://goodstockbadstock.blogspot.com/2011/07/no-to-half-yearly-reporting.html
ps/ps: Dali's different views! http://malaysiafinance.blogspot.com/2011/07/scs-recommendation.html
Tuesday, July 12, 2011
I can't believe this issue is even brought up.