TechnoDex Bhd

Saw this posted on the EdgeDaily.com
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TechnoDex expects net profit of RM7m for FY07

By Gan Yen Kuan

Mesdaq-bound TechnoDex Bhd, a business technology provider specialising in open source solutions, expects to achieve a net profit of RM7.02 million on the back of RM12.46 million in revenue, for the financial year ending June 30, 2007 (FY07).

The projection represents a 60% jump in revenue and 40% in net profit, compared with the targeted revenue and net profit of RM7.78 million and RM5.01 million respectively for FY06. TechnoDex managing director and chief executive officer Nigel Lee said the projection was based on the wide interest in the company’s products. He said that the company would leverage on its matured technology platform and products to boost sales.

Compare that to what was printed in Star Business: TechnoDex to triple net profit

TECHNODEX Bhd, which is targeting a Mesdaq listing next month, is confident of reporting a net profit of RM5mil for the financial year ended June 30, 2006 – more than triple the previous year's net profit of RM1.4mil. Chief executive officer Nigel Lee Siew Tat said the better earnings would be mainly due to the value-added features introduced for its core product, the TechnoDex Enterprise Solution Platform.

He said the platform was an open source-based software that provided the flexibility and scalability for application developers to customise their solutions structure as well as business model to meet market needs. “The product has played an important role in widening our local customer base,” he told StarBiz in an interview.

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Huh?

The Edge: Mesdaq-bound TechnoDex Bhd, a business technology provider specialising in open source solutions, expects to achieve a net profit of RM7.02 million on the back of RM12.46 million in revenue, for the financial year ending June 30, 2007 (FY07).

The Star: TECHNODEX Bhd, which is targeting a Mesdaq listing next month, is confident of reporting a net profit of RM5mil for the financial year ended June 30, 2006 – more than triple the previous year's net profit of RM1.4mil

Fantastic isn't it?

See where the PROBLEM is?

Remember the recent articles about companies not meeting their IPO numbers?

Yung Kong: Part II

Wrote on this stock before: here

Yung Kong just announced it's earnings and it did not lose money.

YUNG KONG GALVANISING INDUSTRIES BHD
Quarterly rpt on consolidated results for the financial period ended 30/6/2006

Well, it's only right that I made this short note.

And just for the record, here is how the stock is performing.

Key West's ESOS issue

Saw this article posted by the Edge Weekly on Key West Global. ( KEYWEST )

Corporate: Key West takes Esos hit
By Siow Chen Ming

Here are some points from the article..

• Mesdaq-listed Key West Global Telecommunications Bhd (KWGT) is probably the first company on Bursa Malaysia to have reported a loss from expensing its employees' share options. The company said it had expensed a sum of RM396,000 on share options in the first financial quarter ended April 30, 2006, causing a pre-tax loss of RM516,000 during the period, on a turnover of RM45.32 million. During the previous corresponding quarter, pre-tax profit amounted to RM770,000 on a turnover of RM25.77 million.

And last but not least, the writer mentioned the following:

• With share options becoming an "expense", this would be a reminder to companies to plan their Esos properly so that their future earnings performance are not affected. This is particularly so for companies that have high staff counts but with small profits or thin profit margins.

Here's the issue for me.

ESOS is to reward the employees.

I have no problem with it.

Expensing ESOS in the books? Yes, it is a must. Someone has got to pay for it and it is an EXPENSE for the company. The shareholders has the right to know how much is the total expenses. Right?

So what's my problem?

Aha... if the company does not MAKE so much money... why should the ESOS be more than what the company make?

Does these employees deserve their ESOS?

Think about it.

That I think should be the most important thing to address!

Tanjong's Tropical Island Resort Investment: Part II

Saw this newsclip:

Tanjong's German resort gets another fund injection By Tamimi Omar, 12 Jul 2006 6:18 PMTanjong plc is taking steps to turn around its loss-making Tropical Islands resort in Germany with the injection of another 34 million euros (RM154 million) for its second phase of development over the next two years, bringing the total investment in the project to 110 million euros.
MORE>>

Incredible isn't it?

Let me repost an old posting on Tanjong's Tropical Island Resort Investment (best comment of course was “Compared with net asset or capitalisation, it's not significant at all,” he said.

=======>>>>>>

I was looking at Tanjong latest quarterly earnings when this statement in their earnings notes caught my attention.

• The Leisure segment recorded a RM76 million increase in revenue following the
  commencement of Tropical Islands operations in December 2004. The segment registered an operating loss of RM69 million in the current year due to delays in the completion of certain facilities in Tropical Islands which resulted in lower than expected admissions and revenue.

Hmm... commenced in Decemeber 2004, and had operating loss of rm69 million. No wonder Tanjung earnings wasn't too happening this quarter.

Let's go back a year ago, March 2005 and look at how this Tropical Island did. Now the notes in the earnings report was pretty sketchy, so I will use a snippet from RHB research notes back in March 2005.

• Tropical Island Resorts (TIR) losses to continue in FY01/06 but should be immaterial by FY01/07 and turn around in FY01/08. To recap, TIR reported a higher-than-expected operating loss of RM51 versus earlier expectations of RM30m start-up losses. The higher losses of TIR were due to delay in installing a “translucent” roof. The cold weather condition slowed installing work and the doom’s height of 107m did not help. As a result, TIR’s main attraction (the Rainforest) did not have the intended tropical sunlight effects. The delay has resulted in negative publicity, which in turn affected tourist arrivals.
  
  In addition to the start-up losses, the resort has yet to reach its optimum number of visitors and yield. To date, one of the four translucent roofs has been installed. A check with TIR’s web-site shows the significant difference in having a ranslucent and non-translucent roof (refer to the above picture). Installation of the roof is scheduled for completion in 3QFY01/06. We believe pre-completion tourist arrivals are not likely to hit optimal level, especially when it would miss out on the peak holiday season (summer months) in Europe. Thus, we expect TIR to remain in the red in FY01/06. However, we estimate that the operating losses would be trimmed from RM51m in FY01/05 to about RM33m in FY01/06.
  
  We were given to understand that with costs under control, TIR is expected to turn around and commence positive contribution in FY01/07. After the completion of the translucent roof, the company would adopt more focus and aggressive marketing efforts to attract visitors and hope to benefit from the spillover effect of the 2006 World Cup in Berlin. However, we have adopted more conservative assumptions on tourist arrivals and costs. We expect an immaterial operating loss of RM0.2m. For FY01/08, we are forecasting RM11.6m operating profit on account of higher visitors.

So what is this TIR? Well, TIR stands for Tropical Island Resort. A project started by Tanjung back in 2003. And this Tropical Island Resort was built in Brand, 60 kilometer south of Berlin.

Yes, a tropical island resort in Germany. LOL!

• Tanjong and Mr Colin Au propose to enter into a joint venture agreement to develop the land into a "Tropical Island" holiday destination that provides an all year-round indoor tropical environment. The "Tropical Island" holiday destination will house a variety of tropical settings such as rainforest, sea, lagoon, beaches, water parks, exhibition centres, tropical flower world, resort hotels and spas to cater for all age group visitors.

Yup, this is probably what an investor do not want to see. Companies straying way off course in their own business objective. Totally bad.

Even the idea is lousy, isn't it? Say, you are a German and you want to go for a tropical holiday. Wouldn't you want to just fly away to a real tropical island than end up in Brand, Berlin? It wound really sound a drag of a holiday. Those Germans that I know, they really like to travel.

And needless to say, the stock was hammered when Tanjong made the announcement back in June 2003. Here is a short snippet then.

• Business Times - 24 Jun 2003
  KUALA LUMPUR
  Tanjong shares plunge on German theme park move
  
  Stock falls 6% as investors deem it a poor investment
  
  MALAYSIAN lottery and power firm Tanjong plc's surprise plan to build a mock tropical retreat in Germany knocked 6 per cent off its shares yesterday as investors guessed it may have made a wrong bet.
  
  Tanjong said on Friday it had bid an undisclosed amount for the land and assets of Germany's Cargolifter AG in a joint offer with Colin Au, the ex-chief executive of cruise operator Star Cruises Ltd.
  
  'Trying to have a theme park in Europe is not a good idea. Just look at Euro Disney,' said Nik Azhar Abdullah of Commerce Asset Fund Managers..... 'I'm a bit surprised with the type of investment. The European economy is not exactly booming right now,' said JP Morgan's Melvyn Boey.

And of course, the company was forced to defend itself...

• Friday, June 27, 2003
  Tanjong: German park not a significant investment
  
  TANJONG Plc said a bid for 500ha in Germany to build a holiday park will not require a “significant'' investment, addressing concerns its finances will be strained.
  
  “The project is not significant in the context of Tanjong,'' chairman Datuk Khoo Eng Choo told reporters after a shareholders' meeting in Kuala Lumpur.
  
  “Compared with net asset or capitalisation, it's not significant at all,” he said.

How would you feel, as an investor, when you hear the chairman declaring that such an investment to be not significant?

So how much was the total investment? It wasn't until July 7th 2003, that folks like me could read it in the papers.

• Tanjong, Au to spend RM304.6m on German tropical resort project
  GAMING and power company Tanjong plc is teaming up with Colin Au to develop a tropical resort in Germany at a total cost of RM304.5 million.
  
  The company said the total cost includes the RM76.1 million or 17.5 million euros cash it is paying for the assets of CargoLifter AG Group.
  
  The assets include a 500ha piece of land situated 60km south of Berlin, Germany. The land currently houses a free-standing hangar measuring 360 metres long, 210 metres wide and 107 metres high.
  
  Tanjong said that two German companies, Tropical Island Management GmbH and Tropical Island Asset Management GmbH will develop and operate an entertainment and leisure based tourist holiday destination with tropical island setting within the hangar. Both companies are 50 per cent owned by Tanjong Entertainment Sdn Bhd, a wholly owned subsidiary of Tanjong.
  
  “The project cost will be funded through a combination of equity funds, shareholder’s advances and bank borrowings to be secured by two German companies,” Tanjong said.
  
  It added that the project is only expected to be completed in the fourth quarter of 2004. “As such, it will not have any material effect on the group’s earnings for the current financial year ending January 31 2004,” it said.
  
  “This project is very much an extension of Tanjong’s existing involvement in the leisure and entertainment business. Over the years, we have been continuously identifying opportunities for the expansion of our business in this sector,” says Tanjong’s chairman Datuk Khoo Eng Choo in a statement to the Kuala Lumpur Stock Exchange.
  
  Au said: “We are confident that this project, when completed, will draw in repeat visitors, especially from Germany and its neighbouring European countries.”
  
  He said the tropical resort is also expected to feature monthly exhibits of a tropical country or region.
  
  “As a start, we hope to work with the Malaysian Tourist Promotion Board to feature Malaysia with its rich heritage of culture, arts, food, architecture, islands, resorts and its rainforest. Also, Malaysia’s cultural groups, musicians and dancers will have the opportunity to perform at the Tropical Island,” he added.
  
  Tanjong also agreed to set up a joint venture company with Au Leisure Investments Pte Ltd to identify, develop and operate entertainment and leisure based holiday destinations with tropical island setting.
  
  The joint venture company, Central Pacific Assets Ltd will have an initial share capital of 5 million euros (1 euro = RM4.35) and an eventual enlarged paid-up share capital of up to 30 million euros. Central will be owned equally by Au Leisure and Tanjong Entertainment.
  
  Tanjong said Au, who has 30 years of experience and expertise in international leisure and tourism industries shall be appointed as chief executive officer of Central. “The position of chairman and chief financial officer of Central shall be nominated by Tanjong Entertainment,” it added.

According to the closed Surf 88 back in 2003...

• The investment cost… With the details now unveiled, the expected investment in the venture is not as massive as earlier feared by investors. The jv will initially be capitalized at Euro 5M (RM21.8M) and eventually up to Euro 30M (RM130.5M). Tanjong’s 50% share hence works out to RM65.3M at the final stage (16.9 sen per Tanjong share or 1.6% of current share price). This is considered a relatively small investment for Tanjong, where funding is not a problem given more than RM300M free cash flow annually (cash flow from operations after dividend and capital expenditure).

So how?

Well, it looks like this 'not significant' investment for Tanjong cost some rm65.3 million.

And the end results?

This fiscal year 2006 earnings for Tanjong showed that the Tropical Island's reported opertaing losses of rm69 million!!

Ahh... when company embarks on a funky corporate exercise, like investing in a tropical island resort, most of the time, the company would end up producing some real funky results too for its investors.

Yeah dude... just play that funky music man!

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edit 12.09 pm 29th March

found some pictures... via a google search on the phrase 'tropical island resort; brand; germany'..

err... how? look fun ar?

and here is a newsclip on it... Gone troppo in Germany

Megan: Part XIX

Dedicated to Wonder:

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: Part X
  Megan: Part XI
  Megan: Part XII
  Megan: Part XIII
  Megan: Part XIV

Here' an update of my opinion on Megan recent quarterly earnings. If not for your request, I would not have made this posting. If I had made a posting, I would have been surely accused for being overly biased against this stock, no?

Before I start, here's a very important question that you should really, really ask yourself, why are you so interested in Megan?

Well, I would assume that there's only one answer.

Which is based on its current earnings per share versus the current traded price, the stock appears to be so cheap.

Right?

So you have one good point.

But in the business world, earnings could always be easily manufactured.

Always.

Some do it via acquisitions. Some do it via insane engineering of their business via enormous capital expenditure via bank financing. And worse of all, commonsense would tells us that such engineering is clearly not sustainable and sooner rather later, there is a real possibility that the business could tumble like a stack of cards once there is a slightest disruption to their business economics.

This was what I have been highlighting all this while for Megan.

I have made reviews after reviews after reviews of the extreme fundamental weakness in Megan.

And the most worrying issue is that the fundamental weakness has never improved each quarter but instead it declined even more drastically each quarter.

So let's take a look at what I posted in Megan: Part X

And let's just review those past reviews. New comments will be in... err.. green font.

<==========>

ps: Megan's latest numbers and new comments will be in PURPLE font. I will using green today.

~~~~~~~~~~~~~~~~~
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, 23.471 million

* ps... what's your expectations? :D

how? tremendous improvement wor... is this the turnaround one is waiting and HOPING for?

Wahh, second consecutive quarter of tremendous improvement. how? Is this the turnaround one is seeking for? Looks good the numbers BUT if one digs deeper, one would have realised that this is pure accounting profit.

What Megan did was they adjusted their depreciation rate from 20% to just 10%. So after spending hundreds and hundreds of millions, Megan dared to make such drastic changes in the rate of their depreciation. End result? Well, they have succeeded in making their numbers look good. But deep down, any accountant will know that this is pure nonsense considering the fact that Megan's business is so technology based, where changes are seen so constantly in its products. So is a depreciation of 10% just for the hundreds and hundreds of millions that they borrowed from the bank to purchase their latest machinery?

Oh.. if they had not used this accounting trick, their earnings for this fiscal year would probably fall as much as 58%!!!!!!

So does it matter that Megan reported a second consecutive quarter of tremendous quarterly earnings improvement?

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.....

for their quarterly earnings, Megan's net profit margin is 7.3% but their fiscal year net profit margin is a mere 5.8%! How?

3. In Part VIII , the balance sheet concern...

Inventories.............................................. 73,543 102.462 43.423
Trade receivables..................................... 333,357 326.950 319.001
Other receivables,deposits & prepayments......18,505 37.142 243.760
Fixed deposits with licensed banks............... 3,589 1.096 9.722
Cash and bank balances.............................. 93,998 53.274 49.829
Tax recoverable........................................ 410
Total...................................................... 523,402

The above was the snapshot of Megan's Current Assets in their last earnings report.

how???????? still good? Worse???

The concern was on ...

a) Trade receivables: 333.357 million. total now 326.950 million now 319.001
b)Inventories: 73.543 million. total now 102.462 million (drastic worry?) now 43.423

As mentioned and explained in that posting.. the trade receivables were soaring and so were the inventory levels.

Ah.. the structural weakness in Megan's balance sheet is extremely clear, isn't it?

Now, it would appear that Megan sorted out its inventory issue since inventory went DOWN from 102.462 million to just 43.423.

But.. consider this issue. Isn't it ironic that on a quarter to quarter analysis, sales went from 214.936 million to 322.671 million. Would I be wrong to say that there is a possibility that Megan embarked on some serious sales campaign to get rid of its excess inventory?

Now normally this would be deemed as an extremely good practice. Getting rid of excess inventory.

But.. take a look at the table of Megan's current asset again. See the entry named Other receivables,deposits & prepayments. My, oh my see how this entry balloned to an incredible 243.760 million? Last quarter it was just 37.142 million.

So would you want to even speculate what Megan did here?

Would we see any improvement? And how much improvement do we want to see? Do we see any improvement?

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!!! Megan total borrowings now stands at 838.669 million!!!!!!!!

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?

So Megan said it made 62 million for it's currrent fiscal year. And it boasted loudly that it's now a billion dollar sales company.

Fantastic.

But do you see any creation of wealth?

How much of this 62 million in net profit is being reflected in its piggy bank?

So does it matter that based on its current earnings per share versus the current traded price, the stock appears to be so cheap?

Eksons

I had talked about this stock, Eksons, quite some time ago in my private forum.

Well two things..

1. It has finally decided to distribute some cash back..

• Eksons to pay out RM33m cash
  
  Eksons Corporation Bhd has proposed to undertake a capital repayment totalling RM32.8 million cash to reward its shareholders amid the company’s improved financial results.
  In a statement on July 4, Eksons said it was distributing 20 sen per share via a share capital reduction exercise. The par value of Eksons shares will be reduced from RM1 to 80 sen each.

( more )

2. Under this writeup in the Star on Monday: Corporates reveal use of cash

• Plywood manufacturer Eksons Corp Bhd is going out on a limb to get the agreement of its minority shareholders for its diversification plans. It announced last week it would seek an “an upfront approval” from shareholders.
  Eksons had earlier proposed to acquire interests in property-based companies, its first foray into this sector.

Well the company announced this today : link

How?

Plywood market is not that good. This causes Eksons to consider a foray into the property sector.

!!??

Well at least the cash back announcement is worth a cheer or two for existing shareholders.

Yes?

No wonder the stock has some oomph lately..

snapshots of an old posting back in 2005.. note the issue of the dividends!

Top of Ze World: Part VII

Here's an update to Top of Ze World: Part VI

Wrote the following back in April:

• Let me bore everyone with numbers and more numbers for Top Glove.
  
  1. FY 2001.
  Shareholders Equity = 93.170 million. Total loans = 13.958 million.
  Total capital used = 107.128 million.
  Earnings generated = 17.217 million.
  Return of total capital used for 2001 = 17.217/107.128 = 16.1%
  
  2. FY 2002.
  Shareholders Equity = 109.136 million. Total loans = 13.440 million.
  Total capital used = 122.576 million.
  Earnings generated = 18.036 million.
  Return of total capital used for 2001 = 18.036/122.576 = 14.7%
  
  3. FY 2003.
  Shareholders Equity = 130.471 million. Total loans = 39.289 million.
  Total capital used = 169.760 million
  Current earnings generated = 25.222 million
  Return of total capital used for ttm = 25.222/169.760 = 14.9%.
  
  4.. FY 2004.
  Shareholders Equity = 162.006 million. Total loans = 63.063 million.
  Total capital used = 225.069 million.
  Earnings generated = 39.509 million.
  Return of total capital used for 2001 = 39.509/225.069 = 17.6%
  
  5. FY2005.
  Shareholders Equity = 216.082 million. Total loans = 154.191 million.
  Total capital used = 370.993 million
  Current earnings generated = 58.141 million
  Return of total capital used for ttm = 58.141/370.993 = 15.7%.
  
  6. TTM (Trailing Twelve Months or most recent 4 quarters).
  Shareholders Equity = 255.538 million. Total loans = 199.478 million.
  Total capital used = 455.016 million
  Current earnings generated = 69.666 million
  Return of total capital used for ttm = 69.666/455.016 = 15.3%.

After today's earnings report from Top Glove, here are the following numbers for Top Glove:

TTM (Trailing Twelve Months or most recent 4 quarters).
Shareholders Equity = 271.624 million. Total loans = 231.937 million.
Total capital used = 503.561 million
Current earnings generated = 76.103 million
Return of total capital used for ttm = 76.103/503.561 = 15.1%.

how?