Strike Three For KarenSoft

KRNSOFT - APPEAL AGAINST DE-LISTING DISALLOWED

• The company wishes to announce that we had today received a letter from Bursa Securities dated 17 April 2007 in respect of the above matter.
  
  Bursa Securities had earlier announced on 17 April 2007 its decision to de-list the securities of KRNSOFT from the Official List of Bursa Securities as the Company had failed to comply with the extended timeframe granted by Bursa Securities until 16 April 2007 to make the Requisite Announcement in accordance with Rule 8.16 of the Listing Requirements of Bursa Securities for Mesdaq Market and GN3.
  
  Bursa Securities further announced on 24 April 2007 that the Company had submitted its appeal against the decision of Bursa Securities to de-list the Company's securities from the Official List of Bursa Securities and given the appeal, the removal of the securities of the Company shall be deferred pending the decision on the appeal by Bursa Securities.
  
  After having considered all the facts and circumstances of the matter, Bursa Securities has resolved that the appeal by the Company be disallowed and that the securities of the Company be de-listed from the Official List of Bursa Securities as the Company does not have an adequate level of financial condition to warrant continued listing on the Official List of Bursa Securities.
  
  In this connection, the securities of KRNSOFT will be removed from the Official List of Bursa Securities at 9.00 am on Tuesday, 29 May 2007. The Company is required to communicate Bursa Securities' decision to their shareholders.
  
  With respect to the securities of KRNSOFT which are currently deposited with Bursa Malaysia Depository Sdn Bhd (Bursa Depository), the securities may remain deposited with Bursa Depository notwithstanding the de-listing of the securities from the Official List of Bursa Securities. It is not mandatory for the securities of a company which has been de-listed to be withdrawn from Bursa Depository.
  
  Alternatively, shareholders of the Company who intend to hold their securities in the form of physical certificates, can withdraw these securities from their Central Depository System accounts maintained with Bursa Depository at anytime after the securities of the Company has been de-listed from the Official List of Bursa Securities. This can be effected by the shareholders submitting an application form for withdrawal in accordance with the procedures prescribed by Bursa Depository. These shareholders can contact any Participating Organisation of Bursa Securities and/or Bursa Securities' general line at 03-2034 7000 for further information on the withdrawal procedures.
  
  Upon the de-listing of the Company, the Company will continue to exist but as unlisted entities. The Company is still able to continue its operations and business and proceed with their corporate restructuring and their shareholders can still be rewarded by the Company's performance. However, the shareholders will be holding shares which are no longer quoted and traded on Bursa Securities.

MOVED over who? The FINAL Saga!

My dearest Moo Moo Cow,

Here are the past blog postings on Karensoft.

Karensoft
Karensoft: Part II
Karensoft: Part III
Karensoft: Part IV
Karensoft: Part V
Karensoft: Part VI
Karensoft: Part VII
Karensoft: Part VIII
Karensoft: Part IX

Today there was an announcement: KARENSOFT TECHNOLOGY BERHAD TO BE DELISTED

• Bursa Securities had earlier announced on 22 March 2007 that it had decided to grant KARENSOFT an extension of time until:-
  (i) 16 April 2007 to make the Requisite Announcement ("RA") in accordance with Rule 8.16 of the Listing Requirements for Mesdaq Market ("MMLR") and Guidance Note No.3/2006 ("GN3"); and
  (ii) 16 May 2007 to submit the regularisation plans to the Securities Commission and other relevant authorities ("the Approving Authorities") for approval.
  
  It was also decided that if any of the events set out below occurs, the security of Karensoft shall be removed from the Official List of Bursa Securities upon expiry of seven (7) market days from the date Karensoft is notified by Bursa Securities or such other date as may be specified by Bursa Securities :-
  
  (i) the Company fails to make the RA in accordance with Rule 8.16 of the MMLR and GN3 by 16 April 2007;
  (ii) the Company fails to submit the regularisation plans to the Approving Authorities for approval by 16 May 2007;
  (iii) the Company fails to obtain the approval from any of the Approving Authorities necessary for the implementation of its regularisation plans and does not appeal to the Approving Authorities within the timeframe (or extended timeframe, as the case may be) prescribed to lodge an appeal;
  (iv) the Company does not succeed in its appeal against the decision of the Approving Authorities; or
  (v) the Company fails to implement its regularisation plans within the timeframe or extended timeframes stipulated by the Approving Authorities.
  
  Karensoft has failed to make the RA by 16 April 2007.
  
  In the circumstances and in accordance with Bursa Securities' earlier decision, the securities of the Company will be removed from the Official List of Bursa Securities at 9.00 am on Monday, 30 April 2007. The Company is required to communicate Bursa Securities' decision to its shareholders.
  
  With respect to the securities of the Company which are currently deposited with Bursa Malaysia Depository Sdn Bhd ("Bursa Depository"), the securities may remain deposited with Bursa Depository notwithstanding the de-listing of the securities from the Official List of Bursa Securities. It is not mandatory for the securities of a company which has been de-listed to be withdrawn from Bursa Depository.
  
  Alternatively, shareholders of the Company who intend to hold their securities in the form of physical certificates, can withdraw these securities from their Central Depository System (CDS) accounts maintained with Bursa Depository at anytime after the securities of the company have been de-listed from the Official List of Bursa Securities. This can be effected by the shareholders submitting an application form for withdrawal in accordance with the procedures prescribed by Bursa Depository. These shareholders can contact any Participating Organisation of Bursa Securities and/or Bursa Securities' General Line at 03-2034 7000 for further information on the withdrawal procedures.
  
  Upon the de-listing of the Company, the Company will continue to exist but as an unlisted entity. The Company is still able to continue its operations and business and proceed with its corporate restructuring and its shareholders can still be rewarded by the company's performance. However, the shareholders will be holding shares which are no longer quoted and traded on Bursa Securities.

WOW!!

Look at it now. Karensoft did not even make the so-called RA.

Was there even an attempt by the company management to salvage the company?

Was there?

Dec 2004, thanks to KN's write-up, Move Over Bill, Karensoft traded as high as 0.96. That meant that Karensoft was valued at 96 million ringgit.

96 million.

Come April 2006... Karensoft will be delisted!

WOW!

Talk about destroying market capital!

Move Over Who?: Part IX

I received some new comments in the following blog posting Move Over Who?: Part VIII

• I just downloaded the Q1/2006 report and noted that Karensoft had actually reported a Q1/2006 profit. Perhaps their strategy of focussing on ERP4Auto is paying off ?
  
  
• However, I am puzzled why you did not mention that Karensoft reported a Q1/2006 profit ?
  
  I downloaded the Q1/2006 and the 2005 accounts and running through the GN3 Guidelines, I cannot understand why Karensoft was clasified as a GN 3 company as they pass all the tests as a Group and should not be classified GN 3.
  
  The only thing that could hit them would be 2.1 (b) & (c) where the accounts of the listed company alone are considered. I noticed that there was an impairment loss of about 9 Million charged to the P/L of the holding company and not the group. As far as I know, FRS 136 on Impairment of Investments should only be efffective 1/1/06
  
  Could it be that Karensoft has been penalsied for early compliance with FRS 136 ?

Yes, by not posting a new follow-up article on Karensoft probably might leave some readers thinking that I am truly biased against some stocks and more so biased against Karensoft since it did report a profit recently.

Anyway, I do hope very much that you do understand that this is a mere personal blog of mine, mumblings of my opinions and views on stocks from an investing point of view. It's really a general blog, hence unless there is an request, I do not feel I have the need and the obligation to follow-up on every issue of every stock I have mumbled on before. Some has even posted ugly comments that I sound like a broken tape recorder when I have kept repeating blog postings on a same stock.

Firstly, for some strange reason, I could not open the pdf file attachment from their latest quarterly earnings posted on Bursa website.

Could someone confirm if they can open the above pdf file attachment link?

Anyway, I will have to rely on Karensfot's Investion Relation (IR) website: here

Now Karensoft was listed back in 2003. Karensoft has been losing money each single year since it was listed. ( see here )

• FY 2003: Loss 0.595.17 million
• FY 2004: Loss 3.930 million
• FY 2005: Loss 10.809 million

The latest earnings, 2006 Q1 saw Karensoft reported a profit. A new year, a new beginning. So how did Karensoft do?

• A sales revenue of 0.593 million.
• A net profit of 0.101 million.

A profit of 101 thousand from sales revenue of 593 thousand???

Hardly impressive at all!

Considering its past torrid history and also the incredible chain of events when Karensoft was proudly proclaimed by a local brokerage house that its Execsuite software could rival the mighty M'soft's Office Suite software and how the stock tumbled dramatically a couple of months after that recommendation, its performance wasn't too impressive, yes?

And the following issue is even more mind-boggling. Have a look at the following screen-shot of this webpage, http://ir.wallstraits.net/karenSoft/page.php?id=profit_loss

Simple exercise.

Add Karensoft total sales revenue since listing in 2003.

Add Karensoft's sales revenue since listing in 2003 and you will get total sales of 12.627 million.
Add Karensoft's total losses since listing in 2003 and you will get total losses of 15.334 million!!

And consider the fact that Karensoft stated that these losses were derived from provision of doubtful debts.

So how does a business accumulate so much doubtful debts?

Now I do reckon that this is one really interesting issue for all. Any conspiracy theories?

How?

Anyway, had you not request commentary on this stock, perhaps some might even accuse me for promoting the stock and making insinuation that perhaps Karensoft is on its way in turning around its business.

But of course, one can argue Karensoft has made a profit and no matter how small that profit is, a profit is still a profit. And since it has made a profit, there is a chance that this could very well be the start of a brand new Karensoft.

True, very true but surely one of question how sustainable is such earnings. A profit of 101 thousand from a sales revenue of 593 thousand is really peanuts and such performance is really shockingly poor considering the fact that Karensoft is a listed company!

And from its IR website, Karensoft's current balance sheet shows a cash balance of 2.943, while its total borrowing totals some 5.453 million (net debt 2.510 million) with accumulated losses of 15.371 million!

Isn't Karensoft in such an appalling state?

And consider this issue. Based on a quarterly profit of 101 thousand, it would require 152 quarters of similar earnings to erase that accumulated losses of 15.371 million in its balance sheet!!! And 152 quarters equates to some 38 years!!!!!!!

See why I had not made an effort in making a blog posting stating the fact that Karensoft reported a profit for its latest quarterly earnings? Should I make a positive blog posting? Or should I make yet another cynical posting on Karensoft? Well if I had made a positive posting on Karensoft based on these facts, perhaps some might get some wrong idea that perhaps I am trying to pull a funky stunt here and promote Karensoft based on some personal vested reason!! And on the other hand, if I was cynical again, some might even accuse that I have some real serious personal hatred against Karensoft!

How?

Regarding the GN3 thingy. Does it even matter? Say Karensoft has been wrongly classified as argued. Does Karensoft even have any investment merits at all?

* past blog postings can be found here:

Karensoft
Karensoft: Part II
Karensoft: Part III
Karensoft: Part IV
Karensoft: Part V
Karensoft: Part VI
Karensoft: Part VII
Karensoft: Part VIII

Move Over Who?: Part VIII

Karensoft reported its earnings tonight.

This was what the management wrote in their notes. ( read more here )

• For the fourth quarter ended 31 December 2005, Karensoft Technology Berhad achieved a turnover of RM0.188 million. Compared to the RM0.172 million achieved in the third quarter ended 30 September 2005, turnover was 9% higher. Despite the marginal increase in the Group’s revenue, its pretax loss widened by 714% to RM8.164 million from the preceding quarter’s loss of RM1.003 million. The huge pre-tax loss incurred for the current quarter was attributable to depressed sales volume, impairment of development cost, provision for doubtful debts and China investment written off.
  For the twelve months ended 31 December 2005, Karensoft recorded a turnover of RM1.254 million compared to last year’s corresponding results of RM6.147 million. Consequently, the Group recorded a pretax loss of RM10.612 million compared to last year’s corresponding period pre-tax loss of RM3.929 million. The significant drop in revenue and the doubling of losses were mainly attributable to poor market demand for its enterprise applications and solutions, impairment of development cost, provision of doubtful debts and investment written off.

==>

a turnover of RM0.188 million?

pretax loss widened by 714% to RM8.164 million!!!!

(total year) pretax loss widened by 714% to RM8.164 million !!!!!!!!!!

• Prospects
  
  The Group has launched a new ERP known as KarenSoft ERP4Auto, which is specifically targeted at automotive industry. KarenSoft ERP4Auto product will assist automotive industry players be more efficient and productive in managing their cost with the AFTA pressure. Hence, the Group foresees the new product to contribute positively to future earnings.
  
  The Group will continue to market it existing KarenSoft ERP2 and other products to target mid-sized and top-tier SMIs in the domestic as well as overseas markets. Karensoft will also continue to develop customized niche products for specific industries.

Huh?

So what happened to its software package that could challenge the great Microsoft's Office Suite??

* past postings can be found here...

Karensoft
Karensoft: Part II
Karensoft: Part III
Karensoft: Part IV
Karensoft: Part V
Karensoft: Part VI
Karensoft: Part VII

Move Over Who?: Part VII

Truly incredible, isn't it?

Me do think so lah.

Remember i wrote in Part III the following?

Company was burning up cash fast.
Loans were increasing!

And the company simply had an enormous problem with their sales collections. If one cannot collect, sooner or later, these debts are deemed doubtful and when it drags on longer it is deemed bad debts. And when it happens, the company has to write it off as a loss. And Karensoft's trade receivables were simply ballooning! It was totally incredible!

Ahh... this trade receivables indeed became a whopping problem.

Variance Between Audited And Unaudited Results For Financial Year Ended 31 December 2004

The Board, with the recommendation of the Audit Committee and external auditors, has made an additional specific provision for doubtful accounts amounting to RM4,952,000. The said additional provision, amongst others, has resulted in the Group registering an audited net loss after tax of RM3,930,000 for the financial year ended 31 December 2004. When compared to the unaudited net profit after tax of RM977,000 previously announced, the above is a deviation of more than 10%.

See? The external auditors recognised this issue. These account receivables were simply questionable to the point that they recommend it to be classified as doubtful debts.

And by doing so, Karensoft had to reclassify and account for for these doubful accounts totalling some rm4.952 million.

Which meant that Karensoft has lost rm3.930 million for fy 2004!

Which meant that Karensoft has lost money two fiscal years in a row!!!

Which meant that Karensoft has lost each year since being listed in the Messdaq!!!!!

Shocking?

And since the losses is derived from doublful accounts, there were some who even questioned the whole integrity of Karensoft sales, especially when their trade receivables kept ballooning each single quarter. Yup, the intergrity of their sales!

And consider this.. a doubtful accounts totalling rm4.952 million is really a lot when one considers that Karensoft's fiscal year 2004 sales only totaled 6.1 million. See the justifcation in questioning the integrity of their sales?

When a company reports 6.1 million in sales, how could 4.952 million be doubtful?

Kinda blows ur mind away, doesn't it?

And yet again... the whole issue of quality control over the companies seeking listing on the Messdaq comes to mind...

Just how did these companies got listed?


Sigh.


Oh and this was Karensoft last reported earnings.

Quarterly rpt on consolidated results for the financial period ended 30/9/2005


Lost money yet again! And look at the ytd losses. Incredible. Just incredible.


Now now consider this issue.

When Kenanga first wrote on Karensoft, Kenanga stated that Karensoft some 69.2 million shares then.

Get this... at 0.96 sen, Karensoft then had a market capital of rm65.8 million

Today?

Karensoft (which had a 1-for-2 bonus issue in June 2005) now has some 115.015 million shares.

Now at 0.065 sen, Karensoft market value (market cap) is only some 7.475 million.

Soooooooooooo ...... from 2nd Dec 2004 to 20th Dec 2005, some 58.35 million in market value has simply vanished!

Would you call this as Value Creation or would you consider as Value Destruction?

how?





me think i shall call it the end.... for now.... :P




Quick ref:

Move Over Who?
Move Over Who?: Part II
Move Over Who?: Part III
Move Over Who?: Part IV
Move Over Who?: Part V
Move Over Who?: Part VI

Move Over Who?: Part VI

Could i end the story at Part V?

No way Jose. We only started!

So what about Karensoft management? The stock is being sold down and all kind of market tok is flying all over all the place.

So on the 7th April, Karensoft nicely had an article in the Star Biz: KarenSoft CEO quashes talk of directors leaving

The article was full of questionable issues!

Besides panic selling by shareholders and the sale of shares by Chee himself, he said the bearish market compounded the problem.

LOL! He himself sold shares. If the boss sells by the truck loads, how and what kind of impressions will others have on the share? Why doesn't he admit that his shares were FORCE-SOLD in the market? Blaming the bearish market? Omigod! Gee! And if me Ah Poh read this, she would probably gave him a good rollicking!

Let's give the whole series of events a thought or two..

1) they announce their big software package,

2) then Kenanga gave it a huge write-up, and of course basing everything on the expected/estimated sales of this software package (now if software fails to deliver, Karensoft at 0.96 was sold to the investing public based on a sky high pe valuations of 81x!).

3) A private placement had to be postponed... (ahh depends on how u read it.. what if no funds in believe in this software package? Placement buyers are investors too mah... if cannot make money or chances are slim to make money, u think they want ka?)

4) Share has been falling steadily all this while..

5) Announcements were made showing that ze bossie's shares were being forced sold!

6) A lame article comes out in Star on that day...

7) From 0.96 to 0.255...WOW!!

And it just doesn't end here. A couple of days later, news came out that Karensoft's placement shares were placed out at a price of 28 sen.

KARENSOFT TECHNOLOGY BHD has fixed the issue price of the final tranche of the new 6.25 million 10 sen shares for private placement at 28 sen per share.

AmMerchant Bank Bhd in a statement on behalf of Karensoft said the issue price of 28 sen per share was based on the five days' weighted average market price of Karensoft's shares from April 4 to 8, 2005.

Naturally, there were a lot of unhappy folks. Some felt that these actions were unjust.

Some even brought out the issue that the placement price is too low compared to Karensoft's IPO price.

And the Edge Weekly promptly had a write-up on this isse on the 19th April 2005: Corporate: KarenSoft's rationale for share placement

Fair or unfair, somehow i felt that from day one, investors should have had known what they were investing in. As mentioned earlier, Karensoft had basically nothing except a potential winner in their software suite. However, sadly, they should have realised that one rule of thumb, potential prospect simply does not equate to profits. And if they had invested in Karensoft, they should have realised that they are merely speculating on Karensoft based on this factor.

And when you speculate, you should realise the risk involved.

And most important, acknowledge the mistakes if and when we are wrong.

To buy and hold such investment is one reason why the buy and hold fails one time too many!

Don't you think so?




Oh.... it does not even end here!!!

to be continued..... Part VII!!!


Quick ref:

Move Over Who?
Move Over Who?: Part II
Move Over Who?: Part III
Move Over Who?: Part IV
Move Over Who?: Part V

Move Over Who?: Part V

So Kenanga remained positively optmistic on Karensoft prospects based on the premise that Karensoft's Execsuite software will take off.

Meanwhile, the stock continued to slide.

And on the 25th March, Karensoft ended the trading day at 0.65.

Well, that's down a whopping 31 sen or 32% from the day Kenanga boldly proclaimed Karensoft's potential product winner.

And the next day, all hell broke loose.

28th March 2005.

The sell-off. Karensoft lost 20 sen on that trading day.

Karensoft ended that day at 0.45.

And of course the Bursa querried but as usual the answer given was rather lame. UNUSUAL MARKET ACTIVITY

Two tradings later, Karensoft closed at 0.235.

0.235!!

So at 0.235, this was getting rather malu for Kenanga. So they had to explained themselves and explain to the poor investors who had followed their rather shockingly poor investment advice. Remember it was just in Dec 2nd that Karensoft was trading at 0.96. Now it was at 0.235. So Kenanga fast-fast wrote the following: Investment case weakened by poor equities market

Here's a complilation of comments again on this issue.

So we have Kenanga iniating coverage on Karensoft at a price of 0.96. Price now 0.235.
Ahem.... so they do an update.... (decent thing to do... BUT isn't it too bloody late? from 0.96 to 0.235... i wonder how many Kenanga's followers has gone to holland orediii????)

So anywayyyyyyyy....

1. they start with Investment case weakened by poor equities market? LOL!!!! comeon.... where there is honey, there is money la!!!!!..... so if Karensoft is really that good.... why aren't those local fm buying their story? What a poor lame excuse, really!

2. Postponement of companies placement shares! Again simple logical question is needed to be asked. If Karensoft potential really good, why no buyers for their placement shares? Why not laku?

3. WORSE of all.... look at their insinuations! Quote: karensoft could be an attractive merger or acquisition target for it remains an attractive software house. Omiiiiiiiigosh!!!!!! Wow! Ini macam olso can, ka?

Soooo...... do we really need research coverage such as this????

==>> The insinuations of the potential merger is soo, soo scandalous. Karensoft at this moment of time is a poor recommendation. Why can't they simply admit they have flawed? To throw in this insinuation is simply giving investors/punters/speculators false hope. Isn't it? Look at the share price today. It is trading at a price of a mere 6.5 sen!

Kenanga is now negative, because Karensoft can NOT proceed with a PP. Like that one, also can .....! Yes, this is very strange, either their software is very good, and then money will come in, or it isn't. Still, the scale of their operations is so unbelievable small.

I think this CCH is also one "interesting" guy:
(a)Subject : UNUSUAL MARKET ACTIVITY
Contents :
We refer to your letter dated 29 March 2005 in respect of the unusual market activity of KarenSoft Technology Berhad (the "Company" or "KRNSOFT")'s shares. In accordance with the Corporate Disclosure Policy on Response To Unusual Market Activity pursuant to paragraph 9.11 of the Listing Requirements of Bursa Malaysia Securities Berhad, the Board of Directors of KRNSOFT after having made due enquiries, wishes to inform that, to the best of its knowledge, the Board of Directors is not aware of:-

1. any undisclosed material development in the Company's business; or
2. any other reasons to account for the unusual market activity.
This announcement is dated 29 March 2005.

(b)Disposed by CCH
29/03/2005 3,541,900
30/03/2005 1,542,600
31/03/2005 1,480,300
01/04/2005 6,104,100
04/04/2005 2,906,000

Circumstances by reason of which change has occurred : FORCE SELLING BY BROKERS
Date of notice : 06/04/2005

(c)Volume and share prices of Karensoft for the past few days:
29/03/2005 7,719,200 (RM0.34)
30/03/2005 9,365,300 (RM0.33)
31/03/2005 8,341,300 (RM0.29)
01/04/2005 13,921,600 (RM0.23)
04/04/2005 10,768,500 (RM0.26)
05/04/2005 2,320,800 (RM0.26)
06/04/2005 2,493,400 (RM0.25)

how?

Shocking? More to follow!... Wait for Part VI!!!




Quick ref:

Move Over Who?
Move Over Who?: Part II
Move Over Who?: Part III
Move Over Who?: Part IV

Move Over Who?: Part IV

Let's review what happened so far.

So far we have a rather interesting case: potential prospect versus actual performance.

The potential prospect is Karensoft execsuite could sell like hot cakes.
The actual performane? Very poor so far.

Would a bet on Karensoft made sense at 0.96 sen?


Look at the picture above.

Look at the 2005 vertical line. Look at how Karensoft started its plunge just after the December period. See the implications on it?

Ahem!

Came Feb 28th 2005.

Karensoft closed the trading day at 0.78 sen. (down from that lofty 0.96 sen in Dec 2004)

Karensoft reported its 2004 Q4 earnings.

Quarterly rpt on consolidated results for the financial period ended 31/12/2004

1. Sales 1.543 million
2. Net Profit 0.164 million
3. Cash 2.990 million
4. Loans 4.799 (up again!)
5. Trade receivables 12.962 million (WOW!!! this company has no collections or what??)

So the initial reaction was.... Where is the Moola? Where? 164 thousand in net earnings wor. Peanuts, isn't it?

And here is what Kenanga said in its review of performance.

Comments:
Going forward, margins and hence earnings should be more exciting especially from 1Q05 as revenue and earnings from its Execsuite software kicks in (already some RM41k in sales was locked in in 4Q despite the late launch last year). The Execsuite will nevertheless be the key earnings driver for Karensoft going forward as it is expected to contribute to in excess of 60% of turnover in FY05.
We are maintaining our projections for FY05-FY07.
Our BUY rating on Karensoft is very much based on the premise that its Execsuite software takes off. We remain positive that this “one software”, an alternative to the Microsoft Office will be successful given the favourable pricing of the product vis-à-vis the Microsoft Office, the attractive vendor commissions to promote the product as well as the successful bundling of its products with PC/notebook manufacturers which enables cheaper overall pricing of their PC/notebook. Based on a fair P/E of 15x for FY05, Karensoft is fairly valued at RM1.46.

They maintained their lofty projections and their BUY rating on Karensoft despite it was rather clear that Karensoft actual performance did not match Kenanga's optimism.




Coming next in Part V....drama starts... the selldowns begins!!!....



Quick ref:


Move Over Who?
Move Over Who?: Part II
Move Over Who?: Part III
Move Over Who?: Part IV

Move Over Who?: Part III

So where was i?

Oh 1st December 2004.

Flashback from Part II:

Karensoft is seeking an extension to their proposed private placement.Huge implications here. What is wrong? Not laku wor. Why? How come? In a hot, hot market where placement shares were in such a demand, Karensoft is seeking an extension.

Interestingly... or perhaps should i say strangely... came Move over Bill, Karensoft coming through! .. the article/ the write-up... proclaiming Karensoft's huge potential...was published 2nd December 2004!

A write-up insinuating a possible 53% upside for buyers of Karensoft.

According to Kenanga, potentially Karensoft might have a terror, sibeh geng software.


The ExecSuite will be the key earnings driver for Karensoft from FY05 and beyond. The ExecSuite will also not only transform Karensoft from purely being an ERP player to a real competitor in the Office Suite market, it would potentially enhance business opportunities abroad as the market for the ExecSuite is global.

As there is no direct competition for Karensoft’s ExecSuite in the local market, we are using a fair P/E of 15x for FY05 EPS which translates to a fair value of RM1.46. This suggests a 52% upside from current level. Bear in mind that our forecast is still fairly conservative and has potential of further upgrades if ExecSuite gains momentum. BUY


Potentially, Karensoft could make tons of Moola....

but... potentially does not necessary equates to profits.

For everything is gambled on Karensoft's management ability to turn potential into profits.

how?

ahh yes, ze ExecSuite is a prospect, will it deliver or not is one issue... but without it.... Karensoft is rather poor. It's there for all to see.

Look at Part I and Part II. These events happened before this article came out.

Karensoft's current net earnings was only 164k and its ytd net profit was of 0.98 million.

Company was burning up cash fast.

Loans were increasing!

And the company simply had an enormous problem with their sales collections. If one cannot collect, sooner or later, these debts are deemed doubtful and when it drags on longer it is deemed bad debts. And when it happens, the company has to write it off as a loss. And Karensoft's trade receivables were simply ballooning! It was totally incredible!

How?

And if one looks at Kenanga's write-up... it's actually there.... in the smaller prints....

They actually estimated a total net profit of 0.8 million for Fy 2004 for Karensoft (see the column under 04e). And at 0.96, they were recommending Karensoft based on a pe multiple of 81x!

But....but.... but... butttt......

they justifies their buy recommendations by arguing that Karensoft will makea whopping 6.8 million for FY 2005.

Will they or not.... that's what the investor had to decide!!!

Doesn't it pay to read the fine prints?

How?

Here is a compilation of comments/views on Karensoft's potential back then.

no way i will buy there are so many alternative to ms office.. some more free one like open office :D

But .... afterwards I also read a few stories about companies/government agencies turning back to MO, people used to the MSFT software, etc.

I use M Office for a very long time, and although I don't like some things, it is quite good, and the de facto standard, so very hard to beat.

yes, firstly i do think the software business is a really tough business. It does not have a strong competitive edge in its business economics. Too many hurdles in the business.

And i wud agree very much that nothing beats MO and that KarenSoft's ES might not sell as great as suggested by Kenanga.

However... i really do applaud KarenSoft .... for making the effort to produce its own software package, a software package that actually competes against the big M.

i think what karensoft create is not that great coz we can get the source code form the internet n just customised it. n to challange Microsoft Ofiice product,even others competitor likes lotus n others pun bungkus.

one more, to compete with prirate software in malaysia where people can buy software for rm5. software programmer tak boleh cari makan kat sini.

How?

The huge potential from Karensoft was proposed to the investing public/speculators/punters.

How?

Would you have followed?

Or would you realise that investing is not a game of follow me, follow you?

Mau ikut or tak nak?





to be cont.... Part IV!

Move Over Who?: Part II

How? How? How?

The very first year listed after being listed, Karensoft lost money.

Cash in piggy bank was depleting fast.

Loans increased.

And company had troubled collecting their sales revenue as the trade receivables kept on increasing!

Makes you wonder.

Really.

If you were the boss, what would do?

I dunno. I am not.

Company was burning up cash fast. So came April 2004, they announced the following: PROOPOSED PRIVATE PLACEMENT OF UP TO TEN PERCENT (10%) OF THE ISSUED... a private placement plus a bonus issue. Yup, private placements (p/s i think private placements is simply disgusting!) were hot then and Karensoft decided to use it as an alternative to raise cash..

CameMay 2005. (fy 2004 Q1)

Quarterly rpt on consolidated results for the financial period ended 31/3/2004

1.Sales 1.393 million.
2.Net profit 0.036 million
3. Cash 2.826 million (last year, same period they had 6.397 million!)
4. Loans 3.119 million (up from 2.870 a quarter ago)
5. Trade receivables 9.417 million. (up from 8.394 million)

Does it look good?

With the mentioned bonus issue thingy announced in April, Karensoft got hot again in Aug 2004. So hot they got ze UNUSUAL MARKET ACTIVITY thingy again.

A couple of days later, Karensoft reported its earnings (2004 Q2)

Quarterly rpt on consolidated results for the financial period ended 30/6/2004

1.Sales 1.7.09 million.
2.Net profit 0.484 million
3. Cash 2.945 million (improved slightly)
4. Loans 3.574 million (up again!)
5. Trade receivables 10.699 million. (up again!!!! what's the problem dude?)

First tranch of placement shares issued: KRNSOFT-Private Placement of up to 10% of the issued and paid-up share capital in KRNSOFT ("PRIVATE PLACEMENT")

Came Nov 2004. (2004 Q3)

Quarterly rpt on consolidated results for the financial period ended 30/9/2004

1.Sales 1.502 million.
2.Net profit 0.293 million
3. Cash 2.886 million
4. Loans 4.173 million (up again!)
5. Trade receivables 11.790 million. (up again!!!! what's the problem dude?)

December 1st 2004.

KARENSOFT TECHNOLOGY BERHAD ("KTB" OR THE "COMPANY") - PRIVATE PLACEMENT OF UP TO TEN PERCENT (10%) OF THE ISSUED AND PAID-UP SHARE CAPITAL OF KTB ("PRIVATE PLACEMENT"); AND - PROPOSED BONUS ISSUE OF UP TO 41,326,175 NEW ORDINARY SHARES OF RM0.10 EACH IN KTB ON THE BASIS OF ONE (1) NEW ORDINARY SHARE OF RM0.10 EACH FOR EVERY TWO (2) EXISTING ORDINARY SHARES OF RM0.10 EACH HELD ("PROPOSED BONUS ISSUE"); (HEREINAFTER REFERRED AS THE "PROPOSALS").

Karensoft is seeking an extension to their proposed private placement.

Huge implications here. What is wrong? Not laku wor. Why? How come?

In a hot, hot market where placement shares were in such a demand, Karensoft is seeking an extension.





how?... stay tuned.... Part III coming!

Move Over Who?

LOL!!!

Ahh... i remember this one all too well.

It was just last December 2nd 2004 when Kenanga wrote extremely bullishly about Karensoft's prospect: Move Over Bill

A made-in-Malaysia software package that could challenge the great Microsft's Office Suite.

Naturally, i was impressed and proud when i read about it.

Anyway, that's not what i want to mumble about. Consider this, when Kenanga branded Karensoft as a buy in their notes, Karensoft was trading at 0.96. Target price was supposed to be rm1.46 sen. Karensoft today is trading at a price of 6 sen.

Amazing?

Yup... the potential mentioned by Kenanga till today have yet to materialise...

Ahh... how it pays to remember that potential does not necessary equate to profitability!

How about doing a CSI-like forensic on Karensoft?

Karensoft was listed on Jan 2003. Now if you look at the earnings table provided by OSK, Karensoft had a rather poor earnings history. One year lose money, one year make money and the next year lose money again. Ding-Dong earnings history.

So it was not too surprising that based on the poor earnings history that OSK made the following remarks in their ipo notes:

Valuation?. We peg a fair value of RM0.49 for KarenSoft. This is 20% below its IPO price of RM0.61. Our fair value was derived based on the average PER of Mesdaq companies of 20x on FY12/03?s EPS of 2.4 sen.

keke... IPO price rm0.61 sen. Fair Value only 0.49 sen!!

Sibeh geng lah!

So Karensoft was listed on Jan 22nd 2003.

It made its debut with a price of 69 sen.

It reported a quarterly earnings the very next day.

Quarterly rpt on consolidated results for the financial period ended 30/9/2002

1. Sales 1.295 million.
2. Net profit 0.445 million
3. Cash 1.372 million
4. Loans 2.491 million

Decent but the value of the sales and the net earnings were extremely smallish in value, isn't it? I mean it's really like a kuci-mai size company, tiok boh?

And more interestingly, the company fast-fast make big announcement:

KarenSoft Achieves 123% Revenue Growth for Q3, Bullish for Q4

123% revenue growth wor!!

But.. but... buttt..... all this is kinda debatable.... cos.... it does state that karensoft lost money for the corresponding period the previous year. So in all honesty, what's the big deal, isn't it?

Company then announced that it will be the first Mess-daq stock to pay a dividend. ( KarenSoft, First Mesdaq Tech Counter to Propose Dividend ), which it duly did.

Comes May 2003, it reported its next quarterly earnings. 2003 Q1

Quarterly rpt on consolidated results for the financial period ended 31/3/2003

1. Sales 1.146 million.
2. Net profit 0.078 million (a profit of 78 thousand?)
3. Cash 6.397 million
4. Loans 0.941 million
5, Trade receivables 5.927 million

Amidst a rather bullish article appearing on the Edge (18-08-2003: KarenSoft says there's increasing confidence in the company ) this stock became a rather hot item, promting an UNUSUAL MARKET ACTIVITY querry from the Bursa.

Here is some of the interesting comments mentioned in the article.

He says this development is an indication that institutional investors are beginning to take interest in KarenSoft. MBTF is a growth and income fund that pursues steady income and long-term growth. Mayban Unit Trust Bhd, a subsidiary of the Malayan Banking Bhd, manages the fund. "What is significant is that we are expected to be in a growth fund. With the entry of MBTF, we believe more funds will invest in KarenSoft," Chee tells theedgedaily.com....The counter was traded at RM1.07 in active trading at 10.30am on Aug 18.

Hmm... very interesting... without a profitable track record, Karensoft can be considered in a growth fund, meh?

Anyhow.. do note the price is now 1.07... up some 46 sen or some 75% from its ipo price of 0.61 sen.

Hehe... market was hot... so was Karensoft...

way to go babe!!

next came fy 2003 Q2

Quarterly rpt on consolidated results for the financial period ended 30/6/2003

1. Sales 1.873 million.
2. Net profit 0.409 million
3. Cash 5.728 million
4. Loans 1.708 million
5. Trade receivables 7.147 million

next came fy 2003 Q3

Quarterly rpt on consolidated results for the financial period ended 30/9/2003

1. Sales 1.568 million.
2. Net profit 0.228 million
3. Cash 5.132 million
4. Loans 2.489 million
5. Trade receivables 8.394 million

Boring? Wait... here comes fy 2003 q4. Let's see howKarensoft did for its first full fiscal year after being listed on the Messdaq!

Quarterly rpt on consolidated results for the financial period ended 31/12/2003

1. Sales 0.516 million!!! (huh? sales only 516 k???!!)
2. Net loss 1.202 million!! (which wipes out everything!!)
3. Cash 3.865 million
4. Loans 2.870 million
5. Trade receivables 8.237 million

Fiyooo... see onot!

This meant that from this quarterly earnings, Karensoft unaudited loss for its first fiscal year after being listed is 595k. Yes, it's a small amount... but a loss is a loss is a loss! And Karensoft posted a loss of 595 thousand the very firsy year it was listed. What about the quality control over the new listings? And what is bad is look at the rate the piggy bank is depleting. Then look at how the loans increases. And also the trade receivables too.

Another quality company being listed on the Messdaq?

sibeh geng leh?

And this was only 27th Feb 2004.


to be continued.... Part II.