Mieco Chipboard Continues To Slide

Ever wonder why and how a stock could trade like below?

See how the stock rocketed to the moon?

And then as they say.. in the short run stocks are a voting machine and in the long run it is a weighing machine.... well... the stock used to trade as high as 3.20....


Now consider the following... on Friday the 13th ( Ooolala ), Aug 2010, the following was posted... And Mieco Rockets To The Moon.

Let me reproduce the article in full.

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One of the hot stocks for the week is Mieco.

Yes my dearest, it's another of them stocks rocketing to towards the moon and yes, some really do love the reason why!

Stock current last traded at 95 sen! 96 sen!

Yes, apparently stocks in the stock exchange are projectable objects which could be launched into the orbit!

So my dearest, what's up with this stock? What's the scoop? What's the story?

Well.. a check on the Bursa website would yield the following announcement.

• MIECO refers to the article entitled “Chinese party in talks with BRDB for MIECO” which appeared in The Edge Malaysia on 9 August 2010.
  
  Having made enquiry with the Company’s substantial shareholder, Bandar Raya Developments Berhad (“BRDB”), MIECO wishes to inform that BRDB has informed MIECO that:
  
  (i) BRDB had recently met a Chinese party to discuss potential collaboration between MIECO and the Chinese party in production and marketing of chipboard and related products including the possibility of the Chinese party participating in the equity of MIECO in the future.
  
  (ii) BRDB is of the opinion that the discussion is preliminary and exploratory in nature at this stage. BRDB will make the appropriate announcement in accordance with the Main Market Listing Requirements should there be any definitive developments concerning its shareholding in MIECO.

Now if my flawed understanding of the English language is correct, what Mieco Chipboard, the flying stock, told Bursa Malaysia that its substantial and major shareholder, BDRB had talks with an un-named Chinese party to discuss potential collaboration between Mieco and the Chinese party.

A collaboration only.

A discussion that is in the preliminary and exploratory in nature.

Which means, nothing concrete, yes?

Hope I am not wrong so far. :D

And somehow... the Edge Malaysia 'could' come up with the story and publish the story on the 9th August! (Spy ah?)

WOW!

Now this is what we call reporting eh?

Our financial press was able to grab information about that meeting between BDRB and the un-named Chinese party! Huhu! Excellent!

Now I have blogged far too many times on Mieco.

And the last blog article is probably the best one to refer too. Mieco Chipboard: For Sale Again!

Yup, BDRB had been trying many years to pawn off Mieco and it has failed. From the blog posting: Mieco Chipboard: For Sale Again!

• Yes, BDRB first tried to dispose Mieco in Aug 2005. Why did it failed? In the posting, A Good Long Look At Mieco Chipboard Again, the reason to want to dispose is rather clear. Mieco went from being a top grade stock to a really poor stock. From a company being in a cash position, healthy profits with growth, Mieco turned in a company with a massive debts and the healthy profits turned into continuous losses.

And when I made that posting in march 2010, I then asked how is Mieco doing lately? The next sentence (from the news article on Mieco) says it all.

• Mieco posted a loss of RM36.3 million in 2008. It may be in the red in 2009 after posting a loss of RM18.2 million for the first nine months of the year.

The reason of losses according to the company.

• Its managing director Datuk Yong Seng Yeow told Business Times that Mieco has been in the red because of supply and demand issues, price war, foreign exchange losses and higher operating costs.

That's a lot of reasons yes?

Supply and demand issues, price was, forex losses and higher operational costs.

• Mieco is consolidating its operations, allowing it to repay part of its RM150 million debt and save cost."We are consolidating to bring down cost. We will hive off some overseas markets if necessary, due to logistics," Yong said. "The industry is going through a tough time. But when things pick up, we can be one of the contributors to BRDB's growth. We are consolidating now and will be ready to ride with the industry growth," Yong said.

That was in March 2010.

And BDRB did NOT manage to dispose Mieco.

And now? A potential collaboration effort between a un-named Chinese party could send Mieco from 41 sen to 95 sen????

LOL! LOL! LOL! LOL!

That's a good one. :D

Here's Mieco last reported earnings: Quarterly rpt on consolidated results for the financial period ended 31/3/2010

Mieco made some money! Mieco had an earnings of 1.436 million. It has 210 million shares or an eps of 0.68 sen!

Cash balances stood at 6.791 million and total borrowings were 170.668 million. (can compare with Feb 2010 posting Review Of Mieco's Earnings )

• Group revenue fell 5% to RM42.4 million for the first quarter of 2010 from RM44.7 million a year ago due to lower sales volume of particleboard, despite higher sales of value-added products.
  Although revenue was lower, the Group recorded a pre-tax profit of RM1.4 million against a loss of RM20.1 million a year a ago due to better margins, lower operational costs and foreign exchange gains.

Lower sales volume of its particleboard? ( Err... is this saying its product not in demand? )

LOL! Of course, some would be quick to point out that Mieco's NTA is a heft 1.52!

Yeah.. it's NTA is worth a lot because of its state of the art 400 million plant expansion it did in 2005! Yeah, the state of art plant expansion that saw Mieco embarking on a massive capex which resulted in Mieco going from a net cash company to a net debt company! Back in 2003, it had 180 million cash and zero debts. Now after that plant, today (as per its earnings notes in May 2010) it's cash is only at 6.8 million and total debts stood at 170 million. ( This is why some are extremely when they see huge capex. Many a times, such capex can bring a company to its knees!)

How?

Mieco closed trading at lunch break at 96 sen, It's market capital is now worth 201.6 million!

Do you think it shoud be worth that much?

Here's Mieco's earnings track record.

It's 2003 and 2004 were the decent years I was talking about for Mieco.

Then in 2005... the capex... the DEADLY capex.

Anyway, remember Mieco talking about 'lower sales volume of its particleboard' in its earnings notes announced in May 2010? Doesn't the quarterly earnings from the table above indicate the shrinking sales revenue? Wouldn't this be a worry since it mean the lower sales revenue is suggesting that the demand for its product is declining?

Oh that FY 09 Q2 earnings looked impressive eh? That's because Mieco included a tax credit of 5.806 million to its earnings! And IINM FY 09 Q4 too had a tax credit added to its earnings.

Past postings on Mieco.

• Mieco
• Mieco: Part II - Ze Buy Recommendation!
• Sun Tzu: Fight Only When It Is Easy to Win
• Mieco: Part III
• Mieco: Part IV
• Mieco: Part V
• Mieco: Part VI
• Mieco: Part VII
• Mieco Chipboard: VIII
• S&P has a Strong Buy on Mieco Chipbaord!
• When Setback occurs in a Business
• Philip Fisher's Management Integrity II
• iCaptal Addresses the Transparent Issue!
• A Quick Look At iCapital's Annual Report 2008
• Did Mieco Chipboard Have A Turnaround??
• A Good Long Look At Mieco Chipboard Again ** (recommended! :D )
• Review Of Mieco's Earnings

ps: I have no idea if you could lose money in this stock!

ps: Some one just blasted at my ears! It doesn't matter if BDRB cannot sell Mieco. Just turn it into a projectile! :P

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Fast forward 16 Oct 2010... so what do we have?

• ... discuss potential collaboration between MIECO and the Chinese party in production and marketing of chipboard
• ... BRDB is of the opinion that the discussion is preliminary and exploratory in nature

Looking back at it now. Consider the implication of the article posted by the Edge Malaysia on 9th August 2010?

Would the article be considered the catalyst that drove the stock to the moon?

Yeah, would you give 'credit' to that 'news' article?

Now the stock is clearly reversing.

Why?

Those talks, how? Any update? Why no update? Are the Chinese party serious?

Shouldn't BDRB give the investing public an update? That's only right, yes? Afterall BDRB had publicly confirmed that they are interested in dumping their stake in Mieco Chipboard.

How?

And since no update... Mieco continues to slide... and slide.....