JAKS Resources Again

Blogged previously: OSK Report On JAKS Resources



As said in the earlier posting:

• I am so confused. OSK managed to produce a huge 7 page report but would not commit to any CALLS on the stock despite the huge disparity between the current traded stock price and their target price. Well I wonder why.

Anyway, JAKS reported its earnings on New Year's Eve.

I wasn't optimistic at all but that's not important. I was more curious how JAKS fared against OSK optimistic earnings projection made back in July 2009. As mentioned in the earlier posting:

• That was JAKS last reported earnings on 29th June 2009. JAKS half year 2009 earnings is a loss of 3.82 million.
  
  Hmmm...... and OSK has a forecast of 22.6 million for JAKS for FY 2009!
  
  Optimistic eh?
  

Here's the screen shot of Jaks earnings.


Fy 2009, JAKS lost some 6.7 million. OSK earnings projection was a massive 22.6 million!!!!

Now as I had mentioned before, I do realise that earnings projections is something that one should take with large pinches of salt. Not saying that the analysts do not know what they are projecting but earnings projection or earnings estimate is simply difficult because one is predicting what the company 'might' earn in the future.

However, having said that, the example of how OSK made its earnings projection for Jaks was rather questionable.

Simple common sense stuff, really.

Consider the following questions.

Did JAKS recent earnings performance suggested it could 'live up' to such 'optimistic' earnings projections?

Have a look at the previous screen shot here again.

As one can see from OSK own numbers: JAKS had lost 6 million in FY 2006, JAKS made 12.4 million in FY 2007 and JAKS made 2.9 million in FY 2008.

So judging from such historical earnings, how did OSK come up with such earnings forecast of 22.6 million for FY 2009?

What was JAKS current earnings indicating then?

Well back then, JAKS first half earnings for fy 2009 was a loss of 3.8 million. And yet by boldly saying that Jaks could earn some 22.6 million for fy 2009, wasn't OSK wildly optimistic?

Here's some simple math. Effectively for JAKS to end the fiscal year earning some 22.million, OSK was saying that JAKS would earn some 22.6+3.8 million or 26.4 million for the remaining 2 quarters for fy 2009. Or some 13.2 million per quarter. Was it even possible? Did JAKS even earned more 10 million per quarter since its listing?

So how did JAKS (stock was trading at 77 sen back then, with a fair value of 1.23!) fared since that 7 page, colored report from OSK?

OSK Report On JAKS Resources

You are a research house. You have a stock trading at around 0.77. You reckon it's worth 1.23. What do you do?

1. Make a buy call.
2. Neutral.
3. Sell

Unable to decide?

Here is the said stock chart.

How?

If the stock is trading at 0.77 and you think it's worth 1.23, surely you would make a BUY call, yes?

Well, if you are OSK, you could the following statement.

• We derive an indicative trading target of RM1.23 for the stock but do not have a call on the company!

I am so confused. OSK managed to produce a huge 7 page report but would not commit to any CALLS on the stock despite the huge disparity between the current traded stock price and their target price. Well I wonder why.

As I was reading the report, the revenue/net profit historical trend chart caught my attention.


Hmm... at first I thought JAKS was making good money with the long GOLDEN bars drawn on the chart. Then I looked closer. The GOLDEN bards represented revenue.

Then I noted the value stated on the right of the horizontal axis. I saw where the zero was. And then I noted the thin line across the chart represented net profits and I saw how many times the profit line went below zero!

Oh... JAKS is not a company with a strong historical track record.

So I wondered what was OSK's earnings forecast for JAKS.


Hmm ... as per OSK numbers, JAKS lost 6 million in FY 2006, JAKS made 12.4 million in FY 2007 and JAKS made 2.9 million in FY 2008. And OSK forecast for FY 2009 is 22.6 million!!!

Rather optimistic because ....... err..... Quarterly rpt on consolidated results for the financial period ended 30/4/2009

That was JAKS last reported earnings on 29th June 2009. JAKS half year 2009 earnings is a loss of 3.82 million.

Hmmm...... and OSK has a forecast of 22.6 million for JAKS for FY 2009!

Optimistic eh?

And then OSK tried to 'explain' how it got the fair value of 1.23.


Historical Average PER?

Historical Average PBV?

Gosh.. could someone explain to me. :p2

How?

I still do not understand hor.

If JAKS's fair value is worth so much at 1.23 and JAKS is only trading at 0.77, why OSK doesn't want to make a call on this stock? Yeah, did I not mention that OSK report on JAKS was rather long - 7 pages? ( Err.. write so long why no make call?)

Jaks Resources

Water infrastructure company JAKS Resources Bhd has been seeing some pretty heavy duty trading activity.

Now there is this interesting piece on the Star Business section today.

JAKS shares up for third straight day

Shares in JAKS Resources Bhd rose for the third consecutive day amid heavy trading, despite the company announcing on Dec 30 financial results that were below analysts’ expectations. JAKS ended yesterday 50 sen or 11.11% higher.

Hmmm... stock's financial results were below ze market sifu's expectations ... and yet... the stock is selling like hot cakes.... yeah, yeah, guilty once more. Mumbling yet once more... anyway, I do like this following one statement the best...

An analyst with a local research outfit attributed yesterday’s five sen jump to the overall positive market sentiment, adding that there was no particular reason for the stock to garner so much interest.

Hmmm.... No particular reason for the stock to garner so much reason... LOL!!!!

Now i find that so farnee hor...

Don't you?

I mean... stocks needs a catalyst for people to buy mah, tiok boh?

Now this sifu cames out and sing loud-loud that there is no particular reason...

hmm... mmmmmmmmm

Looks like the stock got legs to kaki-kia hor... LOL!!... :P

Now here are some ... err... trick questions... LOL!!!

From a business-perspective, why does one invest in a company?

My answer?

The company is making tons of moola and it's very likely to continue to make much, more moola in the future.

And the possibility of the company to make much, much more moola is perhaps a catalyst for folks to buy the stock.

The company is finding big moola mah.. u want onot?

Now of course, silly-billy-me, on the other hand, there is Ze CHIAK (err.. hokkien word hor) theory!

Now dis Chiak theory... we buy the stock cos ze stock is gonna fly (or fry?) up, up and awayyyyyy (fiyoo.. long time no say this pharse)....

Soooooo since the share is going up .. isn't dis why i should also CHIAK the bugger!

How? :P

Ok, enuf humour for now... let's get serious a bit...

So ... we have a stock whose earnings were below sifu's expectations and there was no particular reason for the stock to garner sooooo much interest... so i am wondering just how is Jaks doing because the only financial info that is written in the article is the following:

For the financial year ended Oct 31, 2005, JAKS posted a net profit of RM8.9mil on revenue of RM235.6mil compared with net profit of RM32.4mil and revenue of RM215.7mil a year earlier.

Hmmm....

Jaks current net profit for current fiscal year is rm 8.9 million.
Jaks net profit for its previous fiscal year is rm rm 32.4 million.

Hmmm.... Net profit not so geng wor! Dropped soooo much. No wonder they call it below expectations!

But.... butt.... butttt....

Here is the link to Jaks latest earnings...

Quarterly rpt on consolidated results for the financial period ended 31/10/2005

Wahhh.... that reported 4th quarter... JAKS lost rm12.195 million!!!

Wahhh.... isn't this a rather piece of important information???

How come the reporter no say this in the article???

How cannnnnnnnn???




ps... JAKS and CHIAK.... err... does it rhyme? :P