That Unfair Offer On M3Nergy

I was asked why I did not write on the M3Nergy privatisation saga.

Well...it's a long saga. :D

Let's see where should I start?

Hmmm... it was 29th November 2002.

There was this company called MMM or Malaysian Merchant Marine Bhd. On that day, MMM made the following announcements: Changes in Director's Interest (S135) - Shahrazi bin Sha'ari and Changes in Director's Interest (S135) - Shahrazi bin Sha'ari

The first announcement showed that Shahrazi bin Sha'ari purchased some 2,057,000 shares of MMM at a price of rm 1.00 and the second announcement showed that Shahrazi bin Sha'ari purchased some 13,393,000 shares of MMM at a price of rm 1.00 also.

Now perhaps that would sound like someone who is making a long term investment into the company.

A few days later or exactly 5 days later, the incredible happened. Shahrazi announced he was longer a shareholder! Notice of Person Ceasing (29C) - Shahrazi bin Sha'ari

Maruchi Malaysia Steel Tube Bhd announced that it was buying a 32.5% stake in MMM.

• The Board of Directors of Maruichi Malaysia Steel Tube Berhad (“Maruichi” or “the Company”) had at the Board of Directors’ Meeting held on 4 December 2002 agreed for the Company to enter into a Share Sale Agreement (“the Agreement”) with Shahrazi bin Sha’ari (“the Vendor”) in respect of the acquisition by the Company of 32.5 Million ordinary shares of RM1.00 each which is equivalent to 32.5% of the total issued and paid-up capital of Malaysian Merchant Marine Berhad (“MMM”) for a total cash consideration of RM99.9 Million (“the Proposed Acquisition”).

Well that worked to a price per share worth rm 3.07!!!!

Holy cow!

Huhu! Bought at 1.00 and within 5 days, sell it off at rm 3.07?

WOW! A 300% gain!

Good or what! :P

Who said the share market sucks?

But Maruichi shareholders were not happy.

Oh NO!!!!!!!!!!!!!!!!

• Maruichi aborts MMM deal.
  (From The Star (Malaysia))
  
  MARUICHI Malaysia Steel Tube Bhd, bowing to tremendous pressure from the authorities and minority shareholders, has aborted its plan to buy a 32.5% stake in Malaysian Merchant Marine Bhd (MMM) from Shahrazi Shaari at RM3.07 per share.
  
  In a statement to the KLSE, Maruichi said its board, at its meeting yesterday, decided to rescind the share sale and purchase agreement with Shahrazi, who is MMM chief executive officer and managing director.
  
  In a second statement later, it said that the RM99.9mil that had been paid to Shahrazi - RM35mil on Dec 4, RM64.8mil on Dec 10 and RM100,000 on Dec 11 - would be fully repaid to the … ( source: here ) ( Bursa announcement Share Sale Agreement dated 4th December 2002 pertaining to the Proposed Acquisition of 32.5 million Shares in Malaysian Merchant Marine Berhad ("MMM") )

On 17th December 2002: Changes in Director's Interest (S135) - Shahrazi bin Sha'ari

• Shahrazi acquired back the 32,500,000 shares via Snap Captal

August 2003.

• Trenergy to pay RM61 mln cash for MMM stake
  By Thomas Soon, 9.16pm
  
  Trenergy (Malaysia) Bhd is taking up a 75 per cent stake in the controlling block of 32.5 per cent in Malaysian Merchant Marine Bhd (MMM) for RM61 million cash, valuing the latter at RM2.50 per share.
  
  Under the deal, Trenergy will subscribe for a 75 per cent stake comprising 61 million new shares in SNAP Capital Sdn Bhd, which holds the 32.5 per cent stake in MMM.
  
  In a statement on Aug 28, Trenergy said the company and SNAP entered into a conditional subscription of shares agreement on the same day for the proposed subscription.
  
  MMM managing director Shahrazi Sha'ari and one Tan Sook Yen respectively hold 99.99 per cent and 0.01 per cent stakes in SNAP. Pursuant to this, SNAP will increase its paid-up capital to RM81.25 million from RM20.25 million now.
  
  This confirms theedgedaily.com report on the same day that Shahrazi had struck a deal with Trenergy for the latter to acquire a 75 per cent stake in SNAP for RM61 million.
  
  Trenergy said the acquisition price valued MMM at RM2.50 per share as SNAP's sole investment was its 32.5 per cent comprising 32.5 million shares in MMM.... (see Bursa announcement here ).

So bought at 1.00.. finally sold at 2.50. Nice eh? :D

But amazingly despite the initial attempt to hive off the shares for a 3x gain, Shahrazi Sha'ari, remained as Managing Director and CEO of MMM until May 2006 ( see Change in Boardroom ) and stayed on as a director until November 2006. ( see Change in Boardroom )

And Shahrazi Sha'ari was featured on a Star Business article on Jan 2005.

• Monday January 24, 2005
  Interest in marine lands Shahrazi into shipping
  
  BY LEE KAR YEAN
  SHAHRAZI Sha'ari was only 37 years old when he was offered the arduous task of taking over the management of Malaysian Merchant Marine Bhd (MMM) on his return from his studies and working stint in the United States in 2001.
  
  His venture into the shipping industry was purely by choice as he was into it for the challenge and keen interest in the marine business.
  
  “I came back to Malaysia after the Sept 11 terrorists' attack on the US and I was soon offered the management post in MMM.
  
  “Many people were puzzled by my decision to join the company at that time because of the uncertainties in the world economy and the shipping business was no exception. But I took up the challenge because of my interest in the marine business, I have many friends and contacts in the shipping industry from ship captains, engineers to cooks,” he said.
  
  Shahrazi graduated with a bachelor of arts from Macalester College In Minnesota. He worked in the US for five years in a senior managerial position with a civil engineering company before his return to Malaysia.
  
  Looking back, MMM has done very well indeed under his leadership, chalking up an increase in turnover from RM38mil in the financial year ended Aug 31, 2001 to RM120mil last year. The group's after-tax profit was also up from RM8.7mil in the financial year 2001 to RM11mil in the same corresponding period last year.
  
  Shahrazi said his experience in turning around several companies came in handy. He was previously involved in the restructuring of several companies in the manufacturing, communication, engineering and construction sectors before taking the bold step to go into the shipping industry.
  
  His various senior positions included executive director of the Wira Security group of companies and chief executive officer of the Pacific Asia Consolidated group of companies.
  
  Shahrazi came on board MMM and assumed the position of chief executive officer on Aug 8, 2002.
  
  He was appointed to the board of directors of Trenergy (Malaysia) Bhd as group managing director and chief executive officer on Sept 6, 2004.
  
  “I will give myself three years to build up Trenergy,” he said. “As a CEO, it is my duty to give direction and have a vision for the company. It is my job to restore certainty to the company.”
  
  Trenergy became the largest shareholder in MMM via its acquisition of SNAP Capital Sdn Bhd. Trenergy currently holds 100% interest in SNAP Capital, which in turn owns a 28.7% stake in MMM.
  
  On the steel pipe maker Melewar Industrial Group (MIG) Bhd's decision to purchase a substantial stake in Trenergy via its wholly-owned subsidiary Melewar Steel Services Sdn Bhd, Shahrazi said the latest development would not affect the direction and agenda of the Trenergy group.
  
  “There will be no change in our direction and agenda. The Trenergy board of directors will remain,” he told StarBiz.
  
  MIG had acquired 12 million shares representing 16% in Trenergy for RM38.4mil or RM3.20 per share, making it the single largest shareholder in Trenergy.
  
  MIG said the acquisition would provide an opportunity for the group to venture into the “burgeoning” oil and gas industry and its supporting ancillary and shipping activities at a low entry cost.
  
  The move was also in line with MIG's board decision to diversify into other industries to broaden MIG's earnings base.
  
  MIG managing director Tunku Datuk Yaacob Tunku Abdullah said Trenergy was a well-managed, vibrant and profitable oil and gas player with a lot of potential.
  
  He describes oil and gas as the sunrise industry in Malaysia and MIG will see much growth in this sector in the coming years.
  
  According to analysts, the purchase by MIG is appropriate as the group's steel products will complement Trenergy's floating, production, storage and offloading operations.

Trenergy since had changed its name to M3Nergy....

Then come 2007.

• 28-08-2007: M3nergy to exit M’sian Merchant Marine
  by Lee Yu Tang
  
  KUALA LUMPUR: M3nergy Bhd is exiting Malaysian Merchant Marine Bhd (MMM) by disposing of its entire 28.67% stake and also Islamic preference shares (IPS) in the shipping company for RM33.5 million cash.
  
  It said yesterday Core Attributes (M) Sdn Bhd (CASB) had approached it to acquire the MMM stake comprising 50.37 million shares and 470,000 IPS.
  
  M3nergy’s existing investment in MMM for the 50.37 million shares and 470,000 IPS of RM1 each was RM97.89 million.
  
  “The proposed disposal would enable M3nergy group to exit from its non-core activities and re-focus on its core activity which is in the oil and gas (O&G) industry,” it said.
  
  M3nergy said the cash derived from the proposed disposal would be used in its core activities, which was the O&G industry.
  
  CASB’s core activities are investment holding, property development, provision of general and telecommunication advisory services, food and beverage services and general trading.
  
  CASB’s issued and paid-up share capital is RM500,000 and the principal directors and shareholders are Shahid Islam, Sharlini Marnickam and Suresh Rajaratnam.
  
  “The carrying value of the ordinary shares and IPS under the proposed disposal as at June 30, 2007 is equivalent to the market value on that date amounting to RM15.7 million.
  
  “Based on this carrying value, the group would realise a gain of about RM17.8 million upon completion of the proposed sale of shares,” it said. The proposed disposal is expected to be completed on or before Sept 30.

Trenergy paid 61 million.. now sold at 33.5 million? :P

But the MMM story did not end!

But the sale involved put options and it got messy. The deal was not completed! Here's an announcement in 2009.

• M3NERGY BERHAD ("M3nergy" or "the Company") - FURTHER ANNOUNCEMENT ON THE NOTICE OF PUT OPTION IN RESPECT OF THE REMAINING 20,933,884 ORDINARY SHARES OF RM1.00 EACH IN MALAYSIAN MERCHANT MARINE BERHAD (“MMM”) (“OPTION SHARES”) TO CORE ATTRIBUTES (M) SDN BHD, DATO’ RAMESH RAJARATNAM AND DATIN SL SHARLINI MANIKAM.

Come April 2009, it got even worse!

• M3nergy to sue firm over put option
  
  Published: 2009/04/28
  
  M3NERGY Bhd said it would sue Core Attributes (M) Sdn Bhd (CASB) for breaching a put option to buy more shares in Malaysian Merchant Marine Bhd.
  
  It will also continue to find buyers for its 20.93 million shares of MMM, which was meant to be sold to CASB under the option.
  
  M3nergy’s board will meet again in two weeks to decide what to do next if it fails to find a buyer.

In the midst of all that, in 2008, Melewar offered to buy M3Nergy. Which was rejected...

• Saturday October 18, 2008
  
  M3nergy shareholders advised to reject offer
  
  Melewar’s takeover bid at RM1.20 per share deemed too low
  
  PETALING JAYA: The Melewar group’s move to take over M3nergy Bhd suffered a setback when the independent adviser for the minority shareholders recommended that they reject the offer.
  
  The independent adviser, Kenanga Investment Bank Bhd (KIBB), recommended that M3nergy’s independent directors and non-interested shareholders reject the offer as the RM1.20 per offer share was too low....And recently M3Nergy is being offered to be taken private by Adamus Avenue.

And here is the latest news on M3Nergy: M3nergy: Adamus offer unfair and unreasonable‎

• Saturday July 24, 2010
  M3nergy: Adamus offer unfair and unreasonable
  By EDY SARIF
  
  PETALING JAYA: M3nergy Bhd believes the conditional takeover offer from Adamus Avenue Sdn Bhd was unfair, unreasonable and therefore, not compelling.
  
  It told Bursa Malaysia yesterday that the offer did not seem to reflect the underlying value of the company as well as the prospects of the company’s business.
  
  It added that the board had concurred with the opinion of its financial advisor HwangDBS Investment Bank Bhd (HDBS) on the offer and received similar view from TA Securities Holdings Bhd, which was the independent adviser. Both parties stated that the offer was unfair and unreasonable.
  
  However, it said the board’s decision not to pursue other offers was independent of the appointment of HDBS and it was primarily driven by the fact that there were no other offers being presented to the board at the material time.
  
  To recap, in May, Adamus Avenue Sdn Bhd had launched a conditional takeover of M3nergy Bhd, offering RM1.85 per share.
  
  Adamus is a privately owned by M3nergy Bhd managing director and chief executive officer Datuk Shahrazi Sha’ari.
  
  The RM1.85 offer price was at a premium of 16 sen or 9.47% over the last closing price of RM1.69 on May 14.
  
  Shahrazi’s wife Datin Tinawati Nordin is the other shareholder in Adamus Avenue.
  
  The corporate exercise is to acquire all existing 126.65 million shares of RM1 each in M3nergy not yet owned or held by the offeror.

How?

Me? I am glad I am not a minority shareholder in M3nergy but if I was, I be asking why is the offer so much lower than M3Nergy's assets value.

MMM Has No Money For Audit Fees!

This is getting seriously embarrassing!

MMM needs to raise RM300,000 for audit fees

• Wednesday July 21, 2010
  MMM needs to raise RM300,000 for audit fees
  By SHARIDAN M. ALI
  
  PETALING JAYA: Malaysian Merchant Marine Bhd (MMM) needs to come up with about RM300,000 for the advance audit fees for this year and outstanding audit fees for 2009, said executive director and executive deputy chairman Datuk Ramesh Rajaratnam.
  
  He said the company had no substantial income at the moment as it had obtained an ex-parte injunction order to prevent the sale of its two vessels – MMM Dayton and MMM Kingston.
  
  “The only vessel that is in operation right now is MMM Ashton. But, the income derived from it is used to pay our suppliers,” he told StarBiz.
  
  Ramesh said MMM now had to figure out how to pay the outstanding audit fees for last year and substantial deposit for it to commence the 2010 audit to the external auditors.
  
  He said he had previously funded the company for a few months in the form of salaries and advances among others.
  
  “I personally had to stop funding the company. The 2009 audit fees and deposit for this year’s audit are not a small amount. Going forward, I just want to pay off our creditors and close shop,” Ramesh said.
  
  In a filing with Bursa Malaysia on Monday, the financially distressed shipping company said it had yet to confirm the commencement of the 2010 audit with the external auditors as the 2009 outstanding fees and payment of the 2010 audit fees had not been resolved.
  
  Its directors said they were deliberating on the next step to take with regards to this matter and appropriate announcements would be made in due course.
  
  MMM’s business and restructuring was badly affected by the recent financial crisis. Its Islamic debt securities was continuously downgraded by Malaysian Rating Corp Bhd (MARC) since late last year.
  
  MARC downgraded its rating on MMM’s RM120mil Al Bai’ Bithaman Ajil Islamic Debt Securities to D from C on April 2 after the company failed to meet a repayment of the debt on Mar 29.

Seriously..... sigh.

Some recent postings on MMM:

• 16 March 2010: Another Shocker From Malaysian Merchant Marine
• 17 March 2010: More On Malaysian Merchant Marine

More On Malaysian Merchant Marine

I was just chit-chatting randomly, talking ... sorry... talking about MMM (Malaysia Merchant Marine).

VSS is not say unexpected given current global environment but to VSS the entire staff is truly shocking. This says it all about the company eh?

Anyway, I was chatting about an old discussion on MMM. Here's a screen shot. Click here. In it I mentioned OSK gigantic growth earnings projection.

I found that old OSK report.

I thought it would nice to show.

Quote:

• Charter rates for tanker and bulker have been accelerating by 40-50% y-o-y due to vessel shortage as well as increase in merchant trade
• The forecast charter rate for tanker and bulker segments have been raised to take into account of the current spot rate
• Performance of RoRo segment is stable with a 70% utilisation rate
• Going forward, forecast EPS for FY04-05 raised by 69% and 75%, driven by rising charter rate and additional tanker and RoRo
• Upgrade to a Buy with a revised 12-mth fair value of RM3.60/share

Ah.. EPS growth of 69% and 75%.

You would need to click on the picture to get a readable view.

Ahh.. some would argue that it's normal to read 'optmistic' views and 'optmistic' earnings projections.

I agree.

Business economics can indeed change.. for the better sometimes. It happens.

But... look at the date of the report. It states Jan 2004. What if I roll back to just July 2003. Just 5 months earlier.

Take a look at what OSK said in July 2003.


Look at the proce of MMM in Jul 2003. It was just 1.23. OSK Target price for MMM was 1.60. And the FY 2004 forecasted earnings for MMM was just 16.7 million.

Now let's compare these 2.

1. July 2003, price for MMM, was 1.23. OSK gave it a TP of 1.60.
2. Jan 2004, price for MMM was 2.21. OSK increased it to a TP of 3.60.

And this was justified by the OPTIMISTIC earnings projection. A earnings projection of 16.7 million became an earnings projection of 30.1 million.

(note this 16.7 million already optimistic because its previous year earnings was a mere 9.4 million)

See how 'optimistic' becomes such a lovely justification to rate a stock higher and higher?

And here's two old articles on MMM written on Star Business back in 2003. (Sorry link is broken)

• Saturday August 16, 2003
  An ambitious marine
  
  STORIES BY JOSE BARROCK
  
  MALAYSIAN Merchant Marine Bhd (MMM) is a small shipping company with big dreams. Having stood its ground during the economic downturn that rocked so many sectors and companies, it seems as if things are looking up for the marine.
  
  Still, not many analysts are drawn to track this low profile company. The only time it really hogged the limelight was back in December last year when Maruichi Malaysia Steel Tube Bhd announced a controversial deal to acquire a 33 per cent stake in MMM at RM3.07 per share or RM99.9 million. The deal was aborted following the strong outcry by minority shareholders and has since turned out to be a success story of minority shareholder activism in the country.
  
  Shortly after, MMM slipped back to low-key mode.
  
  Shape up or ship out
  
  In no industry is the phrase “Shape up or ship out” most relevant given the highly competitive nature of the industry and the wild swings in yields that the players are exposed to.
  
  The choice between the two for MMM is quite obvious. Its chief operating officer Captain Panichellvam Ratnam says over the next three years, the company will have a fleet of 20 vessels – up from 12 units currently. The expansion will roughly cost some US$60 million-US$80 million (cost per vessel ranges from US$7 million to US$10 million depending on the size and type)
  
  “If we keep pace with the current developments, MMM should have no problems bringing its fleet to 20,” he says in an interview with BizWeek.
  
  Future strategy also happens to be clearly set out. The marine will focus on three business – tankers, bulk vessels and roll-on-roll-off (RoRo) ships (used specifically to transport cars) – to ensure that its earnings are not threatened or vulnerable to just a sole segment in the transportation industry.
  
  “We (MMM) like to maintain focus on all three arms ... It's a very good balance, a very good distribution,” he adds.
  
  What's hot
  
  The company's foray into RoRo or vehicle carrier market is quite recent. In 2001, it acquired MMM Parana for RM11.4 million.
  
  Currently it has four RoRos. The move has attracted the attention of one analyst from OSK Research. “It is the only local company doing such business here. It can give lucrative returns and is set to drive the group's earnings over the next two to three years,” says the analyst.
  
  Panichellvam asserts that there is a lot more that can be done in this area that will be developed in the near future.
  
  Indeed, the RoRo market is booming. For example, he says, last year, there was tremendous demand for automobiles in China from Japan. “'This is a very interesting area we are looking at. We may be getting more (RoRo) vessels, either of the same size (as currently) or larger ones.” It is widely speculated that MMM plans to acquire another two of such vessels, but Panichellvam declines to elaborate on this issue.
  
  The new business venture has proven to be a boon to the group's earnings.
  
  Net profit grew by 12 per cent to RM9.68 million for financial year ended August 2002 from the previous year while turnover rose over two-fold to RM80.61 million. The RoRo division contributed 10 per cent to MMM's earnings and 30 per cent to sales for the year respectively.
  
  The company is set to report another impressive year in 2003. For the nine months ended May 2003, it posted net profits of RM7.86 million against RM85.41 million sales – a 13 per cent and 38 per cent rise respectively from the previous corresponding period.
  
  At home and abroad
  
  Both on the domestic and regional front, things are looking up for MMM. “In the Asean region, Malaysia currently is the only nation with huge domestic (vehicle) trade because of the movement (from Peninsula Malaysia) with Sabah and Sarawak. The rest of the regions like Indonesia and Philippines currently lack buying power ? but things in these countries are picking up, which will benefit us eventually,” says Panichellvam.
  
  Another plus point for MMM is that its carriage of vehicles is expected to get a boost from the removal of trade barriers within the Asean region as a result of Asean Free Trade Area (Afta) Regulations.
  
  “With the advent of Afta we are looking to be more of a regional player than a domestic one ? Laem Chabang in Thailand is an important (automobile distribution) centre, Philippines, Jakarta in Indonesia and the emerging Indian market especially Chennai will bring tremendous development in this area,” he adds.
  
  Creating a vehicle transhipment hub
  
  The group seems to be moulding itself into a vehicle transhipment hub. To do that however, it would need to tie-up with the region's big RoRo players. Such plans are in fact already being thrashed out by the senior management.
  
  Basically, MMM is keen to transport vehicles to Asean member countries after giant RoRo players have transported the automobiles from Japan and other manufacturing countries to the regional hub. Some of the big players here would include names like Nippon Yusen Kabushiki Kaisha, Kawasaki Kisen Kaisha and Mitsui OSK Lines.
  
  “We (MMM) are looking at supplementing the larger players in the RoRo sector, we are very capable of handling such a project...we are looking at it,” says Panichellvam.
  
  Such aspirations are quite well placed given that two of its RoRo vessels are already operating on the international front while the remaining two ply domestic routes.
  
  As a first step towards this plan, in July this year, MMM acquired almost 49 per cent of MMM Siam Shipping Company Ltd – a company set up in February this year with business in ship management, cargo collection and doubling up as a transit centre for shipping vehicles – for RM11,266 cash. In an announcement to the Kuala Lumpur Stock Exchange, the company said the acquisition would provide MMM with a good position in the Asian vehicle transportation market and more specifically in the “Detroit of the East” which Thailand is commonly referred to as.
  
  In anticipation of such a move, the share price of MMM rose significantly just two weeks prior to the announcement. MMM's share price surged to a 52 week high of RM1.38 on July 14 this year.
  
  And another good thing – MMM has little to worry about in terms of emerging rivals as the analyst says the high barriers to entry in the RoRo segment will stave off competition. Relatively, each RoRo vessel costs between RM40 million and RM50 million, which is rather high compared to a conventional vessel. Offsetting this, however, is that generally, RoRo vessels command higher charter rates compared to both bulkers and tankers and require less maintenance costs.
  
  Pick up in growth
  
  Apart from the RoRo division, growth in the other two areas – tanker and bulker divisions – have also picked up rather strongly as freight rates have stabilised recently after a protracted decline. Against this backdrop, MMM stands to reap significant benefits, particularly following its timely acquisition of another tanker MV MMM Kingston earlier this month.
  
  The bulker and tanker divisions contributed 40 per cent and 30 per cent respectively to group sales in financial year (FY) 2002.
  
  A shipping analyst points out that freight rates have climbed steadily by some 15 per cent so far this year and are expected to rise similarly next year. He expects MMM's earnings to rise by 20 per cent and 33 per cent in FY03 and FY04 respectively on the back of higher freight rates and the recent acquisition of the 7,000 dead-weight tonne tanker – MMM Kingston.
  
  MMM Kingston has been chartered out to a Korean oil company on a two-year contract. The contract was secured prior to the acquisition. Typically, shipping companies ensure that they have a contract in hand before they move forth to make any vessel acquisition.
  
  Panichellvam enthuses over the prospects of the tanker sector. “It's picking up, it's getting interesting ? there are marked improvements in the sector, in line with the opening up of markets with the WTO (World Trade Organisation) regulations ... the opening up of palm oil barriers.”
  
  MMM plans to continue to tap the opportunities of rising freight rates in the industry. It plans to acquire additional vessels, one of which has already been delivered and another, a RoRo, possibly by next month.
  
  “In the last 10 years, this is probably the best time, apart from last year that is, to acquire ships ... so, why not,” Panichellvam says, referring to the attractive prices of vessels in the current environment.
  
  Building bulk
  
  Similarly, bulk rates are on an upward trend, hence lending a bright outlook for this division that is currently the group's largest sales contributor. The rates have risen by 70 per cent from last year to around US$18,000 per day presently.
  
  Currently one of the company's four bulk vessels is a cape size vessel chartered out at about US$13,000 per day on a long-term contract. This rate is 70 per cent higher from the rates charged in 2002.
  
  Despite the global trend of bulk business losing out to containerisation, Panichellvam seems quite bullish on the prospects of the division. “This sector focuses on the ports which are still not ready for containerisation ? these ports are in China, the Philippines ... Containerisation requires the ports to have gantry cranes and other such equipment which require high capital. As such, it will take some time before all the ports in Asia can switch to containerisation. (Meanwhile), we should have no problems.”
  
  MMM is also looking at adding on more bulk vessels as part of a larger fleet expansion plan to capitalise on potential lucrative contracts for iron ore and coal transportation in the country.
  
  Some of these large contracts are likely to come from the coal-fired Janamanjung, Tanjung Bin and Kapar power plant projects. The coal carriage contract for Tenaga Nasional Bhd's Janamanjung plant alone is valued at US$400 million.
  
  “The first shipment is expected to involve three million tonnes of coal a year and is expected to grow to 20 million tonnes once the plant starts to operate on full capacity,” says Panichellvam.
  
  Local shipping companies like MMM are expected to benefit tremendously from these developments as generally, in terms of transportation needs of the country, they are given priority over the foreign players.
  
  The potential overseas seems just as robust. There is an increasing demand for coal and iron ore in large markets like Japan and China that adds to the appeal.
  
  “Japanese power plants are now increasingly reliant on coal while China requires a lot more iron ore. This works to our advantage as the demand outweighs supply making it easy for us to lock in contracts,” he adds.
  
  Bright outlook
  
  The outlook for the company and the industry as a whole, Panichellvam says, is bright. “Now ? not only for Malaysian Merchant Marine, but for all the shipping companies locally the only way is up. We (MMM) learnt a lot during the downturn in terms of out sourcing, even procuring spare parts, we started at the peak time and went through the worst of times.
  
  “Now the only way is up,” Panichellvam says.

And here's the other.

• Saturday August 16, 2003
  Riding on luck
  
  IF luck has anything to do with running a profitable shipping company, main board listed Malaysian Merchant Marine (MMM) must be among the favoured few.
  
  The company made most of its main acquisitions, its vessels, in the 1995/96 period when the shipping market was at it’s most bullish, locking in with reputable chatterers with long-term contracts.
  
  Chief operation officer Captain Panichellvam Ratnam of Malaysian Merchant Marine Bhd reminisces, “During that time it was the peak of the (shipping) market, and we never did any domestic trade ? all our contracts, everything was international, meaning our earnings were in US dollars, majority of our loans were in Ringgit, that pulled us through,” he says.
  
  Not much has changed since the early days. Today MMM has a gearing of only about one time with loans of about RM140 million of which only some 25 per cent is in US dollars.
  
  Still riding on its luck, the company, it is believed, is now planning to take advantage of the low interest rates available in the market, to refinance its loans in the hope of reducing interest expenditure to five per cent from current levels, which even reach nine per cent.
  
  An analyst from OSK Research says the company's interest coverage ratio is expected to improve from 3.7 times for the current financial year to 4.9 times and 5.6 times in the coming two financial years.
  
  Armed with the experience garnered in the last downturn, and remaining cautious and prudent despite the spate of good luck over the last few years, MMM, Panichellvam believes, will continue to do well.
  
  “We have to be cautious especially now with the freight rates going up. The chatterers are looking at tying-up long-term contracts while the rates are still gradually, slowly moving up ? we on the other hand cannot lose out by tying-up on long-term contracts with the rates still not hitting its peak ? somewhat like a game,” he adds.

Riding on LUCK?

LOL!

Anyway... back to OSK and its optimistic earnings projection.

Now do you wonder how MMM fared for its fy 2004?

Well... take a look Quarterly rpt on consolidated results for the financial period ended 31/8/2004

According to that quarterly earnings notes, MMM just earned some 10.9 million for its fy 2004.

OSK's projection? 30.1 million!!!

Go figure!

Another Shocker From Malaysian Merchant Marine

I just saw the following news article. Malaysian Merchant Marine retrenches all staff

• Malaysian Merchant Marine retrenches all staff
  
  Written by Joseph Chin
  
  Tuesday, 16 March 2010 18:46
  
  KUALA LUMPUR: MALAYSIAN MERCHANT MARINE BHD []'s (MMM) staff have accepted a voluntary separation scheme (VSS) offered by the shipping company.
  
  "Accordingly, following the completion of the VSS on March 15, all of the staff of the company are considered retrenched," MMM said in a statement on Tuesday, March 16.
  
  On March 5, the company said it was considered a Practice Note 17 company after its unit, Erayear Solution Sdn Bhd, was unable to complete the purchase of a chemical tanker under a memorandum of agreement signed with Uniships Pte Ltd on Jan 8, 2010.
  
  MMM had said the vessel was to be deployed to service a new and recurring revenue stream and was crucial for its turnaround strategy. The revenues were estimated at RM700 million and a local financial institution had approved the funding.
  
  It said part of the disbursement terms by the local financial institution included the condition that it required the consent for additional borrowings from the existing lenders of MMM.
  
  However, MMM claimed a downgrading of its Al-Bai’Bithaman Ajil Islamic debt securities from A-id to BB+id had negatively impacted it and it was unable to obtain the loan.
  
  On March 3, the vendor of the vessel issued a issued final notice of termination and forfeiture of the deposits.

WOW!

Just like this and all the staff are retrenched!

ALL?????

Now sad to say, I am not totally shocked at all about this development. This is one stock I had blogged before.

16 Dec 2006, I wrote The MMM story.

Quote:

• remember all the poor corporate governance issue regarding mmm? remember the issue of how one of them boss who Bought unashamed millions of shares in MMM from unexpected minorities in the open market, to sell them at more than 3 times the price a few weeks later to Maruichi (which deal later was cancelled). see how it's so important to avoid companies with poor corporate governance?

Quote:

• I feel sad for the minority shareholders but somehow I feel that these investors could have probably done much better. The warning signs were there since 2004.
  
  The insane earnings projections mentioned in 2004. And more especially with that funky corporate exercise in which that one fellow had bought tons of shares and then tried to pawn it off at more than 3 times the share price within a few weeks to Maruichi back in 2004.
  
  That was one insane funky music being played.
  
  The investor should have had headed for the exit doors right there and then!
  
  Now? Too late to cry over spoilt milk, eh?

Sorry to repeat again...

• see how it's so important to avoid companies with poor corporate governance?
  

The MMM story again

My dearest Moo Moo Cow,

Past blog postings on MMM can be found here.

1. The MMM story.
2. The MMM story again.
3. Update on The MMM story.

MMM or Malaysian Merchant Marine released its earnings today. Any better?

MALAYSIAN MERCHANT MARINE BERHAD
Quarterly rpt on consolidated results for the financial period ended 28/2/2007

Total losses for the quarter is 17.8 million.

How?

Update on The MMM story.

There is one huge write-up on Star Biz on MMM ( past blog posting: The MMM story again. and The MMM story. )

• A lot more to do...for MMM to get back on track
  THE writing had been on the wall for some time. After Malaysian Merchant Marine Bhd (MMM) reported a massive RM146.8mil loss for the financial year ended Aug 31, 2006 (FY06), the company has been in the news for all the wrong reasons.

Some of the issues mentioned cannot simply be discounted at all, for it really represent the extreme poor financial condition of the company. For one, the downgrade by MARC is really worth noting:

• “This is underscored by the concern on the rapid deterioration in its financials stemming from very poor financial results, as well as other adverse financial impacts vis-a-vis its ageing fleet, aggravated by softening freight rates in most of the shipping segments it is involved in,” said the rating agency in a press release.

Ageing fleet, softening freight rates. It really highlights the extremely poor business economics the company is caught in. And then the board reshuffling.

• Earlier this week, MMM reshuffled its board, announcing the withdrawal of a service contract to managing director Tunku Mahmood Fawzy Tunku Muhiyiddin. Among other changes, chairman Tunku Datuk Mudzaffar Tunku Mustapha has stepped down, to be replaced by director Datuk Jaffar Indot.

A step forward but a bit too late, isn't it? The company is really in a terrible mess. And needless to say shareholders are disgruntled and less than happy.

Me? I am just wondering and concern about these shareholders. Their ship is clearly sinking. Why are still holding on? Hoping for a miracle or what?

The MMM story again.

Blogged on the issue of Malaysian Merchant Marine before. See The MMM story.

Just saw that its debts ratings has been cut by MARC.

• Malaysian Merchant Marine debt's rating cut
  
  January 10 2007
  
  MALAYSIAN Rating Corp Bhd (MARC) has lowered Malaysian Merchant Marine Bhd's (MMM) RM120 million Al-Bai'Bithaman Ajil Serial Bonds (BaIDS) rating further, with a negative outlook.
  
  The rating was cut to "A-ID" from "AA-ID", on concerns over the company's rapid deterioration in financials stemming from poor results for the financial year ended August 31 2006.
  
  Other reasons cited include adverse financial impacts given its ageing fleet, aggravated by softening freight rates in most of the shipping segments it is involved in.
  
  The downgrade also reflects potentially weaker financial flexibility on the part of MMM to finance its fleet renewal and expansion initiatives amid high capital expenditure requirement coupled with prevailing steep vessel prices in the market.
  
  For the FY2006, MMM recorded a pre-tax loss of RM146.8 million on revenue of RM97.7 million.

The MMM story.

The story about MMM (Malaysian Merchant Marine) dated as far back as 2004, when I chatted with a friend in a now closed forum about Arisiag (a fund which prided themselves about being a 'value investing' fund) investment in MMM.

Here is a snaphot of my comments on the discussion.



And one of my forum friends commented the following based on an Edge news report:

• Caught with their hand in the cookie jar .....! MMM, Informatics, the shady deals with the HK company (insider trading) ...... yes, another fundmanager that I won't respect. There are still some good ones, though!
  
  ================================================
  
  29-04-2004: Arisaig disposes 1.78m MMM shares
  By Jimmy Yeow
  
  
  Singapore-based Arisaig Asean Fund reduced its stake in Malaysian Merchant Marine Bhd to 6.75% or 7.65 million shares after disposing of a 1.5% stake or 1.78 million shares.
  Filings with the stock exchange showed that the fund disposed of the shares over nine trading days from April 14 to April 26.
  The filings did not disclose the price at which the shares were disposed of. The counter was trading between RM1.54 and RM1.74 on those days.

And on July this year, i chatted with some friends about the grave danger in investing in companies with questionable corporate governance issue.

• remember all the poor corporate governance issue regarding mmm? remember the issue of how one of them boss who Bought unashamed millions of shares in MMM from unexpected minorities in the open market, to sell them at more than 3 times the price a few weeks later to Maruichi (which deal later was cancelled). see how it's so important to avoid companies with poor corporate governance?

And back in July 2006, MMM's earnings was already rather poor.

This was its trailing earnings then. 4 Quarters of successive losses!

Rather poor, wasn't it? And the chart back then, said it all.

And if that wasn't bad enough, on October 2006, it posted the following shocker.

Quarterly rpt on consolidated results for the financial period ended 31/8/2006

It posted a quarterly loss of over 118 million! (total fiscal year loss amounted a whopping rm146 million!)

• MMM's FY06 net loss at RM146.93m
  
  Malaysian Merchant Marine Bhd (MMMB) posted a net loss of RM146.93 million for the year ended Aug 31, 2006 againsts a net profit of RM5.6 million in FY05, mainly due to ageing vessels impairment and escalating dry-docking expenditure.
  
  Revenue for the year fell 30% to RM97.65 million from RM127 million. MMMB said on Oct 31 it would continue to sell underperforming assets and replace tonnage sold, and was looking at forming strategic chartering alliances at the regional level.
  
  It has engaged Grant Thornton to conduct a strategic review to develop a comprehensive plan and effect a sustainable operational turnaround within two years

Effectively the company was said the following:

• The Group expects write downs in values of ageing vessels in this financial year resulting in further losses after the review of declined revenue and negative contributions from respective ships

This got me thinking.

Remember those comments from my forum friend? That one fellow had bought tons of shares and then tried to pawn it off at more than 3 times the share price within a few weeks to Maruichi back in 2004.

One and a half year later... MMM is being asked to write down the value of their ageing vessels.

So, don't you find it strange?

I mean, these vessels just do not age suddenly, do they? Surely someone knew right?

Today, 16th December, there is a write-up on Business Times: here

• The bankers had to buy unsubscribed shares of MMM as they underwrote a rights issue that raised RM111 million for the firm last year. They claim the company did not disclose material information in the prospectus for the rights issue.
  
  Tunku Mahmood Fawzy Tunku Muhiyiddin, MMM's managing director and chief executive officer, declined to comment when contacted and told of the allegations.
  
  "It is inappropriate for me to comment regarding a discussion with the shareholders during an annual general meeting," he said.
  
  The shareholders are upset that the company had swung to a net loss of RM147 million in the financial year ended August 31 2006, after writing down some RM80 million in value of its ships.
  
  Other operating losses, including some RM3.8 million loss of deposits, RM5 million loss related to a subordinated bond and RM6 million of bad debt written off, also contributed to the loss.
  
  Shares of MMM has slid 75 per cent from the RM1 per rights share, which was issued in April last year, to 25 sen yesterday.
  
  "Marpol 73/78 rules state that certain type of ships will have to be phased out and the company has cited this ruling as the basis for the write-down," a banker said.
  
  "We are upset that this writedown has come out of the blue with no forewarning, when in fact such a ruling has been informed to the shipping industry since 2003," the banker said.

WOW!

Poor bankers!

But they indeed have a valid point as they argued that the write-down ruling has been informed to the shipping industry since 2003.

So why didn't MMM do anything about it?

Now if the earlier chart of MMM stock price was terrible, this recent chart of MMM's current stock price performance is even more horrible!

How?

I feel sad for the minority shareholders but somehow I feel that these investors could have probably done much better. The warning signs were there since 2004.

The insane earnings projections mentioned in 2004. And more especially with that funky corporate exercise in which that one fellow had bought tons of shares and then tried to pawn it off at more than 3 times the share price within a few weeks to Maruichi back in 2004.

That was one insane funky music being played.

The investor should have had headed for the exit doors right there and then!

Now? Too late to cry over spoilt milk, eh?