And what about Pentamaster?

Saw this article published on the Edge, 30-04-2008: Major profit discrepancy in Pentamaster’s results

• Petaling Jaya: Pentamaster Corp Bhd’s audited net profit for the financial year ended Dec 31, 2007, of RM3.6 million turned up 61% lower than its unaudited net profit of RM9.2 million announced earlier.
  
  The company did not elaborate on what caused the discrepancy when announcing its audited results to Bursa Malaysia yesterday.
  
  In February, Pentamaster announced that its unaudited FY2007 net profit was down 13% to RM9.2 million compared to FY2006, due to additional provisions and write-offs made in FY2007. It said the additional provisions and write-off on inventories and debtors amounted to RM5.8 million and RM492,000, respectively, in 4Q FY2007.
  
  Pentamaster provides automation solutions for the semiconductor industry. The stock closed flat at 48.5 sen yesterday.

This was the announcement posted on Bursa. DEVIATION OF MORE THAN 10% OF THE UNAUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2007 RELEASED ON 26 FEBRUARY 2008 AND THE AUDITED RESULTS OF THE GROUP

Seriously, such explanation simply isn't enough, not when the audited accounts deviates by a whopping 61%.

This company should at least have the decency to explain to everyone what is happening.

Wouldn't you agree?

Manchester United 1 Barcelona 0

The starting line-up gave me shivers.

No Rooney and no Vidic.

And United had not played well all season when Wayne Rooney did not start. And on the back of some rather lackluster performance lately, it simply looked so massive!

All the great games United played this season would count for nothing if they did not win this match.

And like in Nou Camp, the game started off with breakneck pace. And within 50 seconds, my heart sank because it looked like Paul Scholes made one of his reckless and clumsy challenge on Messi inside the penalty box. Luckily the reply showed that the foul occurred just outside the box.

This was the night Cristiano Ronaldo showed the world he is very good team player. And the game he played last night, Wayne Rooney would have been proud.

He attacked Barcelona on the right, on the left and right down the middle. And his duel with Zambrotta on the left wing was simply epic.

And not only he chased after every single ball, he defended. Made couple of fantastic tackles and his defending in the set pieces was fantastic.

And the goal Scholes scored was fantastic enough to win any Cup final.

Yes, it was a horrendous mistake from Deco who gifted the ball to Scholes but the finish from Scholes was simply fantastic.

Well done Scholes!

Teves and Park were fantastic. Full of energy throughout the whole game. Both of them looked like two Eveready bunnies who could go on and on all night long!

Rio who skippered the team was magnificent again and Hargreaves played well as right back.

Wes Brown played much better in the center of defence but he's still lacking.

Nani, full of energy but his final ball was terrible again. He needs to learn a lot more from Ronaldo.

Patrice Evra was fantastic again but perhaps at times his eagerness to bomb down the left flank left United open a couple of times.

What a fantastic night for United!

Well done guys!

Tan Teng Boo Declares Warren Buffett to be a lousy Economist!

I was given the following a screenshot of ICapital's latest commentary.

My oh my, what a huge statement!

I wonder why some people want to write things like this!

(My oh my... KLCI long term target is 2000 points? Why did ICapital dump rm50 million of shares during the last quarter then?)

Anyway, Warren Buffet was the main feature last night and he had several interesting comments.

And yes, Warren Buffett do admits that this field (economics) is not his specialty!

• "This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.
  
  "I think consumers are feeling gas and food prices," he added, "and not feeling they've got a lot of money for other things."
  
  He was not immediately available for further comment. Known for his frugality, the 77-year-old Buffett has lived in the same 10-room Omaha, Nebraska, house for a half-century, despite being worth an estimated $62 billion.
  
  On Wednesday, the U.S. Commerce Department is expected to say how fast the economy grew in the first quarter. Economists on average have projected that gross domestic product grew at an annualized 0.2 percent rate in the quarter.
  
  Two quarters of declining GDP is a traditional indicator of recession. That last happened in 2001. Economists expect the U.S. Federal Reserve on Wednesday to cut a key lending rate for a seventh time beginning last September.
  
  Berkshire is a $197 billion conglomerate best known for its insurance holdings, such as auto insurer Geico Corp, but it owns more than 70 businesses.
  
  Many of those businesses are tied to the housing market, including Acme Brick Co, insulation maker Johns Manville, and the real estate brokerage HomeServices of America Inc.
  
  Others depend on consumers to spend more on discretionary items, such as Ben Bridge Jeweler and Borsheims Fine Jewelry.
  
  "In the retail businesses ... if anything, they've gotten a little worse," Buffett said. "Of course, things connected with housing, whether it's in brick or whether it's in carpet, those businesses have shown no uptick at all. Jewelry had a bad Christmas ... and it stayed that way."
  
  Buffett sees no respite from the housing slump.
  
  "I think this is going to be fairly long and fairly deep, but who knows," he said. ( source of article: here )

How now my dearest MooMooCow?

Is It That Difficult to Spot A Potential PN17 Stock?

Posted by Blogger Dali, Smells & Look Like ...

• Countering The BS: Really hate it when people speak and they bypass their faculties. People think I say mean things, no, I just like to put idiots in their place or else idiots will be running riot. I can be an idiot too, just call me on it when I do stupid stuff. This is the Remisiers association, and their advice to Bursa is to appoint or talk to an investment bank first before putting a company to PN17 ???? I am sure the view is NOT shared by the majority of remisiers.
  
  The Bursa has clear guidelines on when a company goes into PN17, it is not arbitrary or without warning... (do read rest of his wonderful posting here.

What was initially published on Bernama was indeed truly shocking.

• The Remisiers Association of Malaysia (Persama) has urged Bursa Malaysia to consult investment banks before putting a company under Practice Note 17 (PN17) status, said president Sam Ng Soon Lee.
  
  “We (Persama) would like to suggest that next time Bursa Malaysia wants to put any company under PN17 status, they need to consult an investment bank first. This will protect investors and it will be fair to the listed company,” he said after the association's AGM on Saturday.
  
  PN17 refers to a company in financial trouble because successive losses have eroded its shareholders' funds or the company has ceased its business operations. A PN17 company is required to regularise its condition within a certain timeframe, failing which the stock would be suspended from trading and face delisting procedures.
  
  According to Ng, more than 100 companies have been delisted. On the outlook for the local bourse, he said: “It is positive provided that the policy on PN17 is amended. PN17 policy has affected investor confidence.”
  

That set of comments were truly shocking. I mean, is it really that difficult to spot a poor performing stock?

Hmm... one of the newest entry into this sector is Liqua Health.

Let's have a quick look at this stock.

From klsetracker:

Look at the massive amount of losses posted by this company.

Surely, one could easily tell that the quality of this stock is lacking.

And this is Liqua's most recent reported quarterly earnings: Quarterly rpt on consolidated results for the financial period ended 31/12/2007. Liqua reported total net losses of 11 million. Accumulated losses are more than 108 million!

The below is the screenshot of Liqua's Balance sheet then.

Again, is it difficult to conclude that the quality of Liqua as a stock is lacking and that massive risk will be involved if one decides to 'invest' in Liqua?

Is it?

And I fully agree with Dali on the following point.

• Putting more companies into PN17 does NOT rob the market of its confidence, if anything it restores confidence to the maketplace as regulations are properly imposed and carried out, not just wishy-washy rules being skirted or never used in reality. In fact, I still feel companies are still not being delisted quickly enough even now. You want 600 decent companies rather than 1200 so-so companies. The longer these dying companies stay around, most will end up being syndicated plays on their last legs - only if you want that scenario to dominate the local markets, then by all means prolong the PN17s.

Yes Dali, I do smell the stench!

More Rumblings On Tan Teng Boo's ICapital's Disposal Of Shares

Blogged previously, What Do You Think of ICap's Recent Disposal Of Shares Held?

The main issue in the posting was that in the quarterly earnings report ended Feb 29th 2008, ICapital had disposed some 50 million worth of shares.

Some find it truly amazing because it was just in Jan 2008, ICapital's Mr.Tan Teng Boo had been quoted on the daily news paper that he had been bullish on the Malaysian equities.

See Jan 5th 2008 article Corridors of catalysts and Jan 19th 2008 article Analysts and fund managers weigh in on scope of Dow’s impact and as mentioned by Mr.Tan.

• The KLCI is resilient as it is not over-valued with sectors such as palm oil, which is doing well. The KLCI would continue to perform despite a slowdown in the US.

And my point was rather simple. I have nothing against his selling or whatever.

My point is why he is telling everyone he is BULLISH on the market when deep underneath it all, he is a huge seller?

Now, I had received some interesting feedbacks that I thought deserves to be highlighted. One reader, madcap had said that I had simply been insinuating someone to be deceitful with flimsy assumptions is wrong.

Here are his comments:

• Moolah, you have always pride yourself in looking beyond the obvious. In the quarter ending Feb 2008, when do you think ICap sold? Don't you think it is naive to assume that ICap was a consistent net seller in a month from the fact that it was a net seller in a quarter? The first article says he is a net buyer at that time. Was that an outright lie? Fact is, you assumed from the fact that ICap sold in that quarter, that he must be a net seller in January. Could he have sold in February? Honestly, I don't know that.
  
  Was TTB advising on long term trend or was he giving advice on short term market timing? Look at his reasoning and tell me if he is implying that markets will go up in the next month. If TTB is bullish long term, does this mean that he should not trade in the short term? Is he implying that people who listen to his advice should not trade?
  
  The insinuation here is that the man is deceitful, not that he gave bad advice - that he was selling when he gave bullish comments - and I think that it is unsubstantiated.
  
  Finally, you quoted March 8. Take a look at KLCI from March 8. If I took his advice, I would probably be making money. So, do you think he continued to sell in March?
  
  His long term call has yet to be proven right. You can challenge him on that. But to insinuate someone to be deceitful with flimsy assumptions is wrong.

Madcap, many thanks for your feedback. I am not here to degrade Mr.Tan's ICapital capabilities and performance and neither do I want to challenge his long term calls. And let me repeat again, I have absolutely nothing against his selling of shares. What amazes me is what has happened while he was selling the shares!

So, in this reported quarter ending Feb 29th, he could have sold in December, January or February.

Looks like the issue is now focused on when exactly he sold.

If he had sold in December or January, then how would one interpret his two massive comments on January stating that the KLCI is not over-valued and that the KLCI would continue to perform? Now, that wouldn't have been nice and it would NOT make sense, would it? Well sell when he thinks the market is not over-valued?

Yes, he could have changed his mind and decided to sell in February.

Possible. However, to suddenly sell 50 million worth of shares alone in one month, in February would have been incredible.

I am wondering, did something happen in February to spook him?

Can it be the US economy or the US market? Well it can't be because in early March, March 8th, the day of our elections, Mr.Tan had another lengthy interview in the Star Biz, stating that he was still bullish in the US Market, Dare to be contrarian .

And in our local market, the one and notable market event was Gamuda's market led selldown.

And mind you, he did make a commentary on this issue in February 2008!

Feb 23rd 2008, published on BizWeek, Market expected to recover with bargain-hunting.

• While most people are gripped by fear over US taking a one-way street to Recessionville, i Capital.biz managing director Tan Teng Boo maintains an extremely bullish view on the US economy while he holds on to the view that the world economy has decoupled from the US economy.
  
  Tan says that without the strong US export growth in 2007, especially in the China market, the US economy would have been in a recession 6 to 9 months ago. The export-oriented Asian economies have all seen their currencies appreciate.
  
  Tan welcomes the present panic-selling as it allows many equity markets to undergo meaningful corrections. He sees the current fall as a panic attack, based partly on an eagerly waited, long anticipated correction. He expects market volatility to eventually subside.

Still bullish and he publicly said he welcomed the panic selling in February 2008.

Now I am confused, if Mr.Tan welcomes this panic selling in February, did he also sell some 50 million shares during this period too?

Well, madcap, like you, I honestly do not know if ICapital shares were sold during this February time frame but if it did happen during this period, I find it incredible, really.

And more so, early March 2008, Mr.Tan was quoted to say the following,

• If there is a contrarian view currently playing out in Malaysia in relation to the prognosis of the US economy, it’ll have to come from and not surprisingly, the frank and candid Tan Teng Boo – a man with a wealth of experience on equities who currently heads Capital Dynamics Asset Management Sdn Bhd.
  
  And it is for that reason that while many market pundits have written off Asian equities for the time being, he remains unabashedly bullish.
  
  His take is largely premised on the fact that the US is not faced with a doomsday scenario but a slow-paced softening in economic conditions that is easier to stomach for the rest of the world.
  
  “Firstly, the subprime problem remains just that – subprime. Secondly, while many large financial institutions have been badly hit, the central banks have successfully averted a credit or liquidity crunch scenario. Thirdly, the US economy is certainly slowing down but a recession is only a possibility, and not certain.” (do read rest of the lengthy article here )

Anyway, blogger Seng, from Fusioninvestor, had this to say.

• I would like to add my 2 sen worth here, since this topic was discussed at length in my chatbox.
  
  madcap, as john mentions here, "(TTB) has always been bullish". There are many times where he publicly declares that he is bullish. Usually made in a very confident, sometimes, arrogant manner, almost always with no qualification that he has always been bullish.
  
  Now, we must remember that TTB has a wide following. He is looked at as a leader in the local investing world. His words carry significant influence. Many people will take that with confidence and act on it.
  
  At the same time as he is making bullish pronoucements in an almost arrogant fashion, he silently sells. $50 million. This selling is only reported a few days ago from the QE Feb 2008 Quarterly Report.
  
  The amount of selling is not small. Nearly 20%. It is his largest selling yet.
  
  Of course you can try to confuse the issue by saying he is a trader and we don't know exactly the exact timing, he has the right to silently change his minds, etc.. But that's not the impression he gives to the world when managing ICAP. The impression is that he is a Buy and Hold Value Investor. Most people would assume that.
  
  So, it is this inconsistency - almost lack of integrity - that when he maintains his bullishness repeatedly, he sells behind the scene. That is what Moo is trying to point out here. Not other things.
  
  Now, why can't he tell the world that he is "generally" bullish, but will consider/not hesitate to take profits when he feels it's over-priced? Or tone down the arrogance to allow for exceptional cases when some pockets might be overpriced (and thus justify selling)? Wouldn't this be a better and more accurate approach to make? I for one would prefer to see him tell it realistically, rather than maintaining his almost arrogant bullish stance but selling significantly and silently.
  
  Don't get me wrong - one behaviour doesn't make the man. I still have high respects for Uncle Tan especially his investing skills. But my concern is if this gets repeated, that behaviour might become habitual, and one day, you could see a man with a totally different character than the old TTB we thought we knew before.
  
  And of course, if you are the owner of ICAP, then, you would be pleased that he practices sound and prudent money management. But this is NOT the issue here. The issue is the discrepancy between Talk and Action. Some people calls it lack of integrity.

In which madcap replied,

• I must say I am quite disappointed to read your response, Seng. If you tell people that you believe Parkson to be fundamentally sound and you are bullish on Parkson's prospects ("TTB has always been bullish"), but you continue to trade Parkson based on your read of market trends and charts (TTB net seller in last quarter, buying back in this quarter), are you being deceitful?
  
  You have claimed "fusion" investment strategies. And TTB cannot do the same?
  
  TTB gives the impression that ICap will be buy and hold? People assume so? Now they see that he also sells. And he is deceitful? Note your words - "gives the impression", "assume". I remember reading somewhere someone being surprised at the amount of buy and sell he found in TTB's portfolios in the past. As you have pointed out, ICap investors will probably be happier to discover that he applies trading techniques to enhance their fund (like Seng discovering the power of trading).
  
  If TTB says in January that he believes KL markets is still sound. Sells in February. Buys back in March. He is deceitful? I don't know if this is what he actually did. But neither do you know that he sold in January and February. Right? So don't say I am trying to confuse the matter if I say so.
  
  I think TTB is arrogant. I also think that he has a hard time acknowledging his bad calls. Perhaps that is the quality of an adviser of trends and analysis. (I am not even interested in defending him. I am just pointing out bad analysis and judgement here.) You may even say that you think he is a bad advisor. But arrogance is not deceit.
  
  But I don't see evidence of deceit. And I think it is wrong to pressure BB (in your chatbox) to come to this conclusion when the evidence is flawed by a time frame mismatch.

How? What say you?

I do invite more feedbacks on this topic.

-------------------------------------------
Updated: 29th April 2008.

The Wanderer, posted a screenshot of what ICapital said in its January 25th write up!




Quote: .. ICapital and its CEO have been singing a very different BULLISH song....

Chelsea 2 Manchester United 1

You get what you deserved.

You came looking not too lose and such negative strategy never works!

It has happened many times before and it would continue to happen!

Manchester United lost their three points lead over Chelsea in the premiership when they lost 2-1 at Stamford Bridge.

Manchester United used the same tactics as they had in Nou Camp, playing not to lose. And the end result was again disappointing, although it must be said that there were several twists in yesterday match.

Manchester United had always been a team built to play attractive, attacking football. Sitting back and defend is never their bread and butter. Such negative tactics had brought poor results and last night was no exception.

Chelsea played quick, direct decisive, attacking football and they totally dominated the first half and truly deserved their lead. Being down 1-0 at the half, was rather fortunate in my opinion.

In the second half, Sir Alex finally changed the tactics. And the end result was all to see. Playing a more attacking game, the score for the second half was 1-1.

Ok, the penalty decision was ludicrous but for me, United played the folly for their negative tactics in the first half.

End of story.

And worse of all, Chelsea wasn't all that good last night. If not for Michael Essien and Michael Ballack, Chelsea was simply ordinary and in my opinion, they could be beaten if only United had tried.

Tuesday looks too near.

Would Sir Alex Ferguson realised that United cannot sit back and defend on big matches? Why can't United play to their strongest form, which is to attack, attack and attack?

United has 3 matches left to correct their season and they have to win all of them. No buts.

Sigh!

The Trade Receivables In MaeMode

Early this year, I made ceveral postings on the stock MaeMode. A look at MaeMode again , Mae, I hope I am not WRONG! , Reply to Mae, I hope I am not WRONG! and MaeMode Again

MaeMode reported its earnings last night.

Naturally I was interested to see what is happening.

My main concerns back then as posted in the posting, Reply to Mae, I hope I am not WRONG!

• As can be seen, the company has decent, impressive earnings growth but as mentioned the fundamentals behind the company is so rather weak. Let's look at the issues.
  
  1. The net profit margin is declining. When sales and profit growth is achieved at the expense of profit margins, is this not a reason to be concerned?
  
  2. The company net debt position is on an increasing trend.
  
  3. Trade receivables is increasing on an alarming trend.

And I posted the following table.

The company's net debt and receivables issue was most alarming back then. It was so Megan like. See The Receivables Issue And Megan

Those were the two main issues.

Before I begin, I was aware that MaeMode had a rights issue ( see here ), so I was expecting some sort of boost in its balance sheet.

So the first thing I look for was the cash flow statement.

Net proceed from this rights issue was 12.639 million.

But look at the end result!

Cash and cash equivalents at the end of the period was 13.222 million. Another cash outflow of 27.183 million!

And here is the updated table for MaeMode.


The company's net debt has increased to 178.473 million.

The company's trade receivables increased by a whopping 37.117 million from the previous quarter to an insane 308.390 million!

Just how insane is this? Well just consider the fact that the company made only 6.567 million for the current quarter. And the trade receivables soared by 37.117 million. Man, this is no way to manage a business in a profitable manner.

Don't they know that a sale is not a sale until the cash is in the bank?

How?

And do remember when all these receivables issue becomes doubtful, they will have to be written off and given the current size of the receivables, if and when this happen, the losses should be massive!

What Do You Think of ICap's Recent Disposal Of Shares Held?

I would like to focus on Mr. Tan Teng Boo's market views here.

Posted Jan 5th 2008, Corridors of catalysts

• Capital Dynamics Asset Management managing director Tan Teng Boo, who is presently a net buyer of equities, opines that equities should fare well: “The CI performance should be good. The investment exposure in Malaysia is slightly different. We have palm oil that is doing well, and you don't get palm oil in any other part of the world.”
  
  He adds: “The success of palm oil will filter down to society, to the Felda settlers first for instance, and then to the consumers. While consumers will feel the pinch from high oil prices, on a net basis, private consumption should be resilient,” he says.
  
  Crude palm oil futures recently rose to a historic high of RM3,097 per tonne on Dec 27, spurred by the spike in crude oil prices to US$97 a barrel mark.
  
  Rising consumer spending
  
  Last year, there was an estimated 12.6% growth in consumer spending – the strongest since the 13% growth recorded in 2000. This was also on the back of a recovery in passenger vehicle sales since mid-2007.
  
  Tan adds that wages are also rising, and this is one reason why oil prices have held at current levels.
  
  Consumer's disposable incomes have risen, and that is why oil prices have held. If those incomes did not rise, oil prices would not be sustainable, and we would have seen a slowdown in the economy,” he says.
  
  Aseambankers Research economist Suhaimi Ilias says the slow pace of the 9MP implementation has turned out to be a blessing. Presently, less than a third of the RM200bil development spending allocated have been utilised.
  
  “With robust private expenditure growth in 2007, the Government had the luxury to refrain from over-stimulating the economy. Given the higher downside risks to growth as we enter 2008, the Government can therefore use its outlays as a counter measure. In addition, there is the expected rollout and commencement of more major infrastructure projects from 2008 onwards,” he says.
  
  In addition, the Government has unveiled three major economic regions – the Iskandar Development Region, Northern Corridor Economic Region and Eastern Corridor Economic Region with total development expected to exceed RM640bil over the next 13-18 years.
  
  Corridors of catalysts
  
  Tan says that if the corridors are implemented efficiently, it can be a strong catalyst for the market.
  
  “The Iskandar Development Region (IDR) looks good on paper, especially with some of their ideas, for example allowing qualified foreign professionals to come into the IDR without passports. That would make the IDR very attractive.”
  
  The main issue here is when the Government will actually start the spending. “Will it take another year, maybe 2009 or would all end-up in 2010?”
  

Posted Jan 19th 2008: Analysts and fund managers weigh in on scope of Dow’s impact

• Tan Teng Boo
  Managing director
  Capital Dynamics Asset Management
  
  Whether the Dow would continue to fall or rally depends on the Fed, which should be more aggressive in cutting the interest rates. The continuous fall in the Dow currently is due to weak investor sentiments as a result of poor economic fundamentals and expectations of more interest rate cuts.
  
  The KLCI is resilient as it is not over-valued with sectors such as palm oil, which is doing well. The KLCI would continue to perform despite a slowdown in the US.
  
  We expect China and India to continue to grow despite the US issue and help sustain other world markets.

Posted on March 8th 2008, Dare to be contrarian

• If there is a contrarian view currently playing out in Malaysia in relation to the prognosis of the US economy, it’ll have to come from and not surprisingly, the frank and candid Tan Teng Boo – a man with a wealth of experience on equities who currently heads Capital Dynamics Asset Management Sdn Bhd.
  
  And it is for that reason that while many market pundits have written off Asian equities for the time being, he remains unabashedly bullish.
  
  His take is largely premised on the fact that the US is not faced with a doomsday scenario but a slow-paced softening in economic conditions that is easier to stomach for the rest of the world.
  
  “Firstly, the subprime problem remains just that – subprime. Secondly, while many large financial institutions have been badly hit, the central banks have successfully averted a credit or liquidity crunch scenario. Thirdly, the US economy is certainly slowing down but a recession is only a possibility, and not certain.” (do read rest of the lengthy article here )

So Mr. Tan does sound rather bullish on the market, yes?

And since Mr.Tan's I-Capital has a massive following, I was rather interested in its quarterly earnings announced last night.

The below is a snapshot from their earning notes.

Oh my. ICapital during this period, has disposed securities worth 50.999 million!!

Do not get me wrong here. As a closed end fund, there is nothing wrong with ICapital selling securities at all.

However, don't you think these action simply contradicts, as everyone in the market knows that Mr.Tan is a rather bullish on Malaysian equities and he's been quoted so many times in the media.

So don't you think it's rather strange that he tells everyone he is a bull but on the other hand, he's been a seller?

How?

Do you like what you see?

Barcelona 0 Manchester United 0

My Dearest John,

Missed my posting?

Sad to say but I slept well the other night and strangely I did manage to catch my sleep well, hence I missed that match between Liverpool and Chelsea. Unfair as it is, that away goal will be massive. Caught the replay and in my opinion Chelsea was rather very poor, Cech made couple of top class saves and of course Riise.

Last night I was up for it. Who wasn't?

As in two years ago, Sir Alex Ferguson has let me down again. My darkest fear came true as Fergie opted to play not to lose in the away tie. The team formation he put up was simply beyond my understanding but the team did not let him down. They defended the spaces well and Barcelona never did look like scoring at all. Oh yes, Ronaldo penalty was a shocker.

And thanks to Fergie, he killed whatever romance and spectacle this match could offer at Nou Camp.

It was damn boring.

If Manchester United played footie like this and win the Champions League, I would not have been proud at all.

It's simply terrrible and utterly horrible.

And if United continues to play like this, perhaps it's time to kick the footie away and I might as well continue on my knitting instead!

This Barcelona team wasn't great at all. Manchester United could and should have won this match, only if they tried.

Now? I hope Fergie won't live to regret his decision in playing such dreary footie!

Sigh!

Next week, I believe that the massive away goal would be a massive advantage for Chelsea. What more, Liverpool has a terrible record at the Bridge. And I am afraid that Manchester United failure to score that crucial away goal might be a massive factor against United. I do hope I am wrong!!

More On Melewar's RM2.2Bil MonoRail Bid

I got a copy of OSK's report on the Construction sector.

Here is what they said.

• Fears Coming True
  
  Yesterday, it was mentioned on the Business Times and Bloomberg that Malaysian Prime Minister, Ahmad Badawi said that some infrastructure projects under the 9MP may be delayed due to escalating costs. He also commented that on the casualty list is the 2 nd Penang Bridge. Factors in which he cited that had delayed the bridge’s construction include (i) getting the required land, (ii) need to ensure that the given design is most suited and (iii) the issue of escalating costs. According to some sources, the delay would last for about 9 months.
  
  In other news, it was mentioned on the Financial Daily that proposed bullet train linking Kuala Lumpur and Singapore by YTL Corp has been shelved by the EPU. The reason cited for their decision was because the financial model submitted would involve significant costs to be borne by the government.
  
  COMMENTS
  
  From uncertainty to reality. Previously we had highlighted 2 key sector risks associated with the recent political change namely, delay risk and non commencement risk. This recent announcement is testament that the former is becoming an inevitable truth. Rewinding back the clock, the 8MP saw 35% of its projects being carried forward to the 9MP. Rising costs, political risks and poor execution provide us minimal reason to argue why history will not be repeated.
  
  Other projects also at risk. Based on recent media reports, it can be said that the 2 nd Penang Bridge is one of the few key projects that both political parties have agreed on its necessity. Despite this mutual view, possible delays have already been highlighted. This implies even greater risks for other projects where mutual views are not shared. Various media sources have stated that the initial RM3bn bridge could now cost > RM4bn due to escalating costs. In our view, rising costs could also see an alteration in the bridge’s design (e.g. removing the 2 view decks). We continue to maintain our view that the NCER has the highest political risks amongst the 5 corridors and investors should avoid the NCER play. We think the SCORE provides a safer exposure to Malaysia’s growth corridors.

How?

It makes me wonder about Melewar's rm2.2bil monorail proposal.

Melewar Bids for RM2.2 Billion Monorail Project!

Published on Star Biz on June 7th 2007.

• Thursday June 7, 2007
  
  Melewar’s investment in Aussie miner’s shares up seven-fold
  
  By C.S TAN
  
  PETALING JAYA: Melewar Industrial Group Bhd’s investment in an iron ore mining company in Western Australia has turned into a “gold mine”.
  
  The company made an initial investment in Gindalbie Metals Ltd in 2004 and subscribed to more shares last year. Its average cost in Gindalbie is 10 Australian cents a share and the price has surged seven times, or a seven bagger in stock market terminology. Gindalbie closed at 79.5 Australian cents on the Australian Securities Exchange yesterday.
  
  Gindalbie's price received a boost after the company signed on Monday a share subscription agreement with China’s Anshan Iron & Steel Group Corp (AnSteel), which would subscribe to a 12.9% stake in the Australian firm, Melewar chief operating officer Datuk K. C. Lim told StarBiz yesterday.
  
  Gindalbie rose from 70 cents on the news early this week. AnSteel is reputedly the second largest steel producer in China. The news may also be a reason for the recent interest in Melewar shares.
  
  It is not widely known, however, that there is a Malaysian listed company that has a substantial interest in an iron ore mining firm in Australia.
  
  Currently, Melewar is Gindalbie’s single largest shareholder with a 17.2% stake although that would be diluted to about 14.5% after the mining company makes a placement of shares to AnSteel.
  
  Melewar’s stake in Gindalbie is worth about RM165mil. That, in turn, works out to be worth 72 sen a share in Melewar, which closed at RM1.19 yesterday.
  
  It also means Melewar shares were valued at just 47 sen each for the rest of its businesses which include wholly-owned subsidiaries Melewar Steel Tube Sdn Bhd and Melewar Steel Mills Sdn Bhd, and stakes in listed companies, namely 52.4% of Mycron Steel Bhd and 21.5% of M3nergy Bhd.
  
  Melewar stated in its annual report last year that its steel manufacturing division had net assets of over RM380mil. The reason investors overlooked the value in Melewar could be its uneven track record and their focus on larger steel companies.
  
  The group has started to get noticed. M3nergy shared surged to limit up on Tuesday afternoon. Following a query from Bursa Malaysia, M3nergy said yesterday there were no material developments.
  
  The interest in M3nergy could be investors’ discovery that the company is rich in oil and gas (O&G) assets. It owns a floating, production, storage and offloading (FPSO) facility; a floating, storage and offloading (FSO) facility; and net cash of more than RM54mil. M3nergy had net assets per share of RM3.30 against its share price of RM1.44 yesterday.
  
  It is unusual for the shares in an O&G company to trade below its net assets. Besides its assets, M3nergy has agreements for production sharing contracts to develop marginal oil fields in Indonesia and India.
  
  The FPSO and FSO facilities have been profitable from day one of M3nergy's investment. The company’s operating profit from O&G services amounted to RM30.8mil for the 15 months to March 31, 2007.
  
  Melewar COO Lim said the company's directors decided three years ago to invest in Gindalbie when they saw steel prices rising. Eventually, it is intended the Gindalbie shares would be sold. “We’re not mining experts,” he said.
  
  As to the timing of sale, he said: “It has not reached our target price.”
  
  Gindalbie was exploring for gold when it discovered a lot of iron ore deposits on a small section of its land. The company has not started to produce iron ore yet but the A$39mil (RM109mil) to be raised from the share placement to AnSteel would ensure that it has sufficient funds to develop the mine.
  
  The Australian miner would start to bring up the iron ore at the end of the year or early 2008. “We should see a better value in the Gindalbie shares at that time,” Lim said.
  
  Furthermore, Gindalbie could become a takeover target of the global mining giants.

Such bullish comments made on the stock surely had huge positive impact on the stock. And rallied it did.

• 10-07-2007: Melewar hits 52-week high
  
  Melewar Industrial Group Bhd's share price closed 15 sen higher to a 52-week high of RM1.67 yesterday, rising in tandem with its Australian investment Gindalbie Metals Ltd, which rose 17.5 cents to A$1.37 (RM4.05).
  
  The share prices and trading volumes of Melewar Industrial and Gindalbie have risen sharply since a report last Friday that Melewar's stake in the Australian outfit was worth RM165 million. Melewar owns 17.2% of Gindalbie.
  
  Yesterday, there were 12.77 million Melewar shares traded on Bursa Malaysia. Gindalbie saw 15.29 million shares done on the Australian Stock Exchange. TA Securities Research maintained its "buy" on Melewar with a target price of RM2.70, adding that its Gindalbie investment, based on last Friday's closing of A$1.20, was worth RM266 million or RM1.17 per share.
  
  "The group is committed to 50% payout of its net profit as well as 50% dividend received from listed subsidiaries or associates. Based on our earnings estimates, we are looking for the group to declare a gross dividend per share of 12 sen in FY08, which translates into a dividend yield of 7.9%."

December 13th 2007, Melewar, Putera Capital bid for Penang monorail project

• Melewar, Putera Capital bid for Penang monorail project
  
  The monorail project is believed to be worth more than the estimated RM1.6 billion for the previous proposed monorail job
  
  By Hamisah Hamid Published: 2007/12/13
  
  A CONSORTIUM comprising Melewar Industrial Group Bhd (MIG) and Putera Capital Bhd last month submitted a bid to design, build and operate the Penang monorail system.
  
  The bid was submitted on the closing date of the tender, November 14.
  
  The monorail project is believed to be worth more than the estimated RM1.6 billion for the previous proposed monorail job.
  
  MIG managing director and chief executive officer Tunku Ya'acob Tunku Abdullah said the RM1.6 billion was the estimated cost for the proposed loop system.
  
  "The loop involves one line only, so it is cheaper. Now the project involves longer route and double-track. Of course, it will be more than RM1.6 billion," he told a news conference after the signing of a strategic cooperation agreement between MIG's wholly-owned subsidiary Melewar Metro Sdn Bhd and Putera Capital in Kuala Lumpur yesterday.
  
  Also present were Melewar Integrated Engineering Sdn Bhd chief executive officer Uwe Ahrens, Putera Capital chief executive officer Wan Azman Wan Salleh and Putera Capital director Kamil A Rahman.
  
  The signing of the memorandum of understanding is a prelude to cooperation between both parties in the proposed Penang monorail project. Melewar Metro submitted its bid through Melewar Metro (Penang) Sdn Bhd (MMP).
  
  Both parties have also agreed to sign a share sale agreement later on the acquisition of a stake in MMP, where Putera Capital would acquire 20 per cent of MMP.
  
  The previous proposed Penang monorail project was based on private funding initiative. This time around, the government, through Syarikat Prasarana Negara Bhd, will provide the funding, and the private sector has been asked to submit tenders as contractors of the project.
  
  Steel maker MIG and civil and structural expert Putera Capital are confident that their consortium would win the bid for the Penang monorail job.
  
  However, they were tightlipped about the cost of their proposed bid.

Do note that Putera Capital does not have a good track record (here is Putera's latest Quarterly rpt on consolidated results for the financial period ended 30/11/2007 ) and is a PN 17 stock. Hard to imagine that Melewar could pull a billion dollar project off with Putera Capital.

And then came trouble. Uncertainty looms over Melewar’s pledged shares in Aussie miner

• KUALA LUMPUR: Melewar Industrial Group Bhd could be negatively affected by the collapse of Australian stockbroker Opes Prime.
  
  Melewar’s wholly owned subsidiary Melewar Steel Ventures (MSV) had pledged 35.1 million shares or 6.8% Gindalbie Metals Ltd (“Gindalbie”) to Opes Prime Stockbroking to secure a loan from the latter. Now that receivers have been appointed for Opes, the status of the Gindalbie Metals shares is uncertain.
  
  In October last year, MSV took out an A$24 million (RM69.77 million) loan from Opes, of which A$11.1 million are still outstanding.
  
  MSV is Gindalbie’s largest shareholder with a 14% stake in the iron ore miner and has a representative on the board. Melewar acquired the Gindalbie shares in 2004 for an average cost of a mere A$0.10 per share. Thanks to strong iron ore prices, Gindalbie’s shares have risen since then, even hitting a high of A$1.82 last September. At its last traded price of A$0.71 per share, Melewar’s block of pledged Gindalbie’s shares has a market value of A$25 million (RM72 million).
  
  According to Melewar’s statement to Bursa, Opes had appointed a voluntary administrator to look into the affairs of Opes. It was reported in Australia’s Herald Sun yesterday that Opes Prime Group, Opes Prime Stockbroking, Leveraged Capital and Hawkswood Investments were placed in the hands of receivers Chris Campbell and Sal Algeri of Deloitte Corporate Reorganisation Group last Thursday after trading “irregularities” were uncovered.
  
  Following the appointment of the voluntary administrator, Melewar said a secured creditor ANZ appointed receivers and managers in respect of the Opes Group while the Australian Securities and Investments Commission has also formed a special team to investigate whether there are any potential breaches of the Corporations Act by the Opes Group.
  
  Melewar said it is seeking legal advice on this matter.
  
  Gindalbie said in a release to the Australian Securities Exchange on Monday that it was seeking clarification of Melewar’s position and requested for a trading halt for 48 hours. It will be open for trading tomorrow. The stock was down 8.97% to A$0.71 when it last traded on Friday compared to the day before. Melewar’s stock is down 7% to 96.5 sen yesterday compared to RM1.04 on Friday.
  
  Reports in Australia have indicated that Opes is known for its willingness to accept collateral in the form of shares of non-blue chip companies.
  
  According to the Herald Sun, the receivers and managers of Opes say they are not in a position yet to advise the clients of Opes as to whether any money will be returned to them. “The position regarding Opes Prime Stockbroking Ltd client accounts remains unclear and will take some time to reconcile,” the receivers were quoted as saying in the Australian daily newspaper.

Of course, Melewar felt unjust.

• Melewar gets court order to stop Opes stake sale
  
  Published: 2008/04/03
  
  MELEWAR Industrial Group Bhd has obtained a court order to stop a creditor of Opes Prime Stockbrocking Ltd from selling part of its shares in an Australian iron ore miner.
  
  The hearing has been fixed for April 10, it told Bursa Malaysia yesterday.

What this means was..

• 03-04-2008: Melewar faces RM38m potential loss
  by Joyce Goh
  
  KUALA LUMPUR: Melewar Industrial Group Bhd said yesterday it could suffer a potential RM38 million loss, should it fail to recover a block of shares in Australian-listed Gindalbie Metals Ltd that it had pledged with Opes Prime Stockbroking Ltd.
  
  Opes is facing liquidation and a secured lender to Opes is planning on selling the holdings of Opes, which include 32 million Gindalbie shares that Melewar’s unit Melewar Steel Ventures (MSV) had pledged to Opes last year for an A$24 million (RM69.67 million) loan.
  
  The potential RM38 million loss was arrived at after taking into account the fact that MSV had already drawn down more than half of that loan.
  
  MSV had pledged a total of 35.1 million Gindalbie shares with Opes but its secured lenders are only claiming 32 million of those shares.
  
  “…should MSV incur the loss, MSV would have the right to claim for the loss from Opes,” Melewar added.
  
  To protect its interest in the Gindalbie shares, Melewar has also obtained a temporary court injunction to stop the secured lender to Opes from selling the pledged Gindalbie shares. The hearing for the case is fixed for April 10, 2008.
  
  Yesterday, four other borrowers of Opes had filed for injunctions seeking to stop secured creditors of Opes from selling shares they also had pledged to Opes.
  
  MSV is Gindalbie’s largest shareholder with a 14.6% stake in the iron ore miner. Melewar acquired the Gindalbie shares in 2004 for an average cost of a mere A$0.10 per share. Thanks to strong iron ore prices, Gindalbie’s shares have risen since then, even hitting a high of A$1.82 last September. The stock is now trading at A$0.72 after resuming trading following a two-day suspension in light of the Opes crisis.
  
  According to Gindalbie, Melewar has no intention of selling its remaining 7.6% stake in Gindalbie. Melewar has yet to respond to queries from The Edge.
  
  The total book value of the entire Gindalbie shares held by MSV recorded in the latest audited accounts of Melewar for the financial year ended June 30, 2007, is approximately RM123 million.
  
  For FY2007, Melewar’s capital gains from its Gindalbie shares was recorded in the former’s stellar profits. The Gindalbie capital gains contributed a whopping RM140.1 million in profit. Melewar stated in its 2007 annual report that the board was happy to report these gains but added that it “prudently highlights that these gains have not as yet been realised, through the sale of Gindalbie shares

On Saturday, April 19th 2008

• Saturday April 19, 2008
  
  Court rejects Melewar’s appeal
  
  PETALING JAYA: Melewar Industrial Group Bhd’s attempt to stop the sale of its shares in Gindalbie Metals Ltd suffered another setback after its appeal was rejected by the Court of Appeal in Sydney yesterday.
  
  The company had filed an appeal against a ruling made by the Supreme Court in Sydney on Wednesday, which had dissolved its injunction against ANZ Banking Group Ltd. The injunction was to prevent ANZ from selling Melewar's shares in Gindalbie.
  
  The company had on March 31 announced that a wholly-owned subsidiary had pledged a 6.8% stake in Gindalbie against an outstanding loan of A$1.1mil from Opes Prime Stockbroking Ltd (OPS).
  
  However, ANZ, a secured creditor of Opes, appointed receivers and managers for the Opes group.
  
  Melewar said in a filing with Bursa Malaysia yesterday it would file a claim against ANZ for the return of the 32 million Gindalbie shares to the company.
  
  Melewar also said the failure to recover the 32 million Gindalbie shares pledged with OPS would result in the loss of about RM38mil.

And today, Melewar made a huge statement on the press, Melewar submits RM2.2b monorail plan

• Melewar submits RM2.2b monorail plan
  
  By Marina Emmanuel Published: 2008/04/23
  
  The proposed system for George Town, Penang, will boast a 12-car train of monorail and can move 17,600 passengers per hour
  
  MELEWAR Industrial Group (MIG) Bhd has presented to the Penang state government a proposal for a RM2.2 billion monorail system for George Town.
  
  The proposed ultra-light loop monorail system covering a 52km track is set to operate on a single line and run on three different loops from locations like Gelugor, Farlim in Air Itam and Gurney Drive into the city.
  
  “The focus of the main link will be the centre of George Town and we strongly believe that the federal government and state government will work together in bringing a monorail system to Penang,” Melewar Industrial Group’s managing director and chief executive officer Tunku Datuk Yaacob Tunku Abdullah told reporters after presenting the proposal to Chief Minister Lim Guan Eng and members of the state executive council yesterday at Lim’s office.
  
  He said the proposed system, which is aimed at moving people from point-to-point into the city, will boast a 12-car train of monorail and can move 17,600 passengers per hour.
  
  Tunku Yaacob said the company can take 28 months to complete the system which would feature steel structures.
  
  “Land acquisition can also be kept to a minimum because the monorail will be running on road dividers,” he added.
  
  When asked to comment on concerns from Penangites that a monorail would mar the charm of George Town’s historic inner city which is vying for a listing on the World Heritage List, Tunku Yaacob said:
  
  “We will not bring the monorail to heritage buildings ... we will not run it in front of the buildings but behind them.”
  
  However, an artist’s impression of the proposed monorail system for Penang provided by Melewar showed the system running alongside historic structures in the city.
  
  On postings in blogs that Penang should bring back its tram system instead of introducing a monorail, he described the tram concept as an interesting one but pointed out that the trams had not been successful.
  
  Last November, Melewar Industrial Group Bhd unit Melewar Metro Sdn Bhd (MMSB), which is vying for the estimated RM1.2 billion monorail project in Penang, announced that it had formed a consortium with Putera Capital Bhd to cooperate to jointly secure the project.
  
  Melewar Group had said in a statement that the consortium was formalised with the signing of a memorandum of understanding between MMSB’s wholly-owned subsidiary Melewar Metro (Penang) Sdn Bhd (MMP) and Putera Capital. MMSB made the proposal for the monorail project to the government via its subsidiary.
  
  Melewar is one of several parties which participated in a tender exercise for the development of a monorail system for Penang on November 14 last year which was called by Syarikat Prasarana Negara Berhad (SPNB).
  
  In January this year, SPNB awarded a letter of intent for the project to Malaysian Resources Corporation Bhd (MRCB), which has formed a consortium with Penang Port Sdn Bhd and Scomi Engineering Bhd.

WOW!

So it's now NO longer a 1.6 bil bid but a 2.2 bid.

And one cannot stop wondering the timing of it all. Just on Saturday it announced it lost a court appeal which means it will result a loss of 38 million to the company.

By the way, here is Melewar last reported earnings, Quarterly rpt on consolidated results for the financial period ended 31/12/2007.

Below is the snapshot of Melewar's balance sheet.

Time deposit: 3.509 million. Cash and bank balances: 26.733 million. Total: 30.242 million.

Short term borrowings: 322.373 million. Long term borrowings. 94.076 million. Total: 416.449 million.

Now this is where I am wondering. With such a balance sheet, if Melewar wins this BID, would it be able to finance this massive rm2.2 billion project?

Now what is even more interesting, this stock used to be known as Maruchi Steel Tubes. And this is one of the last quarterly earnings before the company was sold to Melewar Group. here

Look at he balance sheet.

What a nice balance sheet Maruichi had back then!

GIC: Worst Recession In 30 years!

This could be the worst recession in 30 years, so says Dr. Tony Tan, the deputy chairman of Government of Singapore Investment Corp (GIC).

Published on TODAYonline, Worst recession in 30 years: GIC

• Dr Tony Tan calls for urgent action by policymakers
  
  Christie Loh
  christie@mediacorp.com.sg
  
  Just weeks before global financial markets were first sucked into a vortex last August, Dr Tony Tan (picture) was sounding alarm bells about "dark clouds", which had already prompted the Government of Singapore Investment Corp (GIC) to cash out of some of its multi-billion-dollar investments.
  
  Yesterday, GIC's deputy chairman was back with an even more harrowing prediction. "We could be facing a recession which is longer, deeper and wider than any recession that we have encountered in the last 30 years," he said.
  
  Dr Tan delivered this warning during his opening speech at the fund's inaugural staff conference yesterday, the only part of the one-day programme open to the media.
  
  GIC, which manages over US$100 billion ($135 billion) of Singapore's foreign reserves, has spared itself some of the pain.
  
  In the third quarter last year, it sold some of its equities before financial markets nose-dived. This helped provide the funds for GIC to pump a total of about US$16 billion into sub-prime-hit Citigroup and UBS over January and December, in exchange for bonds convertible into shares.
  
  Since then, Citi and UBS have unveiled more losses and writedowns, causing their share prices to fall about 7 per cent and 38 per cent respectively.
  
  But Dr Tan said yesterday that GIC believes the two "long-term" investments will bring "good returns when markets stabilise and economic conditions return to more normal levels". Until then, however, these one to two years will be "extremely nervous and volatile".
  
  He revealed yesterday that GIC had set up three group committees to oversee risks, organisational issues and investments.
  
  The group risk committee, which will be chaired by chief risk officer Sung Cheng Chih, provides oversight and guidance for the development and implementation of policies and practices for the entire group.
  
  Lack of oversight has shown up as a major weakness in the financial industry since the collapse of United States' sub-prime mortgage market, as certain banks and investment firms have only recently discovered the extent of complicated, high-risk instruments on their balance sheets.
  
  As banks continue to reduce lending activities and cause the credit supply to contract, the world economy is fraught with "considerable downside risks", said Dr Tan, adding that "a period of extreme uncertainty" is afoot.
  
  However, he said a sharp turnaround in sentiment and the markets could take place if policymakers in the US and elsewhere respond "strongly and appropriately".
  
  On the other hand, "if such actions by the authorities are not taken within the next three to four months, it will be left to the market forces of supply and demand to stabilise the US housing market before we can see the light at the end of the tunnel", said Dr Tan.
  
  "This will be a considerably more painful and long drawn process."
  
  He told some 500 staff in the audience: "The next few years may well be among the most challenging years for GIC since our establishment in 1981. We have to brace ourselves for trying and difficult times, but we are well prepared."

Link: http://www.todayonline.com/articles/249657.asp

Interview With the Man Who Paid $650,100 for Lunch With Buffett!

Mohnish Prabai is the man who won the auction for that special lunch date with Warren Buffett.

And the latest Smart Money article has one fantastic interview with Mohnish.

And Nicole Bullock wrote a nice introductory on Mohnish.

• IT OFTEN SEEMS like every hedge-fund manager is reading from the same playbook about how to look, work and behave. Neatly pressed khakis; thumbs glued to a BlackBerry; slick digs in Greenwich or Manhattan staffed by number-crunching research drones. But apparently, Mohnish Pabrai never got his copy. He wears shorts to his Southern California office, keeps e-mail to a minimum and almost never misses his 4 p.m. nap. And forget goosing returns with fancy computer models or using complex derivatives: Pabrai doesn't even sell stocks short.
  
  About the only thing slick about this 43-year-old investor is his market-trouncing track record — annualized returns of nearly 25% since he set up shop in 1999, enough to earn him a growing cult following. His "secret"? Probably the most documented investment strategy around — a bare-bones, Warren Buffett style of stock picking. While that description may inspire yawns — sometimes it seems like everybody claims to be a Buffett disciple — Pabrai takes it to an extreme. His office houses an impressive Buffett mini-museum: a wall covered with photos and articles he's amassed over the years.

Click here for the rest of the article: Looking Up to Warren Buffett

I do enjoy his way of reasoning in buying Pinnacle Airlines. Which is incredible because it's an airline stock!

• SM: What stocks do you like now?
  
  MP: Pinnacle Airlines. Depending on how things work out, it's anywhere from a double to five or six times return in the next two or three years.
  
  SM: An airline?
  
  MP: It's a regional jet company. The large airlines, like Northwest (NWA: 9.06, -0.63, -6.50%) and Delta (DAL: 8.20, -0.55, -6.28%), outsource the small planes to Pinnacle. Many of the reasons why airlines are so terrible — load factors, price wars — don't matter. The revenue is the same whether there is one passenger or the plane is full and whether Northwest charges $200 or $2,000 round-trip. The contracts are long-term, usually 10 years, and will hold up in the event of a merger. So you can estimate what their cash flows will be many years into the future.
  
  SM: What's the investment case?
  
  MP: Pinnacle has more than $10 a share in cash on the balance sheet. In the next few years, free cash flow will be $3 to $6 a share, depending on how much more business they get. With a simple 10 or 15 multiple on those numbers, you end up with $30.
  
  SM: Why are the shares so cheap?
  
  MP: One overhang is that they have a past-due contract with pilots. But not a lot of Wall Street analysts follow Pinnacle, and the business itself is changing. The evolution away from hub-and-spoke and toward more nonstop flights is driving demand for their services. When you connect one small city to another directly, you aren't going to run a jumbo or a 737

And of course his reasoning why he doesn't short a stock.

• SM: Pabrai is a hedge fund, but you don't short. How come?
  
  MP: Because it's a stupid bet. The maximum you can make is double, if the stock goes to zero. The maximum you can lose is infinite. Let's say a stock is at $10, and you short it and it goes to $100. You are down about 1,000%. The extent to which the stock can go up is unlimited.
  
  

Review Of CME Group

Dedicated to Unker TK again.

CME Group,is listed on Bursa Malaysia Second Board.

Earnings Track Record

As you can see from the table above, CME's earnings has been utterly terrible from 2000-2007.

However, things turned around in an utmost amazing manner for CME. It's simply stunning to say the least.

And the following is the most recent 4 quarters performance from CME.

And as a penny stock, the earnings and the cash per share will simply make one go goo-ga-ga over this stock.

Earnings of 13.801 would equate to an earnings per share of 34 sen and the current net cash balance of 32.371 would equate to an amazing 80.7 sen per share.

And when I blogged about this stock previously, it was only trading at 63 sen!

Yes, the stock did not have the best ever earnings track record but the earnings are showing us that things are turning around in a wonderful manner for CME Group.

So would this be a buy of the century?

Well, if one invests based on numbers and yardsticks, surely one might jump right in, right?

However, how about one understands the business we are investing in?

Like understanding why CME was doing so terribly from 2000-2006 and why the sudden turnaround in 2007. Would the turnaround be sustainable?

The following article posted on the Edge in Dec 2006 helps: 4 Dec 2006: Corporate: CME's fire is back

• Little-known CME Group Bhd has not had much to rejoice about over the past five years. More precisely, its business has seen little activity during this period

Five years? How about 7 years of bad performance?

• The Shah Alam-based company designs and manufactures various types of fire-fighting equipment, including fire engines, aerial access ladders, cranes and fire-fighting and rescue vehicles. So naturally, its main customer is Malaysia's Fire and Rescue Department (FRD). Since 1988, it has sold about 500 fire and rescue vehicles, about 408 units of which were to the department. CME's other clients are port and airport operators, oil and gas companies and the Ministry of Defence.

So CME is a fire-fighting equipment specialist. And it's niche was to supply to Malaysia's Fire and Rescue Department (FRD).

• Hence, when the FRD did not place any orders in the last four years, CME's activities slowed significantly, with revenue falling from RM50 million in 2002 to only RM2 million in 2004. By keeping its operation costs low, CME was able to minimise its losses. For example, it only has 50 full-time staff. From 2002 to 2005, its total net loss was RM10.2 million.

Without any orders the last 4 years equated to a terrible performance the past 7 years (if you look at the tables above, CME performed terribly from 2000-2006)

• However, things have begun to look up for the company. Its chief operating officer Datuk Lim Soo Kok says the FRD placed the largest order ever with CME on Oct 17, after it was allocated some RM500 million under the Ninth Malaysia Plan to purchase fire and rescue vehicles and equipment. The RM211.20 million contract involves the delivery of 200 fire and rescue vehicles over the next 23 months. "Our business is cyclical because it depends on orders from the FRD," Lim tells The Edge.

This is very interesting.

With this new order, CME fortunes turned around drastically.

There are two things for me.

One, the remaining contract is to supply 200 fire and rescue vehicles over the next 23 months. A contract value of rm211 million. Which means the next year or so, things will still be rosy for CME. However, what's next then for CME? Surely this concern has to be addressed, right?

Secondly, what do you think of such business? Enduring 7 years is one mighty task. Most other companies would probably have folded but CME did not. Credit to them here. Yes, on one hand, this is one bumper year for CME and so might be the next. However, it's not that profitable is it? Consider these numbers. From 1999-2007, total earnings for CME in this period is only 3.134 million! And if you minus out fiscal year 1999, CME would still be losing money in this decade. CME lost 1.996 million in this period.

So, if you consider from an investing point of view, surely you would be concerned, yes?

And last but not least I noticed that the stock jumped an incredible 22 sen. Closed at 85 sen. WOW!

But, hang on a minute here. Look at it below.

Volume done was only 1 miserable lot. And volume done in this 10 trading period was also 1 miserable lot!

Yup, this is one hell of an illiquid stock. A dead stock.

And last but not least, it has the nonsensical 1 into 10 Stock Split!!

How?

Do you really want to invest in a stock like this?

Some Rather Bullish Comments On the Malaysian Markets

Posted on Bloomberg News: Templeton's Mobius Says Credit Crisis Is Near End

Yes, Mr. Mark Mobius of Templeton Asset Management Ltd reckons that the credit-market crisis that's caused $245 billion of losses at banks and brokerages is "near the end.''

What struck my attention was what the following statement.

• The fund manager, who oversees $47 billion in emerging- market equities, said he has been buying shares of banks including Bank of China Ltd. and Industrial & Commercial Bank of China Ltd. Malaysian equities are also becoming ``more and more attractive,'' he said in a Bloomberg Television interview today.

And in his brief explanation, he reasoned that

• Malaysia's Kuala Lumpur Composite Index on March 10 plunged 9.5 percent after the government suffered its worst election result in almost 50 years. The gauge has lost 13 percent in 2008.
  
  `Good Impact'
  
  Prime Minister Abdullah Ahmad Badawi last month vowed to proceed with infrastructure projects to promote growth and pledged measures to help the poor, seeking to reassure investors after the government's narrow poll victory.
  
  Malaysian stocks are ``becoming more and more attractive as a result of these political changes,'' Mobius said. ``There has been re-awakening so to speak, reassessing that Malaysia should be doing well and prosper. I think that's good news and that could have good impact on the market.

More and more attractive as a result of the political changes?

Some might argue against these wind of changes in the politics scenes are only in the beginning stages and many uncertainties lies ahead.

Nevertheless, in another report published on Business Times, Citi: Start buying as KL mart is bottoming out

• On its stock pick, the research house puts SP Setia, KLCC Property and UEM World on the top buy list
  
  
  IT is time to buy into the Malaysian bourse as the market is bottoming out with banking, plantation, telecommunications, utilities and gaming sectors taking the lead, said Citi Investment Research yesterday.
  
  “A lot of the bad news (global equities meltdown and shocking 12th general election results where the ruling coalition government lost the two-third majority) are already in the price. In an illiquid market like Malaysia, we urge investors to start positioning,” it said in its research paper released yesterday.
  
  Besides, Citi Investment said, investors would eventually be tired of speculating on the outcome of such negative events and re-focus on basic investment fundamentals.
  
  On the converse, it said, the Kuala Lumpur Composite Index (KLCI) is domestic-centric and hardly any sector is directly exposed to the outside world.
  
  “The only sector that is directly exposed to the external environment is the plantation sector which accounts for 17 per cent of the KLCI weighting.
  
  “Banking accounts for another 23 per cent, while utilities and telecommunications make up a further 16 per cent,” it said.
  
  Citi Investment, which is a division of Citigroup Global Market Inc, said its bottom-up index target suggested a 15 per cent upside for KLCI.
  
  “We now expect the KLCI to hit 1,499 points by year-end,” it said.
  
  The KLCI ended 2.9 points higher at 1,256.54 yesterday.
  
  Citi Investment said some local institutions are seeing their cash levels rising to over 20 per cent and, “we see buying activities picking up imminently.”
  
  It said huge pent-up demands are waiting to re-enter the market and the 2009 Budget is expected to stir up buying interest as investors expect an expansionary budget to shore up consumer confidence.
  
  “The 2009 Budget can boost next year's gross domestic product growth, spending and confidence to levels back to the 1990s,” it said.
  
  On its stock pick, the research house put SP Setia, KLCC Property and UEM World on the top buy list.
  
  “We continue to like IOI Corp, KL Kepong and IJM Plantation in the plantation sector but are dropping Sime Darby from the list.
  
  “Listing Telekom Malaysia's mobile unit can add more interest in the telecommunications space.
  
  “DiGi is also expected to continuously deliver strong earnings growth and cash flow,” it said

How now my dearest MooMooCow?

Would you agree with what Citi is saying here? Or do you reckon that the comments made are far too optimistic in general?