Last night it reported its earnings and the morning papers had so much praises for the company. On Business Times: (sorry I shall refrain from putting up Business Times links for their links aren't permanent. After a week or so, the links would be broken.)
- Scomi Engineering Q3 net surges nearly threefold
By Sharen KaurPublished: 2009/11/05
SCOMI Engineering Bhd's (7366) third quarter net profit for the period to September 30 2009 jumped nearly threefold to RM11.8 million, mainly due to strong contributions from its rail business.
Revenue rose by a third because of higher contribution from overseas markets led by India.
The logistic engineering division recorded higher sales from its rail unit with the start of a monorail project in India, it said in a statement to Bursa Malaysia yesterday.
Scomi Engineering said it continued to derive 71 per cent of its revenue from overseas markets with India contributing 39 per cent.
For the nine months to September, Scomi Engineering posted a net profit of RM49 million on revenue of RM400 million.
President Hilmy Zaini said the recent global economic downturn, which led to shrinking drilling activities in the oil and gas sector, had affected the company's energy engineering business.
But it will continue to contribute positively to its earnings for the remaining quarter with the expansion of existing facility in Indonesia and relocation of Australia and Thailand machine shops to better facilities.
As for the logistics engineering business, contribution from the rail unit will continue to lead the company throughout 2009.
"With the worldwide increase in demand for efficient, reliable and cost-effective transportation solutions, we anticipate that the core business driver from 2009 onwards will be in the public transportation sector," Hilmy said.
Hilmy said Scomi Engineering will continue to pursue opportunities in monorail projects and establish a global presence.
The company sees several potentially big monorail projects in Sao Paolo after Brazil recently secured the rights to host the 2014 World Cup and 2016 Olympics.
Profits surged nearly threefold.
So I decided to have a look at their balance sheet.
Now before I looked inside, what was I expecting?
What are you expecting from a company that is said to be enjoying great fortunes?
Don't you want to see 'some form of wealth generated' within the company?
Don't you think the wealth should be 'visible' straight away in the balance sheet?
Remember the company said it made a net profit of 49 million so far this fiscal year (3 quarters).
First thing first, Scomi Engineering's ASSETS.
What do I see? What do I see?
Trade receivables soared!
Cash shrunk!
Oh oh...
Then I scrolled down to look at the LIABILITIES.
Borrowings surged!
Trade payables surged!
How?
Company said to be making much more money.
People owe them much more money too!
They (Scomi Engineering) owe suppliers much more money too!
They owe the bankers much more money too!
Doesn't everything boils down to three words 'MUCH MORE MONEY'?
For a company that is said to making so much money, do you see wealth created within the company?
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DISCLAIMER: I REALLY DO NOT KNOW IF YOU CAN LOSE MONEY IN THIS STOCK! SO LAY NO BLAME ON ME, IF YOUR MIND PLAY TRICKS ON YER SELF!
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Shouldn't the actual net surged by two fold. Three fold came about when you take into the tax credit.
ReplyDeleteA second look at the cash flow statement, it confirmed that this company is having negative operating cashflow and RM87million negative cash and cash equivalent balance (overdraft). It concurred with Moola claims that this company is having tight cashflows.
One should be particularly careful as the amount of receivables and payables are very high. If the quality of it is not good, it could potentially another "Kosmo" in the making??