The MMM story.

The story about MMM (Malaysian Merchant Marine) dated as far back as 2004, when I chatted with a friend in a now closed forum about Arisiag (a fund which prided themselves about being a 'value investing' fund) investment in MMM.

Here is a snaphot of my comments on the discussion.



And one of my forum friends commented the following based on an Edge news report:

• Caught with their hand in the cookie jar .....! MMM, Informatics, the shady deals with the HK company (insider trading) ...... yes, another fundmanager that I won't respect. There are still some good ones, though!
  
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  29-04-2004: Arisaig disposes 1.78m MMM shares
  By Jimmy Yeow
  
  
  Singapore-based Arisaig Asean Fund reduced its stake in Malaysian Merchant Marine Bhd to 6.75% or 7.65 million shares after disposing of a 1.5% stake or 1.78 million shares.
  Filings with the stock exchange showed that the fund disposed of the shares over nine trading days from April 14 to April 26.
  The filings did not disclose the price at which the shares were disposed of. The counter was trading between RM1.54 and RM1.74 on those days.

And on July this year, i chatted with some friends about the grave danger in investing in companies with questionable corporate governance issue.

• remember all the poor corporate governance issue regarding mmm? remember the issue of how one of them boss who Bought unashamed millions of shares in MMM from unexpected minorities in the open market, to sell them at more than 3 times the price a few weeks later to Maruichi (which deal later was cancelled). see how it's so important to avoid companies with poor corporate governance?

And back in July 2006, MMM's earnings was already rather poor.

This was its trailing earnings then. 4 Quarters of successive losses!

Rather poor, wasn't it? And the chart back then, said it all.

And if that wasn't bad enough, on October 2006, it posted the following shocker.

Quarterly rpt on consolidated results for the financial period ended 31/8/2006

It posted a quarterly loss of over 118 million! (total fiscal year loss amounted a whopping rm146 million!)

• MMM's FY06 net loss at RM146.93m
  
  Malaysian Merchant Marine Bhd (MMMB) posted a net loss of RM146.93 million for the year ended Aug 31, 2006 againsts a net profit of RM5.6 million in FY05, mainly due to ageing vessels impairment and escalating dry-docking expenditure.
  
  Revenue for the year fell 30% to RM97.65 million from RM127 million. MMMB said on Oct 31 it would continue to sell underperforming assets and replace tonnage sold, and was looking at forming strategic chartering alliances at the regional level.
  
  It has engaged Grant Thornton to conduct a strategic review to develop a comprehensive plan and effect a sustainable operational turnaround within two years

Effectively the company was said the following:

• The Group expects write downs in values of ageing vessels in this financial year resulting in further losses after the review of declined revenue and negative contributions from respective ships

This got me thinking.

Remember those comments from my forum friend? That one fellow had bought tons of shares and then tried to pawn it off at more than 3 times the share price within a few weeks to Maruichi back in 2004.

One and a half year later... MMM is being asked to write down the value of their ageing vessels.

So, don't you find it strange?

I mean, these vessels just do not age suddenly, do they? Surely someone knew right?

Today, 16th December, there is a write-up on Business Times: here

• The bankers had to buy unsubscribed shares of MMM as they underwrote a rights issue that raised RM111 million for the firm last year. They claim the company did not disclose material information in the prospectus for the rights issue.
  
  Tunku Mahmood Fawzy Tunku Muhiyiddin, MMM's managing director and chief executive officer, declined to comment when contacted and told of the allegations.
  
  "It is inappropriate for me to comment regarding a discussion with the shareholders during an annual general meeting," he said.
  
  The shareholders are upset that the company had swung to a net loss of RM147 million in the financial year ended August 31 2006, after writing down some RM80 million in value of its ships.
  
  Other operating losses, including some RM3.8 million loss of deposits, RM5 million loss related to a subordinated bond and RM6 million of bad debt written off, also contributed to the loss.
  
  Shares of MMM has slid 75 per cent from the RM1 per rights share, which was issued in April last year, to 25 sen yesterday.
  
  "Marpol 73/78 rules state that certain type of ships will have to be phased out and the company has cited this ruling as the basis for the write-down," a banker said.
  
  "We are upset that this writedown has come out of the blue with no forewarning, when in fact such a ruling has been informed to the shipping industry since 2003," the banker said.

WOW!

Poor bankers!

But they indeed have a valid point as they argued that the write-down ruling has been informed to the shipping industry since 2003.

So why didn't MMM do anything about it?

Now if the earlier chart of MMM stock price was terrible, this recent chart of MMM's current stock price performance is even more horrible!

How?

I feel sad for the minority shareholders but somehow I feel that these investors could have probably done much better. The warning signs were there since 2004.

The insane earnings projections mentioned in 2004. And more especially with that funky corporate exercise in which that one fellow had bought tons of shares and then tried to pawn it off at more than 3 times the share price within a few weeks to Maruichi back in 2004.

That was one insane funky music being played.

The investor should have had headed for the exit doors right there and then!

Now? Too late to cry over spoilt milk, eh?