Part II: The Story Of Garment Player Wanting To Be Oil And Gas Player

Blogged recently: Garment Maker Wants to Turn Into An Oil & Gas Player?

Yes, this is the story of Baneng Holdings. Baneng Holdings, the garment maker wanting to transform itself to an oil and gas player!

Now due to this incredible tale, the stock soared. The chart below on the date of the blog was posted show how everyone on the Baneng tale flew up, up and away.With a paid-up of RM500,000, Lim said, Atmos has had limited resources and needed to tap onto Baneng's access to the capital market as a public-listed company to raise funds for its projects.

The stock closed yesterday at 0.70.

Which was an incredible performance for a stock. It even outperformed the KLCI and many other stocks.

This morning, Business Times carried another article on it, Baneng moves into oil sector with Atmos buy

I was shocked to see that headlines. I had stated the terribly weak balance sheet for Baneng Holdings on my earlier blog posting. Garment Maker Wants to Turn Into An Oil & Gas Player?

• See their cash balance of only 4.914 million? And long term borrowings totals 36.486 million and short term borrowings is at a whopping 98.944 million!

So I thought they finally pulled something amazing off when I saw the headlines. Perhaps they are getting a massive loan or perhaps it's something where an oil and gas player pumps their business into Baneng, yeah a reverse listing of some sort.
So I was much eager to read it's fairy tale.

• GARMENT maker Baneng Holdings Bhd has bought an engineering and fabrication company for RM800,000 to diversify into the oil and gas sector.

Huh? Only rm800,000 for this company? I thought it was a massive purchase? So where's the justification for the stock's huge run up then?

• Executive director Albert Lim Meng Hong said Atmos Engineering Sdn Bhd, the firm that it is buying, has secured jobs worth a combined RM20 million from various oil majors, which will bolster Baneng's earnings. Atmos is also bidding for contracts that are worth up to RM200 million in total, he said.

Wahh! They bought a company for rm800,000? But the company got rm20 million of job order???? Wow? Am I reading it correctly?
Why is Atmos Engineering selling their company so cheap? Why?
The last sentence... bidding for contracts? Ahem. Bidding for contracts just means bidding for contracts, yes? There isn't much value till the contracts are won and after winning, the jobs from the contracts need to be translated to earnings!

Huh? Huh? Ok, so Atmos has limited resources but yet it can secure jobs worth rm20 million! WOW! Incredible story or what!

• He did not elaborate on Baneng's plan to raise money, but said that it is talking to bankers.

And this is so incredible. Obviously Baneng would need to raise money big time too!

• "Atmos will contribute to our earnings from next year. We are still negotiating and there will be more acquisitions to come," he told reporters after signing with Atmos in Kuala Lumpur yesterday.
  
  Baneng will still retain its core business of manufacturing, knitting and dyeing of fabrics and other apparels, he said.
  
  "We will position ourselves in garment manufacturing and oil and gas for now, but will still look for any other businesses that can bring in more income," he added.
  
  Baneng has been on the lookout for strategic purchases in the last three years, he added.
  
  Shares of Baneng have risen 59.1 per cent this year, a stark contrast to the 19.7 per cent fall in the Kuala Lumpur Composite Index over the same period.
  
  The usually thinly-traded stock has also seen some active transactions recently.
  
  Baneng closed 1.4 per cent lower at 70 sen yesterday.

LOL!
Loved the second last line. "The usually thinly-traded stock has also seen some active transactions recently. " So let me attempt to interpret that sentence. This stock used to be thinly-traded (tak-laku or pak-woo-ying?) but lately the stock is moving up and the trading is rather active lately. Hmm.. is it because of this wonderful tale? I wonder.

Garment Maker Wants to Turn Into An Oil & Gas Player?

Yes, this is the story of Baneng Holdings. Baneng Holdings a garment maker wants to transform itself to an oil and gas player!

And how nice, our local press decides to promote this incredible story!

Published on Business Times: Baneng plans to ride on oil and gas boom

• Baneng plans to ride on oil and gas boom
  
  Published: 2008/07/23
  
  The garments maker has explored this business for some time, and this will be a good opportunity for it to move into the oil and gas sector this year, says its executive director
  
  GARMENTS maker Baneng Holdings Bhd is mulling to venture into the oil and gas industry to expand its earning base, executive director Albert Lim Meng Hong said.
  
  "We are negotiating and finalising with several parties on our foray into this sector within the next few months," he said in a statement.
  
  Lim said some of the areas in which Baneng is interested in are bunker services, floating storage vessels, fabrication and engineering, and trading in marine fuel and petrochemical products.
  
  "We have been exploring this business for some time and this will be a good opportunity for us to move into oil and gas field this year," he added.
  
  The group is now engaged in the manufacturing, knitting and dyeing of a range of fabrics, apparels, garments and related products.
  
  "Venturing into the promising oil and gas industry is attractive for the group to ride the oil and gas boom and to expand its earnings base," Lim said.
  
  Shares of Baneng have risen 73.9 per cent this year, a stark contrast to the 23.2 per cent fall in Kuala Lumpur Composite Index over the same period.
  
  The usually thinly-traded stock has also seen some active transactions in the past few days.
  
  About 4.8 million Baneng shares changed hands on Bursa Malaysia yesterday. This is seven times the stock's average volume in the past 15 days, and 14 times of its 30 days average volume.
  
  Baneng closed 10 per cent higher at 76.5 sen yesterday.

And how the stock flew!

Truly surreal. The company is ONLY mulling and exploring opportunities in the oil and gas sector and yet the stock is up a whopping 79%!!!!

I wonder if being a garment maker is truly bad business for Baneng.

Let me check some of the more recent quarterly earnings from Baneng Holdings.

Quarterly rpt on consolidated results for the financial period ended 31/3/2008 : Net earnings 638 thousand!

Here is their balance sheet.

See their cash balance of only 4.914 million? And long term borrowings totals 36.486 million and short term borrowings is at a whopping 98.944 million!

Mountain of debt.

Look at the insanely high trade receivables of over 77 million. Why so high?

Here's the previous quarterly earnings.

Quarterly rpt on consolidated results for the financial period ended 31/12/2007: Net loss of 3.82 million!

Oh my, such quality! Do I even want to look at more details?

Perhaps one day I shall turn my barnyard into a luxury resort with cows singing some Elton John tunes.