For quick reference, past postings..
- Megan
Megan: Part II
Megan: Part III
Megan: Part IV
Megan: Part V
Megan: Part VI
Megan: Part VII
Megan: Part VIII
Megan: Part IX
Megan announced its quarterly earnings today.
Let's take a look at what's posted in Part IX
Megan's latest numbers and new commens will be in PURPLE font.
~~~~~~~~~~~~~~~~~
Time to look at Megan Media Holdings again.. :D
Here's a good exercise. Remember all the concerns I mumbled about? Since Megan Media will be reporting their earnings this month, let's list all of them concerns again so that when Megan Media reports its earnings, we can see clearly if Megan's situation improved or not...
1. Declining Net Profits.
Here is the most recent 7 quarterly earnings. Read from left to right with the last being the latest. The worry was the clear decline in earnings.
- 12.7 mil, 14.3 mil, 15.1 mil, 15.64 mil, 21.1 mil, 12.9 mil, 3.9 mil, 19.837 mil
* ps... what's your expectations? :D
how? tremendous improvement wor... is this the turnaround one is waiting and HOPING for?
2. Declining Net Profit Margins.
The last 4 quarters net profit margins.. and clearly the concern was the drastic slump in profit margins!
- 7%, 8%, 5%, 3%, 9% ... good improvement wor... so far so good!!!!!... hmmmm.....
3. In Part VIII , the balance sheet concern...
Inventories.............................................. 73,543 102.462
Trade receivables..................................... 333,357 326.950
Other receivables,deposits & prepayments......18,505
Fixed deposits with licensed banks............... 3,589 1.096
Cash and bank balances.............................. 93,998 53.274 Where is Ze Moola???
Tax recoverable........................................ 410
Total...................................................... 523,402
The above was the snapshot of Megan's Current Assets in their last earnings report.
how???????? still good?
The concern was on ...
a) Trade receivables: 333.357 million. total now 326.950 million
b)Inventories: 73.543 million. total now 102.462 million (drastic worry?)
As mentioned and explained in that posting.. the trade receivables were soaring and so were the inventory levels.
Would we see any improvement? And how much improvement do we want to see?
And last but not least the debts issue.
Total borrowings for Megan now stands at 725.151 million. Would we see some decline in Megan's borrowings or would we see Megan borrowings increase yet again? emm... debts now is 750.191 million!!! Fiyoh!!! debts still INCREASING!!!
How?
If there is no drastic improvement or if all these concerns still continue to worsen... what's the most commonsense thing to do?
But then... again... commonsense would have told one to sell this stock years ago!
how?
here is some commentary from Megan itself...
- Thursday, 30 March, 2006
Megan Media Holdings Berhad and its subsidiaries ("Megan" or "the Group") had on 30 March 2006 released its third quarter results to the Bursa Malaysia Securities Berhad.
The Group registered sales of RM214.9 million for the quarter ended 31 January 2006 and profit before tax of RM26.6 million.
Third Quarter 2006 versus Third Quarter 2005
Revenue increased marginally by RM2.9 million or 1.4% from RM212.0 million in the corresponding period of the preceding year to RM214.9 million. EBITDA increased by RM6.7 million and EBITDA margin increased by 2.8% respectively driven primarily by higher sales and production capacity of Digital Versatile Disc-Recordables (DVD-R) and increased in sales of Compact Disc-Recordables (CD-R).
Pre-tax margin improved from 7.3% to 12.4% mainly due to lower depreciation expenses which was partially offset by higher financing costs. During the quarter, the Group has changed the depreciation rate of some of its assets from 20% to 10% per annum to better reflect the useful life of the assets.
Third Quarter 2006 versus Second Quarter 2006
Revenue recorded for the quarter was lower, RM214.9 million as compared with the previous quarter of RM248.3 million. The slide in revenue was mainly due to lower sales of outsourced products for the quarter, which then provided the Group with an improved EBITDA margin of 1.7% from 25.5% to 27.2%.
Megan posted a higher operating and net profit of RM40.4 million and 19.8 million as compared with RM20.4 million and RM4.0 million respectively for the previous quarter.
Business Outlook
The outlook for optical storage products mainly DVD-R looks promising as global demand for DVD hardware (mainly DVD burners) is expected to grow by 50% in 2006, mainly due to a drop in prices of hardware. As a result, the 2006 global demand for DVD+R/-R discs is expected to increase to around 6.0 billion discs. Furthermore, cost pressure is expected to ease since recent development indicates that prices of polycarbonate are reducing from a high of USD3.40 per kg to USD2.90 per kg.
What's your vedict?
Comeon... share your comments.... :)
Megan Media Holdings Bhd (7101.KU) - Malaysia
3rd quarter ended Jan. 31:
Figures are in Ringgit (MYR).
2006 2005
Revenue MYR214,936,000 MYR211,989,000
Pretax Profit 26,649,000 15,551,000
Net Profit 19,837,000 15,642,000
Earnings Per Share 9.69 Sen 10.93 Sen
Dividend Omitted Omitted
9 months ended Jan. 31:
Revenue 712,118,000 637,094,000
Pretax Profit 53,852,000 53,475,000
Net Profit 36,763,000 45,060,000
Earnings Per Share 17.96 Sen 31.48 Sen
Dividend Omitted 1.50 Sen
Posts
6 comments:
Hi Moola,
Nice and very detail and interesting way of writing an investment blog.
Anyway, regarding MEGAN, just my humble personal opinion, they set the depreciation charges from 20% to 10%, that means its machine can be used for 10 years.(I doubt we're still widely using DVD after 10 years :) They could upgrade it to HD-DVD but R&D is spent more on blu-ray instead. That's another topic so just ignore it for now.)
Let us roughly count it from RAM's report.I'll have to ass-u&me here, sorry for that. 33 DVD lines (19m/line)still undergoing depreciation charges, 20%/annual = ~31.35m , as they reduce it to 10%/annual, there's a whopping 15.675m reduction in operating expense. (Anyway, the depreciation charges are 18.1m to be exact in the quarterly report) That explains the turnaround EPS. Is this consider a manipulation of accounting?
I recalculate the EPS, assuming tax is the same but depreciation charges at 20%/annual, it's roughly only 0.01. (what a difference!)
Anyway, I assume some investors will look at the EPS and buy the share, so price might be up a while until they notice it's another trick. (I was a buyer of MEGAN myself with huge(%wise) losses) Let's see. I might be wrong altogether.
Hi Moola,
I just read TA Securities's report on Megan. Their PER is only 2x and div yield is 11.4%
Have you seen their report? They upgrade their sell call to a buy...
yikes.
how? if u need to see the report, i can fwd to u.
Anon,
Many thanks for your offer.
Please read Part XI on why in my opinion I think the PER is meaningless.
In short let me repeat it briefly.
Megan states it earned some 19.8million or almost 20 million. Now if a company declares that it earns some 20 million, surely from an investor point of view, you want to see some value being created in the company.
Right or not?
So is there any value?
I see none. Look at the piggy bank cash. It depleted by some 43.217 million? And the loans? Loans increase by another 25.040 million.
Got value meh?
ps.. i am talking from an investor using a business perspective on Megan.
The share price?
I have no idea what will happen hor...
Looks like the price went up as expected. I'll have to agree with Moola to 'show me da moneyzz' when it's loan increased and cash flow is decreasing.
Well, I'd decided not looking anything about it until its next quarterly report. There should be other stocks more worth to study on...
Anyway, I just wonder whether technical traders will buy in, seeing it's in uptrend. It'll be an interesting study on investor's behaviour for this.I wonder do they teach about investor's behaviour in uni?
Hi,
Just for your info... RHB did mention the huge variance in depreciation charges.. and they do note that if the depreciation was set at 20%, then Megan's net earnings will show a serious decline... if you are interested in that copy.. send me an email..
Yes, when a company reports such a surge in corporate 'earnings', it is pretty likely that share could see some demand in the market, resulting in a sharp rise in the share price.
So how does this all this translate to the market player?
For me, I believe that an investor's primary objective is to invest in only the good, quality companies at a reasonable price. And if that is the case, then the share price or the market reaction to the company's earnings is not in the equation. For the focus is always on gauging the quality of the company. ( If one puts the share price in the equation, the investor focus gets muddled because the likelyhood is that the investor might be focused on what the share will do in the market, will the share go up or will the share go down. And the actual focus on the quality of the company is soon forgotten. )
Now if one is a market player, looking constantly to find a way to make money in the share market, then the study of the market behavior and also the market trends is utmost important.
Which is a total different ball game.
Yes?
Which is right and which is wrong or which is the best way.. will always depend on the individual.
Right or not?
Anyway.. here's another food for thought.. ie... if your focus is on the company... ;-)
Megan reportedly 'earned' some 20 million ringgit this current quarter. And yet this 20 million did NO good at all for the company. As argued, there is NO creation of wealth at all.
How?
How much do you reckon that Megan will need to earn?
How much do you reckon that Megan will need to earn to seduce some real investors?
40 million?
60 million?
And let's put that debt issue into perspective. Despite earning 20 million, debts has increased by another 25 million.
How? Will Megan be able to setttle their 750 million debt?
And at this rate... LOL... Megan will soon become a billion dollar company... a billion dollar in debt company! No possible? Or am I being too cynical?
And then, the implications in the issue of the sharp rise in inventory and the extremly high trade receivable is extremely serious and cannot be discounted at all.
Why is the inventory increasing so much?
What kind of inventory are we talking about? And since Megan's products is high tech, we really need to find out if the rise in inventory is caused by 'dead' stock.
And what is so bad? Well.. what if Megan needs to write-off these inventory? 102 million wor. No small amount.
And then the trade receivables.
Such an extremely high trade receivables in Megan's books makes its sales/earnings questionable.
Yes?
No seriously sane businessman conducts their business in such a manner. Now when you consider that their ytd earnings for 3 quarters is only some 36 million, which sane businessman would have a trade receivable totalling more than 320 million? Doesn't one suspect that something is wrong somewhere?
Ok, let's give Megan a benefit a doubt...
Let's consider that there is no hanky panky here and that the company really does have some 320 million in trade receivables.
Now the question then is why isn't the company collecting it?
Is there a problem collecting money from these so-called receivables?
But since the trade receivables have been constantly increasing, would one be wrong to conclude that Megan is seriously having problems collecting money?
And how about putting their debt isssue into perspective.
If Megan could collect all these debts, then Megan need not borrow so much money, right?
And since Megan had to borrow so much money, then isn't there a strong likelyhood that sooner and not later, Megan will have to write-off these trade receivables as doubful debts?
Hmm... 320 million...and if they write-it off... how much losses do you reckon Megan have to record?
Hmm... could I be wrong?
Of course it is possible... but what if I am correct?
And worse still... what if I am correct on both counts?
What if Megan's inventory and trade receivables has to be restated?
Double whammy?
btw.. if u are interested in investing itself, do take a good look at Talam's quarterly earnings. Read their attached wordfile and see how much Talam had to restate their earnings. And from Talam's example, you should understand the pitfall of investing based solely on a company's earnings per share.
Sorry for long reply.... ;-)
Cheers
Mind post an update on latest quarter result?
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