OSK Report On JAKS Resources

You are a research house. You have a stock trading at around 0.77. You reckon it's worth 1.23. What do you do?

1. Make a buy call.
2. Neutral.
3. Sell

Unable to decide?

Here is the said stock chart.

How?

If the stock is trading at 0.77 and you think it's worth 1.23, surely you would make a BUY call, yes?

Well, if you are OSK, you could the following statement.

• We derive an indicative trading target of RM1.23 for the stock but do not have a call on the company!

I am so confused. OSK managed to produce a huge 7 page report but would not commit to any CALLS on the stock despite the huge disparity between the current traded stock price and their target price. Well I wonder why.

As I was reading the report, the revenue/net profit historical trend chart caught my attention.


Hmm... at first I thought JAKS was making good money with the long GOLDEN bars drawn on the chart. Then I looked closer. The GOLDEN bards represented revenue.

Then I noted the value stated on the right of the horizontal axis. I saw where the zero was. And then I noted the thin line across the chart represented net profits and I saw how many times the profit line went below zero!

Oh... JAKS is not a company with a strong historical track record.

So I wondered what was OSK's earnings forecast for JAKS.


Hmm ... as per OSK numbers, JAKS lost 6 million in FY 2006, JAKS made 12.4 million in FY 2007 and JAKS made 2.9 million in FY 2008. And OSK forecast for FY 2009 is 22.6 million!!!

Rather optimistic because ....... err..... Quarterly rpt on consolidated results for the financial period ended 30/4/2009

That was JAKS last reported earnings on 29th June 2009. JAKS half year 2009 earnings is a loss of 3.82 million.

Hmmm...... and OSK has a forecast of 22.6 million for JAKS for FY 2009!

Optimistic eh?

And then OSK tried to 'explain' how it got the fair value of 1.23.


Historical Average PER?

Historical Average PBV?

Gosh.. could someone explain to me. :p2

How?

I still do not understand hor.

If JAKS's fair value is worth so much at 1.23 and JAKS is only trading at 0.77, why OSK doesn't want to make a call on this stock? Yeah, did I not mention that OSK report on JAKS was rather long - 7 pages? ( Err.. write so long why no make call?)