The following news article caught my attention: h7-06-2008: Key West to list subsidiary in Canada
- 27-06-2008: Key West to list subsidiary in Canada
PETALING JAYA: Mesdaq-listed Key West Global Telecommunications Bhd has proposed to list its wholly owned subsidiary, Times Telecom Inc (TTI), on the Toronto Stock Exchange (TSX) Venture Exchange, a public venture-capital market tailored for emerging companies.
The listing will be done via the demerger of the Times Telecom Group, whose principal activity is the retailing of long-distance telecommunications services in Canada. The Edge weekly had reported a few weeks ago on the listing of a subsidiary of Key West Global.
Under the exercise, TTI shares will be distributed to existing Key West shareholders. The allotment of a total of 90 million TTI shares will be on a basis of two TTI shares for every five Key West shares held. Pursuant to the capital distribution exercise, 90 million shares in Key West will be cancelled, ultimately resulting in existing shareholders of Key West who hold five shares ending up with two TTI shares and three Key West shares.
Under the listing exercise, there will not be any issuance of new shares nor offer for sale of existing shares. All TTI shares will be granted listing and quotation on the TSX Venture Exchange. The exercise is expected to be completed by the fourth quarter of this year.
Now Key West Global was listed only in 2005.
This was the Q4 earnings reported on March 2006. Quarterly rpt on consolidated results for the financial period ended 31/1/2006
It made 980 thousand for the year.
A year later, Quarterly rpt on consolidated results for the financial period ended 31/1/2007, it reported losses of 664 thousand.
Couple of months later, I made a posting on this stock. Key West's ESOS issue
I gave a strange feeling. It was one of the first local companies to start expensing their ESOS. Which was good. However, the expenses of the ESOS caused Key West to lose money! Yes it did. Which made me baffled.
Should a company reward their employees with so much money that it causes the company to lose money?
And what about the minority shareholders?
Shouldn't the company justify themselves and its employees to their minority shareholders?
This is my simple issue.
If they want ESOS, fine.
Expense it and most important, they have got to JUSTIFY it.
On March 2008, their fiscal earnings was much better. Quarterly rpt on consolidated results for the financial period ended 31/1/2008. It earned some 1.8 million for the fiscal year.
This got me thinking about today's news article. Key West Global wants to list its subsidiary. I am baffled. As it is, Key West Global isn't making a lot of money. It only made 1.8 million and now it wants to list its subsidiary.
I am just so curious about the potential of this subsidiary that Key West Global wants to list it in Canada.
And accordingly, The Edge weekly had reported a few weeks ago on the listing of a subsidiary of Key West Global.
Here is that article: 27-06-2008: Key West to list subsidiary in Canada
- 26 May 2008: Corporate: Key West likely to spin off unit in Canada
By Joyce Goh
Telecommunication services provider Key West Global Telecommunications Bhd is mulling the idea of splitting its businesses to list one of them in the Canadian stock exchange, say sources. (Damn! The sources strikes again! Look just about anyone can be a source! The coffee Auntie can even be considered the source, yes? So if you don't state who the source is, where is the credibility of such financial news?)
"The company is looking at splitting its retail and wholesale businesses and listing its retail business on the Canadian TSX venture exchange," says a source.
It is unclear how much the company is planning to raise from its Canadian listing and how the structure of the group will look like post-corporate exercise. But this exercise could pave the way for Key West's shareholders to have direct exposure in the company that is to be listed on the Canadian stock exchange. (Huh? It is unclear... ?)
"The company is looking to take out the retail business of the group to list on the stock exchange in Canada. The details have yet to be finalised," points out the source. (Why don't you point out who is the source?)
But, why list in Canada? (Yeah, why Canada?)
It is believed that the nature of Key West retail business will receive better valuations in Canada. "The business is better understood in Canada and the listed company will be able to command a price earnings (PE) ratio of as high as nearly 20 times," says the source.
According to the data in Bloomberg, Key West's PE as at Jan 31, 2008, stood at 10.5 times. (Hello, why didn't the article states clearly how much Key West actually earned?? Talking PE without stating the actual earnings is so outright fuzzy! It just doesn't make any sense!)
Key West through its subsidiaries provides wholesale network products and services to telecommunications companies (telcos) and caters to retail clients comprising corporations and individuals. The company offers a host of telecommunications services such as Internet Protocol voice, data and network services for carriers.
Key West has subsidiaries operating in Malaysia, British Virgin Islands, Canada, US, Hong Kong, Australia and Brunei. Based on its FY2007 annual report, the bulk of its retail business is in its wholly-owned subsidiary Times Telecom Inc Canada. Although it is unclear how the structure would look like post-corporate exercise, this could mean that Times Telecom might be demerged from the group.
Since being listed on the Mesdaq in 2005, the company has not seen heavy activity with a market capitalisation of RM19.13 million. The stock hit its 52-week high of 18.5 sen on Oct 30 last year but dropped its 52-week low of seven sen at end of April. The stock closed at 8.5 sen last Friday. (Perhaps if one had look at Key West Global earnings track record, then one could understand why no one was interested in such a stock in the first place!)
The telecommunication services industry is indeed a competitive one. However Key West's vast network gives it strong global exposure and it has good ties with global telcos in major markets.
For its FY2008 ended Jan 31, Key West returned to the black, registering a RM1.8 million net profit compared to a RM643,000 net loss for the year before. This turnaround was achieved despite its revenue dropping 20% to RM175.9 million compared to its revenue in FY2007 of RM219.6 million. The group had slipped into the red in FY2007. (Nice to see the article stating some actual facts here)
Out of the RM175.9 million revenue achieved in its FY2008 (unaudited), about 72% of it was derived from the wholesale telco sector while 28% was from the retail sector. With the retail sector still contributing to the top line, will spinning it off significantly affect Key West's fundamentals?
According to an industry observer, it should not be a problem for the listed Key West component in Malaysia to maintain its business and achieve further growth.
"Quite a large part of Key West's wholesale business is in VoIP business and that segment of the business is one of the key drivers of growth for the industry. Also, the listed company in Canada would probably be related to the Key West group here in Malaysia so an arrangement between the two is likely," points out the industry observer.
Additionally, according to Key West's announcement to Bursa Malaysia, its wholesale business has new services to offer such as iCall shop and Prepaid PC-to-Phone which it plans to launch this year.
For its FY2008 (unaudited), Key West's cash increased 20% to RM10 million while its borrowings stood at RM4.4 million as at Jan 31, 2008.
Moving forward, Key West expects better days ahead. According to the company's recent research report on Bursa, it expects the telecommunications industry to improve this year. "From the vantage point of 2008, the global telecommunications industry appears to have returned to a firmer footing and looks set to experience better times," notes the research report.
"According to a December 2007 report by Telegeography on the international voice market outlook, international traffic growth slowed sharply in 2006 to 10%, the lowest level in more than 20 years. However, the market outlook appears to be improving, and worldwide revenues are predicted to grow from under US$1.7 trillion (about RM5.4 trillion) in 2008 to over US$2.7 trillion in 2013," it adds.
No doubt the competition in the telecommunications industry is stiff. But given Key West's vast network and an impending corporate exercise, it should give reason enough for a second look at the Mesdaq stock.
*** Edit: Just realised that Key West Global just announced its Q1 Earnings. It made 10 thousand only! ***
Key West Global Telecommunications Bhd (0095.KU) - Malaysia
1st quarter ended April 30:
Figures are in Ringgit (MYR).
2008 2007
Revenue 35,033,000 52,718,000
Pretax Profit (8,000) 1,138,000
Net Profit 10,000 720,000
Earnings Per Share Omitted 0.32 Sen
Dividend Omitted Omitted
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