A Deeper Look At Axis Inc

So it now appears that Axis Inc has crashed and burned. ( See Regarding The Plunge Of Axis!! and The Plunge Of Axis)

This morning I would like to take a simple and quick look at Axis and examine if there was any justifications to invest in Axis Inc or not.

Axis Inc was listed on April 2004 via taking over the listing of the failed Ganad.

The first fiscal year for Axis was announced on May 2005. Quarterly rpt on consolidated results for the financial period ended 31/3/2005.

Axis announced a net earnings of 14.394 million for the fiscal year. Margins were low at 5.18% and company was carrying net debts of over 77.845 million. And Axis is in the garments industry.

For the next fiscal year 2006, Axis earnings were rather shockingly poor. Quarterly rpt on consolidated results for the financial period ended 31/3/2006

Net earnings dropped to 8.154 million despite a sharp increase in sales revenue. Net margins slumped to a mere 2.33%. Net debts soared to 172 million! Any justifications?

The next fiscal year 2007, Axis had a bumper year! Quarterly rpt on consolidated results for the financial period ended 31/3/2007

Sales soared to 492 million from 350 million the previous fiscal year and net earnings soared to 25.167 million. Margins too improved to 5.11%. And an investor who just focus on earnings growth and earnings per share would be seduced, yes?

However, the fundamental weakness of the company was rather crystal clear.

I have compiled a table from all the links above and this is what I would have been looking at.

Shocking is the word. Despite all the incredible revenue and earnings growth, the fundamental deterioration was crystal clear! Total loans soared and the company is now in a net debt position of 224 million! Loans were just 85 million back in 2005. And look at the receivables. Receivables soared from 82 million to 200.9 million!

Others D&R stands for other deposits, receivables and prepayments - this figure would be interesting the next fiscal year!

So where there any justifications to invest in Axis Inc?

And this was Axis latest earnings report made on May 2008. Quarterly rpt on consolidated results for the financial period ended 31/3/2008

Take a look at the compiled figures in the new table below.

Earnings slumped to 16.105 million. Margins dropped.

Total debts is now at 325.701 million, which means the company is now in a net debt of 308.47 million! (Consider this, with a net earnings of around 16 million, it would take this company 20 years just to repay its total loans of 325 million!)

Others D&R, which stands for other deposits, receivables and prepayments soared to 151.559 million! Receivables improved slightly to 197.393 million!

(Sorry for the insinuation - I could be wrong here - but in my simple opinion - which may be flawed - this is simply looking so much like Megan Media!. The low margins, the increase in debts and receivables!)

How?

Was there any justifications to invest in Axis Inc?

Or don't you think Axis Inc simply looked like an accident waiting to happen?