Mems Asks For Support!!

Published on BTimes, MEMS Tech asks for investors' support

• The board of directors has explained all the circumstances of the accounting woes to the shareholders, says MEMS executive director
  
  MEMS Technology Bhd, a microelectronics maker marred by accounting issues and a patent infringement complaint, has asked for investors' support as it faces a bumpy period ahead.
  
  In a shareholder meeting in Petaling Jaya yesterday that lasted almost three hours, directors and management dealt with a vocal crowd as minority shareholders demanded explanations on the cause of the accounting woes that have come to light late last year.
  
  The episode has tainted its public image as the Securities Commission said it started investigation on the firm's possible financial irregularities, resulting in the stock losing almost 70 per cent of its value since late November last year. MEMS Tech last traded at 12 sen yesterday.
  
  Executive director Tan Yeow Teck said its board of directors has explained all the circumstances of the accounting issues to the shareholders present at the meeting.
  
  "On hindsight, we believe this whole thing may not have happened if we've talked to the auditors up front," Tan said, referring to its external auditor KPMG, which raised concerns about certain transactions relating to the firm's revenue, property, plant and equipment last year.
  
  MEMS Tech's accounts had to go through a special audit due to the irregularities.
  
  KPMG did not seek re-appointment at the company's annual general meeting yesterday.
  
  Tan also said that it has written to Bursa Malaysia, requesting for the uplift of the GN3 status on MEMS Tech.
  
  "GN3 usually classifies those companies that are financially-distressed. Our circumstances are different," he said.
  
  As it was embroiled in the accounting issues, a competitor has filed a patent infringement complaint against MEMS Tech with the International Trade Commission. MEMS Tech is defending its position and the case may drag on until next year.
  
  "We hope to put this behind and move on. I believe the shareholders are supportive," chief executive officer Kathirgamasundaram Sooriakumar said.
  
  "The management has been stretched and stressed by events of the past few months but remains committed and motivated to entrench this exciting micro-electro-mechanical systems technology in Malaysia," the company said in a press release yesterday.

Comments:

Support is such a massive word in the investing world.

Yes, it's great to see that the board is finally admitting that they could have done much better to avoid this shambolic event.

However, for the minority shareholder to pledge their support, there are couple of issues worth considering.

1. Support means total trust from the minority shareholder. There was one glaring issue that needs to be considered which was mentioned in a posting back in Feb 2008, What now for Mems Technology?

• Previously blogged on Feb 2008, The said article on Mems
  
  For the first time since accounting problems emerged at MEMS Technology Bhd, new information has surfaced indicating that the company may soon get out of the quagmire it is in.
  
  The much-awaited special audit report, which was commisioned by MEMS and done by Atarek Kamil Ibrahim & Co, has been completed and presented to MEMS' external auditors KPMG.
  
  According to MEMS' chairman and controlling shareholder Datuk Ahmad Kabeer Nagoor, the (external) auditors have some queries on the report. He says these are being discussed by MEMS' independent committee. Ahmad Kabeer declined to elaborate, saying that more details will be revealed soon.

Now what was most glaring was how Mems traded that week.

Article was published on the Edge on Feb 11th. See how the stock surged 42%?

Now consider this, the said much-awaited report and clarification on what happened in Mems accounts wasn't revealed soon as mentioned.

And by the 25th Feb morning, the stock crashed early morning by as much as 18.7% to 13 sen.

Now the biggest issue for me is this one: Changes in Sub. S-hldr's Int. (29B) - AKN EQUITY VENTURES SDN. BHD.

See the hige disposal by AKN Equity Ventures on the following dates.

Disposed 11/02/2008 1,200,000
Disposed 11/02/2008 1,700,000
Disposed 12/02/2008 1,050,000
Disposed 12/02/2008 2,000,000
Disposed 13/02/2008 100,000

Big news article on the Edge and the stock surges and in the same time, big shareholder dumps their share!

How? Is this issue not a concern?

2. How is Mems doing now? I took a look at Mems finally released quarterly earnings early this month, A Look At Mems Technology Again

• Now that Mems had finally reported its earnings and resumed its trading, I thought I take a look at Mems again.
  
  Quarterly rpt on consolidated results for the financial period ended 31/1/2008
  
  Net earnings was only 1.434 million from sales revenue of 16.464 million. Only 1.434 million. This is utterly smallish eh?
  
  Let's look at the Balance Sheet.
  
  

  
  Trade receivables now totals at 34.998 million. Reported period is at 31st January 2008. Compare to the column on left, receivables were only 22.824 million. Which means receivables increased a whopping 12.174 million. Which is extremely massive when the company's net earnings is only 1.434 million for this reported period.

  Cash and bank balances as at January 2008 shrank to 9.874 when compared to July 2007's balance of 18.995 million.

  And the below table highlights Mems' liabilities:

  
  Total loans as at 31st Jan 2008 is at 43.355 million compared to a loan total of 34.267 million in July 2007. An increase of 9.088 million in loans.
  
  How?
  
  As it is what do you see?
  
  I see its net earnings as rather extremely small with low profit margins with a rather below average set of balance sheet. Receivables and debts are increasing while cash is shrinking!

How?

Considering these two issues, would you give your support to Mems?