This morning I saw the following news article.
- Huat Lai to buy TPC Plus for RM8m
Published: 2011/10/04
HUAT Lai Resources Bhd (HLRB) has signed a deal to buy 33.65 per cent of poultry company TPC Plus Bhd from London Biscuits Bhd for RM8.1 million, or some 30 sen a share.
HLRB will announce details of its mandatory general offer in due course.
London Biscuit made another disposal???
Well, to freshen my grey cells, it was just in Aug 2010, London Biscuits was in limelight for all the wrong reasons. On 23rd Aug 2010, London Biscuits announced it was selling its stake in Lay Hong. ( See Bursa announcement: DISPOSAL BY LONDON BISCUITS BERHAD OF ITS ENTIRE EQUITY INTEREST IN LAY HONG BERHAD (“DISPOSAL”)
Original investment cost is 12.088 million.
Disposal price of investment is 11.851 million!
That stake was bought in 2006.
Mind you, the stock market back in 2010, was fairly hot.
And if one followed the posting Review Of London Biscuit, it was so clear that that the money invested by London Biscuit came directly from the funding exercises like bank borrowings!
Now would you personally borrow money to invest?
I bet you wouldn't but that was what London Biscuits did!
Let me repeat what was posted in the posting London Biscuits Disposal Of Its Stake In Lay Hong
( Recommended reading also: Regarding London Biscuits Borrowings )
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Let me reproduce the balance sheet table I made in the posting Review Of London Biscuit again.
Look at the 10 Q3 cash. It says 15.608 million.
Look at the size of London Biscuit's debts. 218.004 million!
Clearly London Biscuit is lacking cash right now, yes?
Isn't it so clear that London Biscuit needs to 'sell'????
And yes, why did London Biscuit's debts soared in the first place?
As mentioned and shown clearly in the posting Review Of London Biscuit, London Biscuit used cash generated from bank borrowings to make such 'investments'.
And the return from one such investment?
Original investment cost is 12.088 million.
Disposal price of investment is 11.851 million.
How?
Lost money in the investment and not forgetting the cost of borrowings needed to make such an investment!
Yes.... it's absolutely shambolical!
And yeah.. let us not forget about the other shambolical investment in Khee San!
- The Board of Directors ("BOD") of LONBISC are pleased to announce that the Company had on 17 September 2007 signed a Sale & Purchase Agreement dated 17 September 2007 between KHEE SAN REALTY & HOLDINGS SDN BHD (“KSRH”) for the Proposed Acquisition of 18,420,300 ordinary shares of RM1.00 each in KHEESAN representing approximately 30.7% of the enlarged issued and paid-up share capital of KHEESAN (‘the said Sale Shares”) for a total cash consideration of RM27,630,450.00
Glee! That's a cost per share 1.50.
What's the price of Khee San today?
0.565!!!!!!!!!!!!
oO
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
( Khee San is currently untraded today (4 Oct 2011) at 51 sen!!! )
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Ok, so Lay Hong was disposed at a loss.
But sadly for London Biscuit, the disposal turned into great embarrassment for them! Lay Hong, the stock (or the chicken) flew up, up awayyyyyyyyy!
No joke!
Borrowed money to 'invest' in other stocks.
To improve cash flow, London Biscuits disposes the stock.... at a stock.
Stock.... then flies!
Sounds comical?
So today, London Biscuits says it disposes its stake in TPC Plus!
I quickly summoned Bursa website for London Biscuit's announcement.
Here is their pdf file
Page 2.
- The original cost of investment was RM8,472,426.00 and the date of such investment was 2 February 2010.
Selling at a discounted price once more!
Oh myyyyyyyyyyyyyyyyy!
And the rationale for disposing...
- The Proposed Disposal is to enable the LBB Group to focus on its core business of cake,
candies, wafers and snack confectionery.
Me? As mentioned many times before, I am not a fan of this Listed Companies OTHER Investments.
If the listed companies have extra cash, they should stop screwing around and just return the excess cash back to their shareholders. And for companies like London Biscuits, they just that 'borrow to invest' is a big NO NO!
Posts
10 comments:
Yeah... finished my morning nasi in double time and stopped my leg 'moving' and posted this!
Miss my posting(s) ar?
:P
wat u think? Some people need their morning coffe fix or whatever. In these turbulent & insane times your blog brings some needed perspective!!!
To improve cash flow, London Biscuits disposes the stock.... "at a stock."
---->at a "loss"?
Eaten too much, finger is faster than brain :P
Ha ha Moolah,
I know for sure you are going to "sing" about LonBisc again. I love too and hence would like to chip in some lyrics.
LonBisc qualifies as a growth stock as its revenue grows in double digits for the last 6 years. At 70.5 sen and its earnings per share of 14 sen, its PE ratio is only 5. Damn good buy, yes? I am sure many people are deceived. What is so seriously wrong about this company?
1.The earnings are not real and 100% managed. There is no free cash flows for all these years.
2.Balance sheet is deteriorating sharply year after year despite of the earnings.
3.Management only interested in empire building and wheeling & dealing. Buy and sell assets, plant and equipment, and always at a loss.
4.Keep on borrowing to do the above until debt ballooned to 200+ million.
5.Keep on borrowing to service increasing interest charges (16 m now)and also pay dividends
6.ROIC at less than 6%, meaning return not enough to cover interest and less than half of required return from investors.
7.Balance sheet looks like shit with high bankruptcy and solvency risks.
Just ponder when the event (7) above will happen.
LOLzzzz!
I am sure I read that list... somewhere before!
:P
Dear Mr Moola,
We need your blog to ensure we don't go crazy and buy some rubbish stock recommended by some high powered investment bank.
Welcome back, CS.
Good to see you back my friend.
They now have "biological assets" (15 million) on their balance sheet, never seen that one before. Anybody want to make a guess at that?
And what about this one: Bonds, cost RM 4,000,000; market value RM 1. Does not sound that great, does it?
Yeah... guilty!
Guilty of being lazy.
:P
Aiyah Moolah,
The "list" on LonBisc you mentioned was mine. I am singing the same old tune again. Can't help it as this song of "London Bridge is falling down" was so interesting.
M.A. Wind, I think the "biological asset" related to oil palm planting; palm oil seedlings, fertilizers, etc? But it is strange why is this asset classified as current asset? Oh stupid me, London is going to flip this asset within a year like they always do; and may be record another loss of a few million then. Bond of 4 m cost and market value of $1? OMG! Must be the CDO, CMO etc from the US previously. That is the "ordinary" business of London; speculating and flipping of assets with the aim of making a loss. Look, its total assets increased by another 21% last year!
KC: Singing? lolzzzz.... is there a rap beat to your Loondon Bridge?
:P
Yeah.... THAT list. :P
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