Is Paper Loss Not A Loss?

Chapter 9, Page 88. How To Make Money In Stocks

When Does a Loss Become a Loss?

When you say, "I can't sell my stock because I don't want to take a loss," you assume that what you want has some bearing on the situation. But the stock doesn't know who you are, and it couldn't care less what you hope or want.

Besides, selling doesn't give you the loss; you already have the loss.

If you think a loss isn't incurred until you sell the stock, you're kidding yourself.

The larger the paper loss, the more real it will become.

For eg, if you had paid $40 per share for 100 shares of Buggers United, and it's now worth $28 per share, you have $2800 of that lousy good for nothing Buggers United that cost you $4000. You have a $1200 loss. Whether you convert the stock into cash or hold it, it's still worth only $2800.

Even though you didn't sell, you took your looss as the stock dropped in price. You'd be better off selling and going back to a cash position where you can think far more objectively.

When you're holding on to a big loss, you are rarely able to think straight; you rationalize and say, "It can't go any lower."

However, keep in mind that there are many other stocks to choose from where your chance of recouping your loss could be greater.

Here's another suggestion that may help you decide whether to sell:

Pretend you don't own the stock and you have $2800 in the bank.

Then ask yourself, "Do I really want to buy this Buggers United stock now?"

If your answer is no... then why are you holding on to the stock?


How true isn't it?

A loss is a loss is a loss.

In the share market, folks who hang on to their losses is an a self-denial state. They are simply wishing and hoping and praying that a market bull will occur and help them recover their losses.

Is this really rational thinking?

I know personally folks who are holding on the stocks that they bought at rm10.00 but now trades at a miserable 1.00 or so. "Why aren't you selling?", I asked. "It's alright since its paid for, so I will wait for the next bull run!" was the answer I got. Well, it's probably about a good 10 years ago!

Rational thinking or plain silly thinking.

Now I wonder, if a dire emergency really happened, would she be willing to finally accept the loss and cash out on her mistake?

The New SP 500 Bubble!

Financial Sense, market commentator, Martin Goldberg, has made an interesting posting called Bull Market in Trust, Bear Market in Dividend Yields

This part I find so interesting:

The apparent failure near an all time high suggests that the year 2000 high in the S&P 500 may have marked the beginning of a new secular bear market which, in spite of the eight year march to a marginal new high, has not ended. Remember, the 2000 high included contributions from a known and confirmed technology stock market bubble. So was the more recent S&P 500 high totally “clean” and supported by valuations? In my view, this new high is characterized by a general stock market bubble which is not getting any attention in the media or financial industry for several structural reasons, not the least of which are the more obvious bubbles that are taking place (and bursting) in real estate, US consumer debt, and also commodities (actually the commodity bubble is a legitimate one caused largely by central bank-created inflation). When was the last time you heard any serious discussion of dividend yields of stocks in comparison to those that occurred prior to the 1990s race to the 2000 high? Today’s stock market bubble is Wall Street and the financial industries’ “dirty little secret.” They’ll only tell you what they need you to know.

Still, unless the market action warrants it, you don’t need to know that the average dividend yield of S&P 500 stocks is just under 1.9% and dividends of less than 3% used to be cause for valuation alarm. (There are 113 S&P 500 stocks that pay no dividends at all.) All you have to do is believe that today’s businesses don’t require that corporations share their profits in any meaningful way with its shareholders.

Click here for the rest of the posting: Bull Market in Trust, Bear Market in Dividend Yields

Bashing iCapital and Tan Teng Boo for No Reason?

Received the following comments on the following posting, A Look At iCapital's Buy Call on NasionCom!

• 廖福深 said...
  I feel sad for TTB because some people here just like to bash people on some small mistakes. TTB has been in the market for a long long time and I don't think his record is anything is be ashamed of. Depending on how you look at your portfolio, I believe you can allow for some 100% writeoffs in your stocks (just like structured warrants expiring worthless). For every Nasioncom, our friend has a few LionDIV. If you strcutured your investment to allow for such eventuality, no need to say sorry!

Dear 廖福深,

Let me explain what has transpired here on this blog.

I had been noticing that Mr. Tan Teng Boo has been rather bullish on the mass media early this year. Several articles have been quoted that Mr. Tan had declared himself to be bullish on the markets. And in his OWN subscription editorial, he had stated that he was a long term bull on the local markets and that his long term targets for the KLCI is at 2000 pts.

(ps if you see this posting here one would notice that in iCapital own words "Instead of boring our subscribers with our LONG-HELD and CONSISTENTLY BULLISH VIEWS...!" )

Which was fine with me.

That's his opinions and views as an independent investment advisor.

I am not even challenging whether his views are correct or not.

Now what I found discovered in the quarterly earnings during this very same period that he had been telling the Malaysian public he was bullish, he contradicted what he said by selling some rm50 million worth of shares.

Everything else aside, is such actions correct?

Why tell everyone one you are bullish when you are actually disposing a lot of shares?

If it wasn't Mr. Tan and it was me. Imagine me blog about Hai-O and imagine me saying that Hai-O is a wonderful stock. And while I am singing my praise to you, I sell my shareholdings in this very same. Now is this correct?

Don't you think that this shouldn't be?

Now if I am wrong, then what about Mr.Tan Teng Boo?

Let's not judge who I am but judge the actions!

Which is why What Do You Think of ICap's Recent Disposal Of Shares Held? was posted. And then followed by More Rumblings On Tan Teng Boo's ICapital's Disposal Of Shares. Which lead to a blogger commented that Tan Teng Boo Declares Warren Buffett to be a lousy Economist! and Is iCapital Views Consistent? Is Warren Buffett a Lousy Ecomist?

Which comes to NasionCom, a stock that I had blogged a couple of times before. NasionCom Founder Charged With Bribery!

And I was shocked to read iCap recommended a BUY call on this stock.

Why was I shocked? I knew NasionCom was a terrible stock. That was a fact.

Let me repeat what I had posted on More on iCapital Buy Call On NasionCom

• A lot of folks like to rate investment advisors based on their accuracy, which is bench marked against the said stock movement.
  
  I do have a differing opinion.
  
  When one is focused on benchmark issues like accuracy and the performance of the said stock, then it renders the actual usefulness of the investment analysis/report. Focus is on performance, right? So what's the difference between a report/analysis with the basic stock tipster?
  
  Is there any difference?
  
  I see zero difference then because everyone is judged on how that stock performs, which ultimately renders the analysis/report useless.
  
  And more so when one considers that in the market, sometimes some stocks go mysteriously higher after a report is published. Which makes one wonder if the analysis was really good or perhaps the dark force was simply stronger?
  
  So what do I prefer?
  
  I prefer to rate the analysis/report based on the reasoning why a certain call is made on the stock.
  
  Yes, I do not want to see contradictory buy calls made despite the glaring issues within the stock.
  
  In short, it's not about how the stock call or recommendation performs but how the call is made.

Yes for me, most important is how the call is made.

Look at NasionCom.

The BUY call totally contradicts the glaring weakness in the stock. How could one well known and good independent investment advisor company like iCapital not able to acknowledge the weakness in the stock?

Am I bashing without a reason?

Or am I merely pointing out what is happening here?

Is it wrong for me to point this out?

ps... I actually feel sad to see all this happening.

More on iCapital Buy Call On NasionCom

Received the following comments on the posting, A Look At iCapital's Buy Call on NasionCom!

• KC said...
  Don't be so naive to think that Icap will have 100% accurate in their analysis.
  
  Read it, do your analysis, form your own judgement. Act on your own risk!

Dearest KC ,

Let's not be so arrogant and yes, obviously, everyone do understands that one should also do our own analysis and use our own reasoning and not rely on companies like iCapital.

And I am not here to suggest that iCap needs to be 100% accurate in their analysis.

The posting was made because I was simply amazed and appalled by how our most reputated INDEPENDENT INVESTMENT Advisory company could have had come up with the conclusion.

Do read the next comment for random.

And random said...

• The issue is not whether investment advisors can get it 100% accurate..
  
  If you can get 6 out of 10 correct, you're already very very good
  
  The issue is whether or not they own up to it when they've made a mistake..
  
  Last I heard, there is such a thing as a SELL call..

Dear random,

A lot of folks like to rate investment advisors based on their accuracy, which is bench marked against the said stock movement.

I do have a differing opinion.

When one is focused on benchmark issues like accuracy and the performance of the said stock, then it renders the actual usefulness of the investment analysis/report. Focus is on performance, right? So what's the difference between a report/analysis with the basic stock tipster?

Is there any difference?

I see zero difference then because everyone is judged on how that stock performs, which ultimately renders the analysis/report useless.

And more so when one considers that in the market, sometimes some stocks go mysteriously higher after a report is published. Which makes one wonder if the analysis was really good or perhaps the dark force was simply stronger?

So what do I prefer?

I prefer to rate the analysis/report based on the reasoning why a certain call is made on the stock.

Yes, I do not want to see contradictory buy calls made despite the glaring issues within the stock.

In short, it's not about how the stock call or recommendation performs but how the call is made.

Let me show what I am mumbling about.

Let's look at NasionCom table again. I added a new row to indicate the ttm (trailing twelve months) or most recent 4 quarters earnings then.

1. Earnings was poor yes? Look at the trailing earnings. A net profit of 4.352 million from a sales revenue of 178.352 million, equated to a net profit margin of a mere 2.44%. What's the likely conclusion from these numbers? Wasn't NasionCom a company that had razor thin profit margins? And given the extremely poor earnings shown in NasionCom's fy 2005 Q3 and Q4, shouldn't this be a concern?

2. Cash. Cash as at 05 Q1 was 10.285 million. 4 quarters later cash was only 3.638 million. Isn't it correct to say the cash is depleting?

3. Loans had ballooned from 28.138 million to 64.356 million. Isn't that not a concern?

4. Receivables exploded from 48.445 million to 71.150 million. Isn't that not a concern?

How?

What does common sense suggest here?

Let's see, with a cash balance of only 3.6 million versus total loans of 64 million, surely the level of borrowings is a worry. And when one adds in the fact the company ONLY made a net profit of 1.7 million for the quarter, surely the level of loans is totally massive! And to makes it worse, receivables is at a whopping 71.150 million!!! Why did the receivables grow so much? Anything smelly?

Commonsense question again.. which sane company would want to do business where the amount that is owed to the company is more than their loans? Why can't the company collect these receivables? And if these receivables, these money are collectable, then the company won't even need the loans right? Doesn't it make sense?

So many clear issues within this stock and yet Icapital comes up with the following conclusion.

• iCapital finds NasionCom to be an interesting company, with one of the factors being the direction and strategy that the new managing director has planned for the group. However, what worries us is the level of borrowings currently carried by the group. As at 1Q06, the group has rm64 million worth of borrowings, rm3.6 million of cash, and incurred interest expenses of rm1.3 million (35% of operating profit). On balance, iCapital rates NasionCom as a Buy below rm0.15 for the medium-term.

How would you rate iCapital based on such reasoning??

They see high level of borrowings but yet they chose to discount it.

Why?

How could they come out with such a terribly poor recommendation?

And this is how I would rate iCapital.

ps: Look at NasionCom now. The company cannot even officially release their fy 06 earnings and the company is fighting hard to ward off delisting from Bursa Malaysia!

A Look At iCapital's Buy Call on NasionCom!

I have gotten an interesting comment on my posting, NasionCom Founder Charged With Bribery!

• From The Wanderer
  Dear Moola, (the financial watch cow)
  I don't want I Cap to conveniently forget about their buy call on 18/08/2006
  The buy below 0.15 is......?????

Here is the screen shot of what The Wanderer posted.

In the last paragraph, iCapital wrote the following:

• iCapital finds NasionCom to be an interesting company, with one of the factors being the direction and strategy that the new managing director has planned for the group. However, what worries us is the level of borrowings currently carried by the group. As at 1Q06, the group has rm64 million worth of borrowings, rm3.6 million of cash, and incurred interest expenses of rm1.3 million (35% of operating profit). On balance, iCapital rates NasionCom as a Buy below rm0.15 for the medium-term.

Ok, iCapital was looking at 06 Q1 earnings of Nasioncom, Quarterly rpt on consolidated results for the financial period ended 31/3/2006

It was nice to see that iCapital recognise that NasionCom had a terrible balance sheet but then on the other hand, why then does it want to rate NasionCom as a BUY below rm0.15 for the medium-term???

Sounds not so correct, yes?

So I decided to compile a table on NasionCom.

Let's look at the numbers based on simple logic reasonings.

1. Net profit - Ok, for 06 Q1 did ok but the previous 2 quarters 05 Q3 and 05 Q4, the earnings has been terrible.

2. The net profit margins is terrible eh?

3. Cash balances. Cash balances have depleted, yes? Exactly a year ago, Nasioncom reported it had cash of 10.285 million in its 05 Q1 earnings. Now it only has 3.636 million.

4. Loan balances. Total loans is at 64 million. A year ago for the same period, Nasioncom had loans of only 28.138 million!

5. Receivables. Holy moly. Incredible. A year ago, Nasioncom Receivables was at 48.445 million. A year later, the receivables have balloned to 71.115 million. Which didn't make sense because during this period, from 05 Q2 to 06 Q1, NasionCom only had net earnings of 4.352 million! Earn so little, how could the receivables balloon so much? Not fishy, meh?

How?

Seriously, NasionCom looks like a damn lousy company yes?

Poor earnings, terrible margins, depleting cash, ballooning debts and receivables.

So many issues yes?

Would you want to invest in this company based on these information?

And yet, iCapital had a MEDIUM-TERM buy on this stock at 0.15 sen!

Do you understand their MEDIUM-TERM buy recommendation at all? I, for one, do not.

So why did iCapital make such a call?

And the only announcement of significant that NasionCom had was on the very same day, Nasioncom announced that it had a huge private placement of up to 80,000,000 new ordinary shares of RM0.10 each (Shares) in NHB, representing up to 10% of the existing issued and paid-up share capital of NHB (Proposed Private Placement)

And this is how NasionCom has done since 18th Aug 2006.

ps: The Wanderer, I wonder if iCap changed their recommendation on NasionCom since Aug 2006?

NasionCom Founder Charged With Bribery!

Utterly shambolic!

Published on Star newspaper today, NasionCom founder faces eight counts involving RM3.85mil

• KUALA LUMPUR: The founder of telecommunications service provider NasionCom Holdings Bhd Datuk Chee Kok Wing was charged in two courts with eight counts of bribery involving RM3.85mil.
  
  Chee, 45, claimed trial at a Sessions Court here to six charges of accepting bribes amounting to RM3.1mil and was slapped with another two bribery charges involving RM750,000 at the Petaling Jaya Sessions Court later.
  
  The former NasionCom Holdings group managing director is accused of committing the offences to help the listing of a seafood company on Bursa Malaysia and to stop investigations by the Securities Commission (SC).
  
  He is alleged to have received a RM1mil bribe each via a bank account from Gropoint Ocean Food Sdn Bhd (GOF) director Lee Sin Teck as an inducement for SC division director Kris Azman Abdullah to help in the listing of GOF on Bursa Malaysia and to stop a probe by the SC.
  
  He is said to have committed the offence at the Alliance Bank Malaysia Bhd in Mid Valley City here on May 19, 2006 and May 25, 2006.
  
  Chee faces a third charge of obtaining a bribe of RM600,000 from GOF director Datuk Lim Kim Ming through businessman Koh Yuet Yee for the same purpose at the NasionCom office here on May 29, 2006.
  
  He allegedly received a RM50,000 bribe from GOF corporate services division director Wong Tze Yen through Koh for the same matter at the same place on May 30, 2006.
  
  Chee is said to have received RM50,000 and RM400,000 from Lim through Koh at the same office on May 30, 2006 and the next day for a similar purpose.
  
  If convicted, he can be jailed up to 20 years and fined five times the amount of the bribe for each charge under the Anti-Corruption Act 1997.
  
  Judge S.M. Komathy Suppiah granted bail at RM500,000 in one surety and ordered him to report to an investigating officer once in two months.
  
  Komathy set June 27 for mention on an application by DPP Abdul Razak that the prosecution had yet to decide if it wanted a joint trial with his other bribery case.
  
  At 2.50pm, he claimed trial at the PJ Sessions Court to accepting bribes on two occasions from Lim for the same mattter at his house in Seri Kembangan between June 17, 2006 and the next day.
  
  Judge Nurmala Salim granted bail at RM50,000 in one surety and set June 26 for mention. His wife posted bail.

Incredible!

A year ago, this very same NasionCom boss was charged for giving false information in its financial statements!

• SC Charges Three For Giving False Information In NasionCom Case
  
  KUALA LUMPUR, May 28 (Bernama) -- The Securities Commission (SC) today charged three individuals for their involvement in the submission of false information related to NasionCom Holdings Bhd's financial statement for the year ended Dec 31, 2005.
  
  They were also charged for giving false information on NasionCom Prospectus for listing on the MESDAQ Market.
  
  The three charged were Datuk Chee Kok Wing and Shamsul Khalid Ismail, both directors of NasionCom, and Mah Soon Chai, a shareholder of Express Top-Up Sdn Bhd, a subsidiary of NasionCom, the SC said in a statement today.
  
  The Companies Commision of Malaysia (CCM) also charged Chee for authorising the making of false statements in NasionCom's documents, namely invoices, dealer agreements, ledgers and bank deposit slips.
  
  Chee is being charged with two offences under the securities law and one offence under the Companies Act 1965:
  
  He was charged for causing the issuance of NasionCom Prospectus for listing on the MESDAQ Market, which contained misleading information. The offence carries the punishment of a maximum penalty of RM3 million fine or 10 years imprisonment or both.
  
  He was also charged, in his capacity as a director, for submitting false information to the SC contained in the 2005 Annual Report of NasionCom, in particular, its revenue for the financial year ended Dec 31, 2005. This offence is punishable by a maximum fine of RM3 million or imprisonment not exceeding 10 years or both.
  
  He was also charged under the Companies Act 1965 for authorising false statement in the document of NasionCom Sdn Bhd which were used for the preparation of NasionCom financial statement for the financial year ended Dec 31, 2005.
  
  Shamsul was charged in his capacity as a director of NasionCom for the same offences.
  
  Mah is charged for abetting NasionCom to submit the false information.
  
  On conviction, Shamsul and Mah are liable to pay a maximum fine of RM3 million or imprisonment for a term not exceeding 10 years or both.
  
  The Court has offered the cases to be jointly tried from November 21 to 23 this year.
  
  The Court granted bail to the accused persons in the following amount with one surety and their respective passports to be surrendered to the court: Chee: RM200,000, Shamsul: RM100,000, Mah: RM50,000.
  
  The prosecution of the individuals follows the SC's action on Feb 15 this year where it publicly reprimanded NasionCom and directed the company to rectify and re-issue its financial statements for the financial year ended Dec 31, 2005.

And what's even more shocking is that 28-03-2008: Chee sells out of NasionCom

• KUALA LUMPUR: NasionCom Holdings Bhd’s major shareholder and former chairman Datuk Chee Kok Wing has disposed of his entire 13% stake in the telecommunications services firm to TBM Resources Sdn Bhd for RM4 million cash.
  
  NasionCom said yesterday it had been notified by Chee that he had on March 24 entered into a shares sale and purchase agreement with TBM to dispose of 100 million shares held directly or indirectly.
  
  As at June 29, 2007, Chee had 105.03 million shares or 13.13% in the Mesdaq-listed company, of which 38 million were held in his own name, 51 million shares under Wing Ken Jie Holdings Sdn Bhd and 15.81 million shares under Beyond Accord Sdn Bhd.
  

Chee has sold out and the company has received a show cause letter on De-Listing of Securities and it's even more shambolic because the company till today still cannot produce it's quarterly earnings for the period ended 31 December 2006 (“2006 Q4 Report”)!!

In a recent announcement dated 6th May 2008,

• Status of issuance of the following financial statements:
  (a) Quarterly financial results for the period ended 31 December 2006 (“2006 Q4 Report”) pursuant to Rule 9.22(1) of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) for the MESDAQ Market (“MMLR”);
  (b) Annual audited accounts together with the auditors’ and directors’ report for the financial year ended 31 December 2006 pursuant to Rule 9.24(b) of the MMLR (“AAA FY2006”);
  (c) Quarterly financial results for the period ended 31 March 2007, 30 June 2007, 30 September 2007 and 31 December 2007 pursuant to Rule 9.22(1) of the MMLR (“2007 Q1, Q2, Q3 and Q4 Report”);
  (d) Annual Report for the financial year ended 31 December 2006 pursuant to Rule 9.24(a) of the MMLR; and
  (e) half yearly research reports for the period ended 31 December 2006, 30 June 2007 and 31 December 2007 pursuant to Rule 9.23(1) of the MMLR.
  
  The Company wishes to announce that it is still unable to release the above financial statements.
  
  Bursa Securities had earlier issued notice on removal of the Company’s securities from the official list of Bursa Securities on 4 April 2008 in view that the Company has failed to issue the AAA FY2006, 2006 Q4 report and 2007 Q1 report within the extended timeframe, i.e. by 29 February 2008 and the Company had subsequently obtained a stay order dated 3 April 2008 restraining Bursa Securities from removing the securities of the Company from the Official List of Bursa Securities on 4 April 2008. Currently, the removal of the Company’s securities is deferred until further notice.
  
  The Company had on 13 March 2008 announced the resignation of Messrs Deloitte KassimChan (“DKC”) as Auditors of the Company and will convene an extraordinary general meeting in due course to appoint a new Auditor in place of DKC.
  
  This announcement is dated 6 May 2008.

And isn't it shambolic and ludicrous that Chee had already disposed his entire stake!

And NasionCom was a stock that I remembered too well.

April 10th 2007, I had written the following posting, NasionCom & Our Financial News Again!

Yes, I was utterly appalled by how OUR financial press had helped promoted this stock!

No joke!

Here read what I had written back then:

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

My Dearest Moo Moo Cow,

I was going through my old blog postings and I found these interesting sequence of postings.

Let's take a step back in time.

------------------------------------------------------------
Saturday, February 11, 2006

Is our financial news really financial news?

Back in Sept 10th 2005, there was this article on Nasioncom.

In that article, again it was crystal clear how ludicrously written the article was. Words like it is believed, sources says, currently believed, it is understood were splattered all over the article.

Makes you wonder if our financial press was printing out actual financial news based on facts or was our financial news being used a tool for some to churn out rumors to seduce punters and speculators to punt on the stock?

And it was such blatant shenanigan when the reporter played around with some actual financial notes.

Take a look at the second last paragraph of that news article:

• For the six months ended June, NasionCom posted a net profit of RM7.2mil on the back of RM112.9mil in sales. In the notes accompanying its financial results to Bursa Malaysia, NasionCom says, “Compared against the group’s results for the financial year ended December 2004, for the half-year ended June 2005, the group has recorded a revenue of RM112.9 million or 70.2% of financial year (FY) 2004’s revenue and a profit after taxation of RM7.18 million, surpassing FY 2004’s full-year profit of RM3.76 million. Moving forward, the group believes that its continuous investments in Internet protocol network infrastructure, broadband infrastructure and Internet data centre, together with development on niche products and services, will yield positive contributions in the future.

The problem is, first of all...

Nasioncom first quarter net earnings was 5.171 million.
Nasioncom second quarter net earnings was 2.009 million.

The earnings report, which the reporter was referring to, saw Nasioncom's net earnings decline from 5.171 million to 2.009 million. This meant that Nasioncom's earnings weren't as rosy as what was indicated by the newsreporter. (see the highlight in blue: a revenue of RM112.9 million or 70.2% of financial year (FY) 2004’s revenue and a profit after taxation of RM7.18 million, surpassing FY 2004’s full-year profit of RM3.76 million.)

Now if I dig into Bursa Malaysia reports, the following is the link to that Nasioncom's earnings report:

Quarterly rpt on consolidated results for the financial period ended 30/6/2005

Click on the attached wordfile... and search for Nasioncom's REVIEW OF PERFORMANCE in their earning notes.... there was 4 paragraphs of remarks...

Ho ho ho... guess what? this reporter DECIDED to highlight ONLY the good stuff!!

The reporter only used the bottom 2 paragraphs, and cleverly ignoring and omitting the first two paragraphs of Nasioncom's notes.

I have pasted those 4 paragraphs in question...

• The 2nd quarter under review has shown a lower overall performance when compared to the immediate preceding quarter ended 31 March 2005. The Group recorded revenue of RM 51.798 million; earnings before interest, tax, depreciation and amortisation (EBITDA) of RM 6.186 million; and profits after taxation and minority interest of RM 2.009 million.
  
  The second quarter results has been impacted by lower revenue due to competitive pricing.
  
  There were no corresponding second quarter results for 2004 as this is the Group’s first 2nd Quarter result after its listing on 25 February 2005 on the MESDAQ Market of Bursa Securities.
  
  Compared against the Group’s results for the financial year ended 31 December 2004, for the half-year ended 30 June 2005, the Group has recorded revenue of RM112.9 million or 70.2% of FYE 2004’s revenue and a profit after taxation of RM7.18 million, surpassing the FYE 2004’s full year profit of RM3.76 million.
  
  Moving forward, the Group believes that its continuous investments in Internet protocol (IP) network infrastructure, broadband infrastructure and Internet data center (IDC) together with development on niche products and services would yield positive contributions in the future.
  
  

~~~~~~~~~~~~~~~

So I wonder, if this reporter made a simple mistake or perhaps there was intent by the reporter?

By leaving out the first 2 paragraphs, the reporter omitted the current poor performance of the company and most important leaving out the fact that the Nasioncom clearly said that the lower earnings was caused by competitive pricing. Isn't this not an important issue to report?

On 30th November 2005, Nasioncom reported its earnings again.

Quarterly rpt on consolidated results for the financial period ended 30/9/2005

Total net earnings from Nasioncom was only a paltry 260k!!!!!!!!! See how important the issue that in the previous quarter, Nasioncom had already being affected by lower earnings caused by competitive pricing?

So in summary:

Nasioncom first quarter net earnings was 5.171 million.
Nasioncom second quarter net earnings was 2.009 million.
Nasioncom third quarter net earnings was 260k.

Yup... and if you look at the very statement of that article: It appears that there is a lot going on at Mesdaq-listed NasionCom Holdings Bhd.

LOL!!!.... what nonsense isn't it?

That was then. In today's Bizweek, the very same reporter, made another attempt to sell the stock!

New major shareholder to emerge in NasionCom

Same style!

"Sources say, it is understood, it is believed" are plastered all over the article again. All hearsay and no actual facts!

Now check this out...

• The price tag of 50 sen may appear a tad high (compared to its current share price of around 29 sen), but an analyst says not necessarily so. “At 50 sen, NasionCom is being valued at a price earnings of about 9 times, which is fair considering the average PE of 15 times of some of the other prominent stocks on Mesdaq such as Green Packet Bhd and REDtone International Bhd.”

Now I really wonder who on earth this analyst is! Nasioncom's current earnings, which is declining drastically, totals some 7.4 million for the first 3 quarters of the year.

Let me put this 50 sen price tag into perspective. This ANALsyt is effectively equating that Nasioncom should be worth, in terms of market capital, some 400 million ringgit!! (This is the price one has to pay if one wants to buy each and every single share of Nasioncom @ 50 sen price tag!)

So can a company making some mere 7.4 million and worse still, in its last reported earnings in November reported a paltry earnings of 260k, be worth a whopping 400 million ringgit????

So clearly this ANALyst is basing the valuation on some incredibly high earnings per share!

Let's see... at 50 sen, with a price earnings ratio of 9 times, this means Nasioncom's earnings per share is some 5.5 sen. Now Nasioncom has some 800 million shares... which means this ANALyst is saying that Nasioncom's net earnings equates some 44 million!

44 million?

Amazing! Truly amazing!.. and how much is Nasioncom's current earnings? Some 7.44 million?

And regarding this ANALyst... isn't it a wonder that this reporter makes no attempt in naming who he or she is?


ps...

this blog entry is not about what and how Nasioncom will trade in the near future! Will Nasioncom go up or down? It interests me not!

Most important issue: Is our financial news really financial news?

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

4 days later, I wrote the following article.

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

Wednesday, February 15, 2006

What again about our financial reporting?

The issue of our financial news used to instigate wild speculation ideas on stocks.

Here are some blog postings on the issues:

• Is our financial news really financial news?


• Should Financial Press be allowed to spin-off Rumours?


• Mutiara

And incredibly, all of those articles was creatively written or should I call it engineered by one same reporter and his so-called sources (or should I call it as Maggie Sauce?!)

Take the latest one: Is our financial news really financial news?

Let's take the issue of Nasioncom. That article was posted on 11th Feb 2006.

1. Nasioncom ended the day trading on the 10th Feb 2006 at 0.305.

2. Nasioncom ended the day trading on the 13th Feb 2006, the day after that incredibly creative story was written, at 0.345. See how nice it is to publish a story, throws in the wild speculative 'according to sources" stuff all over the article. And better still, add in a wild insane, nonsensical valuation based on ONE so-called UN-NAMED analyst! Job done, eh? Check the high volume traded on that day!

3. Nasioncom ended the day trading on the 14th Feb 2006 at 0.30. What a lovely, I Love You Deep-Deep Valentine present from this reporter, eh?

4. Now? The selling pressure 'looks' very strong (errr... you might want to get a second opinion on this statement cause I am not one that could read what the trade is saying!).... anyway... at 11.30, Nasioncom is now trading at 0.285.

How?

Do we need such wild no-substance stories?

And worse still, how come one reporter in our financial newspaper can repeatedly publish nothing but speculative rumors in the financial news?

What good is our financial news if everything is but speculative rumors?

How?

Does all this even matters?

Or does it NOT matter as long as it provides us with an opportunity to punt in the said stock(s)?

Or should I question who gives the divine rights to allow this reporter to write as per his own whims and fancy?

How?

Or should I request that our financial news to be changed to our RUMOUR mill?

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

And the rest is history!

One year later...

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

Friday, February 16, 2007

Nasioncom Caught Inflating Sales Revenue

Posted on Business Times.

SC raps NasionCom
for inflating
revenue figures

The telecommunications service provider has to rectify and re-issue its financial statements for the year ended December 31 2005 within a month

“NasionCom’s revenue of RM194.98 million as reflected in its 2005 financial statements contained RM143.11 million sales that were not transacted,” the SC said in a press release late yesterday.

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

More Update on Timber Sector

A lot of bullish news on the timber sector lately: Timber product prices on the rise.

• Timber product prices on the rise
  By LEONG HUNG YEE
  
  PETALING JAYA: Prices of Malaysian timber products have been rising steadily as the raw materials shortage became critical as a result of tropical thunderstorms.
  
  CIMB Research said in a recent report the heavy rain in the country since February had affected timber-harvesting activities and could dent log and plywood supply over the next few months.
  
  “This could lead to a log shortage over the next few months, which is likely to translate into much higher timber prices if demand from Japan picks up quickly during the same period,” it said.
  
  CIMB said China could be one of the key factors in a major turnaround for plywood prices. It said China’s plywood production had declined since the government reduced the export rebate from 20% to 5% at end-2007. If the output continued to fall, a further recovery of plywood prices in the coming months could be expected, it said.
  
  “Although we believe the worst is over for the timber sector, we take a neutral stance until we see strong signs of a catalyst for the sector,” the research house said.
  
  Meanwhile, analysts said timber products prices were not soaring but gradually improving. They said the prices had risen partly because of the constraints on supply and high transportation costs due to rising oil prices.
  
  “While the construction industry in Japan is recovering, plywood manufacturers were not prepared to ease prices further.
  
  “Rising fuel costs had caused many manufacturers to resist cutting prices. Moreover, some manufacturers were expecting demand to pick up as several reconstruction projects will be launched in China to fix damage caused by recent winter storms,” an analyst said.
  
  Analysts continued to be optimistic about price stabilisation in the near future. However, they expressed concern over the volatility of oil prices as well as a possible recession in the US.
  
  According to Malaysian Timber Association president Datuk Sheikh Othman Rahman, industry players could expect to see better times ahead now that the worst is over for the local timber industry.
  
  He viewed the timber industry as a vibrant industry, contrary to market perception of it being a sunset industry.
  
  “Malaysia’s timber exports have risen to RM23.3bil in 2006 from only RM14bil in 1996, with the largest export markets being Japan, the US and China,” Othman said, adding that timber exports were forecast to reach RM50bil by 2020.
  
  Going forward, Othman expected timber companies to move towards more downstream production. He added that the Government had set up a special purpose vehicle to disburse RM1bil under a 15-year programme to plant 375,000ha of high-value timber trees by 2020.
  
  Meanwhile, two foreign brokerages, Merrill Lynch and Credit Suisse also issued calls to upgrade the timber sector last month.
  
  Credit Suisse issued a note to upgrade the Asian timber sector from neutral to overweight. Merrill Lynch's March 4 report said plywood prices had reached a bottom and had started to pick up.

And here is another news clip: Merrill: Plywood prices starting to rebound

• KUALA LUMPUR: The recent rising plywood price trend is lending support to our view that prices have reached a trough and are starting to rebound, said Merrill Lynch Research.
  
  It said according to forest products industry players, the recovery of plywood prices is gaining visibility and the upside impetus is expected to flow through to May. It said March concrete panel (CP) prices rose 11% month-on-month to US$480/m3 (RM1,536/m3), adding that indicative prices for April and May are also seeing another 10% higher month-on-month .
  
  “If this actuates, May CP price would be only 20% shy of all the all-time high,” it said.
  
  In a research note, it said that the Russian government will raise the softwood log export duty to 80% by January 2009. It opine that once the 80% duty is imposed, many plywood mills using Russian logs will be out of business, adding that this development would boost prices of log and plywood.
  
  It reiterated it’s buy recommendations on Ta Ann Holdings Bhd (34% upside) at a price objective (PO) of RM10.15 and WTK Holdings Bhd (40% upside) at a PO of RM3.30 on the back of improving industry fundamentals.
  
  “Both companies have long-term volume growth plans in place via forest planting and have also diversified into palm oil plantation.”

I had made 2 postings on this sector, Credit Suisse goes bull on Ta Ann and More on Timber Sector

Today RHB had a report on this sector and I was able to get a hand on the report.

In the second page, RHB analyst wrote abut the possibility that 'History May Repeat Itself'.

• Recall, in late-2006, in anticipation of the Russian export tariff hike from 6.5% to 20% effective July 2007, and coupled with the Indonesian government's efforts in curbing illegal logging, Japanese timber traders and stockists began stocking up logs and plywood. Sequentially, plywood prices soared to record levels in late-2006 (refer to Chart 4)....

I am less than convinced.

Yes, history can always repeat itself... but based on today's variables, I have my doubts.

• Based on current economical environment, with tighter global credits, would Japanese timber traders and stockists want to stock up their lumber???
• Look at the housing chart (chart 2) provided by RHB. The housing starts are showing the glaring difference between 2006 and 2008. Why would Japanese timber traders and stockists want to stock up their lumber??? ( See chart from RHB below)
  
  
  

How now my Dearest MooMooCow?

Would you want to be in this sector?

Do you see enough justifications to be in the timber sector?

Yes, they say that there recent timber prices have shown a rising trend and that it indicates that perhaps timber prices have bottomed but do I see enough strong reasoning that suggest that timber prices should surge?

Do I see clear signs that housing starts in Japan are increasing? And given the massive issue within the housing market in America, could one even contemplate a housing boom in Japan? Reasoning is simple here again, without housing boom in Japan, where will the demand of lumber come from?

And if there is no strong demand for lumber, would one ever see a boom in the timber sector?

However, RHB analyst thinks otherwise. In page 3 of their report, they wrote the following:

How?

Do I want to be in this highly cyclical sector under the current economical environment?

Would you be Bullish On the Chinese Stock Markets?

As I was making some housekeeping on my blog, I realised that I had highlighting the following article about Investing In China almost a year ago, back on May 18th 2007.

I would like to highlight that posting again:

• 1. watching Chinese stock prices gallop upward for months, Ding Xiurui wanted a piece of the action. The 45-year-old office worker stood in line at a bustling brokerage Friday to open her first trading account. She brought her sister, who opened an account too. They joined millions of other novice investors who are jumping into a market that has soared to dizzying heights, with prices up nearly 50 percent this year.
  
  "We still can make money," Ding said as she stood at the counter at Tiantong Securities with the paperwork for her new account. Asked what stocks she would buy, Ding said, "I don't know. I'm still learning."
  
  2. Economists say the government should take steps to moderate the price surge or risk a sharp fall that could hurt millions of small investors.
  "This is a very critical time. If policy adjustments take place now, the market can still have a sustainable development," said Hong Liang, a Goldman Sachs economist. "The longer they wait, the harder the eventual landing will be."
  
  3. Enthusiasm for stocks is fueled in part by a lack of other investments in a heavily regulated economy. Famously frugal Chinese families save up to 40 percent of their incomes, but bank accounts pay just 3 percent interest — less than the rate of inflation.
  
  4. "I have a stable income but in China now a stable income doesn't mean a good life," said a 26-year-old government employee who was opening an account at Tiantong Securities and would identify himself only by the English name Leon. "Seeing other people earning a lot of money, all you can think is, you're earning so little and how can you make more?"
  
  5. A 60-year-old cleaning woman in the southwestern city of Chongqing is being feted in the media as a market wizard after doubling her 20,000 yuan ($2,600) investment in two months.
  "At a time like this, who can lose money?" the newspaper Chongqing Morning Post quoted her as saying.
  
  6. The Beijing Youth Daily carried a photo of a Buddhist monk opening a trading account last week at a brokerage in the western city of Xi'an.
  In Nanjing in the east, a man in his 70s mortgaged his apartment to raise 60,000 yuan ($7,800) to play the market, the Web site Shenzhen News Net reported.
  
  7. "It might be dangerous, but who knows? People thought it was dangerous in March," Leon said
  
  8. Stock prices are 30 to 40 times earnings, an unusually high ratio for many major markets, which some say makes them unrealistic. "But that is not paying attention to earnings growth, which is very, very strong," Liang said.
  
  9. "We hear that before 2008, the government won't let prices fall," said Ding's sister, Ding Jingxian. "We're not afraid."
  
  And the most interesting point in my opinion is number 10.
  
  10. "We are opening 40 to 50 new accounts a day," said Zhang Jun, the branch's deputy manager. "Six months ago, it was four to five a day." Nationwide, the number of trading accounts has soared by 30 percent over the past year to 95 million, one-sixth of them opened in the past four months, according to the China Securities Depository and Clearing Corp., which is owned by China's two stock exchanges.
  On Wednesday alone, investors opened 552,559 new accounts, the company said.
  
  Source: 1st-time investors buy up Chinese stocks

See this clip also: http://www.tudou.com/player/player.swf?iid=6236614

And boy oh boy how the excuberance drove up the stock market.

On May 17th 2007, SSE was at 4048 pts. By Oct 17th 2007, the SSE index reached 6092 pts. An increase of 2044 pts or a whopping increase of 50% in a mere 6 months.

Here is an even more interesting view if you look at the SSE from May 2005 to Oct 2007.

However, as we all know, things did not turn up well. That the SSE has been underperforming is an understatement.

At this moment of time, the SSE is only at 3604 pts. Which is LOWER than what it was on May 17th 2007 when the SSE was at 4048 pts.


In my opinion, the decline was rather deadly. I mean, the SSE did NOT fall off the cliff but instead it was like rolling off a hill. And because it was rolling off the cliff and not falling off the cliff, I reckon that many did not realise how drastic the fall could be. And sadly, the longer the time pass, the decline eventually turned severe!


And this drastic decline was highlighted in the following posting, Chinese Stock Markets: The Day They Jumped!

• Published on Seattle Times. Chinese get a taste of investing's downside
  
  SHANGHAI, China — When emergency workers found Wang sprawled unconscious after having downed two bags of insecticide, he was still clutching the PDA he had been using to check stock prices.
  
  Like a number of other small investors in China, Wang had bet — and lost — his life savings, about $15,000, on the Chinese stock market. The propaganda office and doctors at the hospital where he was treated said the 36-year-old factory worker had been preparing to get married and that he had hoped to use the money to buy an apartment for his fiancée.Wang's attempted suicide and those of other investors are a heartbreaking consequence of China's great experiment in capitalism.
  
  In February, Li, a 25-year-old engineer, jumped from the seventh floor of the building where he worked in the city of Chengdu. His company said he had lost a huge amount on the stock market. On March 30, a 39-year-old former ice-cream- shop owner, also named Li, leaped to his death from his apartment building in the inland province of Shandong after losing a third of the $4,500 he had invested.
  
  As China's stock markets crashed over the past six months, the Communist government reacted in a way most consumer investors like Wang did not anticipate: It watched from the sidelines. It wasn't until last week, after the Shanghai benchmark index's fall to a symbolic milestone, below 50 percent of its peak in October, that Beijing finally stepped in.

However, as it is, it does look as if the worse is over for the Chinese Markets, right?

The correction that everyone was looking for has had happened and after the Chinese Government stepped in to stop the rot in the market back in April, the correction had stabilised, right?

So as it is, would one consider this an opportunity to buy in the SSE?

Some still don't!

Posted on CBS MarketWatch recently: Chinese stocks not attractive, even after correction

• But the investment newsletters I track are finding it especially difficult when it comes to China. On the one hand are newsletters who are predisposed to seeing huge opportunity in Chinese stocks, and who accordingly tend to downplay any evidence or objections to the contrary.
  
  On the other hand, some other newsletters appear to harbor an almost jingoistic aversion to investing in China. They accordingly tend to exaggerate the risks and problems that plague the Chinese economy.
  
  The debate on both sides reminds me of a famous remark attributed to Adlai Stevenson, the Democratic Party's candidate for president in the 1952 and 1956 elections: He was fond of mocking opponents by saying, "Here's the conclusion on which I will base my facts."
  
  It is against this background that I paid special attention to a recent article that John Dessauer devoted to investment opportunities in China.
  
  Dessauer, of course, is editor of the Investor's World newsletter. According to the Hulbert Financial Digest, the advice Dessauer has provided in his newsletter since the beginning of 1982 has produced a 10.2% annualized return, in contrast to 9.4% annualized (before dividends) for MSCI's Europe Australia and Far-East (EAFE) index.
  
  Dessauer earned his bona fides as not being knee-jerk against China over a decade ago, before investing in that country had become so popular. "I first visited China in 1994," he wrote in his most recent issue. "After that, ... I went back many times, visiting many of China's provinces. Starting in 1995, I began writing about the Chinese economic miracle, and I advised buying stocks in companies that were doing business in China."
  
  Does Dessauer consider Chinese stocks to represent a good value today, with the Shanghai Composite index trading at barely more than half its high set last fall?
  
  In a word, no.
  
  For starters, Dessauer is concerned about the speculative motivation of most individual Chinese investors in Chinese stocks, and what it would do to the prices of those stocks if and when they decide to pull out en masse. "The sixfold rise in Shanghai stocks happened at the same time that millions of new Chinese investors flooded into stocks," he pointed out. "At times, Shanghai stockbrokers were opening a million new individual accounts a week. Does anyone really believe these individuals are long-term investors?"
  
  Answering his own question, Dessauer continues: "It will be interesting to see how all those millions of individual Chinese who rushed to buy stocks on the way up will react now that the market has fallen sharply. My guess is that many will lose interest in stocks and go back to work to earn back their losses."
  
  In addition to being concerned about the speculative nature of the Chinese stock market, Dessauer also worries about the "lack of managerial talent in China. Mao killed or severely punished most intellectuals, or any talented people. An entire generation of managerial talent is missing in China. It takes a long time to create managerial talent. China has been making progress with education and training but the problem is still far from solved."
  
  A third source of concern for Dessauer is "the difficult issue of guanxi, the intertwining of personal and business relationships, which leads to what we would call corruption or nepotism. In China, it has become ingrained that you combine personal and business relationships... I have visited many companies in China -- public, private and state-owned. The business culture is slowly changing, but it is still common to find high-level managers who do not know what 'profit' means, never mind shareholders. There is still a question about who owns what ... If you are still tempted to buy Chinese stocks, take a look at one or two prospectuses for Chinese companies. That is a sobering exercise that should curb your enthusiasm."
  
  Instead of investing in Chinese companies, Dessauer says that the preferable way to profit from the Chinese "economic miracle" is by investing in "established companies from the developed economics that are succeeding in China."

Interesting views made by Mr. Dessauer, yes?

But what about views from folks like Jim Rogers? Mr. Rogers has been a constant bull on the Chinese Markets for so long already.

For example on March 17th 2007, I made the following posting, And what about Jim Rogers Views?

• "I've sold out of emerging markets except for China," said Rogers, long a prominent China bull.
  
  Even in China, the world's fastest expanding economy, Rogers said stocks were overvalued and could go down 30-40 percent.
  
  But he added: "China is one of the few countries in the world where I'm willing to sit out a 30-40 percent decline."

And in the posting, How now my dearest Moo Moo Cow?

• "I own Chinese shares. I'm not selling Chinese shares. If the Chinese stock market doubles again this year I'll have to sell, because then it's a full-fledged bubble," he told a media briefing after a speech in Hong Kong.
  
  "If it goes down 50 percent this year I will buy a lot more Chinese shares. I'm not smart enough to know what it's going to do, but I'm not selling China at all."
  
  "There's no question that PEs (price to earnings ratios) in China in the A-share market are too high for some companies, but that doesn't mean it can't get much worse. When you have a bubble develop, crazy things happen," he said.
  
  "The Chinese stock market could double this year, even though it's expensive right now."

And in Novemeber 2007, And What Does Jim Rogers thinks Now?

• But I'm gearing up. I didn't put in any orders for tomorrow but I'm starting to prepare my list of things to buy in China. Whether I buy this week or this month or this quarter, who knows. But I'm starting to think about buying new shares in China for the first time in a while. And I'm not thinking about buying in America."

And just last month, it was posted on Bloomberg that Investor Jim Rogers Buys Chinese Shares as Market Hits `Bottom'

• April 27 (Bloomberg) -- Investor Jim Rogers is buying Chinese shares, among the world's worst performers this year, as the market has bottomed, and he's focusing on agriculture, tourism, airlines and education.
  
  ``All my new money goes to commodities and China,'' said Rogers, who co-founded the Quantum fund with George Soros in the 1970s and correctly predicted the start of the commodities boom in 1999. He spoke at a seminar in Beijing yesterday.
  
  ``All the panic looks like a bottom,'' he said. ``I have bought in the last four to five weeks. I've been buying shares in China for the first time in a long time.''
  
  China's benchmark CSI 300 Index plunged as much as 39 percent this year, becoming at one point the world's second- worst performer, amid speculation government steps to quell inflation would hurt corporate profits. The index is a measure of shares traded in Shanghai and Shenzhen.
  
  The stock market, the world's fourth biggest, surged almost six-fold in the two years through 2007, driven by optimism growth in the economy would boost earnings.
  
  The slump triggered government moves to support the market, with the latest taking effect April 24, when the tax on stock trading was reduced. Chinese stocks jumped 9.3 percent that day, the most since Oct. 23, 2001, helping lift the index to a 16 percent gain last week.
  
  Analysts Differ
  
  Some analysts remain unconvinced the measures will have an effect with Morgan Stanley and Credit Suisse Group last week saying China's shares are a ``sell.''
  
  ``Given earnings deceleration, we do not think such a rally can last,'' Morgan Stanley's Jerry Lou and Allen Gui wrote in a report April 25. ``The government's cut of the stamp duty seems to suggest that it is running out of silver bullets.''
  
  Chinese companies' Hong Kong-listed `H shares' are more attractive than yuan-denominated `A shares,' Credit Suisse's Vincent Chan wrote in a separate note.
  
  Selling Chinese shares in 2008 ``is a big mistake,'' said Rogers, adding that he had also bought stocks in Singapore, Taiwan and Hong Kong. ``I have never sold any Chinese shares.''
  
  Rogers said he bought shares related to tourism and education, which ``in China will continue to be a major industry.'' Other investments include those of airlines, water companies and agricultural producers, he said.
  
  ``China has a huge agricultural problem,'' Rogers said. The ``government is doing everything it can to revive the agriculture industry.''
  
  Yuan to Climb
  
  Rogers was bullish on the Chinese yuan, saying it could eventually rise to 2 yuan per dollar.
  ``Don't sell your renminbi, because it will go a lot higher in the next 20 years,'' Rogers said.
  The yuan has gained more than 4 percent against the dollar this year, after climbing 7 percent in 2007. The currency traded at 7.01 to the dollar April 25.
  
  Rogers traveled the world by motorcycle and car in the 1990s, researching investment ideas for his books, which include ``Adventure Capitalist'' and ``Hot Commodities.''

How now my dearest MooMooCow?

Would you be as bullish as Mr.Rogers is on the Chinese Stock Markets?