The other day I was reading their report on Tanjung Offshore. It interested me for a couple of reasons. Firstly OSK warns of lower earnings, ie losses from Tanjung Offshore! Secondly it lowered its target for Tanjung. Now lowering price target is understandable but when the Target Price is reduced from 1.94 to 0.88 sen, one just have to wonder what's happening!
This was their explanation.
- We expect Tanjung Offshore to announce its 3QFY09 results on 24 Nov 2009, which we gather would be in the red. This may be mainly attributed to its UK subsidiary, Citech, experiencing some cost overruns and late delivery issues. Hence, we are lowering our FY09-10 earnings, as well as downgrading our call to Sell, with a target price of RM0.88 (previously Buy, TP: RM1.94)
3QFY09 results likely to be bad. Tanjung Offshore is expected to announce its 3QFY09 results on 24 Nov, 2009, which we understand would be in the red compared to a net profit of RM2.8m in 2QFY09 and RM10.0m in 1QFY09. We gather that the main reason for the weak results emanate from its UK subsidiary, Citech Energy Recovery Systems UK Ltd, which manufactures CITECH waste heat recovery units. Apparently, this unit again experienced cost overruns and late delivery like it did during 2QFY09, when its net profit plunged 72.5% q-o-q. We also see this loss spilling over to 4QFY09, which may erode its cumulative 1H09 profits.
But OSK wasn't the only that had a SELL on the stock.
On 26th Aug 2009 AmResearch downgrades Tanjung Offshore to Sell (AmResearch gave it a fair value of 1.11) and Maybank Investment Research too had a SELL on the stock with a target price of 0.90.
Now OSK too had a report on 26th Aug. This is what they wrote!
Their price target was 1.74! LOL! (Remember AmResearch had it at 1.11 and Maybank had it at 0.90)
I guess their downgrade on 20th November was better late than never!
Tanjung Offshore announced its earnings last night. It made huge losses!
I then looked at its Balance Sheet.
Compared to previous year, cash balance down. Receivables are rather high at 196 million. But the look at the spiralling debts! Look at all the bonds and the Islamic notes. Total debts now stands at 578.194 million! (Are you sure debts is good?)
How?
LOL! Some would say no worries. The losses are 'as expected' and that the recent decline in Tanjung Offshore share prices HAD already reflected these losses.
So how?
On the Edge Financial Daily. Tanjong Offshore posts RM10m net loss in 3Q
- Tanjong Offshore posts RM10m net loss in 3Q
Written by Siti Sakinah Abdul Latif
Tuesday, 24 November 2009 23:48
KUALA LUMPUR: Tanjong Offshore Bhd posted a net loss of RM10.28 million in its third quarter (3Q) ended Sept 30, compared with a net profit of RM5.08 million a year earlier, due mainly to the loss at its UK unit Citech Energy Recovery Systems UK Ltd (CERS).
The company said CERS registered a net loss of £2.70 million (RM15.1 million) in the quarter and had ongoing late delivery charges payments and escalation of costs in its manufacture of waste heat recovery packages.
Revenue for the quarter fell 21.3% to RM154.88 million from RM196.91 million. Loss per share stood at 4.18 sen, compared with earnings of 2.49 sen previously.
"Recently, the group reshuffled the top management positions at CERS so as to have more direct involvement in the day-to-day operational matters. Moving forward, we hope to turn around the losses at CERS and register new sales for the financial year ending 2010," it said in the statement.
For the nine months to September, net profit plunged 86.6% to RM2.46 million from RM18.35 million in the corresponding period of FY08, while revenue jumped 38.3% to RM513.4 million from RM371.13 million.
The company said that it remained "cautiously optimistic" on prospects of the oil and gas industry in the international market .
It said despite the losses registered in 3Q "we remain confident that we are able to overcome short-term losses" as the company continuously enhanced its services to the oil majors in Malaysia and overseas market
Hello Moola, before Tanjong Offshore announce result, one of the director had been selling their shares every week....even the wife or daughter shares in the company also put into the market. So the sign is already there for everyone to see.
ReplyDeleteUntil a stage, our O&G companies cannot just rely on Petronas for its contracts. They have to develop their own competitive advantages and venture out.
ReplyDeleteMistake is for us to learn but it would be pity if we don't learn at all.