Wednesday, February 29, 2012

A Massive Payday Awaits Tanjong Shareholders

There's two rather interesting or revealing passages from the following article on the Edge :Ananda could see RM4b gain from Tanjong buyout

  •  ................
    If the touted price tags for the power and gaming assets are true, Ananda would in less than two years managed to sell two of Tanjong’s prized assets for about RM12.85 billion — over RM4 billion or some 46% more money than the RM8.8 billion Tanjong valued using the RM21.80 per share minorities were bought-out for in July 2010.

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

    Secondly, Ananda’s investment cost is a lot less than the RM8.8 billion Tanjong was valued using the takeover price, as parties that offered to privatise Tanjong already had 49.96% of the group in hand .......
I remembered when Tanjong was privatised many hailed the privatisation because the offer was said to be extremely generous. They praised the generous premium over the stock price.

It was a fantastic payday.

Yeah... but ... have they even wondered if it was even a fair price?

Anyway.... now... apparently someone's going to have a even more fantastic payday!

Yeah... privatisation.... it's such a wonderful business.

But for who?


    Much Lower Earnings And Much Less Dividends From Maybulk

    Maybulk announced its earnings last night.And no, it was not a shocker. Not for me. Do refer to last September's posting (it's a must read) : Maybulk: Does poor corporate governance have a negative impact on a stock?  ( I wonder why some consider Maybulk as an investment grade stock given it's horrific corporate governance! )

    Today Maybulk was featured on BTimes: Maybulk confident of staying profitable

    • Maybulk confident of staying profitable

      By : GOH THEAN EU Published: 2012/02/29

      MALAYSIAN Bulk Carriers Bhd (Maybulk) is expected to take advantage of the current depressed freight market by acquiring more vessels this year.

      "We are monitoring the situation. We plan to reinvest our profits and to take opportunity of the current depressed freight market.

      "If the current situation continues, we expect to see more shipping companies to be in financial distress and maybe face bankruptcy," said chief executive officer Kuok Khoon Kuan briefing yesterday.

      He added that the value of vessels were at "rock bottom" and that buyers could "choose and pick" the vessels they want.

      Maybulk, which now owns and operates a fleet of 17 vessels, including dry bulk carriers and product tankers, is due to take delivery of three new vessels this year, all of which are under long-term charters.

      Currently, the industry is facing lower charter rates due to the oversupply of vessels in the market.

      For Maybulk, the average charter rates of its dry bulk carriers were down by 36 per cent to US$16,519 (RM49,781) a day.

      "The problem we are facing now is oversupply. There's still growth in the market but there's too much tonnage.

      "During such times, too many players will be squeezed and there will be too many bloodbath," said executive chairman Teo Joo Kim.

      Nevertheless, Teo believed that the situation will correct itself over time.

      Kuok and Teo was speaking to the media and analysts during its full-year financial results briefing.

      The company posted a fourth quarter net profit of RM16.81 million, a 75 per cent decline from the same quarter a year ago.

      For the full-year, its net profit fell by 61 per cent to RM93.37 million. Full-year revenue declined by about 36 per cent to RM256.31 million.

      "Although we reported lower numbers, we are thankful that we managed to stay profitable, especially in such challenging times," Teo said.
    Yup, lower dividend and much lower set of earnings.

      And Masterskill Education Group Posts Quarterly Losses ..

      Another company reporting losses was Masterskill Education Group. It reported losses of 1.57 million.

      I wasn't expecting any good earnings result from Masterskill Education Group, given what had been blogged previously ( See And What About The Promise Made By Masterskill CEO? and How Now Masterskill? ) ( If you wonder how Masterskill fared during its listing day, see 18 May 2010: Masterskill listing day ) .

      However.... what was written by Kenanga Research  recently on 13th Feb was rather 'interesting' since Kenanga said it was expecting a flat result from Masterskill.

      They made the following remarks...

      • Expecting a flat 4Q11. We recently met with the management of Masterskill and gathered that since the unfolding news on the reduced PTPTN loan offered in August last year, the group had been experiencing a declining student intake. There were 17,600 active students in 2Q11 and this figure dropped to 14,200 students in 3Q11 on the back of lower student intake in the month of September, this being the last intake for the year. Hence, we are expecting a flat student count in 4Q11 – this also having the impact of pushing the group to reduce its fees in the second half of FY11. Apart from that, the increased minimum entry requirement for the enrolment of nursing programme by the government has further dampened its student growth. On that note, we are looking at a rather flat q-o-q earnings for 4Q11 of RM6.4m as compared to RM5.5m in 3Q11, which is still a marginal 16.3% growth on the back of a low base. We expect the impact to be more evident on a y-o-y basis (compared to RM26.8m in 4Q10), which will represent a 76.1% decline.
      Kenanga's Research team had met with Masterskill Education..... and they concluded that Masterskill should post a flat set of earnings.

      But Masterskill posted its first set of quarterly losses. Listed May 2010. Now Feb 2012, already posting losses. (Yet another quality listing on Bursa Malaysia? )




      And those famous words made by the boss: ( see last Sept's posting And What About The Promise Made By Masterskill CEO? )

      >>>>>

      “Well, I need to wait and see. Perhaps, anything below RM2 doesn't justify keeping the company listed,” Edmund said when asked on the amount of shares he intended to purchase.

      Last December, he told StarBiz that the share price then of RM2.22 was not “justifiable” for a firm that made about RM100mil in net profit annually.He said that the company was fundamentally sound and that its Kuching campus was already in operation.

      “The current share price weakness presents a great buying opportunity for Edmund to accumulate its shares,” an analyst said, adding that Edmund's move to purchase more shares may be a practical thing to do.

      >>>>>>>

      So Edmund... do show us the money.... could you please take MEGB private?

      ps: Why do I keep repeating what Edmund said? In my flawed opinion and my shallow mindset, I strongly feel that CEOs should be more responsible when they make statements to the investing public. They should be more responsible and they should not talk like a stock salesman.

      Tuesday, February 28, 2012

      And now K-Star Reports Losses....

      And there I was posting about China Ouhua Winery Announces Quarterly Losses.

      Tonight I saw K-Star's earnings.

      K-Star was featured in the posting Them Chinese Shoe Stocks where the EdgeMalaysia featured a massive article called Can China shoe stocks remain at bargains.

      The article reasoned the case for them Chinese stocks by saying..

      • ...... Most investors are no doubt sceptical about China stocks listed on overseas exchanges, given the numerous accounting issues these companies have faced in the US and Singapore over the last few years.

        However, analysts also noted that none of these issues has surfaced in Malaysia yet, and the Chinese companies listed here have consistently delivered strong earnings despite their lacklustre stock price performances
        .

        Xingquan International Sports Holdings Ltd, the first Chinese company listed in Malaysia for close to three years now, has yet to disappoint investors in terms of earnings. Apart from Xingquan, four other shoe companies listed here are Multi Sports Holdings Ltd, XiDeLang Holdings Ltd (XDL), K-Star Sports Ltd, and Maxwell International Holdings Bhd.

        According to calculations by The Edge Financial Daily, from 2006 to 2010, the five shoe companies chalked up a compound annual growth rate (CAGR) of at least 30% for both revenue and net profit.

        The five China-based shoe stocks are sitting on large cash reserves and most have paid high-yielding dividends.

        Their PERs are about two times
        — well below the market’s broader average of 15 to 16 times.
      And the article said the following for K-Star
      • K-Star
        K-Star is principally engaged in the design, manufacture and distribution of sports footwear under its own proprietary brands, Dixing and K-Star. The company generates over 700 designs annually.

        Its product range covers athletic shoes for running, tennis, basketball and mountain climbing as well as leisure. K-Star is also an OEM and ODM for international sports brands including Umbro, Diadora, Kappa and China’s footwear brand, Double Star.

        Its proprietary products are distributed across 18 provinces and three municipalities in China at over 870 retail locations. They are exported to Russia and other markets such as Ukraine, Belarus, the Czech Republic, Poland, Finland, Romania and Hungary. In 2010, K-Star expanded into sports fashion apparel and accessories.

        Listed on June 4, 2010, K-Star closed at 28 sen last Friday, falling 60.9% from its IPO price of 71.7 sen (IPO price adjusted for a one-to-three share split on Nov 1, 2010)

        It is trading at a 67.1% discount to its end-September 2011 book value of 177.97 yuan and close to its net cash per share of 25 sen. As at end-September 2011, it had cash reserves of 154.81 million yuan versus current borrowings of 17.68 million yuan, which translated into a net cash position of 137.13 million yuan.

        In FY10, it paid a net dividend of 1.6 sen per share, representing a yield of 5.7%. From FY06 to FY10, the company’s CAGR for net profit and revenue was 47.8% and 43.8% respectively. For FY10, it posted a net profit of 88.25 million yuan on revenue of 670.87 million yuan.

        For 3QFY11 ended September, it posted a net profit of 11.14 million yuan on revenue of 169.60 million yuan, down from a net profit of 31.16 million yuan on revenue of 191.48 million yuan previously. K-Star said the decline was mainly due to higher raw material and labour costs.

        Its sports footwear segment contributed to about 95% of revenue, while its sports apparel and accessories accounted for the remaining 5%.

        As part of its expansion plan, K-Star announced in October that it was buying a piece of state-owned leasehold land of 675 sq m in Jinjiang City in Fujian Province for 27 million yuan in cash.

        As at end-2010, it had four production lines at three factories in Jinjiang City. Its estimated annual production capacity was 3.97 million pairs and output utilisation rate was 93.7% in 2010.
      So K-Star was listed on July 2010.

      It's now only Feb 2012 and K-Star has just reported quarterly losses for its 2011 Q4 earnings!

      !!!!!!!


      past postings on K-Star can be found here: K-Star Sports

      China Ouhua Winery Announces Quarterly Losses

      China Ouhua Winery Holdings Ltd made its listing debut on Bursa Malaysia on 4th Nov 2010. It was the first winemaker to be listed on Bursa Malaysia.

      A month before it was lited, Ouhua was featured on the EdgeMalaysia article:China Ouhua sees China's wine consumption doubling by 2013

      • KUALA LUMPUR: China Ouhua Winery Holdings Ltd expects wine consumption in China to double in the next three years. Its executive chairman and chief executive officer Wang Chao says annual wine consumption in the country is currently one million tons, and he expects it to double to at least two million over the next three years....
      The huge 'expectations' were pledged to the investing public.

      It's now Feb 2012.

      Ouhua announced its Q4 earnings.

      Well.... Ouhua lost money.

      Receivables increased. (115 million vs 62.9 million a year ago)

      Cash depleted. (55.469 million vs 160.695 million a year ago)

      ........ !!

      Wednesday, February 22, 2012

      And Prominent Xtreme's 5.3 Million Jackpot Is Highlighted...

      Posted last Friday: Prominent Xtreme Strikes 5.33 Million Jackpot

      On today's Star that Prominent Xtreme issue was highlighted: KEuro under close watch after granted highway concession

      • Wednesday February 22, 2012
        KEuro under close watch after granted highway concession

        PETALING JAYA: Kumpulan Europlus Bhd (KEuro) has become a closely-watched company since the issuance of the letter of approval for the 60-year West Coast Expressway concession to its subsidiary, West Coast Expressway Sdn Bhd (WCESB), last month.

        Even its recently-announced plan to acquire additional shares in WCESB from little-known Prominent Xtreme Sdn Bhd has come under scrutiny.

        KEuro had on last Friday announced to Bursa Malaysia its intent to acquire a 15.8% stake, or about 4.59 million shares, in WCESB from Prominent Xtreme. The proposed acquisition would cost RM5.34mil, or RM1.16 per share, which KEuro said it would finance by internal funds.

        Upon completion of the proposed acquisition, KEuro’s stake in WCESB would increase from the present 64.2% to 80%, while that of Prominent Xtreme would be reduced from 35.8% to 20%.

        In the same statement, KEuro had explained that Prominent Xtreme was principally involved in investment holding and property development businesses.

        As it turned out, filings with the Companies Commission of Malaysia showed that the nature of Prominent Xtreme’s business was listed as “dormant.” Shares in the privately held company were owned equally by two individuals, namely Liau Yoke Leang and Mohd Ruah Abdul Manan.

        A further check revealed that Liau was formerly the senior general manager of Agrocon Sdn Bhd, a smallish property development company, whose director and major shareholder was Chan Keat Wan. (Chan is the sibling of Tan Sri Chan Ah Chye, who is the major shareholder of KEuro.)

        Ruah, on the other hand, was a director of a smallish construction company called Ekspedisi Jasa Sdn Bhd. The information was based on records with the Construction Industry Development Board of Malaysia.

        Prominent Xtreme had in October 2010 entered a deal to acquire Perak Corp Bhd’s entire equity interest in WCESB, comprising 3.3 million shares, or a 12.19% stake, for RM4mil. Since completion of the deal, Prominent Xtreme and KEuro were the remaining two shareholders of WCESB.

        Analysts reckoned that KEuro would undertake further corporate exercises once the concession for the West Coast Expressway, which would be built at an estimated cost of RM7.07bil over a five-year period, is officially signed in the coming days.

      Saturday, February 18, 2012

      P Gunasegaram: A perplexing settlement Between Danaharta And Tajuddin

      On Star Biz:

      • Saturday February 18, 2012
        A perplexing settlement
        A QUESTION OF BUSINESS By P. GUNASEGARAM

        Danaharta's deal with Tajudin over RM589mil is unsettling given that it had a judgement in hand for the amount

        AN out-of- court settlement when you already have a favourable judgment is allowing the bird already in hand to forever fly away. When those whom you ultimately represent have no idea why you gave that bird up in the first place it makes it doubly worse.

        Such is the case in the perplexing settlement between prominent Malaysian businessman Tan Sri Tajudin Ramli and Pengurusan Danaharta Nasional Bhd. Danaharta had already obtained judgement from the High Court against Tajudin in 2009 for a huge RM589mil, probably the largest sum awarded in Malaysian legal industry.

        The judgement gives interest rate on the RM589 million at 2% over Malayan Banking's base lending rate from Jan 1 2006. Assuming a simple interest rate of 8%, that amount would have now swelled to about RM840mil if the judgment were effected today. What could have made Danaharta lose that kind of money? And did it get anything in return?
        Danaharta is the national debt management agency set up in the wake of the 1998 Asian financial crisis to sort out debt problems in the banking system and recover as much money as possible from borrowers.

        It had filed a suit against Tajudin, a high-flying and favoured businessman, part of a group close to former Finance Minister Tun Daim Zainuddin, who at one time controlled Malaysia Airlines (MAS) and before that mobile telephone operator Celcom through his vehicle Technology Resources Industries Bhd (TRI).

        Tajudin got into serious debt and lost control of TRI and eventually sold his 32% stake in MAS back to the Government in 2001 at the same price he bought it several years back and much higher than the then market price, drawing heavy criticism. He had taken a loan of RM1.79bil to buy the stake in 1994.

        Earlier this week, when the case came up for hearing before the Court of Appeal, it was disclosed that an out-of-court settlement was reached and basically that was that. The terms of the settlement were not made public, despite the case being of great public interest and the fact that Danaharta is publicly funded and has at least a moral duty to explain why it went for a settlement.

        Predictably, the way this case has been disposed off has started tongues wagging and the rumour mill churning with much velocity. With important questions unanswered, serious questions over governance and accountability have risen to the fore and can only be detrimental for the country and its financial and capital markets.

        As one lawyer pointed out, with the High Court judgement, Danaharta was no longer a plaintiff but a judgement debtor while Tajudin was a judgement creditor. At least it would have been prudent on Danaharta's part to wait until the Court of Appeal had decided on Tajudin's appeal.

        In 2009, the Kuala Lumpur High Court ordered Tajudin to pay RM589mil to Danaharta following debts incurred when purchasing MAS shares. The amount was the balance from the RM1.79bil loan taken to purchase MAS.

        The High Court ordered him to pay Danaharta at Dec 31 2005 the principal sum of RM589mil owed plus interest at 2% above Malayan Banking's base lending rate from Jan 1 2006, until the loan was paid.

        Tajudin made counter-claims amounting to some RM13.5bil. These claims are far in excess of the RM589mil in dispute, by over some 20 times. It was filed against 24 respondents, including former Danaharta chief executive Datuk Azman Yahya and former Danaharta officers Datuk Abdul Hamidy Hafiz, Datuk Zukri Samat and Datuk Kris Azman Abdullah.

        He had claimed that Tun Mahathir Mohamad, who was Prime Minister then, had ordered him to buy the 32% stake in MAS to bail out Bank Negara Malaysia which had incurred foreign exchange losses. Mahathir denies this.

        That's the intriguing tale about this whole issue. It offers a lesson on how corporate Malaysia is run with its close interlinks between big business, Government and politics. It was a refreshing decision to see Danaharta turn around and pursue to the end creditors who have the means to repay their debts.

        But this settlement has negated all that and turned the hands of the clock back in terms of progressing to a more transparent and accountable environment with the proper standards of governance in place.

        If there is indeed a convincing explanation for this, than it is incumbent upon all parties, and especially Danaharta, which spent money and effort to bring the miscreants to book and got a judgment in its favour, to make this public so that the rest of us understand.

        Otherwise, we need to add this to yet another one of those things we must get to the bottom of and do something about.

        P Gunasegaram notes that the final amount involved amounts to more than three times that of the RM250mil loan involved in the cowgate (National Feedlot Corp) scandal. (t.p.guna@gmail.com)

      Friday, February 17, 2012

      Prominent Xtreme Strikes 5.33 Million Jackpot

      On the Edgemalaysia.com

      • KEuro to buy 15.8% of West Coast Expressway, up stake to 80%
        Written by Joseph Chin of theedgemalaysia.com
        Friday, 17 February 2012 18:57

        KUALA LUMPUR (Feb 17): KUMPULAN EUROPLUS BHD [] has proposed to raise its stake in West Coast Expressway Sdn Bhd (WCESB) to 80% a move to strengthen its control of WCESB after it secured the RM7.07 billion west coast highway concession.

        KEuro said on Friday it was buying a 15% stake or 4.59 million shares of WCESB from Prominent Xtreme Sdn Bhd for RM5.33 million.

        KEuro said together with the current 18.649 million shares or 64.20%, the acquisition would see it holding 80% equity interest.

        “Upon commencement of the CONSTRUCTION [] of the West Coast Expressway, WCESB is expected to contribute positively to the earnings as well as the shareholders’ value of the KEuro group,” it said.

        To recap, on Jan 26, 2012, WCESB received an approval letter from the Public Private Partnership Unit of the Prime Minister’s Department to undertake the proposed privatisation of the construction of the West Coast Expressway.

        This would be based on build-operate-transfer (BOT) with a concession period of 60 years, at an estimated project cost of RM7.07 billion.

        WCESB’s existing directors are Tan Sri Chan Ah Chye @ Chan Chong Yoon, Datuk Abdul Hamid Mustapha, Datuk David Frederick Wilson, Loy Boon Chen and Datuk Neoh Soon Hiong.

        The company has been loss making over the past five years. It posted net losses of RM21,594 in the financial year ended Jan 31, 2011,
      That one statement highlighted....
      • KEuro said on Friday it was buying a 15% stake or 4.59 million shares of WCESB from Prominent Xtreme Sdn Bhd for RM5.33 million.
      My oh my!

      A rm 5.33 million payout for Prominent Xtreme Sdn Bhd stake in WCESB????

      WOW!

      You might be interested in past postings...

      Tuesday, February 14, 2012

      And Green Packet Now Says .............

      Once upon a time, not too long ago, the following were muttered in our financial world...

      • Feb 2008: we expect the WiMAX business to be ebitda (earnings before interest, taxes, depreciation and amortisation ) break-even this year,"
      • May 2008: we are targeting EBITDA positive by end of next year.
      • May 2009: P1 will be EBITDA will break-even from next year.
      • Feb 2010: concurred that will be EBITDA positive in the second half of this year.
      • May 10: the company remained optimistic that it will be able to achieve an Ebitda break even
      • June 2010: Green Packet Bhd’s target to turn earnings before interest, tax, depreciation and amortisation (Ebitda) positive by year-end may be delayed to next year
      • Sep 2010: Puan added that Green Packet is maintaining that its Ebitda (earnings before interest, tax, depreciation and amortisation) will break even by the end of this year.
      • Nov 2010: "We're confident of breaking even no later than the first quarter. Ebitda (earnings before interest, tax depreciation and amortisation) turnaround is really at the corner," chief executive officer C.C. Puan said at a press conference in Petaling Jaya, Selangor, yesterday.
      • Feb 2011: defers its target of being EBITDA (earnings before interest, taxation, depreciation and amortisation) positive to end-2011.
      • May 2011: Green Packet Bhd is on track to achieve its EBITDA (earnings before interest, taxes, depreciation and amortisation) break-even target by this year-end, according to the group's managing director and chief executive officer Puan Chan Cheong.
      • Aug 2011: ... remained bullish that it will be a "ebitda positive" company by year-end
      Oh yeah, we are talking about the one, the one and only one..... GREEN PACKET!

      It was really hilarious when the following was written on the Star Biz last Nov 2011: Green Packet makes profit pledge again
      • It is a pledge familiar to shareholders. At the briefing, Puan was asked twice if he was indeed confident of delivering an earnings before interest, tax and amortisation (EBITDA) break-even by the end of this year. He did not clearly answer in the affirmative but said that looking at the current figures, he believed that the company was on its way to achieving that goal.

      Well on today's Star Biz, a slightly different message was sent out... GPacket poised to turn around

      The following statements were made...
      • ..... “We are already EBITDA (earnings before interest, tax, depreciation and amortisation) positive at group level as at end 2011. At both levels we will be PAT (profit after tax) positive in 2013,” GPacket group managing director C.C. Puan said in an interview.

        “As for P1, it will be an historic year, as in less than four years it will turn EBITDA positive this year. You must realise that we are in an industry where the gestation periods are long.”

        For this year, he expects the depreciation for P1 to amount to RM100mil. Hence, that will have an impact on its earnings.

        For the third quarter ending September 2011, GPacket reported a net loss of RM24.3mil versus RM13.7mil a year earlier. It is expected to announce its full-year 2011 results later this month...
      Oooo lala.....
      • “We are already EBITDA (earnings before interest, tax, depreciation and amortisation) positive at group level as at end 2011. At both levels we will be PAT (profit after tax) positive in 2013.
      We ARE .... that's what he said..... we shall see.... it's earnings will be out later this month.
      • “As for P1, it will be an historic year, as in less than four years it will turn EBITDA positive this year. You must realise that we are in an industry where the gestation periods are long.”
      LOL!

      Very strange isn't it?

      Puan understands and has reminded that they ARE in an industry where the gestation periods are long.. but yet... the record showed that since 2008... he had kept on repeating and repeating and repeating and repeating and repeating and repeating and .......... repeating.........

      XD

        Them LOW PE Chinese Shoe Stocks Again

        Posted last night: Them Chinese Shoe Stocks

        I was also extremely annoyed with the following statements on that EdgeMalaysia article.

        • The five China-based shoe stocks are sitting on large cash reserves and most have paid high-yielding dividends.

          Their PERs are about two times — well below the market’s broader average of 15 to 16 times.
        The first statement.
        • The five China-based shoe stocks are sitting on large cash reserves and most have paid high-yielding dividends.
        Large cash reserves. Yes they all have the large cash reserves but as mentioned in the posting Them Chinese Shoe Stocks and recent postings on







        Take K-Star. How much dividends did they pay in the year 2011? How much? I see one. Just this one: Final Dividend

        Take XingQuan. Did XingQuan even pay a single send dividend in the year 2011? !!!!

        Take XDL. How much dividends did they pay in the year 2011? How much? Final Dividend

        How?

        Does this justify the statement "The five China-based shoe stocks are sitting on large cash reserves and most have paid high-yielding dividends '?

        Or do you reckon that the statement is sooooo misleading?

        The next statement:
        • Their PERs are about two times — well below the market’s broader average of 15 to 16 times.
        Yeah PER of 2. So what?

        Have a look at this posting: Buy That Chinese Stocks Cos Of The PE Is Very, Very Low

        Allow me to reproduce it here in full once more....

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

        Many of us are taught that low PE stocks are a buy. Some even add in yardsticks like ROE and cash per share. And as long as these requirements are met, they believe that they have a safety margin for their investment.

        Me say? I feel the investors should look deeper. Understand the business and understand the company's books. Don't just simply invest in a stock because of the yardstick.

        I believe more in practicals than theories.

        I look for examples and as long as I could find an example that proves the theory wrong, then I feel one should be cautious.

        Let me use .... Chinese listed stock (S-Chip) in Singapore as an example.

        Take this OLD report from UOB Kay Hian back on April 2008. http://sinotechfibre.listedcompany.com/misc/UOBKH_SINBuyS-chips_030408%282%29.pdf

        Let's look at page 14 of that pdf file.


        Look at the data.

        China Milk was trading then at S$0.675.

        It has a ROE (%) 32.4 and net cash per Share (Rmb) 1.07.

        UOB Kay Hian gave it a target price of S$1.32.

        UOB reasoned...
        • Outlook. Demand for dairy products in China remains strong. C Milk has adopted a multi-prong strategy to steer growth and to better leverage on domestic consumption. The strategy includes the following: a) improving herd quality to bolster production of semen and embryos so as to expand margins, b) moving downstream to produce processed milk, and c) developing herd size through internal breeding, the import of highly-productive herds, and even possibly mergers and acquisitions. We expect a smooth implementation of all these plans, backed by the Rmb1.8b cash in hand.

          Cheaper way to milk China dairy theme. C Milk is a cheaper way to ride on the rising dairy product consumption trend in China. The stock is trading at an undemanding 5.9x FY08 PE and 4.7x FY09 PE. Our DCFbased target price is S$1.32, representing 11.5x FY08 PE. Maintain BUY.
        Trading at undemanding 5.9x Fy08PE and 4.7x Fy09 PE.

        Sounds good, no?

        Low PE, high ROE, got strong cash per share too....

        What could ever go wrong?

        Just about everything! Look at how China Milk Products shares have performed since April 2008!



        The stock was suspended on Feb 2011!

        And the story?

        Scandal!

        http://nextinsight.net/index.php/story-archive-mainmenu-60/912-2011/3971-shame-on-china-milk-management


        From the article:
        • This was a company that once commanded a market capitalisation of S$1 billion and, since its listing in 2006, had wow-ed a lot of investors with its supposedly immense profit margin, its profitability and cash hoard.
        Great profit margins and cash hoard!
        • The hard truth started to emerge when China Milk's convertible bond holders decided to redeem their bonds.

          The company at first claimed it had the US$170.56 million to meet its obligations on the convertible bonds. It just needed time and special approval of the authorities to remit the money out of the country.

          After all, it had said in its financial results announcement that as at end-September 2009, the group’s cash and cash equivalents stood at 2 billion yuan (S$409.7 million).
        S$409.7 million in cash and cash equivalents. The bonds was only US$170.56 million.
        • As matters worsened, the Singapore Exchange directed the company to appoint a Special Auditor.

          KPMG was the chosen one and it found a company whose cash hoard had been milked in major ways.
          When it repeatedly asked the Group to arrange an interview with its bank manager in China, KPMG was told that the manager had no time and could not assist.

          When KPMG asked to interview the main contractor which did US$72.9 million worth of improvement works, they were presented with a Mr Zhang Hong Tao who came across as being unfamiliar with the works done.

          In the first place, he didn’t own a construction company.

          The Group had commissioned improvement works to the farm and facilities and paid USD72.9 million over a period of 5 – 6 months ending in or around March 2010.

          When KPMG visited the sites, it was unconvinced.

          “One would expect salubrious farming facilities after spending USD72.9 million. However, the buildings and its facilities cannot be said by any stretch of reason to be no more than basic or at best average.”  .....
        And do read for from the shocking full report from KPMG posted on SGX website.

        http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_B8AB2097A023C947482578AA00383459/$file/2011_06_07_ChinaMilk_FinalReport_Executive_Summary.pdf?openelement

        So how?

        In China Milk Products we have seen how the sad outcome of an investor who invests in the stock based solely on yardsticks.

        Investing solely based on yardsticks is never enough.

        I strongly one have to really understand the business and with China stocks listed abroad, you just got to be more careful because you never really know if those numbers (cash included) could be trusted!

        I know that last statement is rather ... tricky. Look, I am not insinuating that all Chinese listed stocks are scams but with all the accounting fraud going on .... how can one be sure?

        How?

        Yeah... yeah... no risk no gain babe! No sugar no honey! ..... but is this the risk you want to take?

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

        Here's another article : http://www.sharesinv.com/articles/2011/03/25/s-chips-to-buy-or-not-to-buy/

        • Interestingly, one distinctive characteristic about these S-chips is that they hold a lot of cash. This is evident from the financial statements of China Hongxing Sports and Hongwei Technologies, which had Rmb1,738m and Rmb145m respectively as at 30 Sep-10. As such, investors are spooked by two basic questions: Is the cash really there at all? And is it true that buying into an S-chip, will generally turn into a bad investment strategy?
        • Detecting Red Flags
          As you may sympathize, many of the minority shareholders in all of the companies above as well as China Hongxing Sports & Hongwei Technologies have invested in good beliefs. As such, is there any method for those investors with limited analytical skill in detecting the potential red flag on S-chips?

          To put it simply, a company that has a lot of cash but refuses to give out handsome dividend may prompt the question on whether the cash is there in the first place, as in the case of China Milk. David Gerald, the president of Securities Investors Association (Singapore), said that companies with burgeoning cash balances should provide reasons why they are not declaring a cash dividend.
          Moreover, many S-chips are making cash calls even though they are already cash-rich. As such, this could be an indication that the management lacks capital discipline or that the company’s growth is not sustainable. Furthermore, an ‘unreasonably high’ capital expenditure (capex) also signals that the firm may poorly manage their manufacturing capacity and their budget. More often, an unreasonably high capex is often linked to other issues such as inflated profits.
          To top things off, JPMorgan Chase (JPMC) indicated that half of the S-chips are audited by a ‘Big Four’ accounting firm. And by contrast, three-quarters of Hong Kong-listed China firms do so. Astonishingly, the firms which do not hire ‘Big Four’ auditors are 60% more likely to fail than those who do, added JPMC.


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

        How?

        The problems and issues mentioned in regards to the S-Chip stocks. Do we same exact issue here?

        Do we see a company with LARGE cash reserve making cash cashs via private placements and rights issue?

        Do we see companies earning relatively low interest income for their huge cash reserve?

        Do we see increasing receivables?

        Do we see increasing profit but shrinking cash reserve?

        How?

        Would you want to be a LONG TERM investor and buy that LOW PE Chinese Shoe Stock?

        Monday, February 13, 2012

        Them Chinese Shoe Stocks

        On the EdgeMalaysia:

        • Can China shoe stocks remain at bargains
          Written by Clint Loh
          Monday, 13 February 2012 11:18

          KUALA LUMPUR: After being battered down from their IPO prices, all the five China-based shoe companies on Bursa Malaysia are trading at large discounts to their book values and at low price-earnings ratio (PER) of around two times. Coupled with impressive double-digit growth and attractive dividend yields, how much longer can they remain at bargain levels?

          Most investors are no doubt sceptical about China stocks listed on overseas exchanges, given the numerous accounting issues these companies have faced in the US and Singapore over the last few years.

          However, analysts also noted that none of these issues has surfaced in Malaysia yet, and the Chinese companies listed here have consistently delivered strong earnings despite their lacklustre stock price performances.


          Xingquan International Sports Holdings Ltd, the first Chinese company listed in Malaysia for close to three years now, has yet to disappoint investors in terms of earnings. Apart from Xingquan, four other shoe companies listed here are Multi Sports Holdings Ltd, XiDeLang Holdings Ltd (XDL), K-Star Sports Ltd, and Maxwell International Holdings Bhd.

          According to calculations by The Edge Financial Daily, from 2006 to 2010, the five shoe companies chalked up a compound annual growth rate (CAGR) of at least 30% for both revenue and net profit.

          The five China-based shoe stocks are sitting on large cash reserves and most have paid high-yielding dividends.

          Their PERs are about two times — well below the market’s broader average of 15 to 16 times.

          The recent listing of two China-based apparel stocks in Hong Kong could also provide a re-rating catalyst for the Malaysian — listed shoe makers. China Outfitters Holdings Ltd and Active Group Holdings Ltd were listed at PERs of six to seven times, three times more than their Malaysia-listed peers.

          With such low valuations, the possibility of potential privatisations and corporate exercises cannot be ruled out, according to analysts. This almost happened in the case of XDL.

          XDL’s share price saw some excitement recently when the company’s major shareholder revealed that he held informal discussions with Navis Capital Partners to sell a stake to the latter.

          According to reports, XDL’s founder and managing director Ding Peng Peng was “frustrated with the stock’s lacklustre share price”.

          However, the talks with Navis apparently did not pan out. Investors have started to take notice of XDL’s low valuations, and the stock has risen about 25% since the beginning of the year. It has proposed a bonus issue, private placement and warrants.

          Edmund Tham, head of research with Mercury Securities, said the perception of China-based stocks in Malaysia will gradually improve over the years.

          “It might take a couple of months or even years for investors to change their perception of China companies listed in Malaysia. Over time, with more roadshows and briefings, people will start to see that they are good companies, provided they continue to generate sufficient operating cash flows and profits,” said Tham.

          According to Tham, a good business model and an attractive dividend policy will cause investors to take note.

          He added that the public should not be doubtful about these companies as some of them have first- and second-tier global auditors such as BDO Binder and Grant Thornton.

          Tham covers Xingquan, Xidelang, Multi Sports and Sozo Global Ltd (a China-based foodstuff manufacturer listed on Bursa).

          Except for K-Star, all the companies are covered by a research house as a result of their participation in Bursa Malaysia’s CMDF-Bursa Research Scheme, which aims to enhance research coverage and interest in stocks, particularly smaller capitalised ones.

          On July 10, 2009, Xingquan became the first China-based shoe company to be listed on Bursa. The last was Maxwell which was listed on Jan 6 last year.

          Multi Sports made its debut on Aug 19, 2009, followed by XDL on Nov 11, and K-Star on June 4, 2010.

          The Edge Financial Daily takes a look at the five shoe companies and their underlying fundamentals that appear to be attractively undervalued.

          As at last Friday, the stock which had fallen the most from its IPO price was K-Star (-60.9%), followed by Multi Sports (-52.9%), Xingquan (-44.4%), XDL (-36.2%), and Maxwell (-23.1%).

          These counters are trading at a PER of 1.8 to 2.4 times, according to Bloomberg data. They are also trading below their book values at discounts between 41% and 67% and all are in net cash positions from RM90 million to RM193 million.

          Tham likes Xingquan as it registers the strongest earnings of more than RM100 million and has a strong leadership position in the outdoor casual wear market. Another analyst likes Maxwell as the stock is trading below its cash value per share.

          “The share price is something beyond our control. We will continue to manage the company well, deliver good results and hopefully the share price will take care of itself,” Xingquan CEO Wu Qingquan told The Edge Financial Daily recently.

          He believes the company can maintain double digit growth in its FY12 ending June.

          Xingquan
          Xingquan is principally engaged in the manufacturing and sale of shoes and soles, as well as the sale of apparel and accessories.

          In 2004, it started its own brand manufacturing business for footwear under Addnice and in 2005 expanded into the sports apparel and accessories market.

          Due to better growth opportunities, Xingquan left the sportswear market and ventured into outdoor casual wear with the launch of its Gertop brand in 2010. Its shoes, apparel and accessories are sold under the Gertop brand in the outdoor casual wear segment at more than 2,300 outlets via 31 distributors in 26 provinces in China.

          Compared with the IPO price of RM1.71 in July 2009, Xingquan tumbled 44.4% to close at 95 sen last Friday. The closing price represented a 43.8% discount to its end-September 2011 book value of RM1.69.

          At end-September 2011, it had cash reserves of 399.77 million yuan (RM192.05 million) against borrowings of 38 million yuan, which translated into net cash of 56.3 sen per share. From 2006 to 2011, Xingquan chalked up a CAGR of about 39% for both revenue and net profit.

          For FY11, it posted a 16% rise in net profit to 252.29 million yuan from 217.27 million yuan a year ago, while its revenue increased by 22% to 1.5 billion yuan from 1.23 billion yuan previously. Shoes accounted for 49% of revenue, followed by apparel and accessories (33%), and soles (19%).

          For 1QFY12 ended Sept 30, the apparel and accessories segment contributed 39% to revenue, compared with shoes (37%) and soles (24%). Due to higher contributions from its apparel and accessories segment in recent quarters, Xingquan expects the apparel division to be its main revenue driver.

          For 1QFY12, Xingquan posted a 25.4% increase in net profit to 70.21 million yuan from 56.01 million yuan a year ago, in addition to a 26.8% jump in revenue to 426.30 million yuan from 336.09 million yuan previously.

          Xinquan’s outlets in China grew to 2,382 in FY11 from 409 in FY06. The company said it will add 200 sales outlets in FY12. It will also expand its production capacity for soles to around 30 million pairs in FY12 from 24 million currently. Its current production capacity for shoes is about six million pairs.

          For FY10 ended June 30, Xingquan paid net dividends of five sen per share.

          To ensure sufficient funds for the planned expansion and working capital requirements, no dividends were declared by Xingquan in FY11.

          Maxwell
          Maxwell is an original equipment manufacturer (OEM) and original design manufacturer (ODM) in the sports shoe market. As an ODM the company is able to manufacture as well as design and develop shoes for its customers.

          Its primary products are court sports shoes (soccer, tennis, skateboarding, basketball, badminton and baseball), which contributed to 88.4% of revenue in 2010. Its end-customers include international brand names such as Yonex, Diadora, Kappa, Brooks and FILA.

          Since the debut at the IPO price of 54 sen in January 2011, Maxwell’s stock has tumbled by 23.1% to close at 41.5 sen last Friday. The closing price represented a 13.5% discount to its end-September 2011 cash per share of 48 sen and a 43.2% discount to its book value of 73 sen.

          Maxwell paid its maiden dividend of 3.35 sen net per share in September last year, which represented a net yield of 8.1% based on last Friday’s close. Maxwell has set a dividend policy of 20%.

          As at Sept 30, 2011, it was in a net cash position of RM193.12 million with zero borrowing. From 2006 to 2010, revenue and net profit grew at a CAGR of 46% and 53% respectively.

          For FY10 ended December, it posted a net profit of RM65.14 million on RM335.92 million in revenue. About 96% of the revenue came from China. Customers are mainly trading houses and brand distributors based in China. These customers in turn export Maxwell’s shoes to Europe, South and North America, Asia and Africa.

          For 3QFY11 ended September, Maxwell announced a 13.8% year-on-year (y-o-y) rise in net profit to RM22.59 million from RM19.85 million a year ago. Due to better sales, revenue also increased by 18.4% to RM114.7 million from RM96.88 million previously.

          For the nine months to Sept 30, net profit remained flat at RM49.6 million against RM49.8 million in the previous corresponding period, while revenue grew by 10.8% to RM272 million from RM245.3 million previously.

          Maxwell plans to increase its production capacity to 16 million pairs of shoes by adding four production lines to its current four. In 2010, it produced 11.27 million pairs of shoes, of which 47% was outsourced.

          It is close to sealing a deal with a leading international sports shoe brand, the company added.

          Multi Sports
          Multi Sports stands out from the rest as its main business is to design, develop and manufacture shoe soles only.

          It is a one-stop shoe sole specialist for China’s sports footwear industry. It is vertically integrated and is able to process raw materials into its needed shoe components. The company has produced over 300 designs suitable for a wide range of sports shoes.

          Since listing on Aug 19, 2009, the shoe sole maker has dropped 52.9% from its IPO price of 85 sen to last Friday’s close of 40 sen. It is trading 41.2% below its end-September 2011 book value of 68 sen.

          At end-September 2011, it had cash reserves of 365.3 million yuan versus borrowings of 27.5 million yuan, which translated into net cash per share of 31.2 sen.

          In FY10, Multi Sports paid a net dividend of 2.5 sen per share, giving a yield of 6.3%, based on its closing price last Friday. From 2006 to 2010, it chalked up a CAGR of about 30% for both net profit and revenue.

          For FY10 ended December, net profit increased to 139.14 million yuan from 113.94 million yuan for FY09, while revenue increased to 613.46 million yuan from 474.19 million yuan previously.

          Multi Sports’ revenue comes from four types of soles it produces namely thermoplastic rubber (TPR), rubber, ethylene vinyl acetate (EVA) Model 1 (MD1), and EVA Model 2 (MD2). EVA soles are known to have better elasticity, softness and flexibility.

          In FY10, its MD2 accounted for 56.3% of revenue, while MD1 contributed 31.2%, TPR (8.8%), and rubber (3.6%).

          For 3QFY11 ended September, it posted a net profit of 49.7 million yuan on revenue of 239.60 million yuan, up from a net profit of 35.78 million yuan on revenue of 152.72 million yuan previously.

          The company attributed the higher revenue to increased MD2 sales, but said profit margins had dropped due to higher labour and raw material costs, and depreciation expenses.

          In its 2010 annual report, Multi Sports said annual production capacity is expected to increase to 84.4 million pairs in FY11 from about 35.6 million in FY10, with its new production centre in Jinjiang City.

          On Dec 30, 2011, Multi Sports issued 67.5 million new shares or 15% of its existing issued and paid-up capital to sponsor a depository receipt programme in Taiwan, which entailed the issuance of Taiwan Depository Receipts. The issuance was expected to raise NT$236 million (RM24 million) for capacity expansion and working capital.

          K-Star
          K-Star is principally engaged in the design, manufacture and distribution of sports footwear under its own proprietary brands, Dixing and K-Star. The company generates over 700 designs annually.

          Its product range covers athletic shoes for running, tennis, basketball and mountain climbing as well as leisure. K-Star is also an OEM and ODM for international sports brands including Umbro, Diadora, Kappa and China’s footwear brand, Double Star.

          Its proprietary products are distributed across 18 provinces and three municipalities in China at over 870 retail locations. They are exported to Russia and other markets such as Ukraine, Belarus, the Czech Republic, Poland, Finland, Romania and Hungary. In 2010, K-Star expanded into sports fashion apparel and accessories.

          Listed on June 4, 2010, K-Star closed at 28 sen last Friday, falling 60.9% from its IPO price of 71.7 sen (IPO price adjusted for a one-to-three share split on Nov 1, 2010)

          It is trading at a 67.1% discount to its end-September 2011 book value of 177.97 yuan and close to its net cash per share of 25 sen. As at end-September 2011, it had cash reserves of 154.81 million yuan versus current borrowings of 17.68 million yuan, which translated into a net cash position of 137.13 million yuan.

          In FY10, it paid a net dividend of 1.6 sen per share, representing a yield of 5.7%. From FY06 to FY10, the company’s CAGR for net profit and revenue was 47.8% and 43.8% respectively. For FY10, it posted a net profit of 88.25 million yuan on revenue of 670.87 million yuan.

          For 3QFY11 ended September, it posted a net profit of 11.14 million yuan on revenue of 169.60 million yuan, down from a net profit of 31.16 million yuan on revenue of 191.48 million yuan previously. K-Star said the decline was mainly due to higher raw material and labour costs.

          Its sports footwear segment contributed to about 95% of revenue, while its sports apparel and accessories accounted for the remaining 5%.

          As part of its expansion plan, K-Star announced in October that it was buying a piece of state-owned leasehold land of 675 sq m in Jinjiang City in Fujian Province for 27 million yuan in cash.

          As at end-2010, it had four production lines at three factories in Jinjiang City. Its estimated annual production capacity was 3.97 million pairs and output utilisation rate was 93.7% in 2010.

          XiDeLang
          XDL is predominantly involved in the design, manufacturing and marketing of its own Xidelang brand of sports shoes, as well as designing and marketing of sports apparel, accessories and equipment in China.

          It churns out around 2,000 sports shoe designs yearly, of which 500 are commercialised. Its direct customers are intermediaries such as third-party distributors and retailers.

          XDL’s products are retailed across 25 provinces and municipalities in China through a network of more than 2,500 retail locations, of which about 1,300 are concept stores.

          Shares in XDL have been actively traded since the start of the year following speculation that a major shareholder plans to sell its entire 54.5% stake in XDL to Navis Capital Partners. However, XDL said in a Bursa announcement last month that it had not made any concrete plans or proposal on the matter.

          Since Dec 30, 2011, XDL has risen about 25% to close at 37 sen last Friday. Despite the recent surge, XDL is still trading at undemanding valuations. Based on Friday’s close, the share price was at a 49.3% discount to its book value of 73 sen (as at Sept 30, 2011)

          As at end-September last year, it had cash reserves of RM136.53 million and current borrowings of RM47.17 million, which translated into net cash of RM89.36 million or 20.3 sen per share.

          In FY10, it paid net dividends of 2.5 sen per share, representing a yield of about 6.8% based on Friday’s closing price. From 2006 to 2010, the CAGR for revenue and net profit was 48.5% and 60% respectively. For FY10, it posted a net profit of RM68.19 million on revenue of RM77.91 million, all of which was derived from China.

          XDL’s shoe segment contributed 53% of revenue, while the remaining 47% came from its apparel, accessories and equipment.

          For its 3QFY11 ended September, its net profit increased to RM23.98 million from RM21.92 million a year ago, while revenue was RM132.94 million compared with RM125.25 million previously.

          XDL said an increase in brand awareness and demand led to the improved performance.

          On Jan 18, XDL proposed a private placement, bonus issue and rights issue of warrants to raise up to RM29.7 million for expanding production capacity at its new design and production centre.

          The construction of the first stage of the centre is expected to be completed by the first half of 2012.


          This article appeared in The Edge Financial Daily, February 13, 2012.
        I do have some small comments on these 2 statements.
        • Most investors are no doubt sceptical about China stocks listed on overseas exchanges, given the numerous accounting issues these companies have faced in the US and Singapore over the last few years.

          However, analysts also noted that none of these issues has surfaced in Malaysia yet, and the Chinese companies listed here have consistently delivered strong earnings despite their lacklustre stock price performances
          .
        Ok..

        The first statement, of course, it's a fact.

        The second statement, is so twisted in my flawed opinion.

        Of course, none of these Chinese stocks have been found guilty of accounting fraud yet but shouldn't we look and review the symptoms and characteristics of the Chinese stocks that were alleged to have committed of accounting fraud and then shouldn't we compare with the Chinese stocks listed here? Simple question, do they share the same questionable issues within their balance sheet?

        That would be more logical yes?

        Now take a look at this posting: Featured Posting: China Integrated Energy (CBEH): The Latest Alleged Chinese Fraud

        CBEH was alleged to have committed accounting fraud.

        Let's look at some of the symptoms and characteristics posted on that posting.
        • Despite generating $38.5 million in net income and $35.6 million in operating cash flow in the first 9 months of 2010, the company decided to issue a total of $37.4 million worth of new shares in December 2010. If CBEH is as profitable as it claims, does not need to dilute shareholders at an irrationally low valuation of 6.1 times net income.
        Logical reasoning, isn't it?

        Question: Do we see this here?

        Are we seeing these Chinese stocks listed here raising more cash?

        Are we not seeing some of them raising more money via private placement and rights issue?

        If they are so cash rich, why want to raise more money?

        Would you want to be an investor in such a company?

        And here's my flawed thinking, if company is so cash rich and valuations is so really low and un-justifiable, why don't the owners take their company private? 2 times PER valuations mah... some even 1.xx PER valuation. Why doesn't the owners want to take it private?

        The article then continues:
        • CBEH management has claimed that the Chongqing Tianrun biodiesel facility with capacity of 50,000 tons/year will generate $32 million in revenue and $10 million in net income in 2011. We believe that their projection is highly exaggerated. In reality, the AIC financials for Chongqing Tianrun show 2009 revenue of $1.5 million, a net loss of -$420,000, and total assets of $4.36 million, of which only $790,000 is property, plant and equipment. Given that CBEH recorded over $8 million in PP&E on its supposed 100,000 tons/year facility in Tongchuan City (which we also believe has exaggerated results), we question why CBEH is spending $16.5 million on an unprofitable, tiny company with less than $1 million in real assets.
        Yeah, where is the MOOLAH??? We have here a Chinese company who claims to be rich but does not seem to earn much interest from the tons of money it said to have!!!!

        Question: Do we not see the same issue with some of these Chinese companies?

        Which is why the article makes the damning remark: 'We doubt that the $79.6 million cash on the balance sheet actually exists!!'

        How?

        See this is not stereotyping of these Chinese stocks.

        In my honest opinion, these are simple issues that a long term investor have to address. Despite the stocks being cheap, several investing issues exists. Issues that makes the investor sceptical about the company.

        And if one is sceptical, why take the risk to be a long term investor?

        Investing in a stock just because of a low PER has its risks. ( Remember Megan Media? )

        Ok, out of the list, I have to give credit to Maxwell. At least the company pays decent dividend and the owner had put his money where is mouth by buying more shares last year.

        What has the other done?

        The one that claims of being frustrated by low share prices.... why didn't he buy his own shares? Why don't he take it private? And what does his company do instead? A private placement and rights issue?





          IOI Wants Your Money Again By Relisting Its Property Arm!

          On Star Biz: IOI mulls relisting of arm

          • Monday February 13, 2012
            IOI mulls relisting of arm
            By RISEN JAYASEELEN and DANIEL KHOO

            PETALING JAYA: IOI Corp Bhd is mulling a relisting of its property arm that would see the group unlock values in that segment and enhance the attractiveness of the parent company to investors as a more plantation-focused company, according to reliable sources.

            “The group is in discussion with two investment banks on this to get feedback, especially on the right timing of the exercise,” said a source.

            Analysts said the relisting of its property division would increase the stature of IOI Corp as a pure plantation play which would likely have higher valuations.

            “It will reduce the conglomerate discount and transform IOI Corp into a pure plantation play, with a controlling stake in a valuable property company IOI Properties. Sole industry companies usually tend to fetch higher valuations,” an analyst with a local bank-backed research house said.

            IOI Corp may wish to also time the relisting of its property arm in line with a more bullish view on the property sector.

            In a sales note to its clients issued in January, Maybank IB said that potential downsides had already been priced into the property sector and that it did not discount the possibility of raising its call on the property sector from “neutral” to “overweight” in the medium to longer term as developers today were “backed by considerable unbilled sales, providing near-term earnings visibility.”

            IOI Corp had privatised its arm in 2009. Then known as IOI Properties Bhd, IOI Corp had on Februuary 2009 launched a takeover offer at RM2.60 per share.

            The takeover was successful and IOI Properties was subsequently delisted on April 28, 2009. It is today wholly-owned by IOI Corp. IOI Corp has been actively growing its property business since.

            In January it acquired six acres of land in Singapore for RM995.5mil to build high-end condominums and will have to settle the entire amount to the government of Singapore within 90 days from the date of the tender acceptance letter.

            Presently, it has seven projects which it is developing locally with estimated gross development values (GDVs) of almost RM20bil.

            Properties can testify to its track record in building property projects that have sold well. Excluding the latest land buy in Singapore, it is also presently developing high-end projects in the southern neighbouring island state with GDVs close to RM6bil.

            IOI Properties has completed property development projects in Puchong, Putrajaya, southern Johor and Singapore before.

            Meanwhile, banking sources also said that IOI Corp was in talks with banks to raise more funds.

            “It is in a good position to do so, considering its huge cash flows from its plantation side of the business,” said one banker.

            The funds raised should give IOI Corp sufficient funds to not only pay for the Singapore land acquisition but also ready funds in the event it chooses to buy more assets such as plantation land.

            Based on its results for the first quarter ended Sept 30, 2011, IOI Corp had total short and long-term borrowings of RM688.24mil and RM4.87bil respectively. Most of these debts are denominated in the US dollar, the Singapore dollar and the yen.

            IOI Corp had cash and cash equivalents of RM3.22bil as at Sept 30, 2011.
          Seriously?

          Seriously?

          You seriously cannot be kidding!!!

          For those who 'forgot', do read how IOI Corp treated their minority shareholders of IOI Properties when they took IOI Properties private at a shockingly low price and worst of all, the privatisation was made one year after IOI Properties had completed a rights issue!

          ( In my humble and flawed view, this was the WORST privatisation done in KLSE history! )

          Do read past postings:

          Thursday, February 09, 2012

          One More Question For Europlus

          Blogged last week: That 7 Billion Highway Project!!!

          Now there was one rather interesting news clip regarding Kumpulan Europlus published on the EdgeMalaysia.com on the 6th Jan 2012.

          http://www.theedgemalaysia.com/business-news/198946-kumpulan-euros-6m-shares-done-off-mkt-at-97-below-regular-trade.html

          • Kumpulan Euro's 6m shares done off-mkt at 9.7% below regular trade.
            Written by Joseph Chin of theedgemalaysia.com
            Friday, 06 January 2012 15:02

            KUALA LUMPUR (Jan 6): KUMPULAN EUROPLUS BHD [] saw 6.0 million of its shares transacted in an off-market deal at an average price of RM1.11 on Friday.

            Stock market data showed the shares, which were crossed at RM1.11 each, were 9.7% below its regular market trade of RM1.23.

            The 6.0 million shares accounted for just 1.15% of the paid-up of 520.99 million shares.
          So 6 Million shares were transacted in an off-market deal at an average price of RM1.11.

          What was interesting was this deal was done 20 days before it was announced that KEuro won that amazing 7 Billion Highway Project!!!

          Here's a news clip of the project award on 26th Jan 2012.

          http://www.theedgemalaysia.com/index.php?option=com_content&task=view&id=200012&Itemid=79

          Well, I am just curious.... who is the buyer of these 6 million shares at an average price of rm1.11?

          Keuro last traded at 1.31.

          MRCB Net Profit Rises to RM91.9M???

          On Business Times this morning:

          • MRCB net profit rises to RM91.9m

            Published: 2012/02/09

            KUALA LUMPUR: Malaysian Resources Corporation Bhd's (MRCB) net profit for the year ended December 31 2011 rose to RM91.92 million from RM73.79 million recorded previously.

            Group revenue edged up to RM1.21 billion from RM1.07 billion a year ago.

            MRCB said the improved performance was due to higher contribution from its ongoing and encouraging strata office sales of property development projects at Kuala Lumpur Sentral.

            The group recorded a slightly lower net profit of RM31.95 million in the fourth quarter compared with RM39.2 million previously.

            The lower profit was due mainly to recognition of full cost for variation order claims of which recovery of the same is pending clients' approval.

            Group net asset per share increased to 98.1 sen as at December 31 last year from 93 sen recorded as at end-2010.

            MRCB chief executive officer Datuk Mohamed Razeek Hussain said the group expects to deliver another year of revenue growth in 2012. This will be driven by ongoing property development projects in Kuala Lumpur Sentral, outstanding construction order book and the opening of the Eastern Dispersal Link Expressway (EDL).

            "However, given the intense competition within the construction industry and the anticipated start-up losses from the EDL, the board expects the profitability growth for the group to be challenging," he said in a statement yesterday.
          All sounds so rosy except for that statement highlighted in red...
          • The group recorded a slightly lower net profit of RM31.95 million in the fourth quarter compared with RM39.2 million previously.
          rm 31.95 million compared with rm 39.2 million equals to 'SLIGHTLY LOWER'??

          !!!


          Here's the VERSION from the EdgeMalaysia... which is rather ......

          • MRCB 4Q earnings down 37% to RM26.1m from RM41.50m yr ago
            Written by Joseph Chin of theedgemalaysia.com
            Wednesday, 08 February 2012 18:55

            KUALA LUMPUR (Feb 8): MALAYSIAN RESOURCES CORP []oration Bhd’s (MRCB) net profit fell 37% to RM26.11 million in the fourth quarter ended Dec 31, 2011 (4Q 2011) from RM41.50 million a year ago.

            It said on Wednesday the group recorded a slightly lower profit before taxation amounting to RM42.5 million for 4Q 2011 compared to RM49.3 million in 4Q 2010.

            “The lower profit reported was due to recognition of full cost for variation order claims of which recovery of the same are pending clients’ approval,” it said.

            Its revenue rose 8.6% to RM470.38 million from RM433.12 million. Its earnings per share were 1.88 sen compared with 3.01 sen. It proposed dividend of 2.0 sen a share compared with 1.50 sen a year ago.

            For the financial year ended Dec 31, 2011, its net profit rose 15.1% to RM77.46 million from RM67.27 million. Its revenue increased by 13.6% to RM1.213 billion from RM1.067 billion.

            “The improved performance in revenue and profitability in the current financial year was due to higher contribution from the group’s on-going and encouraging strata offices sales from property development projects at Kuala Lumpur Sentral.

            “However, this was offset by lower revenue from the infrastructure and environmental segment due to completion of existing environmental projects,” it said.

            On the outlook for 2012, MRCB expected to deliver another year of revenue growth, driven by on-going property development projects in Kuala Lumpur Sentral, outstanding CONSTRUCTION [] order book and the opening of the Eastern Dispersal Link Expressway (EDL).

            “However, given the intense competition within the construction industry and the anticipated start up losses from the EDL, the board expects the profitability growth for the group to be challenging,” it said.
          Shall we say... dare to be different!!?

          Well for what it's worth, here's the numbers highlighted by Dow Jones Newswire...






          Thursday, February 02, 2012

          That 7 Billion Highway Project!!!

          On 28th Jan 2012, the following article was published on Star Biz.

          • Saturday January 28, 2012
            Europlus’ RM7bil concession needs answers
            A QUESTION OF BUSINESS By P. GUNASEGARAM

            At a time when many concessions are near expiry, a 60-year toll-road one perplexes

            A CONCESSION for 60 years may well be a record for Malaysia and the only thing that comes to mind, which is longer than that is Malaysia's agreement to supply water to Singapore for hundred years signed in the sixties when the latter moved out of Malaysia.

            Even for the North-South Expressway, the original concession period was half of that at 30 years while its length was more than twice that of the proposed West Coast Expressway at over 770km.

            Not only is the concession extremely long, it is also very expensive with a development cost before land acquisition estimated at a whopping RM7.07bn for 316 kms from Banting, Selangor to Taiping, Perak out which 224km or some 70% will be tolled.

            Kumpulan Europlus Bhd (KEuro), a long-ailing public-listed company that had been involved in property projects especially housing, which had been mired in problems, announced that the concession was obtained by its 64.2% owned West Coast Expressway Sdn Bhd (WCE).

            The project, KEuro said, received an approval letter from the Public Private Partnership unit of the Prime Minister's Department but it does not appear that a government announcement has been made so far.

            KEuro, which is majority owned by entrepreneur Tan Sri Chan Ah Chye and another listed company IJM Corporation Bhd, said the project will be on a build, operate and transfer basis but it is clear that with a 60-year concession, many of us, including the project promulgators won't be around when the time for transfer arrives.

            Apart from the long concession period, there are other features which make it very attractive to WCE, including assistance from the government with a support loan of RM2.24bil starting from 2013 with an interest rate of 4% a year.

            Over and above this, there is an interest subsidy of up to 3% from commercial loans for 22 years. Both interest rate subsidies alone could be worth up to some RM4bil over the period, assuming a principal of RM6bil jand depending on how the principal is repaid.

            Meantime, the land acquisition cost of an estimated RM980 million will also be borne by the government. But any toll revenue over an agreed traffic volume will be shared 70:30 with the government getting the lion's share. However, on full settlement of the loan, WCE will get 70% instead.

            On almost every count, it looks like WCE has got itself a damn good deal. An examination of the deal based on earlier estimated construction costs and international costs again shows it to be favourable.

            Curiously, KEuro had announced in May 2007 that WCE had obtained approval for the same concession but on much less favourable terms, raising questions as to why the deal appears to be so much better now.

            At that time, it involved 216km and linked the same two towns, Banting in Selangor and Taiping in Perak, the main difference apparently being there was no construction of some 90-100km of non-tolled roads which there is now.

            But still, the overall development cost estimated then was substantially lower at RM3.02bil and the concession period was less by almost a half but still very long at 33 years.

            Comparing costs per km, it was substantially lower in the 2007 deal at RM13.9mil per km compared to RM22.3mil for the deal just announced. Over the last four years, WCE has been renegotiating the deal with the government and this seems to be the final outcome.

            While the cost of construction of expressways differs tremendously among different countries and terrain as well as the type and quality of expressway, a 60% increase in costs over four years for essentially the same area and terrain seems way too much.

            International comparisons are difficult because of different costs. India has a programme to build 1,000km of expressways for RS16,680 crores which works out to about RM10bil at current exchange rates. This translates to about RM10mil per km, less than half the figure for the West Coast Expressway.

            Considering that roads are expensive and the public is already burdened by an extensive system of tolls, the government should be rather circumspect about granting toll road concessions, especially one for the hitherto unheard period of 60 years.

            Before one can make a final judgement of whether this deal is fair, more details need to be released. The current and expected traffic on the highway has to be projected, the cost of construction established and a proper rate of return established so that a net value can be ascribed to the project.

            To get the best deal for itself and for the rakyat, the government should have been transparent over the process and invited all qualified parties to bid to keep project cost, tolls and the concession period as low as possible.

            It is still not too late to do that.

            Independent consultant and writer P Gunasegaram (t.p.guna@gmail.com) hopes against hope for transparency, open tenders and proper evaluation to save public money.
          The issues raised were serious and TI-M was quick to express its concerns over the lack of transparency. The following was posted on the EdgeMalaysia on 30th Jan 2012.
          • TI-Malaysia: Explain awarding of RM7.07 bn West Coast Expressway project Written by Joseph Chin of theedgemalaysia.com
            Monday, 30 January 2012 18:36

            KUALA LUMPUR (Jan 30): Transparency International Malaysia (TI-M) has expressed concern over the apparent lack of transparency and proper procedure in the awarding of the RM7.07 billion West Coast Expressway concession project.

            Its president, Datuk Paul Low said this mega project would involve massive public financing of a soft loan of RM2.24 billion and payment of RM980 million for land acquisition, and an unprecedented 60-year toll concession.

            “TI-M views with concern the apparent lack of transparency and proper procedure in the award. Given the public funding and long concession period, there could have been proper governance and transparency in the award through an open, transparent and competitive procurement process and public disclosure of the terms and conditions of the contract,” he said in a statement.

            To recap, on Jan 26, KUMPULAN EUROPLUS BHD [] announced to Bursa Malaysia that its 64.2% owned West Coast Expressway Sdn Bhd (WCE) has received the government’s approval to build the 316-km west coast project costing RM7.07 billion.

            The 316-km Banting to Taiping expressway would be on a build-operate-transfer (BOT) with a concession period of 60 years.

            KEuro also said the land acquisition cost of up to RM980 million for the project would be borne by the government.

            The company had also said a government support loan of RM2.24 billion, starting from 2013 at an interest rate of 4% per annum, and an interest subsidy, of up to 3% from commercial loans for a period of 22 years, would be granted to WCE,” it said.

            KEuro had then said toll revenue in excess of an agreed traffic volume would be shared on the basis of 70:30 between the government of Malaysia and WCE till full settlement of the government support loan and subsequently 30:70 after the loan is settled.

            However, on Monday, Low pointed out that such a mega project and also its impact on the public was an ideal candidate for implementing the Integrity Pact (IP), a tool for curbing corruption risks in public contracting projects.

            “The government has recognised the potential benefits of IPs by a Treasury circular dated Dec 16, 2010 outlining guidelines for implementing IPs in government procurement.

            “Further, MRT Corp., the GLC tasked with implementing the MRT project, has agreed to incorporate the IP in its procurement exercises,” he said.
          Today, we have an article on BTimes.

          I was shocked to read how BTimes would allow an UN-NAMED SOURCE to feature in the write-up. I thought the issues raised were dead serious and to have an un-named source making a lot of statements on the issue were rather disturbing.

          Sigh.

          Why can't the source be named?

          Don't they know there's not much value and credibility in the article when everything is based on an unknown source?

          Sigh!

          What an insult!

          • 'Incentives not sweetheart deal’

            By ADELINE PAUL RAJ Published: 2012/02/02

            LONG-TERM PLAN: Soft loan, perks for Kumpulan Europlus are to jumpstart expressway project, says source
            THE RM7.07 billion West Coast Expressway (WCE) project awarded by the government to Kumpulan Europlus Bhd (K-Euro) is no “sweetheart deal”, says a source close to the project.

            The deal, which involves the government providing KEuro a soft loan of RM2.24 billion at four per cent interest, among other supportive moves, as well as a 60-year toll concession, has drawn criticism that it favours the public-listed company at the government’s expense.

            The source, however, argued that the deal was structured with government support in order to get banks comfortable enough to help fund the deal.

            Without the soft loan, no bank would have come forward and the project would never take off, he said.

            The 316km WCE, which will link Banting, Selangor to Taiping, Perak, is meant to be an alternative to the increasingly congested North-South Expressway (NSE).

            It will take five years to complete the project, with work expected to start by yearend, the source said.

            “Traffics in this corridor is generally quite low except for the Klang Valley area, but the government sees huge long-term potential in the project in reducing traffic pressure on the NSE,” the source told Business Times yesterday.

            With low traffic projections and high costs, the government’s support loan provides “enough comfort for bankers to support the deal from the beginning”, he added.

            The project now would cost more thandouble to build than it would have in mid- 2007, which was when the project wasoriginally planned, due to several reasons, including that building material costs were now substantially higher, the source said.

            He said the estimated RM7.07 billion cost took into account the fact that the highway stretch was 100km longer than originally planned, and would include 5km of elevated sections (in the Klang Valley) that cost “four to five times more”, extra structures, and “fairly large” bridge crossings over four rivers.

            On rising material costs, he said stones and sand as well as bitumen, for example, now cost about three times more than in 2007, while the price of steel has shot up by more than 150 per cent.

            “All of these have contributed to the added cost,” he said.

            It will take time to build up traffic volume on the WCE, which is why a longer concession period is needed, he said, adding that it could take 10 years before “decent” traffic builds up.

            KEuro’s proposed 60-year concession is the longest known so far in the country.

            By comparison, it was offered a concession of 33 years in 2007.

            The traffic volume forecast in the current deal is about “20-odd per cent” lower than in 2007 and deemed more “realistic”, the source said.

            This was why, he said, the company was prepared to share toll revenue in excess of agreed traffic volume with the government on a 70:30 basis, in favour of the government, for as long as it’s paying off its soft loan.

            Under the current deal, the government is also providing KEuro subsidy of up to three per cent for commercial loan interest payments. Land acquisition costs of RM980 million is also to be borne by the government.
          And here is my question. With this unknown source admitting that traffic is generally low, why this highway project????

          Why?

          Can the projected traffic justify that 7 Billion price tag?

          ****************************

          ps: Oh yeah, I deeply deplore the usage of 'according to sources' in our financial news and reports. When the source is un-named, how does the reader know the credibility of the said article. And seriously, shouldn't financial news based on facts and quotable sources?

          When the financial news is based on un-known source, the financial news becomes nothing more than a gossip tabloid!

          I pray that such practise ends!

            Wednesday, February 01, 2012

            Malaysian AE Models 2Q net profit jumps 70%???

            The following article was posted on the Edgemalaysia.com

            • Malaysian AE Models 2Q net profit jumps 70% to RM3.34m
              Written by Surin Murugiah of theedgemalaysia.com
              Tuesday, 31 January 2012 18:33

              KUALA LUMPUR (Jan 30): MALAYSIAN AE MODELS HOLDINGS [] Bhd (MAEMode) net profit for the second quarter ended Nov 30, 2011 jumped 70% to RM3.34 million from RM1.97 million a year earlier, due mainly to higher revenue and better profit margins from logistics projects.

              The company said on Tuesday that its revenue for the quarter rose 44.24% to RM165.46 million from RM114.71 million in 2010.

              Earnings per share was 3.12 sen compared to 1.84 sen a year earlier, while net assets per share was RM2.21.

              For the six months ended Nov 30, MAEMode’s net profit surged RM7.76 million from RM2.82 million in 2010, on the back of revenue RM317.09 million compared to RM224.33 million a year earlier.

              On its outlook, the company said it was confident on the improvements of the global economy that may enhance its future profit moving forward.

              “With the current order book and barring any unforeseen circumstances, the board is optimistic that the group will remain profitable for the remaining quarters of the financial year,” it said.
            Sounds good, yes?


            However, this is one stock which I had blogged several times before and it was blogged based on all the wrong reasoning.

            Past postings: http://whereiszemoola.blogspot.com/search/label/MaeMode

            On 29th July 2011, my last posting on MaeMode was Maemode's Mind Boggling Q4 Earnings.

            Let's review the issues.

            1. Is there improvement in profitability?

            Current half year sales revenue increased to 317.088 million. Current net profit totals 7.764 million. This equates to a margin of 2.4% only. Last fy 2011, MaeMode had margins of 3.08%.

            2. Is there improvement in cash balances?

            Company said its profits increased a lot. Well if the company is making more money, surely the company has more cash, right?

            Here's a snapshot of MaeMode's balance sheet.


            3. MaeMode has an issue with its receivables, is there any improvement?

            MaeMode's total receivables, ie trade receivables+amount due from customers on contracts ( I wonder why the need to have list these items separately since both items essentially represent amount owed to MaeMode) now totals 499.464 million. Same quarter last fiscal year, the receivables totalled 442.443 million.

            Receivables increased a lot once again!

            Now, let's refer to table posted in the last posting: Maemode's Mind Boggling Q4 Earnings.



            In FY 2006, MaeMode's receivables was 186.128 million. Receivables today stands at 499.464 million!

             Is that mind boggling or is that mind boggling???!!!

            4. Is MaeMode owing more money now?

            One of the other issue was the MaeMode's loans kept on increasing. As at end fy 2011, MaeMode owed some 368.224 million.

            Let's have a look at MaeMode's current borrowings.


            MaeMode's current total borrowings now stands at 410.097 million!

            It's borrowings increased a lot, once more!!!

            But the most worrying issue is stated on notes B9.



            Amount payable within next 12 months is 376.997 million!!

            !!!