KNM - Would Poor Corporate Governance Have A Negative Impact On The Stock?

******* EDIT 10/10/2011. The following posting is rather meaningless now because I realised that
I Screwed UP My Earlier KNM Posting   ********

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Last month, I posted on the issue of the impact of corporate governance on a stock.

Do see Maybulk: Does poor corporate governance have a negative impact on a stock?

So this morning I was wondering about And KNM Directors Got Fined.... rm 25,000 Each!

( Yeah, tell me about it. A fine of rm 25,000 for a corporate director? I wonder who does the fine insult??? Really! )

Anyway, I was thinking about the impact of the poor corporate governance from KNM on its stock price.

I asked myself, what if an 'investor' bought KNM when it IPOed back in 2003 and held it till today.

Now that sounds like a fun exercise, no?

So, I opened up the chart of KNM from RHBInvest. This was KNM's chart since its listing in 2003.

Doesn't look too bad, yes?

But then I looked at all those little bells on the chart. And I made reference back to Bursa website and the result was rather interesting.

First, the IPO.

27 June 2003: PUBLIC ISSUE OF 6,680,000 NEW ORDINARY SHARES OF RM1.00 EACH AT AN ISSUE PRICE OF RM1.48 PER NEW ORDINARY SHARE PAYABLE IN FULL ON APPLICATION AND PLACEMENT OF 4,400,000 NEW ORDINARY SHARES OF RM1.00 EACH AT A PLACEMENT PRICE OF RM1.48 PER NEW ORDINARY SHARE PAYABLE IN FULL ON APPLICATION BY THE NOMINATED PLACEES

Ok, let's ass-u-me.... :)

IPO at 1.48 - 27 June 2003.


Assume 'investor' purchases 2,000 shares. This means an investment outlay of 2x1.48 = 2960.

(ps: if I do screw up with my calculations, please don't sue... just tell me and I will correct. :P )

A. 1 for 2 bonus issue Sep 2006 ( see announcement: Bonus Issue )

So total number shares becomes 3,000

B) 1 for 1 bonus issue and then share split 1 into 2 - June 2007. ( see announcement: Bonus Issue and Entitlement - Others )


Getting tricky. :P

Total number of shares held is now 3,000

After bonus issue, total number of shares becomes 6,000

After share split of 1 into 2, total number of shares becomes 12,000
 
Hope I have yet to screw up. :P
 
C) May 2008, rights issue of 1 for 4 at rm 4.00.  ( see announcement: Rights Issue )

Getting even trickier. :P

(rights issue? LOL! Put more money in babe!)
With 12,000 shares, 'investor' will be eligible for 3,000 new shares at a price of 4.00 each.

Assuming 'investor' agrees and takes up the rights issue, 'investor' puts in extra outlay of rm 12,000.

Total outlay + original cost of investment = 12000 + 2960 = rm 14,960

Number of shares held becomes 15,000

( no screw yet, I hope! )

D) 2 for 1 bonus issue. July 2008 ( see announcement Bonus Issue )

Waaaahhh! so generous! 2 for one bonus issue woh!

So the number of shares held increases from 15,000 to 30,000

Aha! Made a mistake here. :P

Investor had 15,000 shares. A 2 for 1 bonus would see investor get 30,000 new shares.

So investor would now have 45,000 shares. ( Sorry.. sorry... and thanks for the correction!)

E) 4 into one share split!! ( see announcement: Entitlement - Others )

( Hehe... KNM back then... faced thunder, lightning woh! ... let's see there were ... forced selling on CEO shares, share buybacks,  MBOs.... errr... such a happening stock.... and yeah KNM was a penny stock then! 4 into 1 .... would make KNM... appear more expensive. Hohoho! )

4 into 1 reverse share split...hmmm...30,000 shares held would be consolidated into 7,500

45,000 shares would be consolidated into 11,250 shares. ( how did I pass my maths? :P )

Ok so far?

Remember original outlay + original cost of investment = rm14,960.00 and the number of shares held is 11,2500 shares.

KNM today is 1.23



If investor cashes out today, investor gets back 11.25 x 1230 = 13,837.50


But.... cost of investment = 14,960!!!!

Arrrrrrrrrrrrrrghhhhhhhhhhhhhhh!!!!

See the wonders of holding an investment in a stock that has poor corporate governance?

But.... but..... it looks like I have screwed up!!!

Oh.... no..... oh yeah!

I left out all dividends. *&^^:$%^#^%%#@@

hey but if you are interested to know how huge the dividends were... and lol.. if you think too huge... please skip the tedious counting below... :P

1. June 2004: Final Dividend
2. May 2005: First and Final Dividend
3. June 2006: First and Final Dividend
4. June 2007: First and Final Dividend
5. Feb 2008: Interim Dividend
6. Feb 2009: Interim Dividend
7. March 2011: Interim Dividend   ( I don't see any for 2010. :P )

Ok... 7 set of dividends.... should be fast and easy.

June 2004, 5 sen tax exempt. In this case, investor had 2000 shares then. This means 10 sen collected.

May 2005. 3 sen less tax of 28%. ( 3 sen also want to less tax? :P ) Investor had 2,000 shares. So dividend collected this year would be 4.32. Total dividend collected = 14.32 sen.

June 2006. 5 sen less tax of 28%. Still 2,000 shares. So dividend collected this year would be 7.2 sen. Total collected = 21.52 sen.

July 2007. 5 sen less tax of 28%. Now have 3,000 shares. So dividend collected this year would be 10.8 sen. Total collected = 32.32 sen.

Feb 2008. 4 sen less tax of  27%. Now have 12,000 shares.So dividend collected this year would be 35.04 sen. Total collected = 67.36 sen.

Feb 2009. 1 sen less income tax of 25% and 0.5 sen tax exempt. Now have 45,000 shares. So dividend collected this year would be 18.75 sen.  56.25 Total dividends collected = 123.61 sen.

March 2011. 3 sen tax exempt. Number of shares now held 7500. 11,250. So dividend collected this year would be 22.5 sen. 33.75 sen. Total dividends collected = 108.61 sen. 142.36

So total dividends collected (assuming me calculations is not screwed up) since 2003 is 108.61 142.36 sen.

Let's add this figure to the earlier calculations...

Cost of investment - 14,960
Shares worth today -  13.837.50 *** corrected figure ***

Dividends collected - 1423.60 ** corrected figure ***


How?

* hehe... got profit woh! *