Buy That Chinese Stocks Cos Of The PE Is Very, Very Low

Many of us are taught that low PE stocks are a buy. Some even add in yardsticks like ROE and cash per share. And as long as these requirements are met, they believe that they have a safety margin for their investment.

Me say? I feel the investors should look deeper. Understand the business and understand the company's books. Don't just simply invest in a stock because of the yardstick.

I believe more in practicals than theories.

I look for examples and as long as I could find an example that proves the theory wrong, then I feel one should be cautious.

Let me use .... Chinese listed stock (S-Chip) in Singapore as an example.

Take this OLD report from UOB Kay Hian back on April 2008. http://sinotechfibre.listedcompany.com/misc/UOBKH_SINBuyS-chips_030408%282%29.pdf

Let's look at page 14 of that pdf file.

Look at the data.

China Milk was trading then at S$0.675.

It has a ROE (%) 32.4 and net cash per Share (Rmb) 1.07.

UOB Kay Hian gave it a target price of S$1.32.

UOB reasoned...

• Outlook. Demand for dairy products in China remains strong. C Milk has adopted a multi-prong strategy to steer growth and to better leverage on domestic consumption. The strategy includes the following: a) improving herd quality to bolster production of semen and embryos so as to expand margins, b) moving downstream to produce processed milk, and c) developing herd size through internal breeding, the import of highly-productive herds, and even possibly mergers and acquisitions. We expect a smooth implementation of all these plans, backed by the Rmb1.8b cash in hand.
  
  Cheaper way to milk China dairy theme. C Milk is a cheaper way to ride on the rising dairy product consumption trend in China. The stock is trading at an undemanding 5.9x FY08 PE and 4.7x FY09 PE. Our DCFbased target price is S$1.32, representing 11.5x FY08 PE. Maintain BUY.

Trading at undemanding 5.9x Fy08PE and 4.7x Fy09 PE.

Sounds good, no?

Low PE, high ROE, got strong cash per share too....

What could ever go wrong?

Just about everything! Look at how China Milk Products shares have performed since April 2008!

The stock was suspended on Feb 2011!

And the story?

Scandal!

http://nextinsight.net/index.php/story-archive-mainmenu-60/912-2011/3971-shame-on-china-milk-management

From the article:

• This was a company that once commanded a market capitalisation of S$1 billion and, since its listing in 2006, had wow-ed a lot of investors with its supposedly immense profit margin, its profitability and cash hoard.

Great profit margins and cash hoard!

• The hard truth started to emerge when China Milk's convertible bond holders decided to redeem their bonds.
  
  The company at first claimed it had the US$170.56 million to meet its obligations on the convertible bonds. It just needed time and special approval of the authorities to remit the money out of the country.
  
  After all, it had said in its financial results announcement that as at end-September 2009, the group’s cash and cash equivalents stood at 2 billion yuan (S$409.7 million).

S$409.7 million in cash and cash equivalents. The bonds was only US$170.56 million.

• As matters worsened, the Singapore Exchange directed the company to appoint a Special Auditor.
  
  KPMG was the chosen one and it found a company whose cash hoard had been milked in major ways.
  When it repeatedly asked the Group to arrange an interview with its bank manager in China, KPMG was told that the manager had no time and could not assist.
  
  When KPMG asked to interview the main contractor which did US$72.9 million worth of improvement works, they were presented with a Mr Zhang Hong Tao who came across as being unfamiliar with the works done.
  
  In the first place, he didn’t own a construction company.
  
  The Group had commissioned improvement works to the farm and facilities and paid USD72.9 million over a period of 5 – 6 months ending in or around March 2010.
  
  When KPMG visited the sites, it was unconvinced.
  
  “One would expect salubrious farming facilities after spending USD72.9 million. However, the buildings and its facilities cannot be said by any stretch of reason to be no more than basic or at best average.”  .....

And do read for from the shocking full report from KPMG posted on SGX website.

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_B8AB2097A023C947482578AA00383459/$file/2011_06_07_ChinaMilk_FinalReport_Executive_Summary.pdf?openelement

So how?

In China Milk Products we have seen how the sad outcome of an investor who invests in the stock based solely on yardsticks.

Investing solely based on yardsticks is never enough.

I strongly one have to really understand the business and with China stocks listed abroad, you just got to be more careful because you never really know if those numbers (cash included) could be trusted!

I know that last statement is rather ... tricky. Look, I am not insinuating that all Chinese listed stocks are scams but with all the accounting fraud going on .... how can one be sure?

How?

Yeah... yeah... no risk no gain babe! No sugar no honey! ..... but is this the risk you want to take?

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

Here's another article : http://www.sharesinv.com/articles/2011/03/25/s-chips-to-buy-or-not-to-buy/

• Interestingly, one distinctive characteristic about these S-chips is that they hold a lot of cash. This is evident from the financial statements of China Hongxing Sports and Hongwei Technologies, which had Rmb1,738m and Rmb145m respectively as at 30 Sep-10. As such, investors are spooked by two basic questions: Is the cash really there at all? And is it true that buying into an S-chip, will generally turn into a bad investment strategy?
• Detecting Red Flags
  As you may sympathize, many of the minority shareholders in all of the companies above as well as China Hongxing Sports & Hongwei Technologies have invested in good beliefs. As such, is there any method for those investors with limited analytical skill in detecting the potential red flag on S-chips?
  
  To put it simply, a company that has a lot of cash but refuses to give out handsome dividend may prompt the question on whether the cash is there in the first place, as in the case of China Milk. David Gerald, the president of Securities Investors Association (Singapore), said that companies with burgeoning cash balances should provide reasons why they are not declaring a cash dividend.
  Moreover, many S-chips are making cash calls even though they are already cash-rich. As such, this could be an indication that the management lacks capital discipline or that the company’s growth is not sustainable. Furthermore, an ‘unreasonably high’ capital expenditure (capex) also signals that the firm may poorly manage their manufacturing capacity and their budget. More often, an unreasonably high capex is often linked to other issues such as inflated profits.
  To top things off, JPMorgan Chase (JPMC) indicated that half of the S-chips are audited by a ‘Big Four’ accounting firm. And by contrast, three-quarters of Hong Kong-listed China firms do so. Astonishingly, the firms which do not hire ‘Big Four’ auditors are 60% more likely to fail than those who do, added JPMC.

Why Quarterly Earnings Reporting Must Be Maintained!!

I can't believe this issue is even brought up.

Look, why was the quarterly earnings introduced?

Why? It improves transparency. It gives the investor 'some' whatever small insight to what's happening to the company that they have vested interests in. By knowing what's happening, it helps protects the minority investor against accounting fraud.

It also provides much information to the prospective investor.

That's my simple reason why the quarterly earnings reporting must be maintained.

I do not believe in just theories. Let's take a real example and see if quarterly earnings helped.

I take the simple one,







May 2009: Quarterly rpt on consolidated results for the financial period ended 31/3/2009

Sales 38.775 million Net LOSS 0.084 million Receivables 163.773 Million Cash 2.222 million Total borrowings 144.574 million

Aug 2009: Quarterly rpt on consolidated results for the financial period ended 30/6/2009

Sales 57.686 million Net Profit 1.013 million Receivables 207.584 Million Cash 2.202 million Total borrowings 144.463 million.

Nov 2009:  Quarterly rpt on consolidated results for the financial period ended 30/9/2009

Sales 35.334 million Net Profit 3.718 million Receivables 225.317 Million Cash 2.298 million Total borrowings 143.354 million.

Feb 2010: Quarterly rpt on consolidated results for the financial period ended 31/12/2009

Sales 101.441 million Net Profit 4.769 million Receivables 248.662 Million Cash 2.210 million Total borrowings 142.203 million.

Ok.. the next one... June 2010 was reported AFTER all hell broke loose..... I will just state it anyway.

June 2010:  Quarterly rpt on consolidated results for the financial period ended 31/3/2010

Sales 18.762 million Net LOSS: 146.552 million Receivables 152.339 Million Cash 0.440 million Total borrowings 139.043 million. ( Why the huge loss? Do read this old posting:  Kenmark Finally Discloses In Detail Why It Suffered 146 Million In Losses But... )

Looking at the info above. Wasn't it so crystal clear that something was not right in the accounts? Let's look at Aug 2009 report and compare it versus the May 2009 report.

Look at how the receivables 'suddenly jumped' to 207.584 million. Last quarter, receivables were 'only' 163.773 million.

What on earth is happening???

Sales only improved some 18.911 million, from 38.775 million to 57.686 million.

But receivables jumped some 43.811 million!!

Unreal isn't it? Pure insanity! How on earth can any company run a business in such a fashion? A cash balance of only 2.2 million and total debts of 144.463 million? Was there any way possible such a business could survive????

And all this simple concerns were easily spotted right there and then, WITH THE HELP OF QUARTERLY EARNINGS REPORTING.

It gave the investor a rather clear and precise warning that things weren't right in this company.

Consider this. Half yearly earnings means every six months, meaning we will skip one set of quarterly earnings.

For Kenmark's case above, could the minority shareholder enjoy the luxury of skipping one set of the quarterly earnings?

Which set of quarterly earnings do you suggest we skip?

And without that set of quarterly earnings, and without news coverage on the stock... what chances is there for the minority shareholder to survive?

I can run though other examples. Take the fall and the accounting fraud in Megan Media. Did quarterly earnings helped alert the investor? Take the recent plunge of Hai-O. Did the quarterly earnings helped? Did the quarterly earnings helped the investor make the correct decision? Did the quarterly earnings gave sufficient warning to the investor that Hai-O's growth was clearly over and that the best course of action was to sell? Or the recent slowdown in glove makers earnings? Did the quarterly earnings help the investor make the correct decision?

Or the minority shareholders just isn't important? Yeah, the minority shareholders is just there waiting to be screwed???!!!!

Or how about a more current/live issue?

Take Muhibbah's current APH issue. We all know the concern is whether Muhibbah can collect payment from APH and also we want to know how Muhibbah's balance sheet is faring. We want to know the state of Muhibbah's receivables. Is it improving or is it worsening? Yes?

Now assume we are on a half yearly reporting. The last reported earnings was on May 2011.

Muhibbah came crashing down on June 2011.

This would mean that the investing public needs to wait until Nov 2011 to be updated!

Is this acceptable?

With the quarterly earnings, the investing public can be updated by Aug 2011.

Which is better?

How now brown cow?

My say?

Quarterly earnings is a must. And if the listed company thinks that it's a waste of time, then the listed company should not waste the stock market's time being a listed entity.

We all want a fair and fully transparent stock market!


ps: snowball had his say too! http://goodstockbadstock.blogspot.com/2011/07/no-to-half-yearly-reporting.html

ps/ps: Dali's different views! http://malaysiafinance.blogspot.com/2011/07/scs-recommendation.html

Regarding XDL

Did you see XiDeLang (XDL)'s trade today?

Actively traded early in the morning. Its opening price was 40.5 sen and it surged to 43 sen. And then it continued to trade much lower all day and it closed at 37 sen. Down some 8.6%.

And yes XDL is another of them Chinese listed stock on Bursa Malaysia.

And like other Chinese listed stocks, XDL have 'decent' earnings.

And like other Chinese stocks, XDL had quite a lot cash. 98.380 million ringgit according to its last reported earnings.

And like other Chinese stocks, XDL did not have much borrowings. Just 19.3 million ringgit.

And like other Chinese stocks, XDL trades rather lowly versus its earnings. Early this year XDL was trading around 50 sen. Its eps then was around 19 sen. Yes it was trading around a PER valuation of around 2.6x.

How?

Invest in this stock just because of low PE?

And not forgetting, Richard Cranium reminds me of of this posting: Yusli: Them Chinese Stocks Are NOT Poor Quality

Now here's an interesting thing about XDL.

First, XDL last reported earnings: Quarterly rpt on consolidated results for the financial period ended 31/3/2011

Remember cash balances is said to be some 98.3 million ringgit and total borrowings is said to be 19.3 million ringgit.

From the above, we can see that XDL pays a quarterly finance cost of 142 thousand. (remember XDL's total loans is around 19.3 million)

Then I look at the cash flow.

Interest received is ...............................73 thousand?

Huh?

Remember cash balances is said to be some 98.3 million ringgit and total borrowings is said to be 19.3 million ringgit.

So how come.... financial cost is more than its interest income?

Er......

then I scrolled down....

Err....as can be seen, XDL said it has some 98.370 million ringgit in cash and out of that 98.370 million only some 967 thousand is placed as deposits with financial institutions.....

I then .... closed the pdf file.

End.


** ps. I don't know how XDL will trade in the future. Yup.. not interested. **

Drop More Buy More?

Why the need to average down?

Cos ... the stock went lower. :P

But why la did the stock go lower?

Bad market sentiments mah...

If the sentiment is bad, why didn't we see it coming? Didn't they teach prevention is much better than cure?

What's that two Sun Tzu's Art Of War, timeless concepts mentioned many, many, many times before?

• Think before you act.
• Act only when you have the confidence to win.

If we had thought and reasoned it out carefully, won't it help eliminate the need to buy more because the stock went lower?

Of course, some will say, lower prices means more offer. True. But how long can we continue to say 'drop more buy more'? Are our pockets really deep enough?

But even if our pockets is really deep and we can afford it, shouldn't we think what we are actually doing here? Think about the stock we are buying. What if the stock is only considered good in our own shallow opinion and what if our opinion is wrong?

Does two Wong make a Wright?

What if we make a mistake with our stock selection?

Dare we say we will never make a mistake with our stock selection?

Yes dear, what if we bought the wrong stock?

And if so, doesn't buying more means we are buying more of the wrong stock?

And if the wrong stock is caused by our initial investment mistake, buying more means buying more of our mistake?

And if so, by averaging down, aren't we saying we can correct our mistake by buying more of our mistake?

oO

Think about it...

Mr. Soros became rich because he insisted he knew when he was wrong.

Mr. Buffett knew the only the way to get out of a hole is to stop digging.

Think about it.

What does one do when one make a mistake? Don't we want to rectify it? And isn't the best way to rectify it is by stop being wrong?

Yeah, instead of averaging it down, why don't we seriously consider if we did screw up with our stock selection or not?

And if we did... isn't cutting loss (ie rectifying our mistake) ... the logical thing to do?

And oh I do know... the tricky part here of course is.... determining if we are correct or we are wrong!
Me? I am not a fan of the averaging down.

Did We Screw Up With Our Stock Selection?

Digging and reading thru some old stuff, I found the following set of writings. No, they are not mine they are from an investing forum based in Singapore but unfortunately that forum, wallstaits, has since closed down. (iinm the writings were from 2005)


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


Investment lessons learnt this year and advice for newbies

When I just started investing late last year, this was the first investment website I stumbed upon. I was greatly influenced by its FA bent and the eloquent arguments from fellow forummers.

I have some advice for newbies from personal experiences as a newbie.

There are certain practices advocated by FA proponents that newbies need to be careful of.

The first one is with regards to averaging down. FA proponents like to say when the share price of one of your holdings goes down, you should buy more because it has become cheaper. So, when prices are depressed, you should be happier because you can buy more of the same good thing more cheaply.

You could try that if you have sufficient grounds to be so confident of your investment. But if you are just starting out as a newbie like me, please cut your losses and don't compound your mistake. You make a purchase, the share price goes down -> probably you made a mistake. Who are you, little junior, to argue against the market? If you are a newbie, assume you are an idiot waiting to pay school fees and don't average down. Cut your losses!!

Perhaps the most valuable advice that I have received from FA proponents is to know your investments very well and avoid those which you only vaguely understand. If you know your investments with the depth that Warren Buffett has with his, then you can average down with less worry.

One of my mistakes was to make investments based on superficial understanding. True, I read prospectus, annual reports and even taught myself accounting so that I could understand financial reports better. Most of my investments were made based on favourable financial ratios without a deep understanding of the business nature. I did not try out the company's goods and services. I don't know if the company's customers, employees, suppliers are satisfied with it.

My main fault as a newbie was to be over-confident. I thought after reading and learning so much, I was ready. I thought I could be as good as the masters and followed one of their strategy -- concentrate your eggs in one basket and watch that basket carefully. Once again, I reiterate that such a strategy is meant for the masters. If you are an amatuer, it is safer to assume that you are an idiot and to protect yourself from stupidity, please diversify. By putting all your eggs in one basket, you may have fatally injured yourself by catching all the falling knives with one hand.

Some FA practitioners do not have a stop-loss policy. They use a similar argument - if a good thing becomes cheaper, I should buy more instead of selling it away.

The TA approach "Cut your losses and let your profits run" is worth considering. It is a safe way to protect your capital. Sell after your losses reach 10% of the intial capital outlay no matter what. After all, he who fights and runs away may live to fight another day. In fact, by adopting such an approach, you could protect yourself against CAO, Informatics and Auston.

Unfortunately, I did not follow the advice above. I waited until fundamentals have clearly decayed before thinking of selling. In the meantime, I continued to average down as the price slided down. When the financial report was out, fundamentals did look bad but ALAS!!, it is too painful to sell now.

This is one of the problems with FA. You can only make decisions an a quarterly or half-yearly basis which by then, the price may have slid to a psychological unacceptable level to sell.

FA proponents like to say making decisions based on price movement is nonsense. Say, the management has been trying to hide important fundamental data from the financial reports for as long as they can. The silent accomplices - auditors and independent directors - who are on their payroll prefer to close one eye or both eyes as long as they have ready excuses to plead ignorance and other disclaimers when the situation implodes.

The poor FA practioner will continue to average down, thinking that he is profiting at the expense of the foolish irrational market. Meanwhile, the insiders are selling the stock down to the sucker - that foolish guy averaging down.

In such a situation, the TA practioners will be safe. Having observed that the price has been in a downtrend caused by insiders selling down, they would have already sold out before the bombshell explodes. In the cases of CAO, Informatics and Auston, the price chart has shown an obvious downtrend before the explosive truth was out.

Are there any other advice and warnings fellow forummers can share with future newbies?

PS: I do not want to get into a TA vs FA debate. If any FA proponent thinks I am wrong, please point it out objectively without making personal remarks. I am still learning and am considering using a mixture of both FA and TA at the moment.


----------------------- another posting ------------------------

I agree that averaging down is a scary thing. When you buy a stock like you buy a business (which means price is only one small component of your overall analysis) and the price falls-- what I do is ask myself "if the business is failing"? A falling stock price may be a sign of danger as other savvy investors see flaws with the business model, increasing competition (usually seen as narrowing profit margins), etc. Or, sometimes it is an over-reaction to what you believe is a temporary setback, like rising commodity prices.


If, after raising your skeptical antenna, you continue to believe your business is on track to continue its long term growth and build shareholder value... than the proper (if corageous) thing to do is buy more shares at the now more attractive price. After all, it is the same business you previously liked at a higher price.

If, on the other hand, your heightened skepticism results in some important questions needing answered-- maybe about intensifying competition or rising raw material costs-- you might want to sit back and wait and study further. But, cut loss on rumors and whims isn't likely to make you wealth. Often, you will be selling into weakness with the irrational crowd without confirming any business weaknesses. A cut-loss system, or any other system that doesn't require careful analysis and thought, is not very wise and not very FA-ish.

An example... Warren Buffett accumulated shares of the Washington Post during the 1970s recession, and bought more during a newspaper union employee strike. He saw these as temporary troubles, while others were cutting losses. He is now up more than 10-fold. He bought American Express during troubled times, he bought Geico Insurance when it was in trouble too. He looked at the falling share prices in each case, and decided to buy more, because he believed the businesses were sound and their troubles temporary. He was usually right.

Most important aspect of FA... be careful you only buy good businesses at fair prices. If you get this right, you eliminate most worries about cutting losses. Step 2... remember Ben Graham's advice... "Never buy a stock simply because it has risen sharply in price or sell one because it has fallen sharply in price. The opposite advice would be wiser."



-----------


My comments:

Excellent advice!!!

And more so I believe in that one Mr.Soros quote "I am rich because I know when I am wrong"

So when the stock you purchased, tanks after your purchase, don't just blame it on bad luck but ask oourself this simple question:  Did we screw up with our stock selection?

And if you did, averaging down means u are buying more shares in a wrong investment!

Doesn't make sense, does it? Remember CUT YOUR LOSSES!!!!

And Warren Buffett use to say "The most important thing to do when you find yourself in a hole is to stop digging!"

Doesn't it make sense?
Think about it. What does one do when one make a mistake? Don't we want to rectify it? And isn't the best way to rectify it is by stop being wrong?

Do think about it.

So the next time you see losses for a stock in your portfolio, instead of buying more, ask yourself a simple question, 'did you screw up'?

Or perhaps the stock selection might be good, but if you overpay for your investment then the chances of success in this investment would be very slim, yes?

But then... I know .... some would not agree.

They will just HOLD long la. Be patient la. The stock market bull will come and if if you hold it long enough, you can sell your mistake without a loss.

This is their version of buy and hold.

Yes that's so possible and since in a bullish market, most stocks do stand a chance of making a comeback.

But... isn't such a strategy a game of chance then?

Aren't we hoping that the bull market will be kind and help correct the stock selection mistake?

And to make it a bit more complicating.....  in a bull market .... have you consider that it's possible to have individual stock crash(es) ?

How?

I dunno ... me just mumbling ya.

Why Don't I Give Bumi Armada A Break?

From the posting http://whereiszemoola.blogspot.com/2011/07/bumi-armada-today-is-different-from.html

• brotherlone said...
  
  c'mon... give mr AK a break
  
  bumi armada had to leverage up to more than 3.0 times D/E to acquire those assets.
  
  what will investors if it goes up to 3.0 times, it will be sold down immediately.
  
  
  a fast growing company needs to gear up.. and it needs patient capital.

brotherlone:


C'mon.... bro.... so who's EVER gonna give the poor minority shareholder a break?

Ever think about it this way?

Why should we look from that side of the.... grass?

Me?

I know where I moo from.

I am of ONE of the small minority investor in the Bursa Malaysia.

Just a small cow in the grassland.
A small cow who asks who's gonna speak for the minority shareholders who weren't given a chance to see their investment in this company 'morphed from a small, domestically focused company into a major international offshore service player'?

That's all I interested.

Sadly I know that is past history.

And I am just a tormented lost cow speaking of past injustice.

And again I stress I am not the least bothered to know how this IPO will perform. Will it go up? Will it go down? Sorry I am not bothered.  And I am not writing to ask anyone who wants to try their luck to buy into this IPO. Please, buy if you want to. It's your money and don't let me stop you..

And seriously, I own no vodoo stick that can put a curse on a stock. Serious lah. Curses don't work lah.

All I know is what had happened before.

I know.

There... I have spoken yet again on Barmada.

Good luck with you on this IPO.

Tons of shares being offered.
May you make your money.
 
Peace with you.

There Are More Crooks Out There!!

On SBT: http://www.businesstimes.com.sg/sub/news/story/0,4574,445683,00.html?

• Published July 1, 2011
  
  Fraud is a clear and present danger: KPMG
  
  
  Survey shows it has risen in companies since global crisis
  
  By MICHELLE QUAH
  
  (SINGAPORE) The average number of fraud incidents per company in Singapore has more than doubled since the global financial crisis, while the estimated total cost of these incidents has also risen sharply.
  
  The KPMG Singapore Fraud Survey report 2011 released yesterday showed that the average number of incidents reported per organisation among those hit by fraud was 9.0 in 2011, compared to 3.8 incidents in 2008.
  
  One in five survey respondents said they were aware of at least one fraud incident within their company over the past two years - a similar proportion to KPMG's previous survey reports in 2004 and 2008.
  
  The total estimated cost of these incidents was $6.5 million in 2011, up from $5.3 million three years ago.
  
  And, according to the survey, internal sources remain the major fraud threat.
  
  'The survey findings that 17 per cent of fraud is carried out by senior members of a company is of great concern,' said Bob Yap, head of Forensic at KPMG in Singapore. 'These individuals set the ethical tone for the organisation and are in the position to do the greatest harm.'
  
  The survey also found that 46 per cent of fraud incidents were perpetrated by employees - making it a total of 63 per cent of frauds being 'inside jobs'.
  
  Mr Yap explains the finding: 'This report largely spans the period of the global economic crisis, where companies faced the greatest economic turmoil in recent years. One effect is that it led to an increase in retrenchment and resignations and employee misconduct frequently comes to light only when the employees leave their organisation.'
  
  Many will remember the $12-million fraud perpetrated by two former employees of the Singapore Land Authority, which was only discovered after the two men had left the employment of the statutory board.
  
  KPMG, in its survey, found that the three main causes of fraud were unfamiliarity with red flags of fraud (59 per cent), weakness in IT security (56 per cent), and weakness of management or board oversight (50 per cent).
  
  Yet, despite this, only 31 per cent of companies said they have conducted fraud awareness training for staff or management. A slightly larger proportion (37 per cent) said they had an anti-bribery and corruption compliance programme in place, while 62 per cent said they had no plans to design and implement a fraud incident response plan.
  
  Mr Yap said: 'These (causes of fraud) relate to weak preventive measures on the part of the victims, rather than any particular ingenuity or sophistication on the part of the perpetrators. The fact that internal controls continue to fail or are being overridden suggests that companies should pay greater attention to internal threats. Staff need to understand their role in fraud prevention if they are to be an effective component of an organisation's defences.'
  
  The survey also, for the first time, covered companies' approach to bribery and corruption. And it showed that bribery and corruption compliance is a challenge: 57 per cent of respondents were unfamiliar with Singapore's own Prevention of Corruption Act, while 85 per cent were unfamiliar with the UK's new Bribery Act 2010.
  
  'Many anti-bribery and corruption enactments have extensive extraterritorial reach and draconian sanctions, which means they bring significant risks to companies that trade abroad and have any connection with either the US or the UK,' Mr Yap said.
  
  He said companies should: ensure an ethical tone from the top and fraud training to help create a culture of fraud prevention and detection; have risk assessments to ensure the continuing effectiveness of controls, as well as a fraud response policy to help a company respond to fraud in a swift and effective manner while minimising damage.
  
  'The total elimination of fraud will never be possible. However, companies can go a long way towards protecting themselves by ensuring that fraud risk management is embedded in management and governance processes and spread effectively throughout the organisation,' Mr Yap concluded.
  
  KPMG's 2011 survey covered directors and senior executives across a broad range of industries and from companies listed on the Singapore Exchange.
  

Bumi Armada Today Is Different From Bumi Armada Yesteryear ...

I did not feel like making another posting on Bumi Armada or Barmada until I read that very last passage of Star Biz article on Barmada today: Bumi Armada plans to raise RM2.8bil from IPO

• “Bumi Armada morphed from a small, domestically focused company with RM250mil revenues and RM50mil net profit company pre-2005, into a major international offshore service player with total revenues of RM1.2bil and net income of RM351mil last year,” said Hassan. For 2010, the company saw an earnings before interest, taxes, depreciation and amortisation (EBITDA) of RM714mil and has achieved a compounded annual growth rate of over 50% for its EBITDA since 2008.

Yes... Barmada today is different from Barmada yesteryear.

Barmada yesteryear had sales revenue of 444 million and earnings of 63 million. ( ahem.. i have no idea where he got the 250 mil revenue and 50 mil net profit from) (you can verify my data from the earnings reported back in 2003 here: Quarterly rpt on consolidated results for the financial period ended 31/12/2002 and for your info, Barmada was suspended from trading the following month on 21 March 2003)

Barmada currently is now different. Of course it is. As per Star article, Barmada had morphed into a major international offshore service player with total revenues of RM1.2bil and net income of RM351mil last year.

And the growth prospect according to the IPO prospectus is there too!

But here's something NOT MENTIONED!!

Back in 2003, Barmada too had an incredible growth prospect!!

How good a growth prospect?

Well... just a 25% growth per annum growth prospect.

So think about it.... if Barmada was not forcefully taken private back in 2003.... why shouldn't it continue to grow like how it had grown today?

What is there to stop Barmada from morphing from a small, domestically focused company into a major international offshore service player????

Not possible?

Remember it had a 25% per annum growth rate back then!

So if Barmada was not forcefully taken private back in 2003... won't these minority shareholder gotten their true compensation, their true reward for taking the investment risk in being a minority shareholder??

See the point here?

How do you want to quantify such lost of investment profit?

Yeah  How Will Previous Shareholders Feel About Bumi Armada's Re-Listing?

How would these minority shareholders feel?

I tell you how they would feel. I would assume that they would feel robbed!

That's my flawed opinion.

What's the point to being a minority shareholder if the minority shareholder cannot get their due rewards from their investments?

And yeah.. I still don't get it.

This is a new Barmada is being listed.

Barmada or Bumi Armada is different TODAY when compared to 2003. YES. Of course it's different. No doubt.

Bumi Armada's current future looks promising. It has an incredible growth prospect! YES. ( but don't forget.. the old Barmada too had a very promising future back in 2003 too! )

Bumi Armada should be treated as a new ipo - stop deluding yourself with the past. There's a very good chance that one can profit from the ipo. YES... ( key word 'good chance' hor... and you know very well.. in the stock market.. a chance is a chance. It's not 100%. )

Of course it's a new stock. It's a new IPO. It's a whole new day. It's a whole new ball game. TRUE!

And of course... there's a CHANCE that one can PROFIT from the IPO. YES! A new IPO. Chances is there to make money. Hey, don't let this posting or my past postings on Barmada stop you from buying the share. Don't let this posting deter your chance to make money. Hey your money, your decision. Nothing to do with me.

Don't blame me if you fail to make money!
Don't thank me if you make money too!


So............... there.

I have said my piece for today.



Time to go laze around.... :)