Another Fine Mess From OSK Research?

A brand New Year and a brand NEW MESS from OSK Research?

Well, just in case you need to know, I am NOT a fan of OSK Research at all. It's well documented on this site, the reasons why I reckon they are simply way below par. (for example do read: QC And The Research Reports or past postings

This morning, I noted this stunning snippet from Business Times: It’s OSK Research, not MCIL   (do note, that BTimes link is not a permanent link! )

• It’s OSK Research, not MCIL
  
  Published: 2012/01/04
  
  KUALA LUMPUR: Our report published on January 3 headlined “MCIL: Payout ratio of 60pc for next two years”, should quote OSK Research and not Media Chinese International Ltd (MCIL).
  
  MCIL has clarified that it has not at any time released any statement which forms the basis of the article.
  
  “We have also not given any statement stating that among others, we will be incorporating a payout ratio of 60 per cent for the next two years nor have we given any opinion on the exchange rate for USD into RM,” the company said in a statement.

So I decided to check Btimes 6 day's archive for yesterday's article: http://www.btimes.com.my/Current_News/BTIMES/6days_html?myday=Tuesday

That article could not be found. Googled it. I got this not working link: Media Chinese Int'l: Payout ratio of 60pc for next two years

But luckily I got a copy of that article. Business Times wrote the following:

• Media Chinese Int'l: Payout ratio of 60pc for next two years
  
  Published: 2012/01/03
  
  KUALA LUMPUR: Media Chinese International Ltd (MCIL) sees that its dividend surprises are likely to go forward to right-size the group's balance sheet.
  
  MCIL said it is incorporating a payout ratio of 60 per cent for the next two years, which translates into a decent yield of more than five per cent per year.
  
  MCIL was formed by the merger of Sin Chew Media Corp Bhd, Nanyang Press Holdings Bhd and Hong Kong-based Ming Pao Enterprise Corp Ltd.
  
  It emerged with four core daily publications in Malaysia, which are Sin Chew, Nanyang, China Press, and Guang Ming.
  
  MCIL came off a stellar 2011 with a nine-month advertising and expenditure (adex) growth of 10.4 per cent year-on-year.
  
  It saw a positive momentum spilling over to 2012, with adex likely to close at two times its 2012 gross domestic product growth forecast of 5.2 per cent.
  
  "It is expected to be boosted by upcoming major adex-friendly events such as the national snap polls and Euro 2012 in the middle of the year," MCIL said in a statement last week.
  
  Newspaper remains the largest advertising medium with more than 50 per cent share of total adex.
  
  Newsprint makes up more than 40 per cent of MCIL's financial year 2011 operating costs.
  
  It said that in the event of a sharp spike in newsprint prices, the negative impact would be partially mitigated by continuous weakness in the US dollar against the ringgit for which it is targeting to close the year at RM3 per US dollar compared with RM3.15 currently.

That was what Business Times wrote!

• MCIL said it is incorporating a payout ratio of 60 per cent for the next two years

Now interestingly, the Sun Business carried the following article on 1st Jan 2012: MCIL is OSK's top pick in media sector ( I know, I know... it's sounding like a circus.... he says she says he says... )

• MCIL is OSK’s top pick in media sector
  Posted on 1 January 2012 - 08:18pm
  
  PETALING JAYA (Jan 1, 2012): Media Chinese International (MCIL) is OSK Research's top pick in the media sector, supported by its strong management, sturdy 2012 advertising expenditure (adex) growth and its near-monopoly of the Chinese daily space in the country.
  
  The research house has maintained its buy call on MCIL at RM1.27, with an unchanged fair value of RM1.47 based on 13 times CY12 price/earnings ratio.
  
  "In view of the volatile global equity markets, we believe MCIL would also appeal to risk-averse investors given its decent dividend yield and relatively defensive earnings," it said in a report.
  
  For the first nine months of 2011, Malaysia's adex grew 10.4% year-on-year and the momentum is expected to spill over to 2012, with adex likely to close at two times OSK's 2012 GDP growth forecast of 5.2%.
  
  "It is expected to be boosted by upcoming major adex-friendly events such as the national snap polls and Euro 2012 in the middle of the year. Newspapers remain the largest advertising medium with more than 50% share of total adex. We believe that MCIL could again emerge as a key beneficiary, bolstered by its stranglehold in the Chinese daily segment as its adex share approaches a new high of 75%," OSK said.
  
  With over 40% of its FY11 operating costs coming from newsprint, MCIL is expected to benefit from newsprint prices that are likely to hover at the current US$600-650 per tonne in 2012, given worries over the global economy and Europe's deepening sovereign debt crisis.
  
  "In the event of a sharp spike in newsprint prices, which we believe is unlikely at this point of time, the negative impact would be partially mitigated by continued weakness in the USD against RM, for which we are targeting to close the year at 3.0 compared with 3.15 currently," said OSK.
  
  As of Q1 FY03/12, MCIL was sitting on a net cash hoard of RM370 million, representing 15% of its current market capitalisation. OSK said the group is a cash cow in the making with its strong cash generation of an estimated RM320 million a year.
  
  "And given its minimal annual capital expenditure of RM30 million, we believe that dividend surprises are likely, going forward, to right-size the group's balance sheet. We are incorporating a payout ratio of 60% for the next two years, which translates into a decent yield of more than 5% per annum," it added.
  MCIL is the result of a mega-merger involving Sin Chew and Nanyang, with Hong Kong's Ming Pao. Today, it has four core daily publications in Malaysia namely Sin Chew, Nanyang, China Press and Guang Ming, one in Hong Kong under the Ming Pao brand, and a few magazine titles as well as a Hong Kong travel business.
  
  The group's core Malaysian operations still contribute a significant 85% of group EBIT given its near-monopoly of Chinese daily publications, with the lion's share of 85% of the market.
  

Hmm.. and so for once (gulped) ... I would not fault OSK Research here. They have stated their reasoning ( ... but.. but... one could also start arguing the validity of OSK's reasoning, given the fact that MCIL had disputed this 60% payout assumption!!! ) and the Sun reported it as it is wheres Business Times just zoomed in to the juicy part and highlighted it!!!

Just to make it more interesting... the EdgeMalaysia reported the following yesterday evening. Media Chinese Intl director sells 400000 shares

• Media Chinese Intl director sells 400,000 shares
  KUALA LUMPUR (Jan 3): MEDIA CHINESE INTERNATIONAL LTd director Tiong Kiew Chiong disposed of 400,000 shares in the open market on Dec 30.
  A filing to Bursa Malaysia on Tuesday showed he disposed of the shares, representing 0.03%, for RM1.19 a share.
  After the disposal of the stake, Tiong’s stake was reduced to 3.607 million shares

The What IF Blue Sky Valuation Strikes Once Again

And ................. OSK strikes again!

Slightly more than a year ago, on March 2010, OSK wrote a report on MMC. Their head of research introduced a brand new yardstick called Blue Sky valuation.

I kid you not!

Let me reproduce what was posted on March 2010: OSK's What If Blue Sky Valuation!Today the same writer is pulling the very same stunt!

Truly amazing la.

Is it too much asking to ask the writer to come up with a better seduction method? As it is, it's rather same old, same old.

Anyway, what do we have?

Today we have What IF.

Oh, he added the BLUE SKY valuation!

OMIGOD! OMIGOD!

I kid you not!

I guess this is the first of the kind in the world.

Ho ho ho ho!

Mr. Blue Sky!

ROFLMAO!

First he states the risk in one small passage...

Then he comes out with his gun banging...

So if my Blue Sky comes, the fair value is rm 3.26. Else it's a plain boring price of 2.41 with an un-seductive target price of rm 2.80!

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

And so how did MMC fared? Well apparently it was cloudy and Mr. Blue Sky was not to be found: Comments On MMC Earnings

And the remarks on MMC's earnings was remarkable. So What Is OSK Saying Now About MMC

And that was then.

Now is 27th April 2011 and OSK head of research is now no longer talking about Mr. Blue Sky. Instead it's the CROWN JEWEL...

ps: Naturally the SOP (sum of parts) value is increased.
A good trade. With Syed Mokhtar definitely appearing to be in the good books of the government currently, we do expect that it will only be a matter of time before something comes MMC’s way. As such, we maintain our Trading Buy call on the company with our SOP fair value unchanged at RM3.62.

QC And The Research Reports

From the posting, What Do You Look For In A Research Report? Part II
Mun Wai said...

• How far do you think QC is checked at research houses? (first at the analyst level n then the Head of Research)

I do not know. Honestly. I am not in the industry, so I cannot write what I do NOT know.
However... I did think about it.... for many minutes. I did. :P

Then I realised the report featured in the posting What Do You Look For In A Research Report? Part II. The feature report on Timberwell was written by Chris Eng. He's now OSK head of Research.
So why focus on Chris Eng?
Do indulge in me for a couple of minutes.Now at the end of each report, the report are signed by the head of research and in OSK case, it's Chris Eng.


In the posting, What Do You Look For In A Research Report?, I wrote the following:

2. IS THE RESEARCH HOUSE CONSISTENT ON THE STOCK RECENTLY?

Are the reports consistent on the stock? Perhaps a past example would explain it clearly why this is important. 22nd July 2009, I posted Featured Report: OSK Research On Axiata Look at the end of the posting. It tracks the recent Recommendation history and price target for the stock.

• 24th Dec 2008. Axiata 3.58. Maintain Neutral at 4.20.
• 08th Jan 2009. Axiata 3.60. Maintain Neutral at 4.20.
• 06th Feb 2009. Axiata 3.18. Maintain Neutral at 4.20.
• 19th Feb 2009. Axiata 3.36. Maintain Neutral at 4.20.
• 28th Feb 2009. Axiata 3.06. Maintain Neutral. TP lowered to 3.00.
• 25th Mar 2009. Axiata 2.61. Take profit. Downgrade. TP lowered to 2.50.
• 30th Mar 2009. Axiata 2.38. Upgrade to Neutral. TP at 2.50.
• 28th Apr 2009. Axiata 2.10. Take profit. Downgrade. TP lowered to 1.73.
• 20th May 2009. Axiata 2.32. Upgrade to trading buy! TP at 2.70.
• 18th Jun 2009. Axiata 2.28. Trading buy maintained. TP at 2.70.
• 08th Jul 2009. Axiata 2.42. Trading buy maintained. TP at 2.70.
• 21st Jul 2009. Axiata 2.98. BUY upgrade. TP at 3.40.

On Dec 2009, OSK reckoned that Axiata was worth 4.20. It had a neutral call on it. Come Feb 2009, Axiata was worth only 3.00! Yeah, it's call is neutral! (LOLOLOL!). Then in April, Axiata is even valued worst. The call was TAKE PROFIT! ( YEAH... this is where everyone should scream their lungs out and shout O-M-G !!! What profit was there to take? It was just in Dec OSK said the stock was a neutral with a fair value of 4.20. It's now April and its a bloody TAKE PROFIT with a fair value of 1.73? Look the screenshots. This was not made up!) And a month later, Axiata value suddenly jumped from 1.73 to 2.70!!!! ( O-M-G!!!! Exactly!)

So how was that?

Now all those reports were signed by Chris Eng himself. You can verify it in the posting Featured Report: OSK Research On Axiata.

Now I am asking myself. Was there QC done? Did Chris Eng actually read those reports or did he just sign for the sake of signing?

Issue is simple. The stock was tanking big time. Sinking to new lows. But the analyst made the ULTRA confusing recommendation to 'Take Profit' on April 2009. How on earth does one take profit on a stock that is sinking to a new low? Wasn't cut loss a more precise and accurate call? And yet, the head of the research, signed that report.

So is there QC?

Does QC exist?

I do not know.

And is this an isolate incident?

Do I have more examples?

On March 2010, I wrote the following: OSK's What If Blue Sky Valuation! (report written by Chris himself.) (LOL! I had a great time laughing at that report last year and I had a great laugh when I re-read it once more)

So now the head of research made that report. (Please read OSK's What If Blue Sky Valuation! )

How did it fare? On May 2010, MMC reported its earnings. I posted Comments On MMC Earnings

Now Chris Eng had said " While we are conservatively sticking to our earnings forecast for now".

But the ultra sticky point was Chris Eng's conservative forecast earnings for MMC Corp was RM 424.2 million!!!!!!

Come lah..I was laughing to myself. How could this be considered conservative when the earnings forecast was assumed to grow at 79.3% this year!!!!!! Does earnings grow so easily????
Apparently it does according to Chris.

And MMC earnings for that quarter was only earned 34.4 million!!!
And naturally when I got a hold of OSK report that day on MMC, I had to make another posting, So What Is OSK Saying Now About MMC. Do give it a read.

How? Well, it was incredible for me! Amazing!
So is there QC?
Let's take another example. A random one.
On 7 July 2009, I posted the following: iCapital And Swee Joo.

Do give it a read. Swee Joo today trades at 18 sen!
And since you had asked, I too wonder if there was QC from iCapital?

What Do You Look For In A Research Report? Part II

Price targets. Again for most market punters, price target is everything. Absolutely.

Eat porridge or eat rice also depends on how juicy the price target is.

All we can hear is '... but XYZ (brokerage house) said price target was 5.00 leh... so buy, buy, buyyyyyyy!' ( or is it bye, bye, bye? :P )

An infamous old story retold. It was 11 March 2004. The stock last traded 4.16. The stock had already gone up a lot. Seriously a lot. ( Exactly a year ago, before the stock was trading at 4.16, it was trading less than 90 sen! )

That was a massive movement, yes?

And the stock? Seriously? Its fundamental was shocking. :P

March 2003: Quarterly rpt on consolidated results for the financial period ended 31/12/2002. It reported yearly loss of 6.6 million. The previous year it lost 7.4 million.

But yet... somehow.. miraculously... its shares were in demand. Yes, somehow, someone in Aug 2003, had the hindsight to buy a 10% stake in this loss making company.

Private Placement of 4,725,000 new ordinary shares of RM1.00 each ("Private Placement")

And somehow... in yet another miracle of miracle... the stock soared and soared... it flew up, up and away to the orbit. By 11 March 2004, it hit 4.16.

Now that 10% private placement investors must be much better than Warren Buffett! Bought 10% in Aug 2003 at 1.00. Comes March 2004, the shares were worth 4.16.

No need to even talk about the stocks fundamentals. Who needs fundamentals? Who cares if the company is losing money? Who really cares?

Do you care? Why you want to make so much noise? You no make money in it? Don't be a sore loser! Stop your moaning!

Even Bursa smacked the stock with the UMA or UNUSUAL MARKET ACTION .

And so there we were.

On 11 March 2004, the stock closed the previous trading day at 4.16 and in came OSK with an truly amazing, out of the world BUY recommendation on the stock, giving the stock a target price of 5.00!

Yo dudes! Yo dudettes!

This is the stock yo! It's worth 5 bucks a pop! And it's only trading at 4.16.

You want or not?

I was amazed. Seriously, that so-called analyst must be extremely skillful. No joke. It's not easy at all. The stock had ZERO earnings. Losing money. And the stock had almost gained 5 folds since a year ago. Yet, this analyst could come up with a BUY recommendation with a 20% call!

Now that's skills!

Eat your heart out Goldie!

Here's a screen shot.

As can be seen, at 4.16, the stock had a market cap of around 226.3 million!

This was the stock's most recent quarterly earnings before March 2004. (LOL! Now that's 10 years ago, babe! :P)

Quarterly rpt on consolidated results for the financial period ended 31/12/2003

Look at the revenue? 34 million only. Yeah revenue only. And yet the market is valuing the stock at 226.3 million already. ( ho ho ho .. life is good! (how many times must I tell you this?) )

And somehow, OSK young analyst then, could came up with a report, suggesting that this company is worth....... another 20% more! Gee another 20%? That means the stock's market cap is suggesting the company is worth 271 million!

It doesn't matter the stock lost money the last 3 years, it doesn't matter the sales turnover is only a mere 34 million! And it certainly matters not the poor balance sheet it has! It doesn't matter that it had net debts of over 50 million! And it seriously doesn't matter that the company had some 273 thousand ( that's not a typo! So stop starring at me! LOL! :P ) only in its piggy bank!

Good is good eh?

And incredibly, the analyst DID acknowledge the concerns of the stock's track record!

In an effort to learn more, let me reproduce by pasting the exact words:

Concerns on Track Record

Productivity after the lull

We note that Timberwell has not conducted large scale timber extraction for the past 3years and that its mills have run on low capacity since 2002. As such, there is concern that its productivity and EBITDA margins may be lower than that of its peers.

Net debt of RM54.8m

Timberwell may focus on clearing its debt before it pays out any dividend as its current interest expenses have averaged RM4m over the past 4 years. Nonetheless, with the increased optimism in the timber sector, Timberwell may be able to restructure or refinance its debts over a longer period.

Valuation

Fair value at RM5.00

We have estimated an average price of USD320 per cu m for Timberwell¡¦s plywood prices and USD360 per cu m for its sawn timber given the recent run up of prices. We have also forecasted a CAGR of 2.6% for plywood and sawn timber prices. Based on these estimates, our EPS forecast of 26.3 sen for FY04 means Timberwell is trading at 15.8x projected PER. This is a 16% discount to the timber sector PER of 18.8x as of 10th March. With the revaluation of FMU3 which will be submitted for approval this quarter, Timberwell is also trading at 0.9x of its book value.

Timberwell has outperformed the KLCI by over 200% since December 2003. This may reflect the growing realisation that its sustainable forest concession gives it a big advantage as long as the company is able to extract what has already been allocated to it. Based on our Discounted Cash Flow model, we value Timberwell at RM5.00 given its potential for long term stable earnings. The value is price sensitive, with a 1% increase in the CAGR of log, plywood and sawn timber prices resulting in a fair value of RM5.81 while a 1% reduction in the prices CAGR gives a fair value of RM3.95. The stock is currently trading with a potential upside of 20.2% based on assumed prices for log, plywood and sawn timber.

There you go.

Do you like the way the analyst had reasoned the stock should be worth that much?

First, "An independent valuation of FMU3 has priced it at RM220m. This translates into a huge jump for Timberwell's assets and a corresponding 4.12x increase in its NTA/share from RM1.21 to RM4.99" A re-evaluation of asset.

It then brushes aside the net debt issue. ( I wonder if the analyst saw the company had only 273 thousand left in its piggy bank!)

Then it gave an EPS forecast of 26.3 sen!

Fantastic! From losing money the last three years, Timberwell earnings is supposed to drop from the heavenly skies. The stock earnings for fy 2004, despite all the recent year losses, is projected to be 14.3 million or an earnings per share of 26.3 sen. Yes babe!

From zero EPS to a 26.3 sen EPS! WOW! Well done!

And then... of course... to spice it up... a DISCOUNTING CASH FLOW model is created for Timberwell.

All the right ingredients eh?

So here comes the trick question.

Is the TARGET PRICE important or what is more important is the reasoning why the stock deserves such TARGET PRICE?

Think about it... :P

On 11 March 2004, the stock opened at 4.16. Had a high of 4.18 and a low of 4.02. It closed at 4.06.

Ok... stop laughing.

Please.

The very next day.... err.... the stock.... PLUNGED!!!!!!!!!!!!!

No joke!

TWO TRADING DAYS later, the stock closed at 2.74!

From 4.16 to 2.74!

Holy moo moo cow!

Take a look!

And get this.

A year later, Feb 2005, if one takes a look at Timwell's quarterly earnings, Quarterly rpt on consolidated results for the financial period ended 31/12/2004, one would have realised that the FY 2003 final audited losses were adjusted to 5.95 million! And yeah, Timwell had losses for FY 2004 too! And it had losses for FY 2005 too!

Of course OSK has its Disclaimers nicely inserted back then!

• The information in this report has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.

Remember that.

Remember they accept no liability for any direct or indirect losses!

Of course they have since changed the wordings slightly.

• All research is based on material compiled from data considered to be reliable at the time of writing. However, information and opinions expressed will be subject to change at short notice, and no part of this report is to be construed as an offer or solicitation of an offer to transact any securities or financial instruments whether referred to herein or otherwise. We do not accept any liability directly or indirectly that may arise from investment decision-making based on this report. The company, its directors, officers, employees and/or connected persons may periodically hold an interest and/or underwriting commitments in the securities mentioned.

So how?

Is the TARGET PRICE important or what is more important is the reasoning why the stock deserves such TARGET PRICE?

Of course, hackers would scream out loud!

Hindsight is simply story telling!

Here are some of the more recent ones.

Remember the JCY story? (Oops that passed a long time already yes?) 27th Aug 2010: Regarding JCY International

• JCY earned some 207 million for its fy 2009. CIMB says times are good in 2010, so JCY should earn some 359 million! And 2011, JCY earnings will be even more super. JCY should earn some 441 million by then!

And JCY's Target Price of 2.68 was based on this projection. A projection that JCY should earn 441 million.

And the reality?

• .... JCY's total 3 quarters so far is only 198.944 million. And to make matters worse, the earnings are declining each quarter. Would JCY even post a net earnings of 250 million for its fy 2010? I dunno. And what's CIMB's estimates again? 359 million for 2010 and 441 million for 2011!

Clearly, back in Aug 2010, one could clearly see that CIMB numbers were way too optimistic.

And sadly, JCY started missing... and the downgrade of earnings had to be made.... and with it ... the downgrade of Target Prices.

Do remember JCY has 2044 million shares!

Simple exercise for fun. Do you think JCY should trade at around 1.00?

Let's back track. For JCY to trade at 1.00 and at a PER of 12x (why 12x? Well that's what folks like CIMB had been using for JCY) JCY eps should be around 8.3 sen. And based on 2044 million shares, this would translate to an earnings of 169.652 million. Ok so far?

Is an earnings of 169.652 million possible for JCY?

JCY Q1 earnings is only 7.5 million only!!!! Can JCY's remaining 3 quarters earn some 162 million? Or an average of 54 million per quarter? From 7.5 million per quarter to 54 million per quarter?

Ok. How about a more recent example?

Take Perisai. Have you not heard people suggesting out loud that Perisai target price is 1.43?

Yes?

Did you hear that?

Why 1.43?

Cos the anaylsts said so!

:P

Seriously. Is the target price all that matters?

Or should one take the time and read how the anaylsts are reasoning why the stock is worth so much?

From this month's posting: Why Perisai Is Rated So High By The Local Analysts?

Let me paste what's written here again:

My comments: Again as stated before the potential is a mere USD25 per annum revenue. (revenue and not profit). I am also curious the statement 'NOT the same asset'. Look that asset is going to be 'refurbished' (Yes, going to be refurbished. The rig is not even fully converted yet! and yes, Perisai is buying a refurbished unit. A reconditioned unit.). So doesn't the 'refurbished' unit comes from the very same asset???

♦ Potential for upside. Our back-of-the-envelope calculation suggests net profit contribution from the charter to be around RM40-50m, vs. the FY10 reported net profit of RM10.3m and FY11 consensus net profit of RM30m (which excludes the Intan acquisition as well as this proposal). As this proposal is only expected to be completed in the 4Q11, the full-year impact would be in FY12, lifting the current consensus FY12 net profit estimate to around RM70-80m. Assuming 846m enlarged share capital, this suggests an FY12 EPS of 8.3-9.5 sen or a PER of 10.6x. Tentatively assuming a target PER of 15x, i.e. in line with our target for the market, this implies a fair value estimate of RM1.25-1.43/share.

My comments: RHB is now declaring that the NET PROFIT contribution from the charter works out to be RM 40-50 million and the very basis of their reasoning that Perisai should be worth around RM 1.25 to 1.43 per share.

Now that's their reasoning and based on their estimated earnings they reckon Perisai should be worth that high.

Simple question to ask is what if their estimate is way too optimistic?

Ah... why such a question?

Reasoning is simple also.

The higher the estimate the higher the assumed fair value is.

Yes?

From my flawed mindset, I would ask the following questions...

The obvious glaring thing for me is that Perisai's own comments is that Garuda is only giving them a USD 25 million revenue per annum. To be exact, let me paste again.

• 9) The expected revenue of USD25 million is based on the bareboat charter to be entered between the Target Company and GEM.

Using a slightly higher USD exchange rate conversion of 3.1 to the Ringgit, this would be about rm 77.5 million expected revenue per annum.

And is 'expected' revenue only. Sometimes the figure can be lower.

Now what's RHB estimated PROFIT? Let me quote them again:

• Our back-of-the-envelope calculation suggests net profit contribution from the charter to be around RM40-50m,

rm 40-50 million per annum??

Take the lower number, 40 million.

So RHB is saying from a revenue of 77.5 million, the net profit contribution should be at least 40 million????

WOW!

Isn't that an extremely profitable business?

But is the charter of a MOPU such a profitable business???

Is that possible?

Now the following document is posted by Perisai: PERISAI-announcement(290311).doc

• The bareboat charter of MOPU business is a competitive industry, with other players operating in the Malaysian market. Competitive factors include price and quality of services as well as the quality and availability of MOPUs.

Those were Perisai's own words.

The bareboat charter of MOPU is a competitive industry!

If that's the case... how did RHB analyst come out with an estimate net profit contribution of at least rm 40 million??

Hey in terms of net profit margins, RHB is saying a net profit margin of 40/77.5 = 52%!!!!

A 52% net profit margin estimation when Perisai declared that "The bareboat charter of MOPU is a competitive industry"!

WOW! WOW! and WOW!

Think about that.

And the other silly question I would ask is if Garuda's earnings potential is good, ie 40-50 million per annum, why is Nagendram selling Garuda to Perisai for only 210 million????

How?

Think about it. Is RHB estimate way too optimistic?

What if.... Perisai's earnings from this charter business is only worth say 10 million per annum. Adding in Intan Offshore possible earnings contributions and Perisai's own business, perhaps a 40 million net earnings is pssible.

Now the problem with a 40 million estimate, based on an extremely enlarged new share base of 845.791 million shares, this would work out to an eps of only 5 sen per share!

And get this... if I use a 15x multiple on Perisai, this would equate to rough estimate of only 75 sen!

Ok. Of course that's a flawed simple thinking.

However, you can play around the numbers yourself. Yes, PLEASE DON'T USE MY FLAWED ESTIMATE OF 40 MILLION! :=)

You could use a net profit estimate of 50 million. This would equate to an eps of only 6 sen!

What about CIMB Research? Here's a snap shot.

• Perisai is paying US$70m (RM210m) in cash and shares for Garuda Energy (L) Ltd, owner of a jack-up rig that is being converted into a MOPU, which will be supplied to an oil major. We estimate that Garuda will contribute RM40m p.a. to Perisai’s bottomline effective 4Q11. In view of this, we raise our EPS forecasts by 25.0% for FY11, 76.8% for FY12 and 67.6% for FY13.

Same.

CIMB also is using the estimate value of Rm 40 million!

How?

Ah.. perhaps their (RHB and CIMB) estimates are all spot on... and my posting is simply flawed!

Yes, that is is very much possible but whatever it is, best you think about it.

So how?

Is the TARGET PRICE important or what is more important is the reasoning why the stock deserves such TARGET PRICE?

Mudajaya Shares Plunges!

On today's Edge Financial Daily: RM1b worth of new jobs in FY10 for Mudajaya (Apparently OSK released that report yesterday)

• RM1b worth of new jobs in FY10 for Mudajaya
  Written by Financial Daily
  Thursday, 05 August 2010 11:23
  
  Mudajaya Group Bhd
  (Aug 4, RM4.93)
  Maintain buy at RM5.08 with a target price of RM7.33: Based on our estimates, Phase 1 (RM762 million) hit 41.9% completion as of June versus 23.2% in January. We understand that deliveries for the key plant components are slightly delayed to August from June as scheduled earlier due to minor specification changes. Nonetheless, management reaffirms that the entire project is on track for completion by end-2012.
  
  We expect the bulk of the revenue recognition for Phase 1 to take effect this year. There are also plans to expand capacity by another 2x360MW when the existing four plants near completion.
  
  This means Mudajaya could land another EP contract estimated to be worth RM1.7 billion.
  
  The Indian government intends to set up nine Ultra Mega Power Plants (UMPPs), three of which have been awarded. The next two up for grabs are located in Chhattisgarh and Orissa, for which the prequalification of tenders will be conducted by end-August.
  Evaluation is expected to take two to three months before the final tenders are called, which could then take another six to seven months before the results are known. Each UMPP will have a capacity of 4,000MW and cost about US$5 billion. Mudajaya intends to bid for both UMPPs via a consortium.
  
  During its AGM, Tanjong said it intends to bid for the UMPPs together with Mudajaya. We gather that an Indian-listed contractor, IRB Infrastructure, could potentially be the consortium’s local partner.
  
  Management did not provide details on the shareholding structure, but we think Mudajaya may take up a 20% to 25% stake. We believe that if successful at the bid, Mudajaya could grab a slice of the EPCC contract, expected to be worth US$3.75 billion.
  
  Locally, Mudajaya will be submitting its tender for the civil works portion of the LRT extension, which will close by month-end. Recall that Mudajaya constructed some stations for the existing line.
  
  The company is also looking at the seven highway projects planned under the Public Private Partnership (PPP).
  
  However, it intends to participate in those jobs as a pure contractor instead of a concessionaire.
  
  It is also eyeing some PFI projects comprising education facilities and power plants. Overall, management is guiding for RM1 billion worth of new jobs for FY10. — OSK Investment Research , Aug 4
  
  
  This article appeared in The Edge Financial Daily, August 5, 2010.

As you know, Mudajaya shares plunged!

And OSK had a report with a recommendation of "Maintain buy at RM5.08 with a target price of RM7.33".

The next day stock plunges 20%!!

Ouch!!!

Is Mamee Well Loved??

Saw the following article: Mamee — the well-loved blue monster

LOL!

A well-loved blue monster????

Oh gawd... given such a title... lemme guess.. the research report is from the one and only.... OSK!

And as usual, I seek the chart of Mamee first.

Why?

Well, we need to know where the stock is compared to recent days. Are we buying a potential sleeping beauty? An undiscovered gem? Or is the broker (LOL! if you are sensitive with the word 'broker' (just to be broken, eh?), I could always use the name 'research analyst'.:P ) insinuating a BUY call when the stock looks like it's on a very strong erection, which needless to say, allows us, the punters or investors the very chance and opportunity to try our 'luck' on the sacred money-making-strategy of buy high, sell much, much higher to the next sucker theory. :P

(ps: obviously... that above is my flawed ways to look see. And obviously.. you might even have a much better strategy. :D )

Anyway... here is Mamee's stock chart.

The arrow... the arrow... under Share Price Performance...

• Prices 3 Months.... LOW... 2.800 (28-May-10)
• Prices 6 Months.... LOW... 2.000 (30-Nov-09)

Hmmm... 6 months ago... Mamee... the well-loved thiny... was 2.00.

Hmmm... 3 months ago... Mamee... the well-loved thingy.. was 2.80.

Today, the stock is 3.70.

:P

Now I am able to grab a hold of the report. Yay! ( hmm... you think they happy? :P )

Hmm... price is rm 3.70.

They think the well-loved monster is worth.... rm 4.00.

Hmmm.....

Stock is... way up.... buy higher and hope to sell higher at rm 4.00??

Hmmm....... mmmmmmm.......

but.... but.... butttttt..... I really have to give them credit for saying the following.....

• Buy recommended. Given the recent rally in the share price, upside to our TP of RM4.00, based on the PER of 11x over FY11 EPS, is rather limited. Nonetheless, given the current strong sentiment on consumer stocks, we initiate on Mamee with a Buy.
  
  
  

Glad they realise the upside is rather.... limited. :P

I then want to se how the "based on the PER of 11x over FY11 EPS".

Yessir me... I do understand that everyone says that a company should be worth what it can earns in the future.

Yup... the stock in the share market is usually priced what it can makes or don't make in the future.

But.. but... butt.... butttttt...... who determines the future earnings?

What if the future earnings is way optimistic?

Yeah... yeah... what if a broker jacks up the earnings estimate... then... surely... the stock... 'appears' to be worth so much more... yes? (ah.. the beat the 'estimates' game we always see on the TeeVee)

Well according to table, Mamee earned some 44.4 million in fy 2009. Current fy 2010, it should earn around 48.4 million. And the next year, fy 2011, it should earn some 54.9 million.

And OSK values Mamee based on this 54.9 million. :P

See it's simple.

It uses a 11x PER over fy 2011 number.

Compare the difference.

Fy 2009, eps is 29.3. Well 11x of this eps = 3.22.

Fy 2010, estimated eps is 36.3. Well 11x of this eps =3.99 or 4.00.

And currently? The most recent quarterly earnings looks something like this....

The research report also said....

• Mamee has net cash of RM45.7 million and is well supported by a healthy net operating cash flow of RM20 million to RM30 million a year.

Here's Mamee's most recent balance sheet. here

Well.. if my eyes is not faulty.... the piggy bank cash balances as at 31st March 2010 for Mamee stands at 40.688 million. (ps at 31st Dec 2009, Mamee piggy bank cash balance is skighty more... at 43.457 million)

How? How did OSK get 45.7 million?

And oh... apparently... Mamee is an expert in the stock market!

No joke.

In the first 3 months of the current fiscal year...

• Mamee purchased some 9.142 million worth of shares.
• Mamee disposed some 8.923 million worth of shares.

And how can Mamee not be an expert when Mamee made a very impressive 45 thousand from these purchases/disposal of quoted shares.

You reckon I should call them for some share market tipsy?

Mamee's five year chart.

ps: I am not the Sotong, so I surely do not know if this posting will help you lose money. Ok?

OSK Claims Offer For Southern Steel Is Reasonable

Oh gawd!

On today's Star Business: Hong Leong founder Quek believed to be buying Southern Steel

• ..... However, OSK Research analyst Ng Sem Guan views the offer as a reasonable one but suspects that long-term investors such as SSB co-founder Datuk Dr Tan Tat Wai, who collectively owns 7.9% in the company, may deem the offer price too low and are unlikely to accept the offer.
  
  He said the offer price represented a 5.7% premium to OSK’s original target price of RM1.94 and suggested that investors, especially those with a short-term investment horizon, accept the offer or dispose of the shares in the open market.
  
  Ng does not expect an upward revision to the offer price.
  
  He added that the further acquisition of SSB by Quek came as a surprise.
  
  “We had earlier thought his recent privatisation of Hume Industries may suggest a possible exit from the steel business as it gave him the flexibility to make a disposal at the right pricing and realise a huge pile of cash,” he said in a note.
  
  In a statement to Bursa Malaysia on Friday, the offeror said it intended to keep SSB listed if its shareholding level together with PAC rose above the 75% threshold but remained less than 90% after the offer lapsed.

Huh?

OSK's target price for Southern Steel is 1.94?????

I am truly baffled? How does OSK changes target prices so fast like that? How could a company's value swing from 2.04 to 3.04 to 1.94 in less than one year? Yeah eight months to be precise!

As mentioned in the posting, Southern Steel Privatisation Offer

• I was left baffled. How, where, when and why did OSK suddenly make its decision to change it's target price from rm 2.12 to rm 3.04? (huhu... that's a 43% increase in target price hor. From Nov to Jan.. can the valuation of a company suddenly increase by a whopping 43%???? Well, apparently in OSK stock recommendation universe it can!)

From Nov 2009 to Jan 2010, target price went from rm 2.12 to rm 3.04. Best of all, one of the MAIN REASON and justification given was that Southern Steel could be a potential M&A target play!

OSK now claims its target price is only 1.94.

But if it did... it's even more incredible!

Let's see...

Nov 2009 target price 2.12
Jan 2010 target price 3.04
Current target price 1.94!!!

huhu!

Now since OSK covered Southern Steel under Bursa CBRS scheme, I decided to do a quick search.Here's my search results. Only 2 hits!

1. March 2010: Southern Steel: A Pleasant Surprise ( BUY: Target Price 3.04)
2. May 2010: Southern Steel: Alert on Medium Term Outlook (HOLD: Target Price 2.50)!!!

huhu!

In May 2010, OSK gave it a target price of rm2.50!

They now claim muted M&A excitement! And that Southern Steel is falling below estimates! (Now GLEE! (yeah I used it.. that four letter word. :P), the higher than normal estimates were assigned by yourself initially. So you cannot blame Southern Steel to be falling below estimates can you?)

huhu!

How?

From a CBRS user perspective. ( Let's assume one is. )

So OSK Research covers Southern Steel under Bursa CBRS Research reports.

November 2009, it says BUY with target price 2.12. link to research report on Bursa website

It then went on made a huge upgrade on Southern Steel's Target Price on 20th Jan 2010 report but that report was not loaded in Bursa website!

From 2.12 to 3.04, big upgrade yes? Important? And you think OSK would have shown the CBRS users some respect by loading that said report!

March 2010, all the CBRS user sees is Southern Steel target price is suddenly changed to 3.04.

So how could the investor know that OSK had made such an incredible alteration with its Target Price recommendation for Southern Steel.

And then on May 2010, OSK downgraded Southern Steel to a HOLD with a target price of 2.50.

The same analysts now appears in the media and claims his target price is only 1.94! How? Why wasn't the report loaded into Bursa CBRS??? Why not???

And he claims that the offer price of 2.05 for Southern Steel to be reasonable!

Why?

Cos the offer price represented a 5.7% premium to OSK’s original target price of RM1.94!!!

huhu!

What EXACTLY is his meaning of OSK original target price of 1.94??

ORIGINAL TARGET PRICE OF 1.94????????

ORIGINAL TARGET PRICE OF 1.94????????

ORIGINAL TARGET PRICE OF 1.94????????

ORIGINAL TARGET PRICE OF 1.94????????

!!!!!

What's the recent target prices?????

Nov 2009, it was 2.12
Jan 2010, it was 3.04
May 2010, it was 2.50
Jul 2010, it is NOW 1.94

Who in Jan 2010 said the following:

• "We think Southern Steel may easily carry a price tag of above RM3 per share at 8.0 times normalised earnings if a major block is offered to the market. This, together with the good results and a more promising 1H, prompts us to maintain our BUY recommendation with 12-month target price of RM3.04," it said.

Well apparently in OSK Stock universe, anything and anyhow also..... CAN!

Southern Steel Privatisation Offer

The last two postings on Southern Steel was..

1. 7 May 2009: A Quick Look At Southern Steel And The Steel Sector
2. 12 Nov 2009: Southern Steel Swings Back To Profit

On 13th Nov 2009: on Bursa CBRS, we can see the following report: SOUTHERN STEEL BERHAD (clickable link on the name SOUTHERN STEEL to Bursa CBRS website or via the search link on the key phrase 'Southern Steel' from 12 Nov 2009 to present day.

• As Southern Steel’s 3Q results came in lower than expected and its 4Q performance is hinged on developments in the China market, we are expect a minor loss for FY09. Nonetheless, we are hopeful for FY10 as stimulus packages around the world serve to drive steel demand. The rich market liquidity is also prompting investors to turn their attention to high beta steel stocks, which justifies our BUY recommendation. We are tagging our 12-month target price at RM2.12.
  

Now on 22nd Jan 2010, OSK Research had the following comments on SSteel. (Strange this article did NOT appear from my search via Bursa CBRS! I wonder why! :P)

I am baffled. The target price os not rm 3.04. November's target price was only rm 2.12! (you can also read the same thing from the edge malaysia: OSK Research maintains Buy on Southern Steel at RM2.39

• It said on Friday, Jan 22 Southern Steel’s 4Q results were a pleasant surprise to the research house and the market. Apart from being impressed with good showing, it was generally bullish on the steel price and demand outlook for 1HFY10.
  
  "This together with the possibility of the company being a potential M&A candidate post-privatisation of Hume Industries, we maintain our BUY recommendation with a target price of RM3.04. The fair value is derived from a blended valuation of 9.0 times PER and 1.17x NTA per share on FY10 numbers," it said.
  
  OSK Research said it was looking at a potential M&A for Southern Steel. The company, 42%-owned by Hume Industries, is currently under-going a Voluntary
  General Offer by its major shareholder, Tan Sri Quek, to take the holding company private.
  
  "We suspect the privatization of Hume may give the ultimate shareholder the flexibility to exit the steel business at the right pricing. Tata Steel, which is the company’s second major shareholder, is the prime candidate as an interested party.
  
  "We think Southern Steel may easily carry a price tag of above RM3 per share at 8.0 times normalised earnings if a major block is offered to the market. This, together with the good results and a more promising 1H, prompts us to maintain our BUY recommendation with 12-month target price of RM3.04," it said.

I was left baffled. How, where, when and why did OSK suddenly make its decision to change it's target price from rm 2.12 to rm 3.04? (huhu... that's a 43% increase in target price hor. From Nov to Jan.. can the valuation of a company suddenly increase by a whopping 43%???? Well, apparently in OSK stock recommendation universe it can!)

Ah... but then I found it... on 20th Jan 2010, OSK had a long, long report on the steel sector. LOL! Since the report is long (29 pages), needless to say, the target prices are long too. LOL! :P

On page 27 of the report,

Ah..... there.... that was their reasoning. It was a potential M&A target.

On Friday evening, Southern Steel Berhad (“SSB” or the “Company”) Receipt of Notice of Unconditional Take-over Offer

• The Board of Directors of the Company (“Board”) wishes to announce that the Company has today received a notice of conditional take-over offer (“Notice”) from Hong Leong Investment Bank Berhad, on behalf of Signaland Sdn Bhd (“Offeror”) on the Offeror’s obligation to acquire all the ordinary shares of RM1.00 each in SSB which are not owned by the Offeror and the persons acting in concert with the Offeror (“Offer Shares”) at a cash consideration of RM2.05 per Offer Share. Notice of Take-Over Offer.pdf

LOL!

Err... to be taken private at rm 2.05 per share.

OSK ass-u-med and said out boldly that a potential M&A could make Southern Steel worth rm 3.04!!!

How now?

Back in January, Hume Industries was taken private. Yeah, I was appalled and totally disgusted at the privatisation offer. It was an insane price. Way too cheap!

• 20 Jan 2010: Comments On Hume Industries Privatisation
• 22 Jan 2010: Taking Of Hume Industries 1,2,3!
• 27 Jan 2010: Offer For Hume Industrious Is Way Too Low
• 17 March 2010: Who Is Public Investment Bank Trying To Kid By Saying Offer For Hume Industries Is Fair?

And sadly, I did not see MSWG mention anything on this privatisation offer. Hope I did not miss those comments, if any.

Any lessons from all these?

Is there any advantages of being a long term shareholder when the majority shareholder can delist the company any how and at any price? (ps. if one had followed OSK comments and bought SSteel based on the M&A thingee... how now?) Seriously hor, 'suka suka' list, 'suka suka' delist. I mean, as a minority shareholder, isn't there a feeling that one is a shareholder is simply there waiting to be screwed by the major shareholder?

And what about other Hong Leong companies? Would you dare to be a long term shareholder? What if a privatisation offer happens when the share is in the doldrums? What if the privatisation offer is way below your cost of investment?

How?

So What Is OSK Saying Now About MMC

Blogged this morning. Comments On MMC Earnings

Just got a copy of OSK latest report on MMC.

Here's OSK comments.

• MMC’s results disappointed again, pulled down by continued losses at Zelan and high tax and MI rates. While we expect the high tax and MI rates to normalize, the disappointment at Zelan leads us to forecast zero associate earnings for 2010 and strip out Zelan from of our Sum of Parts value for MMC. Due to the lower net profit forecast (down 5%-6%) and a higher attributed WACC due to market volatility, our SOP fair value is reduced to RM2.54. Nonetheless, there is still value in the company, and the upcoming 10MP as well as hopes for expansion of the Tanjung Bin power plant prompt us to maintain our Trading Buy call.
  
  

So it's Zelan's losses, higher tax rates and MI rates.

It's not the fault of the researcher who had assigned such incredible earnings forecast of 424 million.

Yeah, MMC is only expected to see an earnings growth of ONLy 79.3%.

So if MMC disappoint, it's not all MMC's fault and not the fault of the researcher who assign such an incredible earnings forecast.

Hey, researcher cannot be wrong, yes?

Now here comes another incredible thing.

MMC only earned some 34.3 million for the first quarter. OSK did revised down the earnings forecast for MMC.

Earnings estimate fell from 424 million to 399.1 million. Yeah, OSK downgraded the earnings estimate to 399.1 million.

Yeah, after MMC earnings on a Q-Q basis fell from 107.7 million to 34.3 million, OSK still expects MMC to have a yearly growth of some 68.6%!!!

WOW!

No wonder MMC is still considered a trading buy despite having its target price revised down from 2.80 to 2.54.

Incredible!

Let's see.. one year has 4 quarters. First quarter MMC only earned some 34.3 million. To reach 399.1 million, MMC needs to earn some 364.8 million for the remaining 3 quarters!. Oh, this equates to roughly an earnings of rm 121.6 million per quarter.

LOL!

Good or what??!!

Comments On MMC Earnings

I just saw Business Times article on MMC earnings.

• Power, ports drive MMC profit jump
  
  Published: 2010/05/26
  
  MMC Corp Bhd (2194), a power producer and port operator, said its first quarter net profit rose by a tenth, driven by its power and logistics businesses.
  
  The group, controlled by Tan Sri Syed Mokhtar Al-Bukhary, expects to do better for the year to December 31 due to a better Malaysian economy. It made a net profit of RM236.7 million for 2009.
  
  MMC made a net profit of RM34.4 million for the quarter to March 31. Revenue was up 8.2 per cent to RM2.1 billion. Its pre-tax profit jumped by almost a third to RM210.4 million.
  
  The group's energy and utilities division, which posted a revenue of RM1.7 billion in the quarter, reported improved results. Its share of the group's pre-tax profit rose by 19 per cent.
  This was "mainly driven by better performance of Malakoff Corp Bhd and higher volume gas sold by Gas Malaysia Sdn Bhd," MMC said in a statement to Bursa Malaysia.
  
  Its transport and logistics division's share of pre-tax profit surged 75 per cent due to higher throughput volume from port business, following the global economic recovery.
  
  However, there was lower contribution from its engineering and construction division due to the lower contribution from the double-track railway project. This is due to revisions in the overall margin, MMC said.
  
  Shares of MMC fell 1.3 per cent to close at RM2.26 yesterday.

It is sounding good eh?

Then I look more carefully.

That one line "It made a net profit of RM236.7 million for 2009." made me curious.

Last year, it made 236.7 mil. Now the first quarter it only made 34.4 million. At this rate, surely MMC would make much less money.

Time to do some digging. :D

Feb 2010: Quarterly rpt on consolidated results for the financial period ended 31/12/2009. MMC made 107.7 million.

Nov 2009: Quarterly rpt on consolidated results for the financial period ended 30/9/2009. MMC made 90.534 million.

Doh!

MMC said it made only 34.4 million!

Then I realised something..... hey... Mr. OSK, did write something on MMC and I blogged on it. OSK's What If Blue Sky Valuation! LOL! the report was written by Head of research, himself, Chris Eng! Hello Is The Stock Market Heading For Better Times Or .... Not???

Hmm... my mind started racing. LOL!

Seriously... LOL!

I was so excited... cos...I forgot how OSK made their valuation on MMC already and I was wondering how is MMC earnings compared to OSK's forecast made.

Oh my!!!!!!!!!!!!!!!!!

Quote:

• While we are conservatively sticking to our earnings forecast for now

Chris Eng's conservative forecast earnings for MMC Corp was rm 424.2 million!!!!!!

Come lah.. how can this be considered conservative when the earnings forecast was assumed to grow at 79.3% this year!!!!!!!!!!

Does earnings grow so easily????

79.3%!

LOL!

Oh... MMC only earned 34.4 million!!!!!!!!!!!!!!!

How lah?

Is The Stock Market Heading For Better Times Or .... Not???

On May 7th 2010, OSK Research Head, Chris Eng said Stock market heading for better times

• ... economy will be back in business in 2011, and the stock market will be better than what it is now, said OSK Investment research head Chris Eng.
  
  “With the listing of Petronas’ (Petroliam Nasional Bhd) units in the second half of the year, there will be a spillover into the oil and gas play.
  
  “The Sarawak state election should also provide some excitement. Things should go back to normal by year-end,” Eng said during the launch of OSK’s Top Malaysian Small Cap Book: 50 Jewels.
  
  Eng added that most of his clients were now trading in the market, although clients who had global headquarters were still cautious. According to him, the next few months will be choppy with a mixture of positive and negative headlines, but all these are temporary factors.
  
  Eng has a year-end FBMKLCI target of 1,465 for 2010, and a fair value target of 1,580 for 2011....
  
  

Now it's ONLY May 24th 2010, in the Edge Financial Daily, Volatile landscape for FBM KLCI, Eng was quoted to have said the following:

• ...OSK Research head of research Chris Eng said while the current market weakness raised concerns, it was largely within the research house’s expectation.
  
  Eng foresees a volatile landscape for the FBM KLCI, which is expected to trade at between 1,250 and 1,400 within the next five months.
  
  “We are still hopeful of a stronger year-end once the sovereign debt crisis in Europe subsides,” Eng said in a research note.
  
  
  This article appeared in The Edge Financial Daily, May 24, 2010.

You can also read this: OSK Research still hopeful of a stronger year-end

Tada... the FBM KLCI target is NOW only expected to trade between 1250 and 1400!

May 7th 2010, the stock market is headed for better times, a target of 1465 was expected. Today the target is now only 1250 and 1400!!!!

Good or what???

OSK On Sino Hua An

Posted the other day.. Update on Sino Hua An Losses

I made the following remarks:

• As mentioned in the early posting, OSK's previous earnings forecast for Sino Hua An was much, much higher than KN, at rm 100.3 million. I am disappointed because I have yet to see OSK make an update on Sino Hua An's earnings today. I wonder... why... hmmm....

Today, OSK finally loaded their report on Hua An.

They downgraded their earnings forecast by a whopping 62.9%!!!

Totally unreal.

And more incredible if you take their Jan earnings forecast of 120 million into consideration.

Here's OSK recommendation.

• Downgrade to NEUTRAL. The exceptionally poor earnings visibility prompts us to trim our earnings forecast for FY10 and FY11 by 62.9% and 53.8% respectively.

So from an earnings forecast of 120 million in Jan 2010, it was lowered to 100 mil on 1st March 2010 and now to a mere 37.2 million.

So in a span of 4 months, the earnings forecast was lowered by a whopping 82.8 million!

Holyyyyyyyyyy singing cow!

And it continued....

• The murky outlook also suggests that we switch our valuation to PBV, which reduces our fair value from RM0.70 previously (7.8x PER FY10 EPS) to RM0.40, based on 0.6x FY10 BVS.

Aikkkkkkkkkkkkkkksssss!

So from using a PER valuation, valuation is now done using PBV!!!!!!!!!!!!!!!!

Holyyyyyyyyyyyyyyyy cow!

Go figure out why I like OSK so much!

• We downgrade our call to NEUTRAL from Buy previously.

Ahem.

Let me see if I get this correct.

On January 2010: Rising demand to benefit Sino Hua-An. Sino Hua An was at 52 sen. OSK called it a buy with a Target price of 87 sen.

On 1st March, Sino Hua An was 48.5 sen, OSK gave it a buy with a Target Price of 70 sen.

Today, Sino Hua An is at 38.5 sen. OSK calls it Neutral with a target price of 40 sen.

WOW!