Singer Malaysia And Seven Eleven Proposed Listing

Many years ago, 18 Jan 2006, to be exact, I wrote the following... I Do.. The Losers!

• So what's left for Intan Utlities?
  
  After scrapping their proposal to buy Berjaya Sports Toto shares, the company announced it plans to consolidate its business by selling all its non-core businesses and concentrate on its chain of 7-Eleven business.
  
  Sounds fair.
  
  But what about the market players who 'invested' in Intan based on their early announcement to buy shares in Berjaya Sports Toto? Without this share purchase, it would appear that the current share price is not justifiable given the historical poor earnings from Intan....
  
  They announced a deal, suddenly value was created.
  They rescinded the deal, suddenly value is destroyed.
  
  Such is the power of corporate exercises.
  
  Oh yes, in the share market, there's always winners and losers, and the losers in this "I Do.. I Don't" flip-flop controversy is Intan.
  
  But is the loser only Intan?

Many months later.. Intan was taken private.

• Vista to take Intan private for RM85.6m
  
  Intan Utilities Bhd’s single largest shareholder Vista Meranti Sdn Bhd, with a 57.7% stake, is taking the company private with an RM85.61 million voluntary general offer for the remaining shares at RM2.10 each.
  
  The cash offer price is a premium of about 10.53% to the five-day weighted average market price up to Monday (Sept 11) of RM1.90 per share. Yesterday, it closed four sen higher at RM1.88, with only 100 shares done.
  
  In a statement yesterday, Intan said Vista had submitted the de-listing proposal to its board to request the company to undertake a voluntary withdrawal of its listing from Bursa Securities.......

So Intan was taken private via a VGO worth about 85.6 million.

In another story, October 2006.

• Cosway minority shareholders prefer sale
  By Chong Jin Hun
  jinhun@nstp.com.my
  
  MINORITY shareholders of Cosway Corp Bhd want the direct-selling firm to be put up for sale rather than let its parent Berjaya Corp Bhd (BCorp) take it private.
  
  "It is a bad idea to take Cosway private as it is a good and profit-making company with a bright future. Investors like to invest in companies with good dividends and bonus issues," proxy holder William Woon told reporters after Cosway's annual general meeting in Kuala Lumpur yesterday.
  
  He said it would be better to put the company up for sale as competitive bidding can produce higher sale prices.
  
  Woon was commenting on BCorp's recent announcement that it is considering a proposal to buy the remaining shares it does not own in Cosway. BCorp currently owns 74.4 per cent in Cosway.
  
  Another shareholder, who spoke on condition of anonymity, said it is unfair for Cosway to be taken private as the group has done well financially, thanks to its strong shareholders' funds.
  
  "The company had earlier sold shares to minority shareholders, and now, when it is making money, it (BCorp) wants to take it back from the minority shareholders," he lamented.
  
  It was reported that BCorp's possible voluntary general offer may cost the group between RM105.8 million and RM123.5 million for the remaining 25.6 per cent it does not own in Cosway.
  
  The amount works out to between RM1.20 and RM1.40 per Cosway share, whose price had advanced 73.4 per cent this year.
  
  Shares of Cosway closed higher by one sen at RM1.07 yesterday, while BCorp shares were unchanged at 15 sen.
  
  In the year ended April 30 2006, Cosway's net profit grew 62 per cent to RM98.2 million on a smaller revenue increase of 5 per cent to RM1.12 billion.
  
  Net profit for the first quarter to July 31 2006 decreased 15 per cent to RM10.3 million, while revenue was down 35 per cent to RM180.4 million.
  
  The dip in earnings for the first three months was due to the deconsolidation of former subsidiary Dunham-Bush (M) Bhd, according to Cosway's filings to Bursa Malaysia.

Good point mentioned: "The company had earlier sold shares to minority shareholders, and now, when it is making money, it (BCorp) wants to take it back from the minority shareholders,"

So Intan Utilities was taken private.

So was Cosway.

Yesterday, Businesss Times had this article.

• Berjaya to list Singer, 7-11 via new unit
  
  Published: 2009/09/29
  
  BERJAYA Corporation Bhd has announced the proposed listing of Berjaya Retail Bhd, the listing vehicle for subsidiary Singer (Malaysia) Sdn Bhd and 7-Eleven Malaysia Sdn Bhd, on the main market of Bursa Malaysia.
  
  In a statement to Bursa Malaysia today, the group said B-Retail will be principally involved in the marketing and direct selling of consumer durables with instalment option schemes via Singer Group, and the operation of a chain of convenience stores via 7-Eleven Group.
  
  The proposed listing will be undertaken via the implementation of the following proposals:
  
  i) proposed disposal of Singer to B-Retail for RM360 million;
  ii) proposed acquisition of 7-Eleven by B-Retail for RM600 million;
  iii) proposed dividend-in-specie by BCorporation;
  iv) proposed offer for sale of B-Retail securities; and
  v) proposed listing of and quotation for ordinary shares of RM0.50 each in B-Retail and irredeemable convertible preference shares in B-Retail on the Main Market of Bursa Securities.
  
  The Singer and 7-Eleven acquisitions will be satisfied through a combination of assumption of debt and issuance of new shares.
  
  "The Proposed Listing will enable BCorp to achieve its objective of unlocking shareholder value and distributing to its shareholders via the Proposed Dividend-In-Specie thus enabling its shareholders to have a direct participation in the equity and envisaged growth of B-Retail Group," the company said.
  
  It added that following the Proposed Dividend-In-Specie, BCorp shareholders will directly hold securities in a prominent organization with strong brand values and good growth prospects without the need for any cash outlay.
  
  "The Proposed Listing will also enable B-Retail Group to gain access to the capital markets should it wish to raise funds for its future expansion and continued growth," it added.
  
  Barring any unforeseen circumstances, the Proposed Listing is expected to be completed in the quarter ending 31 March 2010.

How?

One minute, companies are listed. Next they are taken private. Now they wants relisting again.

Is our local stock market such a easy cheap, easy market where companies can list and delist and relist as per they like?

One minute in and one minute out!

How does one expect our market to attract quality funds to invest in our market when this keeps happening?

Now I also want to spare a moment for Intan Utlities and Cosway shareholders.

I am sure that they would be not happy to read such a development.

For Intan Utlities ex-minority shareholders, how much was they offered for their shares? How much does B-Retail wants to buy Seven Eleven for now? 600 million!

For Cosway ex-minority shareholders. Many had objected but yet the company was taken private. Now a subsidiary of its company, Singer Malayisa, is sold for how much now? 300 million!

How?

Can't help it but does it not look like the minority shareholders got the extra short end of the stick?

And what does this say about long term investing?

Yeah, some say it wouldn't work because long term investors always tend to get the short end of the stick.

However, some say, this is not true. Long term investors just needs to be really prudent. One cannot simply buy any company and declare it as long term investing! Or as some would say, never be a shareholder of a business venture if you cannot trust your partners!

Frank Barbera: Stage Is Set For Disappointment Of Most Epic Sort

Posted the other day: If The Economic Recover Is Real...

On today's financialsense market wrap, market commentator, Frank Barbera, talks about the same issue: Market Messages from the Outer Fringe

• As the bullish headlines continue to sway the masses that hope springs eternal, and that global economic recovery lies directly ahead, the outlook in our view for 2010 remains highly uncertain. In the weeks and months ahead, while it will be key to track a number of tried and true leading economic indicators, we also like to look below the surface as some of the lesser follow economically sensitive gauges. Call them - indicators of the outer fringe. In this case, one of our favorite fringe ‘battlefield’ type gauges is the shipping rate or shipping rate indices put out by the famous Baltic Exchange. These various indices measure the day rates for various types and sizes of merchant shipping. There is an aggregate index known as the Baltic Freight Index, which encompasses a number of sub-indices including day rates for dry goods, and a variety of energy related components which track tankers and of different shapes and sizes. The key point here is very simple, when the global economy is genuinely improving, these day rates tend to trend higher, and to that end, guess what is not happening in recent weeks? In the charts below, we take a look at the trend of the Baltic Dry Index, and some of the energy related, crude oil shipping rates. Get the idea, that things are not trending up? ..........
  
  In our view, this means there is still a lot more proof that needs to be seen coming from the market, --- from the frontlines of global business, where goods are bought and shipped, before we can take solace that a genuine recovery is taking hold. For now, the lackluster behavior in these fringe economic indices is strong evidence that a divergence of substance is present, and while this could end up improving as the year wears on, for now, the trends appear to be on the downside. According to a recent study by the National Bank of Greece, “it is highly unlikely that demand from China will be as strong as it was in the first half of the year.” The report goes on to say that, any pick up in demand should global economies begin to recover is expected to be moderate. National Bank of Greece estimated that it will take another two years before demand for dry bulk cargoes will stabilize, and the same applies for the tanker market as well, while the fact that a large number of newbuildings will hit the market, is expected to make matters in the freight market even worse.
  
  In our view, if it should turn out that next year is not the recovery of substance that so many now expect, the stage will be set for disappointment of the most epic sort. Psychologically speaking, if the herd is heading for another episode of fear and disappointment, the potential ramifications will be felt along a very wide fault line as bullish expectations have been riding very high over the last few weeks.
  
  Take a look at the action in some of the high beta ‘discretionary’ spending stocks. During last year’s contraction, where the ‘high-end’ sphere of ultra-wealthy was only dinged by the major contraction. ---Yes, high end home prices began to decline, but only sold off to a much smaller degree then the middle and low end range for homes where sub-prime mortgages dominated and laid waste to the economic landscape. While it is true that capital market portfolios (equity market declines) hurt those on the high-end, to a very large degree their financial staying power was much greater then that of Joe Six Pack, who saw the plunge in 401K values hit much closer to the financial core. This year, 2009- has been a different story, as high end home values are now falling at a much faster pace, with the lower and middle range of home prices heavily bombed out, and beginning a sort of begrudging plateau. The outlook for 2010 is not rosy, as the number of prime mortgage foreclosures and REO’s is rising steadily. This is the ‘high end’ taking its turn as feeling the recession bite.
  
  In our view, real change is always seen at the periphery, often in the underlying message of obscure markets like the Shipping rates, or perhaps to cite another example, in the value of Gaming shares. In the Gaming shares, we have an entire fringe sector that is absolutely manically leveraged to debt and debt dependent to the extreme. They now reside in the giant hangover of the Great Las Vegas/Macau building/development booms of the last decade. “Take two aspirin and call me in the morning”, is not likely to be any kind of quick fix as this industry is in desperate need of a genuine recovery. Yet, at the heart of a recovery that leads people into the gambling dens of Vegas and Macau, there needs to be a sustained asset re-inflation. To this end, the Gaming stocks are on the far end of the high dive board acting like happy days are here again.. In our view, one small misstep and its off the plank and into the drink, snake eyes for the gaming group. Consequently, we like to watch the price action of the GST Gaming Index, which includes a wide variety of usual suspects such as Bally Tech, IGT, Penn National, Las Vegas Sands, MGM, Wynn and others. So far, what we see is a five wave bull market that ended at the peak in October 2007 (at 87.09), followed by a five wave collapse into the March 2009 lows at 9.44, a heart stopping decline of 89.16%. Since those lows, the index has been fueled by the herd mentality of eternal hope, (ed. right along with other heavily marginal sectors such as Housing and REITS) soaring by a stunning 224.8% in just the last 6 months. Now annualized that!
  
  Here’s the real point. Typical bear market rallies, however powerful, very often retrace about 50% to 61% of the prior decline. In the case of the GST Unweighted Gaming Index, the striking rally of the last few months has led the index back up to a virtual bulls-eye on the 50% bear market retracement mark. This is going to be very telling as to which direction the next 10% to 15% move happens to be. If a real recovery lies dead ahead in 2010, then the heavily leveraged gaming issues should soon be latching onto the pungent aroma of fresh dollar bills heading for the crap tables and the slots. If on the other hand, the outcome for 2010 turns out to be the stench of a double dip contraction, well, then in that case, the Gaming Stocks are likely to start under performing the S&P. That means a declining relative strength ratio in the weeks ahead, and lots of divergence with the S&P...

Marc Faber: This Crisis Is Just The Appetizer

Just for the record, published on CNBC: This Crisis Was Just the Appetizer: Marc Faber

• "It's a total and complete disaster and the crisis we had is just the appetizer to the big total breakdown of financial markets and of governments in five or 10 years time when the whole system goes bust," Faber told "Worldwide Exchange."
  
  The G20 meeting is not likely to find a solution that would prevent a future meltdown, as the people who are supposed to implement the new measures are the same people who were unable to foresee this crisis, he said.
  
  The issues of excessive leverage and the "uncontrolled, unbound credit growth," as well as the bulging deficits and interest rates at zero are not being addressed, he added.
  
  "My view is that this G20 meeting is a complete and total waste of time," he said. "Nothing will be achieved except that they will implement regulations that are even worse than the regulations that brought us all these problems."
  
  Starting with 2002, former Federal Reserve chairman Alan Greenspan and current chairman Ben Bernanke "managed to create a bubble in everything." But inflation pressures are building up, and the Fed's measure of inflation, which excludes volatile food and energy prices, is not relevant, according to Faber.
  
  "If you have interest rates at zero essentially you discourage people to save and encourage them to speculate," he said. "I look at the US dollar. Whenever a currency is weak, it's weak because of some inflationary pressures."
  
  Emerging markets are the place to be in the long term, because their economies are gaining importance in the world, bit this will lead to geopolitical tensions, Faber warned.
  
  "I think that people will have to rethink the world and that they should have little money in the US and have 50 percent of their funds in emerging economies," he said.
  

Did I Misunderstood The Comment From Green Packet?

Posted the other day: Incredible Talk From Green Packet Yet Again!

Got the following comments from singer ...

• I think you have misunderstood the comment from Green Packet.
  
  As I understand the target is 'revenue' of RM1bn, and not profit as stated in your article.
  
  RM1bn is big target but possible and if an operator in this telco space is not aiming and planning big then they are unlikely to survive.

Singer, I merely commented what I read from the local press and in this instance, I was commenting on what was published on Business Times. Here is the link to that Business Times article: here

Do note that Business Times links are not permanent. Links tend to be missing after time.

Here is the snap shot of the article.

And the arrow indicated exactly what Business Times had published.

Well, I do not not think I misunderstood the comments at all.

Did the reporter misunderstood what was said by the boss or this was exactly what the boss said?

And if the reporter misinterpreted the boss comments, why didn't Green Packet attempt to retract such a massive statement in the press?

Last but not least... what's the point of a company boasting its sales revenue? Isn't it more important that the company shows the investing public it can make money instead of losses?

Regarding Oilcorp

Blogged previously. And OilCorp Comes Crashing Down Once More!

Well Oilcorp really crashed!

What now?

If I am stuck at this stock, perhaps it's best to reevaluate my current position. Yes? That would be the logical thing to do yes?

Here are some main issues for me to consider.

1. What has OilCorp done lately?

Well, time to dig up some past.

June 2006. A step forward for Oilcorp in fisheries

• MOVING from oil and gas to fishing may seem a step backward for some, but for Oilcorp Bhd, the latter seems to hold more promise than what many people believe.
  
  The company sees revenue contribution from deep-sea fishing activity reaching in excess of RM300mil in five years, which would be far greater than what its current other core businesses, oil and gas (O&G) and property, would generate. Its O&G division is projected to earn RM200mil in revenue and its three property projects RM60mil.

Oil company going into deep-sea fishing????

Feb 2007. Oilcorp decides to do a 1 into 10 stock split!

What's the problem with such an exercise? Well, how much was Oilcorp trading back on Feb 2007? Around 1.10. And Oilcorp wanted to split every stock into 10! What's the rational? What's the point of such exercise? How does it reflect on the management? (This split was not implemented)

Apr 2007.

• Monday April 9, 2007
  
  Oilcorp unit sees new RM1b contracts
  
  By YVONNE TAN
  
  PETALING JAYA: Oilcorp Bhd subsidiary Oilfab Sdn Bhd expects to clinch RM1bil in new projects by 2009, given the industry’s bright prospects, its chief executive officer and managing director Mohamed Hazali Abu Hassan said.
  
  “In the current environment, we are convinced of being able to continue reaping more profits and opportunities as more offshore developments emerge,” he told StarBiz...

June 2007.

• Saturday June 30, 2007
  
  Oilcorp confident of RM1.73bil Mideast contract
  
  PETALING JAYA: Oilcorp Bhd is confident of securing a US$500mil (RM1.73bil) oil and gas contract in the Middle East, group managing director Sunny Ng Huat Tian said.
  
  “Chances of winning the project are very good,” he said after the company AGM... here

Aug 2007.

• 07-08-2007: Oilcorp wins RM290m fabrication job bby Woon Wu Lin
  
  KUALA LUMPUR: Oilcorp Bhd has secured its largest ever fabrication contract to the tune of RM290 million from Petronas Carigali–PTTEPI Operating Company (CPOC). Following this, Oilcorp officials alluded to the possibility of the group and other fabricators standing to benefit from other multi-billion contracts from Carigali and its umbrella contractors over the next five years...

Aug 2007

• Oilcorp sees RM135m from sale of hotel in KL
  
  By Chong Jin Hun
  jinhun@nstp.com.my
  
  August 15 2007
  
  OILCORP Bhd stands to generate at least RM135 million from sale of its upcoming hotel in Kuala Lumpur, the second of its four planned hospitality units comprising some 3,000 rooms it hopes to build in Malaysia in the near term.
  
  Oilcorp executive director Pua Yow Liang said the 375 rooms in the 33-storey hotel in Kuala Lumpur could be sold for between RM360,000 and RM600,000 each. The developer will, in turn, lease back and manage the properties....

Aug 2007.

• Wednesday August 15, 2007
  
  Oilcorp plans to launch three property projects worth RM1.2b
  
  KUALA LUMPUR: Oilcorp Bhd, an integrated holding company, aims to launch three new property development projects with a gross development value (GDV) of about RM1.2bil over the next four to five years.
  
  Executive director Pua Yow Liang said yesterday the projects were at KL Sentral, Genting and Pulau Indah....

Sep 2007.

• Tuesday September 18, 2007
  
  Oilcorp to list property and resort arm
  
  KUALA LUMPUR: Oilcorp Bhd's property and resort management arm, D'Tiara Corp Sdn Bhd, is en route to listing on the Alternative Investment Market (AIM) of the London Stock Exchange (LSE).
  
  Oilcorp said in a statement yesterday it had appointed international financial services firm Libertas Capital Group plc adviser for the flotation.
  
  D'Tiara is involved in property development, resort operation and property investment. It owns and manages the D'Tiara Beach Resort in Port Dickson....

Jan 2008

• Friday January 4, 2008
  
  Oilcorp O&G division to clinch more contracts
  
  PETALING JAYA: Oilcorp Bhd expects its oil and gas division to clinch more projects in the next three to six months.
  
  Petroliam Nasional Bhd (Petronas) is anticipated to award about RM10bil worth of new projects in the next three years to a handful of qualified fabricators, according to Oilcorp group managing director Sunny Ng.
  
  As of August last year, the six licensed Petronas fabricators were Oilfab Sdn Bhd, Brooke Dockyard & Engineering Works Corp, HL Engineering Sdn Bhd, Malaysian Marine Heavy Engineering Sdn Bhd, Ramunia Fabricators Sdn Bhd and Sime Darby Engineering Sdn Bhd, he said after Oilcorp's EGM yesterday..

So much promises. Let's take a look at how Oilcorp performed as per its own earnings announcement back in Feb 2008. Quarterly rpt on consolidated results for the financial period ended 31/12/2007

It made some 3.5 million ringgit but pales in comparison to its last fiscal year earnings, same quarter, earnings of 6.6 million. And this comes on the back of a surging sales revenue! Sales revenue for the whole fiscal year was 456 million compared to its previous year revenue of 153 million.

And if you look into the balance sheet, the trade receivables showed that its receivables soared to 553.014 compared to previous year 284.033 million.

Hmm..... on a year-year comparison, sales soared by 303 million, receivables soared by 268 million and net profit only increased by a measly 1.358 million!!!!

Does this sound right? If a company sales increased by a whopping 303 million, why did its net profit only increase so little?

Its cash balances was 62.749 million and it had 328.699 million in loans.

Last year?

Its cash balances were 10.642 million and it had 220.376 million in loans.

Hmm... looks like its cash balances worsen.

So how?

Let me address the earlier question again.

Does this sound right? If a company sales increased by a whopping 303 million, why did its net profit only increase so little? And why did its cash balances worsen so badly despite all massive increase in sales revenue? What's happening here?

21st May 2008. All hell broke loose!

• Oilcorp revising 2007 audited accounts
  
  By Adeline Paul Raj Published: 2008/05/21
  
  The company is in talks with its auditors to resolve a disagreement 'on a long-term contract amounting to RM110 million, inclusive of a variation order of RM20 million'
  
  OILCORP Bhd, an engineering services firm, may cut its 2007 pre-tax profit figure by 68 per cent due to differences with its auditors on the accounting treatment of a contract.
  
  It told the stock exchange yesterday that it would be amending its 2007 annual audited accounts because of a disagreement between the management and the auditors "on a long-term contract amounting to RM110 million, inclusive of a variation order of RM20 million".
  It did not provide details on the contract.
  
  Based on the auditors' proposed accounting treatment, Oilcorp's pre-tax profit would be reduced to RM7 million from RM22 million.
  
  This means that its pre-tax profit for 2007 would have declined by 46 per cent from a year ago instead of rising 69 per cent.
  
  The company is in discussions with its auditors to resolve the disagreement, and expects to take two weeks to come to a resolution.
  
  "Once we resolve this issue with the auditors, we expect to be able to submit the amended (audited accounts) by June 9," Oilcorp said in the statement.
  
  Trading in the main board-listed company's shares was suspended yesterday pending the announcement.
  
  It will continue to be suspended until Oilcorp submits the amended accounts, together with the auditors' and directors' reports, to Bursa Malaysia.
  
  The stock last traded at 78 sen....

How?

Now if one puts into perspective and compared this to all the highly optimistic articles published on the press, how would you evaluate this company?

Look back again at the chain of events. Oil company going big time into deep-sea fishing. Billion dollar contract expectations in oil industry and billion dollar property projects and now dispute in its audited accounts.

Suspect?

And what has happened to Ascentland's listing in AIM?

July 2008.

• Follow order or face penalties, Oilcorp warned
  
  Published: 2008/07/26
  
  THE Securities Commission (SC) has warned Oilcorp Bhd of "civil and criminal penalties" if it fails to comply with an order to let an auditor investigate its books.
  
  This came after Oilcorp appeared to challenge the SC's directive by questioning Baker Tilly Monteiro Heng's (BTMH) appointment by the regulator and invoked the threat of legal action against the auditor...

July 2008. Oilcorp – drilling for truth

• ..... Strip away the bad blood and background noise, and you’ll find allegations and counter-allegations of misconduct, conflicts of interest, and lapses in the performance of duty. If they indeed happened, many of these are punishable offences.
  
  It would be reckless to dismiss these accusations and insinuations without investigations, never mind that some appear to be trivial and diversionary.
  
  This is why it’s great that the Securities Commission (SC), Bursa Malaysia and the Malaysian Institute of Accountants (MIA) have started probing. At this point, only they have the authority and resources to untangle this mess....

31st July 2008.

• 31-07-2008: MARC revises status of Oilcorp notes to negative
  
  Malaysian Rating Corporation Bhd (MARC) has revised its MARCWatch status of its MARC-2ID/A-ID ratings on Oilcorp Bhd’s RM70 million Murabahah Underwritten Notes Issuance Facility/Islamic Medium Term Notes Facility (MUNIF/IMTN) to negative from developing.
  
  The rating agency said it was concerned that a prolonged accounting dispute would affect Oilcorp’s access to capital and may result in disciplinary action by the regulators...

Aug 2008. Unable to name new auditor or no one wants the job???

• 12-08-2008: Oilcorp unable to nominate new auditor
  by Doreen Leong
  
  KUALA LUMPUR: Oilcorp Bhd has not been able to nominate another firm as its statutory external auditor, with the absence of a professional clearance from its previous auditor Baker Tilly Monteiro Heng (BTMH) hanging over the oil and gas services provider.
  
  As such, sources said pursuant to the Companies Act, the Companies Commission of Malaysia (CCM) would have the authority to appoint a new audit firm to act as Oilcorp’s external auditor....

Nov 2008. Still talks of winning billion dollar contracts!

• Oilfab eyes RM1b deals by 2010
  
  By Presenna NambiarPublished: 2008/11/18
  
  Oilfab Sdn Bhd, a subsidiary of Oilcorp Bhd, says it targets to win projects worth RM1 billion by 2010, with more big jobs coming its way.
  
  The completion of work on the extension of its bulkhead (platform in which the topside and jacket is built) and seawall this month will enable it to construct structures of more than 10,000 tonnes, from 2,000 tonnes now.
  
  A seawall is a structure that protects the shoreline against erosion...

4th December 2008. Oilcorp submits new accounts

• ... The value of the project was disputed earlier this year, leading Bursa to order a re-audit of its accounts.
  
  Meanwhile, in its filing with Bursa Malaysia yesterday, Oilcorp said the group’s audited net profit for FY07 was RM4mil compared with its unaudited result of RM15.4mil reported on Feb 29, due to adjustments such as allowance for doubtful debts, deferred tax expenses and professional fees.

Its fy 2007 earnings is now only 4 million?? From reporting an earnings of 15.4 million. it's now restated to just 4 million???? How big of a deviation is this?

December 2008. Converting debts into shares!

• 04-12-2008: Oilcorp exchanges debt for equity, accounts cleared
  by Joyce Goh
  
  KUALA LUMPUR: Oil and gas fabricator Oilcorp Bhd has proposed to covert RM80 million in debts owing by its clients into a 10% equity stake in loss-making Renewable Fuel Corp Inc (RFC). The company’s long-overdue accounts for the financial year ended December 2007 also passed the scrutiny of its auditors and were finally submitted to Bursa Malaysia.
  
  In a statement to Bursa yesterday, Oilcorp said its indirect wholly owned subsidiary, Oilcorp International Limited, had entered into a conditional agreement for the proposed subscription of 2.2 million preferred stocks in RFC to be satisfied by the conversion of debts owed by Plant Biofuels Corporation Sdn Bhd (PBC) and Optimis Tegus Sdn Bhd of RM40 million each.
  
  These debts are due to Oil-Line Engineering & Associates Sdn Bhd (OLEA), a wholly owned subsidiary of Oilcorp.
  
  RFC is involved in the manufacturing and distribution of bio-diesel and blended diesel fuels in the US. It posted a net loss of US$1.7 million for the financial year ended Sept 30, 2008, mainly due to administrative expenses. The company was incorporated in September 2007...

And RFC which was the root of all accounting issues posted a net loss of US$1.7 million.

And Oilcorp does a debt into equity deal with RFC?????

11th December 2008.

• 11-12-2008: Oilcorp shares plunge on resumption of trading
  
  KUALA LUMPUR: Oil and gas fabricator Oilcorp Bhd saw its share price tumble by almost 50% after it resumed trading following its suspension in May this year for failing to submit its audited accounts for the financial year Dec 31, 2007.
  
  The accounts could not be submitted as the management of Oilcorp and its auditors were in disagreement over the contract value of a job secured by the company to build a biofuel plant...

Made two blog postings on that day. Regarding The Plunge Of OilCorp Shares Today! and OilCorp and Its Trade Receivables

Oilcorp share price down 15%

• .... Under the PN17 rules, the company is obliged to regularise its financial conditions within a certain timeframe or face delisting.
  
  Oilcorp also said it did not have a formal regularisation plan at present, but it would shortly appoint a principal adviser to formulate such a plan. It added that it would continue to negotiate with its lenders.
  
  On Friday, it said the interest payment was part of the facility agreement between EON Bank Bhd, Capone Bhd and Oilcorp under a primary collateralised loan obligation (CLO).
  
  “The company had on Sept 15 written to Malaysian Trustees Bhd to seek indulgence of time of up to one month from the due date to remedy the matter,” Oilcorp said, adding that the lender and trustee had yet to declare Oilcorp in default under the facility agreement.
  
  If such declaration of default were made, the CLO would be immediately payable together with the accrued interest, it said, adding that such default would impact business, financial and operations.
  
  Oilcorp expects to resolve the issue if given the indulgence period, as it is pursuing the payment of receivables. The options available to lenders would be to issue legal proceedings against the company.
  
  The company is seeking legal advice as to whether such a default constitutes an event of default under any other loan agreements.
  
  “The directors are unable to form an opinion that the company will be able to meet its debts as they fall due and accordingly the company is not solvent,” Oilcorp said.
  
  Last Friday also saw the resignation of two of the company’s non-executive and independent directors Tuan Raime Unggi and Sim Ti. They are also members of the audit committee. Oilcorp now has only one independent director.
  
  The company, which is involved in oil and gas, special projects, hotel, resort operation and property investment, and deep-sea fishing, is heavily geared with net debt of RM421.8mil as at end-June.
  
  Malaysian Rating Corp Bhd (MARC), in an email reply to StarBiz, said Oilcorp’s liquidity position was very weak and it had limited options to stabilise its credit profile.
  
  Oilcorp had relied on its moving receivables from oil and gas majors as a source of liquidity, it said, adding that the company was unlikely to be able meet its obligations unless it quickened its trade receivables collection, or rely on external support.
  
  The rating house had recently downgraded Oilcorp’s RM70mil Murabahah underwritten notes issuance facility/Islamic medium-term notes facility (Munif/IMTN) to MARC-4ID/BBID from MARC-2ID/A-ID.
  
  Oilcorp failed to deposit the balance of RM10mil into the designated accounts for the Munif/IMTN facility due on Sept 7, before the RM20mil redemption on Oct 7.
  
  “MARC has been informed that the sole bondholders of the Munif/IMTN have granted indulgence of up to three months to Jan 7, 2010 in order to meet the sinking fund due on Sept 7 and redemption due in October,” the rating house said.
  
  Oilcorp posted a wider net loss of RM1.5mil for the second quarter ended June 30 versus RM1.02mil in the previous corresponding period, as revenue fell 15% year-on-year to RM69.5mil.
  
  Earlier this month, subsidiary Oilfab Sdn Bhd secured a RM36mil job for Brownfield Retrofit Project from Carigali Hess Operating Co Sdn Bhd.
  
  Oilcorp had previously delayed its 2007 audited accounts due to disagreement between the management and the auditors over the value of a contract. The management, when contacted by StarBiz, declined comment.

MARC's original press statement was published on Business Times.

• MARC downgrades Oilcorp's RM70m Islamic debt
  
  Published: 2009/09/12
  
  MALAYSIAN Rating Corp Bhd (MARC) has downgraded Oilcorp Bhd's RM70 million Islamic debt to "BB" from "A-" due to concerns that it may not be able to settle the debt.
  
  Oilcorp, which is involved in oil and gas engineering, property development and deep sea fishing, has failed to deposit RM10 million into an account on September 7 to repay part of the debt due on October 7.
  
  It needs to pay back RM20 million on that day, MARC said in a statement.
  
  Oilcorp had identified certain receivables, primarily arising from variation orders, to make the September payment.
  
  "However, the group has failed to make any notable progress on collection of its stagnant receivables amounting to RM347.8 million in the first six months of 2009 and its receivables turnover increased to 567 days,"
  
  MARC said Oilcorp has no other sources of potential liquidity apart from outstanding receivables that it may rely on to meet the upcoming obligation.
  
  Nonetheless, Oilcorp has got a time extension to make the sinking fund payment from its sole bondholder.
  
  Oilcorp made an unaudited loss before tax of RM0.5 million for the first half of 2009 on the back of falling revenue.
  
  Net cashflow from operating activities during the period was negative RM20.7 million.
  
  MARC could downgrade the debt further if Oilcorp could not find other sources of repayment closer to the October redemption deadline.

How would one evaluate what Oilcorp has done lately?

Take away all the contract awards, and the accounting issues, what does one have?

Let's look at MARC assessment. Net cashflow for the period was negative rm20.7 million, company not making money, and now, as per Star Biz article, "Oilcorp failed to deposit the balance of RM10mil into the designated accounts for the Munif/IMTN facility due on Sept 7, before the RM20mil redemption on Oct 7. "

Oct 7 comes very fast!

How?

2. What about Oilcorp the stock?

As we have seen time and time again, stocks don't usually follow its fundamentals. Stocks do fly without wings, just like Peter Pan!

So for one that is stuck in Oilcorp, perhaps with the current incredible bullish market undertone worldwide, one feels that perhaps Oilcorp could see some sort of bounce, for they argue nothing could go down forever.

Yes, there's a chance that one could see a technical rebound in the stock after falling so drastically.

But then, there's still a chance that Oilcorp could go down much, much more!

Why not?

Because since Oilcorp is now a newly designated PN17 stock, chances are more that Oilcorp could go down much more! (Well here's what one can go. One can dig up all the PN 17 stocks and check their performances during the early stages after being designated as a PN 17 stock. What do you see?)

And it's not easy for one to get out of the PN 17 status.

Companies are designated as a PN 17 stock for a reason and the reason is that the companies are rather extremely poor in its fundamentals. Remember MARC statement, company is in a negative cash flow of 20 million! Company has huge debts due and the company not making money.

Collecting of debts is always possible but let's look at MARC's statement again, "the group has failed to make any notable progress on collection of its stagnant receivables amounting to RM347.8 million in the first six months of 2009 and its receivables turnover increased to 567 days,"

Receivables turnover increased to 567 days!

What kind of receivables are those?

567 days and Oilcorp could not collect.

How do you rate Oilcorp chances of collecting these debts in the near future?

Unable to collect these debts is one thing but the longer it remains un-collected, sooner rather than later, Oilcorp needs to re-classify these debts.

And when it's reclassified, it's BAD DEBTS. And bad debts equates to accounting losses.

Consider this. Oilcorp's current market cap at 17.5 sen is some 38.420 million.

And what is the size of Oilcorp's receivables? Some 489 million!

What if just half of its debts is reclassified as bad debts and into accounting losses? Half would be some 244 million! Which is more than Oilcorp's equity!

How?

Huge mess, yes?

If Oilcorp was not in such a deep mess, surely it would have wanted to be designated as a PN 17 stock, yes?

And remember that under the PN17 rules, the company is obliged to regularise its financial conditions within a certain timeframe or face delisting.

And what if the stock is delisted?

How then? Would you rate your chances betting on this stock?

And given the fact that there are so many other stocks, surely one have to ask, "Why bet on this stock? No other better stocks to bet on?"

3. Any sell down in shares by the major shareholders?

Yes!

Notice of Person Ceasing (29C) - NG HUAT TIAN
Changes in Sub. S-hldr's Int. (29B) - PRAMADDUN HOLDINGS SDN BHD
Notice of Person Ceasing (29C) - GENESIS ACRES SDN BHD

Vote of confidence?

And if one is still a shareholder, how would one feel? The smarter insiders, had already cashed out before the 'bad' news.

4. What to do now?

Is it too late to consider the fact that this is a terrible mistake to 'invest' in Oilcorp?

Consider this statement again from Mr.Soros... "I'm only rich because I know when I'm wrong."

Is it too late to sell?

What if the stock goes below 10 sen?

Yes, one could hold. One could bet that Oilcorp could recover one day.

But when you consider all the issues mentioned so far, how do you rate your chances?

What if Oilcorp do not recover?

What if Oilcorp receivables are classified as bad debts?

What if Oilcorp is delisted?

The Accident Waiting To Happen In The Financial Markets

Highlighted on Financial Sense University.. A Peter Pan Market

• Only in Never Never Land can age and gravity be defied. In the real world such ideas may be described as “escapist fantasies”.
  
  There has been much debate in recent weeks regarding whether US Equities have entered a new Primary Bull Trend or whether we have been witnessing a bounce in a Primary Bear Trend.
  
  Let us not mince words. In the view of this analyst we have been witnessing a bounce.
  
  Clearly, anything that one reads in the media may be regarded as history. In this case, however, it is arguable that the media stories are so bleak because the economic outlook is in fact bleak. Arguably, the typical investor is rationalizing that things cannot get worse and that, therefore, now is buying time.
  
  Again, not to mince words: In this analyst’s view those who are arguing that the markets have bottomed are guilty of selective perception. They are ignoring some very important facts.
  
  Below is factual evidence that the world economy is very likely still contracting and that, in the USA in particular, further economic contraction may be expected and, finally, that the US Equity Market is an accident waiting to happen.. ...

Good old Peter flys without wings eh?

• Those who are arguing for investing in equities on the basis that we are heading for inflation are not only ignoring the decreasing velocity of money. They are also ignoring the fact that there is no shortage of supply of anything except, possibly, energy. They are also ignoring the fact that wages lag inflation and that ordinary people are forced to cut back when prices rise because they can’t afford to pay the higher prices. They are also ignoring the massive overhang of consumer debt which, in particular, is rendering the asset side of the balance sheets of the commercial banks highly suspect. In context of the large number of domestic mortgages in the USA which have a balance owing that is greater than the value of the underlying real estate security, the US banking industry is surviving on silver tongue bullshit artistry – not to put too fine a point on it.

Do read the rest of article here. I do recommend it. :)

And OilCorp Comes Crashing Down Once More!

Dejavu!

It just an accident waiting to happen!





Oilcorp share price down 15%

• PETALING JAYA: Spooked by the spectre of Oilcorp Bhd slipping into Practice Note 17 (PN17) status, investors sold down the stock yesterday, loping as much as 20% off the share price before the counter closed at 26.5 sen, a fall of 5 sen or 15%.
  
  Last Friday, Oilcorp said it had failed to make an interest payment of RM1.6mil because it did not have sufficient funds due to the delay in collecting certain large receivables.
  
  Trading in the stock was halted the same day and resumed yesterday. Oilcorp was one of most heavily traded counters for the day.
  
  Investors’ fears were confirmed when the company announced after 5pm that it was an affected issuer under PN17 of Bursa Malaysia’s listing requirements because it had defaulted on the interest payment and could not provide Bursa with a solvency declaration.
  Under the PN17 rules, the company is obliged to regularise its financial conditions within a certain timeframe or face delisting.
  
  Oilcorp also said it did not have a formal regularisation plan at present, but it would shortly appoint a principal adviser to formulate such a plan. It added that it would continue to negotiate with its lenders.
  
  On Friday, it said the interest payment was part of the facility agreement between EON Bank Bhd, Capone Bhd and Oilcorp under a primary collateralised loan obligation (CLO).
  
  “The company had on Sept 15 written to Malaysian Trustees Bhd to seek indulgence of time of up to one month from the due date to remedy the matter,” Oilcorp said, adding that the lender and trustee had yet to declare Oilcorp in default under the facility agreement.
  
  If such declaration of default were made, the CLO would be immediately payable together with the accrued interest, it said, adding that such default would impact business, financial and operations.
  
  Oilcorp expects to resolve the issue if given the indulgence period, as it is pursuing the payment of receivables. The options available to lenders would be to issue legal proceedings against the company.
  
  The company is seeking legal advice as to whether such a default constitutes an event of default under any other loan agreements.
  
  “The directors are unable to form an opinion that the company will be able to meet its debts as they fall due and accordingly the company is not solvent,” Oilcorp said.
  
  Last Friday also saw the resignation of two of the company’s non-executive and independent directors Tuan Raime Unggi and Sim Ti. They are also members of the audit committee. Oilcorp now has only one independent director.
  
  The company, which is involved in oil and gas, special projects, hotel, resort operation and property investment, and deep-sea fishing, is heavily geared with net debt of RM421.8mil as at end-June.
  
  Malaysian Rating Corp Bhd (MARC), in an email reply to StarBiz, said Oilcorp’s liquidity position was very weak and it had limited options to stabilise its credit profile.
  
  Oilcorp had relied on its moving receivables from oil and gas majors as a source of liquidity, it said, adding that the company was unlikely to be able meet its obligations unless it quickened its trade receivables collection, or rely on external support.
  
  The rating house had recently downgraded Oilcorp’s RM70mil Murabahah underwritten notes issuance facility/Islamic medium-term notes facility (Munif/IMTN) to MARC-4ID/BBID from MARC-2ID/A-ID.
  
  Oilcorp failed to deposit the balance of RM10mil into the designated accounts for the Munif/IMTN facility due on Sept 7, before the RM20mil redemption on Oct 7.
  
  “MARC has been informed that the sole bondholders of the Munif/IMTN have granted indulgence of up to three months to Jan 7, 2010 in order to meet the sinking fund due on Sept 7 and redemption due in October,” the rating house said.
  
  Oilcorp posted a wider net loss of RM1.5mil for the second quarter ended June 30 versus RM1.02mil in the previous corresponding period, as revenue fell 15% year-on-year to RM69.5mil.
  
  Earlier this month, subsidiary Oilfab Sdn Bhd secured a RM36mil job for Brownfield Retrofit Project from Carigali Hess Operating Co Sdn Bhd.
  
  Oilcorp had previously delayed its 2007 audited accounts due to disagreement between the management and the auditors over the value of a contract. The management, when contacted by StarBiz, declined comment.

The mess with Oilcorp was there from day one.

The delay "in collecting certain large receivables"?

Warned last year, OilCorp and Its Trade Receivables.

• If you compare the 498 million in receivables for OilCorp's most recent reported quarterly earnings to the same corresponding period a year ago, OilCorp had 465 million in receivables. An increase of some 33 million in receivables in 'one' fiscal year.
  
  Now look at OilCorp sales revenue. It's only a paltry 76 million and its previous quarter was some 81 million.
  
  Now to have only sales revenue of less than 100 million, don't you think it's rather incredible to have trade receivables amounting to 498 million?
  
  I do think so. Very much in fact.

And worst still the problems with its account had caused its shares to tumble last December too! ( see Regarding The Plunge Of OilCorp Shares Today! )

---------------------

see latest update: Regarding Oilcorp

Incredible Talk From Green Packet Yet Again!

Published on Business Times:

• Green Packet sets ambitious profit target
  
  By Goh Thean Eu Published: 2009/09/24
  
  GREEN Packet Bhd (0082), a telecommunications and broadband service provider, has set a net profit target of RM1 billion for 2013, driven by a maturing broadband and solutions business.
  
  The company posted a net loss of RM54.98 million for the financial year ended December 31 2008.
  
  "It's an ambitious goal. That's why we are really working hard on that. We believe both our business pillars of solutions and service provider will grow. By then, we will have more than one million subscribers on broadband space," group managing director Puan Chan Cheong told Business Times in an interview.
  
  The company expects to sign up 200,000 subscribers by year-end, from 35,000 in the first quarter of 2009.
  "By end of the third quarter, we should have more than 100,000 subscribers. We believe that we can sign up over 30,000 subscribers per month for the final quarter," he said.
  
  Green Packet expects revenue to increase more than threefold to RM300 million this year, from RM88.43 million in 2008.
  
  "Our first-half 2009 revenue was already 11 per cent more than what we had in the entire 2008. We expect the momentum growth to be bigger in the second half and we believe we can comfortably achieve RM300 million this year and RM1 billion two years later," he said.
  The company offers broadband services to homes and offices using the WiMAX (Worldwide Interoperability for Microwave Access) technology.
  
  To achieve its subscriber target, the company would need to expand its broadband coverage area, so that more people will have the opportunity to subscribe it.
  
  "In terms of sites, we are also on track to hit 700 sites, or 2,100 base stations by year-end," he said.
  
  Over the next two years, the company will be aggressively expanding its coverage and acquiring broadband customers. When its subscriber base hits the critical mass, it is expected to launch its new service - mobile voice.
  
  "We are looking to launch mobile voice service in 2011. We can do it by ourselves, but initially, we will be looking at domestic roaming. On areas we don't have coverage, then we will fall back to existing operator's network," said Puan, who expects to sign up more than two million mobile voice customers by 2013.
  
  The cheapest mobile prepaid is giving away free minutes.
  
  It also develops WiMAX customer-premises equipment (CPE), such as the WiMAX modems. For the first half, it has delivered over 150,000 WiMAX CPEs to 35 operators worldwide.
  
  "The estimation for WiMAX product shipment world is going to be about 1.6 million to 1.7 million this year. We aim to capture 20 per cent of the world's market shipment, or to ship some 350,000 units of CPEs this year," he said.
  
  Besides developing CPEs and offering broadband services, it also develops telecommunications software - such as its InTouch connection management software - for operators.
  
  The InTouch connection management solution, allows the user to integrate multiple wireless network.
  
  Developing the solutions pillar is critical for Green Packet's bottomline growth, as it commands higher margins than some of its other businesses and it helps the company to strike a balance.
  
  "Moving forward, we see half of our revenue coming from our service provider (WiMAX broadband) business and the other half from solutions.
  
  "In terms of topline for our solution business, 30 per cent will come from software and 70 per cent will come from CPEs. However, for bottomline, software will contribute 50 per cent of the profit for the solution business," he said.

Of course, one cannot fault another for having ambitious goals, can we?

But a net profit of 1 Billion by 2013????

In the posting, Would You Want To Invest In Green Packet?

• Let's look at their earnings since 2006: 55 mil -> 30.2 mil -> -55mil -> -84 mil (estimate losses from Insider Asia)

And in four year's time, 2013, it wants to earn 1 Billion?????

oO

Ambitious goal or is talk is simply cheap???

How many times have we not hear all the big talk from Green Packet's bosses (as highlighted in the posting, Green Packet Again )

Then again, when the company is in the midst of a 98 million rights issue exercise, what else can expect to hear from the company's boss?

Yup, talk is simply cheap when supply is more than demand!

If The Economic Recover Is Real...

Everyone is screaming out loud that we are seeing economic recovery.

Everyone.

And if you are not in the stock market, you are missing out one of the greatest bull run ever!

However, as pointed out many times before, if economic recovery is as real as what they are saying, why is the Baltic Dry Index moving the opposite direction?

Look at the numbers last night.

The index closed down yet another 3.1%!

So what kind of economy recovery are we even talking about?

And what about this article?

The ghost fleet of the recession anchored just east of Singapore

• Here, on a sleepy stretch of shoreline at the far end of Asia, is surely the biggest and most secretive gathering of ships in maritime history. Their numbers are equivalent to the entire British and American navies combined; their tonnage is far greater. Container ships, bulk carriers, oil tankers - all should be steaming fully laden between China, Britain, Europe and the US, stocking camera shops, PC Worlds and Argos depots ahead of the retail pandemonium of 2009. But their water has been stolen.
  
  They are a powerful and tangible representation of the hurricanes that have been wrought by the global economic crisis; an iron curtain drawn along the coastline.
• ...............
• 'A couple of years ago those ships would have been steaming back and forth, going at full speed. But now you've got something like 12 per cent of the world's container ships doing nothing.'
  
  Aframaxes are oil bearers. But the slump is industry-wide. The cost of sending a 40ft steel container of merchandise from China to the UK has fallen from £850 plus fuel charges last year to £180 this year. The cost of chartering an entire bulk freighter suitable for carrying raw materials has plunged even further, from close to £185,000 ($300,000) last summer to an incredible £6,100 ($10,000) earlier this year.
  
  Business for bulk carriers has picked up slightly in recent months, largely because of China's rediscovered appetite for raw materials such as iron ore, says Huxley. But this is a small part of international trade, and the prospects for the container ships remain bleak.
  
  Some experts believe the ratio of container ships sitting idle could rise to 25 per cent within two years in an extraordinary downturn that shipping giant Maersk has called a 'crisis of historic dimensions'. Last month the company reported its first half-year loss in its 105-year history.
  
  Martin Stopford, managing director of Clarksons, London's biggest ship broker, says container shipping has been hit particularly hard: 'In 2006 and 2007 trade was growing at 11 per cent. In 2008 it slowed down by 4.7 per cent. This year we think it might go down by as much as eight per cent. If it costs £7,000 a day to put the ship to sea and if you only get £6,000 a day, than you have got a decision to make.
  
  'Yet at the same time, the supply of container ships is growing. This year, supply could be up by around 12 per cent and demand is down by eight per cent. Twenty per cent spare is a lot of spare of anything - and it's come out of nowhere.'

Supply of container ships is growing coupled with lack of demand!

• Stopford explains: 'Globalisation and shipping go hand in hand. Worldwide, we ship about 8.2 billion tons of cargo a year. That's more than one ton per person and probably two to three tons for richer people like us in the West. If the total goes down by five per cent or so, that's a lot of cargo that isn't moving.'
  
  The knock-on effect of so many ships sitting idle rather than moving consumer goods between Asia and Europe could become apparent in Britain in the months ahead.
  
  'We will find out at Christmas whether there are enough PlayStations in the shops or not. There will certainly be fewer goods coming in to Britain during the run-up to Christmas.'
  
  Three thousand miles north-east of the ghost fleet of Johor, the shipbuilding capital of the world rocks to an unpunctuated chorus of hammer-guns blasting rivets the size of dustbin lids into shining steel panels that are then lowered onto the decks of massive new vessels.
  
  As the shipping industry teeters on the brink of collapse, the activity at boatyards like Mokpo and Ulsan in South Korea all looks like a sick joke. But the workers in these bustling shipyards, who teem around giant tankers and mega-vessels the length of several football pitches and capable of carrying 10,000 or more containers each, have no choice; they are trapped in a cruel time warp.
  
  There have hardly been any new orders. In 2011 the shipyards will simply run out of ships to build!

And what economic recovery are they even talking about?

By the way, if you put the CURRENT decline of the Baltic Dry Index into perspective than what if the following article "What Is Stock Market Leading Indicator Saying Now?" holds true?

Oh, less I forget. Let's also Cheer The Jobless Recovery!

Or perhaps BDI does not matter!

Or perhaps unemployment does not matter!

Hey, it's a freaking bull market and don't you pour cold water all over it!

AIG And the GAO Report

On today's Business Times, there was an article on how AIG shares soared on Monday, 22nd Sept 2009. AIG shares leap on bailout revamp talk

• WASHINGTON: Shares of American International Group Inc (AIG) jumped more than 20 per cent on Monday after the head of the House Committee on Oversight and Government Reform said that panel will examine a plan to reduce the company's massive bailout package.
  
  The stock surge occurred despite a report from congressional investigators that cast doubt on whether efforts by AIG to restructure its operations and fully repay the government the billions it received will ever prove successful.
  
  Rep. Edolphus Towns, chairman of the House committee, will have that panel study a plan by AIG's former CEO Maurice "Hank" Greenberg to reduce and restructure the company's bailout package, a committee spokeswoman said on Monday.
  
  Towns, who has not spoken to the Treasury Department about the plan, met with Greenberg last week, the spokeswoman said.
  
  Greenberg was ousted as CEO in 2005 amid an accounting scandal. He still holds millions of shares of AIG stock through a privately held investment company called CV Starr & Co.
  
  Standard & Poor's equity analyst Catherine Seifert upgraded her rating on AIG's stock to "Hold" from "Sell" on Monday, saying Towns' review of Greenberg's plan should boost the insurer's stock price in the near term.
  
  Seifert raised her price target on the stock to US$45 from US$30 (US$1 = RM3.48).
  
  AIG shares have been extremely volatile in recent months as investors bet on whether the New York-based company will be able to pay off its government debts and fully recover from the economic downturn. Its shares jumped US$8.49, or 21.3 percent, to US$48.40 on Monday.
  
  In a taxpayer-funded bailout, the Federal Reserve and Treasury Department have provided US$182.3 billion to the insurance giant. The Government Accountability Office said that as of early September, AIG's outstanding balance of aid was US$120.7 billion.
  
  The GAO, in a report released Monday, found "some progress in AIG's ability to repay the federal assistance." But improvement in the company's stability depends on its long-term health, market conditions and continued government support.
  
  The report concluded that "the ultimate success of AIG's restructuring and repayment efforts remains uncertain." - AP

AIG soared more than 20% despite report from GAO casting a shadow of doubt on AIG's restructure program and its ability to pay back the billions owed to the government.

Now as highlighted by TT, here's another article posted on Straitstime.com, AIG owes $174b: GAO

• WASHINGTON - US INSURANCE giant AIG, partly nationalised a year ago to avert a collapse authorities said would destabilise the global financial system, needs to repay nearly US$121 billion (S$174 billion) in taxpayer aid, an official report said on Monday.
  
  The Government Accountability Office, an investigative arm of Congress, said the ultimate success of AIG's restructuring and repayment efforts remains uncertain,' in a report on the US$700 billion Troubled Asset Relief Program.
  
  The GAO said that American International Group, which received by far the biggest federal bailout, had shown some progress in its ability to repay the federal assistance.
  
  But that 'improvement in the stability of AIG's business depends on the long-term health of the company, market conditions, and continued government support,' the report said.
  
  AIG was on the brink of bankruptcy in September 2008 when the government offered a financial lifeline in exchange for an 80 per cent stake in the company, deeming the insurer, deeply intertwined in the global market, too big to be allowed to fail.
  
  The company was in trouble after backing trillions of dollars in risky financial products amid a US home mortgage meltdown that triggered a global financial crisis.
  
  The AIG bailout was the biggest in a series of government rescues launched to battle a global financial meltdown.
  
  'To address systemic risk that could result if AIG were to fail, the Federal Reserve and Treasury made over US$182 billion available to assist AIG between September 2008 and April 2009. As of Sept 2, 2009, AIG's outstanding balance of assistance was US$120 billion,' the GAO said.
  
  The Fed and the Treasury routinely monitor AIG's operations and follow the company's restructuring, which has included the sale of assets to raise cash.
  
  'While these efforts are being made, the government remains exposed to risks, including credit risk and investment risk, which could result in the Federal Reserve and Treasury not being repaid in full,' the GAO said.
  
  The congressional watchdog said it would continue to review and report on the monitoring efforts of the central bank and the Treasury 'to determine the likelihood of AIG repaying the government's assistance in full and the government recouping its investment.' -- AFP

Yeah, and the stock soared.

Anything wrong with the financial markets?

Anything?

The stock soared! What else mattered? Life is just sooooooooooooo good.

What's Wrong With Our Financial Worlds?

Written by Paul Krugman in his NY Times editorial: Reform or Bust

• ............
  What’s wrong with financial-industry compensation? In a nutshell, bank executives are lavishly rewarded if they deliver big short-term profits — but aren’t correspondingly punished if they later suffer even bigger losses. This encourages excessive risk-taking: some of the men most responsible for the current crisis walked away immensely rich from the bonuses they earned in the good years, even though the high-risk strategies that led to those bonuses eventually decimated their companies, taking down a large part of the financial system in the process.

That's exactly the problem isn't it?

Isn't it so clear?

Why are the executives still being paid with totally obscene money??

• The Federal Reserve, now awakened from its Greenspan-era slumber, understands this problem — and proposes doing something about it. According to recent reports, the Fed’s board is considering imposing new rules on financial-firm compensation, requiring that banks “claw back” bonuses in the face of losses and link pay to long-term rather than short-term performance. The Fed argues that it has the authority to do this as part of its general mandate to oversee banks’ soundness.
  
  But the industry — supported by nearly all Republicans and some Democrats — will fight bitterly against these changes. And while the administration will support some kind of compensation reform, it’s not clear whether it will fully support the Fed’s efforts.
  
  I was startled last week

when Mr. Obama, in an interview with Bloomberg News, questioned the case for limiting financial-sector pay: “Why is it,” he asked, “that we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or N.F.L. football players?”

That’s an astonishing remark — and not just because the National Football League does, in fact, have pay caps. Tech firms don’t crash the whole world’s operating system when they go bankrupt; quarterbacks who make too many risky passes don’t have to be rescued with hundred-billion-dollar bailouts. Banking is a special case — and the president is surely smart enough to know that... ( source: here )

What's Up Kumpulan Jetson?

Good article on Saturday Star Biz: Takeover bids jack up share prices

It features the takeover bid by SM Nasarudin SM Nasimuddin and SM Faliq SM Nasimuddin of the Naza Group of the rather very smallish construction company Kumpulan Jetson Bhd.

Yeah, smallish.

Kumpluan Jetson has a share base of 53 million shares only, discounting the loan stocks and warrants. (Jetson has some 6 million loan stocks and 17 million warrants)

As mentioned by the author of the article, Anita Gabriel, "“It’s a small deal, Who cares!” scoffs a banker in a cavalier manner. "

Yeah, who cares yet again.

That's it yes?

Who cares if the minority shareholders are screwed.

Anyway, here's the deal described by Anita Gabriel.

• Galvanising the takeover scene further, on Aug 20, Kumpulan Jetson announced that it received a takeover notice from Superior Pavillion Sdn Bhd, a company controlled by SM Nasarudin SM Nasimuddin and SM Faliq SM Nasimuddin of the Naza Group and Odyssey Wealth Sdn Bhd (which is 50% owned by the Nasimuddin brothers). The bid follows the acquisition of a 33.15% stake in Kumpulan Jetson on Aug 19 at 70 sen per share which triggered a conditional takeover offer for the rest of the shares, loans stocks and warrants in the company not already owned by them. The block was acquired from the company’s co-founders – Isnin Rahim (chairman and executive director) and brothers Datuk Teh Kian Ann (group managing director) and Tee Keng Kok (executive director), among others.
  
  Barely two weeks later, on Sept 7, the offer price was raised to RM1 per share (still below its net asset per share as at June 30, 2009 of RM1.54). Of course, minority shareholders (and profit seekers) cheered the move but what’s puzzling is why? The offerers had not made any further purchases since then and no explanation was given on the price revision. This begs the question – what could have changed in a short span of 12 trading days? This – its share price had skyrocketed by 48.5 sen or a whopping 66% in a single day following the takeover announcement. As of Friday, a month following the revelation of the takeover bid at RM70 sen per share and two weeks after the offer price was revised upwards to RM1, the share price stood at a high of RM1.96, taking little heed to Bursa’s warning to investors to trade with caution. Really, how high can it still go?

Yeah, all it takes is a takeover offer and the share rockets to the moon!

Anita raises more questions.

• Here’s the thing – if the purchase price of the 33.15% block was seemingly undervalued, then why were the shareholders willing to let go at such a price to the detriment of the minority shareholders?

Yeah, why?

• Adding to the bewilderment of market observers is that in recent days, Kumpulan Jetson’s director and co-founder Tee, who had earlier sold his stake to the offerers, has also been buying shares in the company. In filings with Bursa Malaysia, it was disclosed that Tee had bought 400,000 shares at between RM1.42 and RM1.43 on Sept 11.
  
  If Tee sold his stake at 70 sen a month ago and is now buying at just over RM1.40 per share, what is it that could have led to a change of mind? As a substantial shareholder (then) and director of Kumpulan Jetson, did he act in the interest of minority shareholders?

Now that's the obvious stinker!!!!

Sold at 70 sen but bought back some 400,00 shares between 1.41 and 1.43!

And Kumpulan Jetson last traded at 1.96.

How nice!

And of course, many would point out that this is such a smallish stock. It's way too easy to push up the shares!

And of course, many would also say.... 'Who cares!'

And here is the flight of Jetson the stock!

Would You Want To Invest In Maxis Re-Listing

Sigh! It has happened. Sigh!

On the Edge Financial Daily, Maxis to offer 2.25b shares under IPO

• KUALA LUMPUR: Maxis Communications Bhd (MCB) plans to list its Malaysian operations Maxis Bhd (Maxis), under an initial public offering (IPO) which will involve 2.25 billion shares, of which 2.075 billion will be offered to institutions and the remaining 174.79 million shares for the public and its customers.
  
  The IPO is set to be the country's biggest since 1995 and estimated by sources at US$2 billion, as investors rush to capitalise on booming stock markets, according to Reuters.
  
  Currently, MCB is the beneficial owner of 7.5 billion shares, representing 100% of the paid-up of Maxis. It is the promoter of the listing exercise and selling shareholder.
  
  MCB said in its exposure draft posted on the Securities Commission website on Sept 18 that it will hold 5.25 billion shares, representing 70% of the paid-up of Maxis after the IPO .............................

A US$2 Billion IPO!!!

From a minority investor or rather 'prospective' investor point of view.

1. MCB to hold 70% of the paid-up of Maxis after listing.
2. 2.25 billion share will be sold. 2.075 billion offered to funds and the remaining 174.79 million to minorities...

Regarding point no.2.

2.075 out of 2.25 billion for institutional funds of 92.2% will be sold to funds. The rest only for minority shareholders.

MCB will hold 5.25 billion shares after listing. Add in the the 2.25 billion shares for listing. Total shares will be 7.5 Billion! And only 174.79 million is sold to minority shareholders. That's around 2.3%!!!

Which means after listing, MCB holds 70% and the institutional funds hold 27.7%.

We the minorities will only hold 2.3%!

Rather lopsided isn't it?

Does the minority shareholders even matter?

And with such lopsided equity holding, what's there to stop another future privatisation exercise from happening again?

Will you even bother to be an investor in Maxis?