Scomi Creditors Allows Scomi To Postpone Repayment Of 630 Million

This one news clip on Business Times caught my attention.

• Scomi unit creditors agree to deferment
  
  Published: 2010/06/15
  
  SCOMI Group Bhd said creditors of wholly-owned unit Scomi Oilfields Ltd have agreed to defer the repayment of its RM630 million medium-term notes by three years and put in place new profit rates.
  
  The notes will now mature between December 2013 and December 2016.
  
  They have also agreed that between 2010 and 2013, pre-determined amounts of the notes would be redeemed by Scomi, the group said in a statement to Bursa Malaysia.

Here is the announcement on Bursa: Scomi Final 140610.pdf

• CIMB Investment Bank Berhad wishes to announce, on behalf of SGB, that the noteholders of KMCOB Capital Berhad’s RM630 million nominal value Murabahah medium term notes have approved the Debt Rationalisation Exercise. The Debt Rationalisation Exercise has been completed on 14 June 2010.

Now I remember Scomi. I had blogged few times on it before. My last posting was on Nov 2009: A Look At Scomi's Earnings which was a mere update to the posting more than a year ago in May 2009, A Quick Look At Scomi Group's Latest Earnings.

Now I want to compare Scomi latest earnings reported in May 2010 to what I wrote on May 2009.

Let me paste what I wrote....

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

For its fiscal year 2003, Scomi Group announced an earnings of 14 million.
For its fiscal year 2004, Scomi Group announced an earnings of 61.4 million.
For its fiscal year 2005, Scomi Group announced an earnings of 151.692 million.
For its fiscal year 2006, Scomi Group announced an earnings of 84.545 million.
For its fiscal year 2007, Scomi Group announced an earnings of 257.149 million.*
For its fiscal year 2008, Scomi Group announced an earnings of 116.553 million.

*note 2007, see q2 earnings. Earnings was distorted in a positive manner due to disposal of its holdings in Scomi Oilfield limited*

On Feb 2009, Scomi announced it made some 40 million. Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Last night. Quarterly rpt on consolidated results for the financial period ended 31/3/2009. Scomi announced its earnings were only some 9.5 million!! (Same quarter a year ago, it made some 21 million) oO

I was also curious on some of the key balance sheet issues mentioned last time. I would mark the current numbers in green.

1. Cash is at 87.595 million. (Cash now is at 301.518 million.) Cash is now 135.191 million.

2. Trade receivables has increased to 438.430 million. (Trade receivable is now at 497.968 million.) Trade receivables is now at 862.085 million!!!!!!!!!!!!

3. Group's borrowings is now at 918.363 million. (Group borrowings is now at 1.330 BILLION!!) Group's borrowings is now at 1.273 Billion.

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

Those were the 3 yardsticks I had focused on. Cash, Receivables and Borrowings.

Here is Scomi's earnings reported last month, May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010

1. Short-term deposits, cash and bank balances

Current Short-term deposits, cash and bank balances totals 211.449 million.

Scomi cash was at 135.191 million so this looks like a massive improvement, yes?

However, if one looks at the cash flow statements, in Feb 2010, cash flow showed that cash was boosted by 151.580 million thanks to 'Proceed from ICSLS'. Cash balance in Feb quarterly earnings showed Scomi had some 315 million in cash balances.

So cash is up, thanks to Scomi's issuance of new ICLS shares.

2. Trade receivables

Receivables is now at 849.566 million. A year ago, it was 862.085 million. A slight improvement.

However, the question that really begs to be answered is why is Scomi's receivables so extremely high? Can we have an audit to check if any of these receivables need to be reclassified as doubtful debts? Surely, this is a reasonable request yes? These receivables have been in Scomi's book for sometime now. Can it be collected? If not, it needs to be classified as bad debts (And when it does happen, Scomi will be hit hard with huge provisions!)

3. Borrowings.

Scomi's total borrowings is at 1.303 billion! A year ago it was 1.273 billion.

ps: in the posting Regarding Scomi, in Scomi's fiscal year 2003 Q2 earnings, its total loans were only some 18.617 million! (ps: that posting Regarding Scomi would be a good reference on Scomi's performance since listing.)

How?

How would you describe Scomi's current financial position? Huge debts, poor cash flow and poor collection of receivables?

Would that be a flawed assessment?

Now let's put the Business Times article into perspective...

• SCOMI Group Bhd said creditors of wholly-owned unit Scomi Oilfields Ltd have agreed to defer the repayment of its RM630 million medium-term notes by three years and put in place new profit rates.
  
  The notes will now mature between December 2013 and December 2016.
  
  They have also agreed that between 2010 and 2013, pre-determined amounts of the notes would be redeemed by Scomi, the group said in a statement to Bursa Malaysia.

Ahem... Scomi had 630 million medium-term notes that needed to be redeemed. It's now postponed...

Isn't it so nice that Scomi's creditors are allowing Scomi to postpone the repayment?

How?