ECM Now Says Sell Notion With A Target Price Of 1.85!

So I featured RHB dramatic reversal in recommendation for Notion Vtec in the posting: Is The Downgrade From RHB On Notion Vtec Fair?

Now get a load of this.

In the posting Some Comments On Notion Vtec, I remarked that ECM Libra made the following posting ECM Libra ups target price for Notion Vtec

Now this same posting can be seen on the Edge Financial Daily. ECM Libra ups target price for Notion Vtec

• ECM Libra ups target price for Notion Vtec
  Written by Financial Daily
  Tuesday, 27 July 2010 10:41
  
  Notion Vtec Bhd
  (July 26, RM2.65)
  Maintain buy at RM2.74 with higher target price of RM3.74 (from RM3.63): We hosted a corporate luncheon recently for Notion VTec which was attended by a good crowd of buy-side analysts and fund managers. Management gave some good insights and outlook for the HDD business which will be the main growth driver in the coming years.
  
  We understand from management that due to pricing issues, debt financing will be used instead. Nonetheless, the 1-for-5 free warrants exercise will proceed as planned.
  
  Management believes the 2.5-inch HDD segment is where growth is due to (i) the explosive growth of data, (ii) high growth of external HDDs and (iii) high growth of mobile PCs against desktop PCs.
  
  By year-end, Notion expects capacity for the 2.5-inch HDD components (base plates, spindle motor hubs) to reach two million per month under its first phase. Notion currently produces 400,000 to 500,000 per month for Samsung. Subsequently, the second and third phases will proceed with each phase requiring about six months each for total capacity to reach four million per month and eventually seven million per month. Management hinted that due to political uncertainties in Thailand and the need to oversee the new plant in Klang, any major expansion in the Thai plant will likely be completed only sometime in 2011. Notion is looking to expand floor space from 25,000 to 225,000 sq ft.
  
  Orders for HDD business have been very positive so far though there was a slowdown in June. It is difficult to tell if the slowdown is simply temporary. Also, Notion is working to bring down rejection rates in its new Klang plant from 10% to 12% to 5%. In the interim, margins may be affected.
  
  We raise FY2010/12 EPS forecasts by 3% to 5% to account for (i) the aborted private placement, (ii) higher interest costs, and (iii) dilution from the in-the-money warrants. Hence, we revise our target price from RM3.63 to RM3.74 based on an unchanged PER multiple of nine times on mid FY2010/11 earnings. We are positive that progress in the new Klang plant is on track, and believe once quality issues are ironed out, margins should improve and earnings growth should accelerate. — ECM Libra Investment Research, July 26
  
  
  This article appeared in The Edge Financial Daily, July 27, 2010.

That was just last Tuesday.

Now today, ECM Libra downgraded Notion to a mere 1.85!

• Notion VTEC at headwinds
  We gather that Notion is facing some issues in the HDD segment with regards to its new plant in Klang which may have a bigger adverse impact on earnings than we initially anticipated. While Notion has managed to reduce rejection rates to current levels of 10-12%, we believe 3QFY10 earnings will bear the full brunt of higher costs, thus resulting in sharply lower margins. We also gather that orders from Samsung may not be as strong as anticipated though management declined to elaborate further pending the release of its results. Given demand and supply issues as further discussed below, it is possible that Notion may scale back expansion from phase 3 to phase 1. We downgrade Notion from Buy to SELL as we revise our TP downwards from RM3.74 to RM1.85 based on a revised PE multiple of 6x (previously 9x) on revised FY11 adjusted EPS of 30.9 sen.

Holy cow!

That's even faster and a bigger downgrade than RHB Research!

Reasoning aside... think about it... think about the implication here on the investing public who relies on such research reports for their investing decisions.

On 27th July, ECM comments were accessible to all via the broadcast on the Edge Financial Daily: ECM Libra ups target price for Notion Vtec

Price then was 2.65. Now including 27th July, six trading days has passed since.

6 trading days.

That's all it took for ECM to downgrade Notion from a TP of 3.74 to a mere 1.85!

Holy cow!

Malaysia's Exports Climb 17.2% In July

On MSN news.

• By Agence France-Presse, Updated: 8/3/2010
  
  Malaysia exports climb 17.2 percent in June
  
  Malaysia said Tuesday its exports, the mainstay of the economy, had risen 17.2 percent year-on-year in June due to stronger demand for electronic goods and liquefied natural gas.
  
  Export-dependent Malaysia, Southeast Asia's third-largest economy, was hit hard by the global slowdown and its economy shrank 1.7 percent last year.
  
  The trade ministry said in a statement that shipments had risen to 52.83 billion ringgit (16.7 billion dollars), while imports were up 30.1 percent at 46.79 billion ringgit, producing a surplus of 6.04 billion ringgit.
  
  The increase was due to greater exports of electrical and electronic goods, liquefied natural gas, chemicals and chemical products, palm oil and rubber products, among others.
  
  Electrical and electronic items account for 40.2 percent of Malaysia's total exports to markets such as Singapore, China, the United States and Japan.
  
  The economy is forecast to grow 5.5 percent this year, but Prime Minister Najib Razak recently said he was aiming for 6.0 percent this year, as he unveiled a 69-billion-dollar development plan aimed at spurring growth.
  
  Malaysia expects exports to grow between six and seven percent this year as demand improves. Exports dipped 16.6 percent in 2009. ( Source: http://news.malaysia.msn.com/regional/article.aspx?cp-documentid=4253975 )

Hmm... it's a comparison made versus last June, June 2009.

Hmmm... I rather use BNM website.

http://www.bnm.gov.my/files/publication/msb/2010/6/pdf/7.4.pdf

Now if I compile the numbers into a more simplified table and include a June export number of 52.830 billion, this would how our exports would look like..

Yes, compare to 2009, our current figures looks superb!

But...but... butttt.... if I HIDE the 2009 column... (why because 2009 was a terrible trading year for most countries globally and any comparison made versus 2009 would be rather meaningless!).. this is what I see. The dark yellow colored boxes indicates where 2010 fared worse than 2008.

How?

Here's the preliminary report from the our statistics department.

http://www.statistics.gov.my/portal/index.php?option=com_content&view=article&id=538&Itemid=61&lang=en

Here's Business Times article: Slower Malaysia export growth in June

• MALAYSIAN exports in June 2010 grew slower than market expectations, in tandem with the performance of regional peers.
  
  The Ministry of International Trade and Industry (Miti) said exports rose by 17.2 per cent year-on-year in June, while imports grew by 30.1 per cent year-on-year. Trade surplus stood at RM6.04 billion.
  
  Miti said the rise in exports was broad-based, namely electrical and electronic products, liquefied natural gas, chemicals and chemical products, optical & scientific equipment, palm oil, manufactures of metal, crude petroleum, crude rubber and rubber products.
  
  Commenting on the latest trade data, HSBC Bank Asian economist Wellian Wiranto said it points towards slower exports momentum going forward alongside its regional peers.
  
  The latest reading is the slowest since November last year due largely to the petering out of base effects.
  
  "All in all, the picture for Malaysia's exports is roughly the same as the picture we see for the region in general going forward: a less enthusiastic pace of expansion, but no double-dip," he said.
  
  Wiranto said given the relative slowdown in trading activities around the region, it may get comparatively harder for the exports of electronics, although he expects receipts from the segment to be within the RM19 billion to RM21 billion range.

Here's Star Business version: Malaysia’s exports advance 17.2% in June

Is The Downgrade From RHB On Notion Vtec Fair?

Yesterday I blogged on Notion Vtec because the stock price had been falling rather dramatically in the posting Some Comments On Notion Vtec and apparently RHB had downgraded Notion Vtec.

And the Edge Financial Daily even highlighted this issue yesterday: Notion VTec top loser on downgrade

Here's the link to RHB's report: Notion Vtec Berhad : Not As Good As Hoped - 03/08/2010

• ♦ Warning for 3Q results. The market yesterday beat us to the punch, de-rating Notion’s share price by 10.3%. We believe 3QFY9/10 results (to be announced on 5 Aug) are likely to be worse than expected due to higher costs incurred from the RM80m expansion of the 2.5” Hard-Disk Drive (HDD) baseplate capacity and lower revenue after adjusting for the weaker US$ vs. RM. Conditions are not expected to improve in 4QFY9/10.
  
  ♦ Outlook dimmed due to competition and weak demand. The outlook for 4QFY9/10 and beyond now appears more negative compared to the more bullish view after our visit to the company in May. We note that major HDD manufacturers including Western Digital and Seagate recently guided that lower-than-expected HDD demand caused by EU debt problems and slow US recovery has been compounded by capacity oversupply in the industry. Aggressive competition has thus resulted in falling prices and diminishing margins. The upside from Samsung’s aggressive expansion plans in the 2.5” HDD segment also appears to have evaporated
  
  ♦ Forecasts cut. We have cut our FY9/10-12 EPS forecasts by 21.1%, 36.2% and 47.4% respectively, after factoring in 25-35% lower sales and lower margins. We had originally expected baseplate capacity to rise from 350-400/month currently to 1m/month by end-FY10, 5m/month in FY11 and 7m/month in FY12, but the likelihood now is that the company will stop at 2m/month in FY11 while further capacity expansions will be on hold for now. We note that 80% of the capex has already been spent. For FY10, revenue has also been affected by the -7.7% YTD decline in the US against the ringgit. However, we note that we are still looking at the RM/US$ exchange rate coming back to around RM3.20-3.30 by year end.
  
  ♦ Risks to our view. 1) Recovery in demand if US economic growth strengthens earlier than expected; and 2) Fluctuations in RM/US$ exchange rate.
  
  ♦ Downgrade. Although the camera segment remains resilient and will provide some support to revenue growth, the focus will likely remain on the negative outlook for PC sales growth and the oversupply of HDDs. Our fair value has been cut to RM2.07 based on our new forecasts and a more conservative target FY9/11 PER of 8x (vs. 10x previously). Although yesterday’s share price fall suggests that the market has already factored in this negative view, we believe there is still downside risk given the uncertain earnings outlook. We thus downgrade our call on the stock to Underperform from Outperform.

Here's Notion Vtec numbers..

As it is Notion Vtec's most recent 4 quarters or trailing twelve months earnings is already some 50.553 million.

RHB's earnings forecast for Notion fy 2010 has been cut from 53.6 mil to just 41.25 mil.
RHB's earnings forecast for Notion fy 2011 has been cut from 72.4 mil to just 44.8 mil.

Of course the cuts are drastic.

RHB mentioned Western Digital itseself had been guiding lower earnings forecasts.

From yesterday posting: Some Comments On Notion Vtec

• So Western Digital says it expects the coming quarter, Q1 eps to be around 80 to 90 sen.
  Wastern Digital Q4 EPS was 1.23. (Street was expecting 1.35)
  From an eps of 1.23 to an eps of just 80-90 sen is rather a huge decline, yes?

RHB also mentioned the following factors.

1. higher costs incurred from the RM80m expansion of the 2.5” Hard-Disk Drive (HDD)
2. revenue has also been affected by the -7.7% YTD decline in the US against the ringgit.
3. Aggressive competition has thus resulted in falling prices and diminishing margins

Are the reasoning valid?

Yes, some would point out that they DID NOT like the TIMING of the downgrade!

On 16th July, which was not long ago, Notion Vtec was trading at 2.99. Why didn't RHB Research warn the investing public then? Why ONLY release the report when Notion Vtec had fallen to a low of 2.35? Notion closed yesterday at 2.11.

Isn't the timing of the downgrade way too late?

And the previous RHB Research report was made on 20th May 2010:hNotion Vtec Berhad : Set To Deliver - 20/5/2010

Yeah.. anothe massive complaint then because Notion price in May was 2.73 and RHB gave Notion an Outperform with a target price of 4.68!

Yes the grouse and utter frustration is understandable because the investing public were told by RHB Research that Notion Vtec is deemed to have a GREAT FUTURE on 20th May 2010. It's now only the beginning of August!

How can a company value diminish from 4.68 to 2.07 in just 2 months?

How can?

Here's the first two paragraphs of the RHB's report in May 2010.

• ♦ On track to deliver 2.5’’ baseplate target. According to management, construction work on its new 150k sq ft plant is near completion. The new plant which is expected to house most of the base plate production capacity is set to commence production by Sep-10. Note that management expects capex of around RM80m to ramp up the base plate capacity to 1m/month, 5m/month, and 7m/month by FY10-12 respectively from 350-400k/month (currently) vs. 100k/month in Jan-10, pending the arrival of additional equipment and machinery i.e. die casting and computer numerical control (CNC) machines. Additionally, management is planning to increase the total workforce to 3,000 by 2011 (vs. 1,900 currently).
  
  ♦ Riding on volum e loading for Western Digital (WD). The company expects stronger volume loading in 2H2010 from WD on the back of strong demand for HDD components i.e. antidisks, disc clamps, and spacers as well as WD’s market share gain. Recall that WD overtook Seagate as the number one HDD vendor in 1Q10. WD now expects to increase its total HDD shipments by more than 20%. While Notion’s current capacity for these components is 800-900k/month, management is expecting to increase capacity to 1.5-2.0m/month by end-2010....

Ah... apparently RHB Research was guided by Notion's management notes in May.

And the warrants issue. Sorry but let me repeat this again.

• Did you see OSK's report on Notion Vtec dated 16th July 2010. Notion then was 2.99 and since the conversion price for the warrants was priced at 2.55, OSK shouted out very loud that one was getting free warrants that was 'in the money'! It's now 3rd August 2010, and the warrants are no longer in the money! :P), perhaps one should use 169 million shares as the potential share base for Notion Vtec. This is to prevent the investor from being shocked by the dilution in earnings.

Putting the quality issue of OSK aside ( LOL! Yeah, what's new mate? :P) these warrants went ex yesterday, 3 Aug 2010. Entitlement is based on a 1 for 5. And some 34,003,503 were issued. With the conversion price at 2.55, some might want to account for the possible dilution in eps caused by conversion of the warrants.

Ok, let's take Western Digital's guidance numbers as a guide. Western Digital says it expects its earnings per share to drop from 1.23 to around 80-90 sen. Now the worse case 80 sen eps would represent a decline of 34.9%!!

And we do have to factor in the current strength in the Ringgit versus USD (is the Ringgit really strong or the USD really weak? :P ). What would be your guesstimate of the impact on Notion since Notion's products are priced in the USD? Would you say maybe a 5% impact caused by the exchange rate? Fair assumption? Or perhaps the impact is minimal? ( Why? Because if you look at the latest report pdf file from Notion, Notion currently has an existing USD50 million hedged to its USD receivables. )

But then ... some might argue that perhaps RHB is being far too negative. Why? Notion Vtec does NOT cater to HDD segment only!

From Notion's last earnings report.

• In Q2FY2010, HDD parts revenue recorded RM26.9 million (Q1FY2010: RM19.1 million), camera parts recorded RM20.4 million (Q1FY2010: RM26.7 million) whilst the industrial/automotive revenue was at RM9.2 million (Q1FY2010: RM10.5 million). The product mix for the Q2FY2010 was HDD:Camera:Industrial/Automotive of 48%:36%:16% compared to previous quarter's mix of 34%:47%:19%. The HDD revenue increased by 40% whilst the camera sector was lower by 24% compared to Q1FY2010.

Hmmm.... HDD revenue increased by 40% in Q2Fy2010!

And what about me?

If I have to throw in a dart, I would say perhaps an earnings of 32 million for Notion for its fiscal year 2011. LOL! Yes, that low. :P

LOL! Stop starring la. I am NOT a Sotong and that's my darts figure and surely I could be dead wrong. :P

Now RHB's earnings per share is based on just 154 million. The last approved placement share of 15.4 million shares, which has not been placed out yet, has been currently discounted by RHB.

Let's see two scenarios. One with 154 million share base and the other with 169 million shares.

1. With 154 million share base, an earnings of 32 million equates to an eps of 20.7 sen.
2. With 169 million share base, an earnings of 32 million equates to an eps of 18.9 sen.

And what would be the fair PEx multiple you would use?

And so far, apparently RHB is the ONLY research house to downgrade Notion's Vtec earnings.

Now in the posting Update On Notion VTec. on 4th May 2010, I noted some of the other earnings forecast made on Notion Vtec.

• RHB's 2011 net earnings forecast for Notion is 56 million. (LOL! Downgraded since then)
• Kenanga's 2011 net earnings forecast for Notion is 62 million.
• CIMB's 2011 net earnings forecast for Notion is 80.8 million.
• And here comes the champion... OSK... OSK's 2011 net earnings forecast for Notion is 95.0 million.

How?

You want to BUY Notion now because you think Notion has dropped a lot?

Or you want to do a wait and see. Yeah, wait for Notion's quarterly earnings notes, which should be announced this month, first.

How?

Some Comments On Notion Vtec

Notion the shares has been plunging and since I had made several postings on it, I thought perhaps it's best I make some comments or two on the stock.

The first thing I would always refer to is if there exist any negative news that might impact the stock.

On the Edge Financial Daily yesterday, there was this article HDD makers continue to fall

• Written by Koo Jie Ni
  Monday, 02 August 2010 11:33
  
  KUALA LUMPUR: JCY International Bhd and Notion VTec Bhd continued their downward trend last Friday, as Western Digital’s dour quarterly forecast warning sent stocks of hard-disk drive (HDD) manufacturers reeling.
  
  JCY and Notion VTec are fellow manufacturers of HDD components, although the latter has also diversified into production of camera and automotive parts.
  
  News reports on July 21 had it that international HDD maker Western Digital attributed its forecast profit dip to laggard spending patterns, European debt worries and lower prices....

I find it rather ironic. :D

Of course, as an investor, one would regard Western Digital's profit warning as important BUT in May 2010, Notion Vtec management did warned too regarding future profits. See posting Update On Notion VTec.

• Management warned that there is some risk that capacity ramp-up and product testing costs for its 2.5” base plate and spindle motor lines could dampen earnings in the next two quarters

And in April 2010, I blogged on the potenial earnings dilution caused by the continous share placements.

1. Honey, My Notion's Earnings Per Share Has Shrunk!
2. Reply To Notion's EPS Dilution Caused By Share Placements

And my concern as stated in the second posting was:

• However, let me stress that we are now looking at an increase of 29.270 million new shares, which works out to a 20.8% increase from the initial share base of 140.717 million.
  
  And in my opinion, this is simply way too much in such a short time frame. January 2010, share base increase by 10%. Now Notion wants to increase by another 10%.
  
  If one is a minority shareholder, what would one expect?
  
  Which means, after these two share placements, Notion Vtec earnings has to increase by more than 20.8%, in order for the minority shareholders to see 'real growth' in their earnings per share.
  
  Would this be possible?

Now something had happened... on the 27th July, ECM Libra ups target price for Notion Vtec

• We hosted a corporate luncheon recently for Notion VTec which was attended by a good crowd of buy-side analysts and fund managers. Management gave some good insights and outlook for the HDD business which will be the main growth driver in the coming years.
  We understand from management that due to pricing issues, debt financing will be used instead. Nonetheless, the 1-for-5 free warrants exercise will proceed as planned.

So apparently, there's a chance that the second share placement would not happen.

Management said it was due to pricing issues.

But from an investing perspective or from a conservative perspective, shouldn't one question why?

Yes, besides pricing, why wasn't Notion Vtec able to perform this share placement? Why can't Notion Vtec able to attract new investors? Are the investors sceptical? Do they know something we don't?

But then of course, the 'opportunist' might say that perhaps this sell down is a 'strategy' to push down Notion Vtec's shares so that it could be able to priced out these share placements.

Well, frankly, I do not discount that. Yes, I think it's possible but if that was the case and I am the minority shareholder now, how could I possibly be happy if this was the case?

But as it is.... it's mere speculations.

Hmm... Notion Vtec was supposed to announced its earnings in July 2010. (Its previous quartely earnings was posted on 29th April 2010)

Anyway from a dilution point of view, since Notion Vtec has NOT officially announce on Bursa website in regards to the second batch of placements, I guess perhaps from an earnings dilution perspective, it's best one to remember the following table..

Discounting the warrants (lol! Did you see OSK's report on Notion Vtec dated 16th July 2010. Notion then was 2.99 and since the conversion price for the warrants was priced at 2.55, OSK shouted out very loud that one was getting free warrants that was 'in the money'! It's now 3rd August 2010, and the warrants are no longer in the money! :P), perhaps one should use 169 million shares as the potential share base for Notion Vtec. This is to prevent the investor from being shocked by the dilution in earnings.

So what did Western Digital warned about? Western Digital warns of weak Q1, shares slide

• * Q4 EPS excluding items $1.23 vs Street view for $1.35
• Western Digital executives warned that heightened competition from companies like of Hitachi and Seagate Technology (STX.O) will pressure margins, while demand in the current quarter is expected to stay weak amid economic turmoil in Europe and lackluster U.S. consumer demand
• For the current quarter, Western Digital expects revenue of $2.35 billion to $2.45 billion and earnings per share of between 80 cents and 90 cents. That is sharply below analyst expectations of $2.6 billion in revenue and earnings per share of $1.47 for the current quarter, according to Thomson

So Western Digital says it expects the coming quarter, Q1 eps to be around 80 to 90 sen.

Wastern Digital Q4 EPS was 1.23.

From an eps of 1.23 to an eps of just 80-90 sen is rather a huge decline, yes?

So that was a massive profit warning from Western Digital, yes?

And so how for Notion Vtec?

Surely there's going to be an impact yes?

And unfortunately, Notion Vtec at this moment of time, Notion VTec shares has increased and if Western Digital profit warning holds true, then do you think that there's a strong chance that Notion Vtec's EPS could see a bigger decline?

ps: This posting is as it is. I do not know if Notion will continue to fall or make a rebounce. Please contact your nearest Sotong if you really require such information.

Should Media Continue To Spin News To Drive A Stock Up?

Yup.. the media publishes the According To Sources spin, the stock flies, the company denies and very soon, the stock falls back down.

And over time... everyone forgets all about it... how the media helped push up the stock.

On Bursa website: Eastern & Oriental Berhad ("E&O" or "the Company") Article in The Edge, 2 August 2010, "Are E&O shareholders looking at privatisation?"

• We refer to the article entitled "Are E&O shareholders looking at privatisation?" published in The Edge on 2 August 2010.
  
  E&O would like to clarify that the Company has not received any notice from any of its shareholders pertaining to plans to privatise the Company. The Company is also not aware of any such plans by any of its shareholders.
  
  This announcement is dated 2 August 2010.

Let's look at how the E&O fared yesterday.

The stock of course opened GAP up, with a 6 Sen Gain!

Many thanks to the power of the pen!

Glee!

It would be nice if the Bursa have a look at why the Edge constantly publishes such news and oh, do check out if the author constantly pens such articles.

PS... in regards to yesterday trading....

ps: The media publishes the article in the weekend and the very first thing the stock does is to open gap up with higher than normal volume. Go figure that out.

ps/ps: if the stock markets is a sport, would you score this as an assist for the media?

Premium Over Traded Prices Means A Fair Offer?

A privatisation offer priced at a premium over traded stock price does NOT necessary means the offer price is fair.

Paying the minority shareholder premium peanuts still means the minority shareholder is getting peanuts.

And a peanut is a peanut is a peanut is a nut.

And not all investors are nuts.

Do not insult us.

P&O: And The Flying Stock Soars Even Higher!

What a circus!

K&N writes on P&O, based on hugely questionable reasoning, as explained in the posting Regarding P&O: The Stock That Flew Into Orbit.

Stock flies to the orbit.

Star Business highlights what K&N writes and throws in a seduceable name, Prudential UK, but the name is based on 'market talk'. Yeah it is believed, so said Star Business.

And what does K&N do today?

They published another report based on Star Business' Prudential UK eyes P&O takeover

Absolutely brilliant.

And needless to say the stock soared.... up a whopping 22%!

Life is great! :D



And to spice things up further... P&O made the following announcement today..

• On 29 July 2010, Pacific & Orient Berhad had written to Bank Negara Malaysia to seek their approval to begin preliminary discussions for the potential divestment of an equity interest in Pacific & Orient Insurance Co. Bhd. to Prudential Holdings Limited.

Oh .... they wrote to Bank Negara on 29th July, eh?

And oh... what irony because when Star Business published the article on Saturday, Star Business specifically said "P&O declined to comment on the matter."

Regarding PMCorp's 93 Million Cash

Got the following comments from the posting Regarding PMCorp

• PMCORP has 93 million in cash!

Yes, I am well aware of this fact, however if you would indulge in me in this rather long posting.

Oh before I begin, allow me to be a burden by repeating again: I do not indulge in guessing if a stock would go up or down. I have zero prediction skills at all. Yeah, sue me because I am that bad and needless to say, I am not a Sotong either.

Now say you have a company that is 'cash rich'. Now don't you want to know how the cash got there? And how's the piggy bank cash doing all the years, is it increasing or is it decreasing? I do not know about you but at least these are the questions I will be asking.

When I had a look through PMCorp's archives announcements, the following caught my attention: PAN MALAYSIA CORPORATION BERHAD ("PMC" or the "Company") - Change in Utilisation of The Remaining Unutilised Cash Proceeds Previously Raised From The Disposal of Cement-Based Associated Companies

• Currently, PMC has unutilised cash proceeds of approximately RM288.5 million raised from the disposal of cement-based associated companies in previous years...
• To repay the existing bank borrowings of PMC... 240 million.

And this issue goes way back to 2000. :P

PAN MALAYSIA CORPORATION BERHAD ("PMC" OR "COMPANY") PROPOSED UTILISATION OF PROCEEDS FROM THE DISPOSAL OF THE CEMENT-BASED ASSOCIATED COMPANIES ("PROPOSED UTILISATIONS")

• On behalf of PMC, Commerce International Merchant Bankers Berhad ("CIMB") is pleased to announce that on 1 August 2000, the Securities Commission ("SC") had approved PMC's application for the utilisation of the balance of the proceeds of RM738 million from the disposal of its cement-based associated companies as set out below:-

So PMCorp basically had tons of cash.... from their disposal of the Cement-Based associated companies...

This would mean that I have to look back in 2001.

Feb 2001: Quarterly rpt on consolidated results for the financial period ended 31/12/2000

Those are the key issues I be looking at.

Earnings = profit, debts = bank borrowings, net cash = cash - debts.

And apparently in 2000, PMC is an expert in the share market. So I guess since the focus of this posting is on PMCorp's cash, then I guess I should include how much shares PMCorp have and in my table Shares = cost of 'quoted shares'.

Now back then in 2000.. the figures look decent eh? Net cash of 429.924 million and PMCorp hold some 306 million worth of 'quoted shares'. :P

Let's see how PMCorp performed over the next couple of years...

WOW!

Yup! I felled of my chair upon seeing how PMCorp had performed since then.

The company had 623 million CASH in 2002. By Feb 2005, it reported that this cash had shrunk to just 340.019 million. Their 'quoted shares' now had a carrying cost of only 177.5 million! And needless to say, the NTA shrank from 2.52 in 2000 to just 0.49 in 2004!!!

WOW!

huhu!

Seriously... that's rather poor, yes?

And yes... PMCorp in their 2005 Q4 earnings, reported a 1.1 Billion of losses!

That was actually warned on 31st Jan 2005: Pan Malaysia Corporation Berhad (“PMC” or the “Company”) - Members’ voluntary winding-up of Syahdu Pinta Berhad (formerly known as Syahdu Pinta Sdn Bhd) [“SPB”], a wholly-owned subsidiary company of PMC

• At the Extraordinary General Meeting of the Company held on 28 October 2004, the shareholders of the Company have approved the settlement of inter-company advances owing by Malayan United Industries Berhad (“MUIB”) involving the issuance of Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) by MUIB (the “Settlement”). The details of the Settlement are contained in the Circular to Shareholders dated 12 October 2004 issued by the Company (“Circular”). Pursuant to the Settlement, MUIB issued RM1,285.0 million nominal value of ICULS to SPB in settlement of the inter-company advances owing of RM1,066.5 million.

huhu!

Now in THAT Q4 earnings, (Quarterly rpt on consolidated results for the financial period ended 31/12/2004) there was a striking statement. Under the 'prospects of

• The Directors anticipate that the Group's operations will continue to face challenging trading environment for the financial year ending 31 December 2005 especially in respect of rising input costs. The Group will continue to focus on cost control measures to mitigate the effects of rising costs, increasing its market share for existing and introduction of new product lines. In January 2005, the Group has disposed its entire 22.3% interest in Chemical Company Of Malaysia Berhad for a gross consideration of RM193.4 million. Part of the proceeds will be utilised to repay bank borrowings which will reduce interest expense.

Ah.. more lumpy disposals. So the next fiscal year... PMCorp should see some improvement back in their balance sheet, yes?

And I would need to make a correction in the NTA because in 2006, the NTA for PMCorp had been revised to 0.604.

And also from the fy 2004 Q4, regarding the 'shares', I would note that the market value of these shares were only worth some 25.559 million. Apparently PMCorp is not that good in the share market. :P

And over the years, there were constant disposals.

Like for example, PMCorp had been disposing their shares in PMI.

• Jan 2009: Pan Malaysia Corporation Berhad ("PMC" or the "Company") Disposal of 112,800,072 ordinary shares of RM0.10 each in Pan Malaysian Industries Berhad ("PMI") by wholly owned subsidiaries of PMC, for a total cash consideration of RM6.5 million
• Jan 2007: Pan Malaysia Corporation Berhad ("PMC" or the "Company") Disposal of 91,901,000 ordinary shares of RM0.50 each in Pan Malaysian Industries Berhad ("PMI") by Bidou Holdings Sdn Bhd, a wholly owned subsidiary of PMC, for a cash consideration of RM3.3 million
• Sep 2006: Pan Malaysia Corporation Berhad (“PMC” or the "Company") Disposal of 322,313,000 ordinary shares of RM0.50 each in Pan Malaysian Industries Berhad (“PMI”) by Bidou Holdings Sdn Bhd, a wholly owned subsidiary of PMC, for a cash consideration of RM9.7 million (“Disposal”)

These disposals are good to note because it helped boost PMCorp cash...

And here's the compiled table on how PMCorp has fared since 2000.

How?

Oh.. the quoted shares.. I left empty because PMCorp did not state the cost of the quoted shares in their fy 2010 Q1 earnings report. I wonder why.

So how? All PMCorp states it's market value of their quoted shares is 53.333 million.

Ahem!

Yes, PMCorp has 92.253 million cash in its piggy bank but it also have some 42.243 million in bank borrowings!

But given what has happened in the recent 10 years... this 92.2 million... is the lowest level.

Yeah.. it's in net cash of 50 million but this 50 million net cash paled in comparison to its previous years.

A simple comparison. On Feb 2006, PMC reported its fy 2005 Q4 numbers. Cash then was at 392 million. With debts amounting to 317 million, PMCorp then was carrying a net cash of 74 million. Its quoted securities then had a carrying cost of 176 million.

Now surely PMCorp is more 'interesting' or 'valuable' on Feb 2006 compared to now, yes?

Would I be wrong to make that assumption?

So let's look at how PMCorp the share had fared since 2006.

How?

If one had purchased PMCorp based on the 'cash' and 'quoted shares' value in PMCorp in 2006, reasoning that PMCorp is a 'value' investment, one would have fared badly yes?

Ah.... but past share performance is never an indicative of how the share could perform in the future. I am aware of it. That's why I refrain from predicting if a share would go up or down. Yes, I have no idea how PMCorp would perform as a share, so do take this posting with a massive dose of salt. And it's best that you consult your local Sotong for stock advice.