MEMS Told To Correct Its Financial Statements!

On Business Times:

• THE Securities Commission (SC) has instructed microelectronics maker MEMS Technology Bhd (MEMS), for the second time this year, to comply with the applicable financial reporting standards by adjusting its reissued financial statements dated October 7 2009.
  
  The regulator is giving the ACE Market-listed company 14 days to do so.
  
  The statements issued were for MEMS' financial years ended July 31 2007 and July 31 2008 as well as the quarterly report for the six months ended January 31 2009.
  
  MEMS is also required to announce to Bursa Malaysia the adjustments made, reasons for the adjustments and their detailed effects on the company's financial statements.
  
  The decision came after MEMS' admission in its reissued financial statements that they were not in compliance with the financial reporting standards, FRS118 "Revenue".
  
  In a statement issued yesterday, the SC said it viewed MEMS' non-compliance with the FRS118 "Revenue" "very seriously".
  
  On August 4 this year, the SC directed MEMS to rectify and reissue its accounts for the financial years ended 2007 and 2008. MEMS was also to rectify and announce to Bursa Malaysia its unaudited condensed consolidated income statements for the six months ended January 31 2009.
  
  MEMS was to rectify the financial statements by excluding RM49.183 million from its revenue for all the three financial statements.
  
  The basis of the SC's directive was that the amount was derived from transactions that never took place in the respective financial years and period.
  
  Investigations by the SC revealed that the group's revenue of RM53.699 million reported in the 2007 financial statement contained bogus sales of RM13.007 million, while the revenue of RM71.994 million reported in 2008 contained RM24.161 million sales which did not take place.
  
  For the six months ended January 31 2009, MEMS reported revenue of RM37.366 million, of which RM12.015 million sales had not been transacted.
  
  These sales were recorded in the financial statements of MEMS' wholly-owned subsidiary, Senzpak (M) Sdn Bhd.

Yup!

This is one reason why I do not take SALES growth seriously. Sales revenue means nothing when the sales growth does not improve a company bottom line.

Anyway, I seriously believe MEMS Tech should be SANCTIONED for what they did.

By including these revenue that HAD NOT been transacted, it gave the ILLUSION that Mems tech were a HIGH GROWTH company.

And don't we all know how the stock markets love high growth.

5th April 2008, I wrote Mems Technology Again!

• So by overstating its earnings by a mere 8 million, based on market capital, Mems managed to value itself 531 million. And if compare to the present value market value of 95 million, this overstating of earnings caused the company to be over valued by as much as 436 million!!!
  
  How?
  
  Overstate your earnings by a mere 8 millions and the stock market could reward you by valuing it an extra 436 million!!!

Mems present day 28th Oct 2009, has a market capital of a mere 42 million.

So the question that needs to be asked... DID MEMS TECH BENEFIT FROM INCLUDING TRANSACTIONS THAT HAD NOT OCCURED INTO ITS ACCOUNTS?

My answer is a clear YES!

Past postings on Mems: here