Flonic Expects To Return To The Positive!

On the Business Times today, the article on Flonic Hi-Tec caught my attention, Flonic expects to be back in the black

Flonic was another of them Messdaq stocks that caught my attention much earlier. It was listed back in 2005. And on its first full year after listing, it made a mere 1.3 million in earnings. However, the next year, it reported losses of more than 6 million. And yet again for me, it made me wonder truly about the quality and the relevancy of the Messdaq stock exchange.

Anyway, it was the company's annual meeting, and of course as expected, the company made promises that it would do better.

From Business Times article:

• Flonic expects to be back in the black
  
  By Zaidi Isham Ismail Published: 2008/07/29
  
  FLONIC Hi-Tec Bhd, which specialises in precision cleaning for electrical and electronics (E&E) components, expects to return to the black in the current financial year ending January 2009, after registering losses in the previous financial year.
  
  The Shah Alam-based company made a net loss of RM6.6 million in the financial year ended January this year compared with a net profit of RM1.3 million before.
  
  It also registered a lower revenue of RM8.5 million this year compared with RM18.5 million a year before, due to a decrease in orders from major customers, labour and overhead costs arising from factory expansion activities.
  
  Flonic executive chairman and chief executive officer Yen Yoon Fah said last year was the worst for the company, because the world's E&E sector slowed due to the global economic slump and the US subprime crisis.
  
  "This year, we expect to return to the positive because as of now we already have an order book of up to RM9 million, which is half of what we secured for the whole of last year.
  
  "Demand has picked up with more frequent enquiries from existing and new customers, and orders, which were deferred in the previous year, are coming in now," Yen told reporters after the company's 4th shareholders meeting in Selangor yesterday.
  
  Flonic cleans sensitive E&E components such as computers, hard disk drives, keyboards, laptops, semiconductor, mobile phone parts, digital cameras and others.
  
  He said while older models of computers and electronic devices are being phased out, upgraded and newer innovative models are being launched, which require precision cleaning at the production stage.
  
  Yen said, the company, which exports 70 per cent of its products and expertise, is also affected by the weakening US dollar, which trims its export earnings, but the pressure was offset by its exports to Europe due to the strengthening euro.
  
  Yen said the company prefers to consolidate and grow slowly rather than grow all out and then later exhaust itself.
  
  He said the management has also taken steps to control rising cost by intensifying marketing activities, improve the design department, outsource and find the best machines.

The following statements caught my attention.

• last year was the worst for the company, because the world's E&E sector slowed due to the global economic slump and the US subprime crisis.

I felt that wasn't too accurate.

Flonic started reporting losses for the period ending 31/1/2007 - see Quarterly rpt on consolidated results for the financial period ended 31/1/2007 and if you add in the quarterly report made recently on June 2008, Flonic would have had reported 6 consecutive quarters of losses!

Here is the link to its most recent earnings: Quarterly rpt on consolidated results for the financial period ended 30/4/2008.

Sales revenue of only 1.59 million and losses were 1.605 million! Balance sheet is in a terrible state.

Cash balances of 665k versus total loans of 7.239 million!

And with such a weak balance sheet, it carries a massive trade receivables of over 5 million!

I, for one, cannot simply understand how the company is managed in such a fashion. Company is clearly in dire need of cash and yet it allows such a huge receivables account! Why isn't the company attempting to collect what is due to them? Why?

So now the company states that it has a order book of 9 million and expects to return to the black.

Well, I do hope so, for the sake of its minority shareholders and I would keep track of the company's progress!

Flonic last traded at 0.045!! (Flonic once traded above 61 sen!)