And London Biscuits Disposes Its Investment For A Loss Again!

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 )

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


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

18,420,300 million shares of Khee San bought at a CASH consideration of 27,630,450.
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!!! )
----------------------

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.

Original cost of investment 8.472 million. Selling for 8.075 million!

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.

How?
 
Me? As mentioned many times before, I am not a fan of this
 

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

From fellow blogger M.A. Wind's posting: Bursa: long term returns

• My best overall guess of the long term yield including dividends and costs incurred of a portfolio is in the range of 4-5% per year. This is rather disappointing given the GDP growth of Malaysia. Western countries have had less growth in GDP but higher returns on investing in shares. I think that the reason for this is the lower degree of Corporate Governance in Malaysia, which is directly influencing these returns. Related Party acquisitions at (highly) inflated prices and General Offers with delisting threats at (very) low prices are directly lowering returns.

Aren't you curious about the issue of lower degree of Corporate Governance and how Related Party Transactions is directly lowering returns?

Yes....

Does poor corporate governance have a negative impact on a stock?

Let's take a well known stock, a stock where some have claims as an 'investment grade' stock,

I certainly wasn't impressed.

Company makes 62 million losses and it doesn't even attempt to explain how these losses incurred.

And by Dec 2008, I was wondering Why Is Maybulk So Active In the Share Market?

Let me reproduce that entire posting here again...

Yes, why is Maybulk so active in the share market?

Caught the following announcement on Bursa Malaysia: Dealings in quoted securities pursuant to Paragraph 9.21 of the Listing Requirements

• Malaysian Bulk Carriers Berhad ("MBC” or "the Company”) wishes to announce that the MBC Group has, for the period from 31 January 2008 to 22 December 2008, purchased quoted securities from the open market. These purchases have exceeded 5% of MBC's latest audited consolidated net assets ("NA") as at 31 December 2007, details of which are set out below:-
  
  1. The aggregate purchases for the period from 31 January 2008 to 22 December 2008 amount to RM91.38 million. This represents 5.15% of NA;
  
  2. The total cost of all investments in quoted securities as at 22 December 2008 is RM143.80 million;
  
  3. The total book value of all investments in quoted securities as at 22 December 2008 is RM122.12 million;
  
  4. The market value of all investments as at 22 December 2008 is RM122.93 million; and
  
  5. There were sales of quoted securities during the current financial year and the losses on disposal amounted to RM11.23 million.
  This announcement is dated 23 December 2008.

Fact from 31 January 2008 to 22 December 2008, Maybulk purchased shares amounting to RM91.38 million.


Aren't you shocked at what it is doing?


Don't you think that the amount is way too much?

Someone once mentioned that Maybulk's management is highly 'reputable'. Well that the fact that Maybulk chose NOT to disclose what they bought and the fact that they bought more than 5% of its total Net Assets as of its audited accounts as at 31st Dec 2007 places a massive question mark over the management. Won't you agree?


And honestly, what do the management of the company think they are? Is Maybulk a securities trading firm?


Does the management reckons that they are super traders or super investors?

Well, the fact that they loss some rm 11.23 million speaks volumes about their stock market skills!


Seriously, don't you reckon that Maybulk should stop this?


Look they aren't good, are they? And if so, why dabble in the share market?


Does Maybulk have so much money to lose in the share market?


And if you are a minority shareholder, do you honestly like what you see?


Aren't you appalled by all this?

==>>>

I was certainly appalled with all these. I dislike the idea of our listed companies dabbling in the share market. This is a no-no for me. I feel the management should always focus on its core business.

Well that's my flawed thinking.

And then of course there is that massive related party transaction issue between Maybulk and POSH.

Unfortunately, I did not post anything on it.

However, many thanks to blogger M.A. Wind, he is kind enough to share his horrific experience.

Do read the following posting: Maybulk/POSH: What happened to the Cash?

According to Wind:

So far we have seen the following significant breaches of rules:

• no mentioning of the purpose of Maybulks investment in POSH
• no recently audited accounts (less than 6 months old)
• incomplete financial picture leaving out (for instance) non-interest bearing debts
• incorrect calculation of the gearing ratio

And according to Wind there is more! (Do check out his blog http://cgmalaysia.blogspot.com/ for more updates based on his personal experience on Maybulk.

This is however only the top of the iceberg. The next two episodes will be:

• Clarkson, the valuer who didn't believe his own valuation
• the magical accounting tricks of KPMG

And so we have here... Maybulk, a stock, flush with massive corporate governance issues.

So how?

Does poor corporate governance have a negative impact on a stock?


My say?

I would always avoid stocks that have poor corporate governance.

When I invest in a stock, I regard myself as being a small business partner of the business. And as a business partner, how can I trust my business partners who have poor corporate governance? Am I a business partner for them to take advantage of? Yes, would I be short changed the very minute I turn my back? How could this equate to a smart investment for me?

And with the poor performance of Maybulk the stock, it appears that this isn't such a poor decision!

Is There Value In London Biscuits?

London Biscuits reported its earnings recently and according to the management, the performance was within expectations.

• The Group achieved a profit before income tax after minority interest of RM6.715 million on the back of RM56,922 million in turnover, as compared with the profit before income tax after minority interest of RM3.516 million and a turnover of RM46.656 million, respectively, reported in the preceding year corresponding quarter. The Group’s result is within management’s expectation.

London Biscuit was blogged several times before. See London Biscuits. Here's the updated numbers.

Looking decent but the issues mentioned before, still persist.

The balance sheet issue mentioned in the posting Review Of London Biscuit and Regarding London Biscuits Borrowings

• Yes, that's London Biscuit's balance sheet and seriously, from my flawed point of view, I really think it's awful!
  
  That's no way how one would grow a business. I know I wouldn't if the business was mine!

Here's the updated numbers. Look at the spike in debts and receivables. Cash increased due to bank overdrafts.

In regards to its 'investing activities' mentioned in the posting Review Of London Biscuit and I guess one should not forget how London Biscuit 'shot' itself in the foot via its investment in Lay Hong, London Biscuits Disposal Of Its Stake In Lay Hong


And in regards to the Property, Plant and Equipment (PPE) issue mentioned in the posting Regarding London Biscuits Again. In that posting, in my flawed opinion, I felt that 'the company is wheeling and dealing in PPE (Property, Plant and Equipment)!!!'

Well, London Biscuit now only reports a summarised cash flow statement in its quarterly earnings. So sadly, one has to wait for the annual report.

London Biscuits Disposal Of Its Stake In Lay Hong

Since I had blogged on London Biscuit the other day in the posting Review Of London Biscuit and London Biscuit is currently suspended because of its disposal of its stake in Lay Hong.

The disposal.

• Further to the announcement made on 23 August 2010 pertaining to the above mentioned matter, the Board of Directors are pleased to inform that :-
  
  i) The total consideration is RM11,851,759.89; and
  ii) The highest percentage ratio is 15.78%.

Now in the announcement yesterday: DISPOSAL BY LONDON BISCUITS BERHAD OF ITS ENTIRE EQUITY INTEREST IN LAY HONG BERHAD (“DISPOSAL”)


The following statements is most interesting.

1. This disposal will allow the Company to realize its investment in LHB and the proceeds will increase the Company’s cash and bank balance position.
2. LBB has invested in LHB since 2006 and the original investment cost of RM12,088,798.

Original investment cost is 12.088 million. Sold yesterday (err.. Bursa Malaysia is now over 1400 points eh? Si Lembu lari ah? :P ) at a disposal price of 11.851 million!!!!!
oO
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
See this is why I do not like to see our local listed companies dabble in the stock market!
And let us not forget the point no 1.

• This disposal will allow the Company to realize its investment in LHB and the proceeds will increase the Company’s cash and bank balance position

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

18,420,300 million shares of Khee San bought at a CASH consideration of 27,630,450.
Glee! That's a cost per share 1.50.
What's the price of Khee San today?
0.565!!!!!!!!!!!!
oO
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Review Of London Biscuit

Dedicated to Loke.

Firstly, do remember I am not a Sotong. Yes, I do not know what this stock will or will not do in the future. I simply cannot predict stock movements and neither do I know if you can lose money if you just follow this blog.

Ok?

Now I usually view a company based upon a business perspective and the first question I would ask myself is the earnings track record.

1. Earnings Track Record.

What's your interpretation/opinion/view of the above track record?

My flawed view? Compared to 2003, earnings currently (ttm) and past fiscal yearnings has truly been much better.

However, it's not of a company which had shown consistent yearly earnings growth and in fact between 2005 to 2008, earnings had been rather poor and dismal because earnings was stagnant and I would also note that the profit margins had been declining since 2003.

So what's my overall view? A slightly average company? That's my flawed, personal view.

And needless to say, some would be appalled for me to base my conclusion of London Biscuit based on these set of numbers. Surely there's more to it than just looking at numbers like that!

Yes, that's absolutely correct but this is my basic initial scan of a company. If a company cannot get past this step and convince me that this could be a truly great company, what's the point of continuing?

See, I don't believe in trying to invest in every single company. I just try to invest in a couple of companies which I truly think has a wonderful set of business and what does a wonderful business have? A great profitable business, yes? I hope I am not wrong on this part because I truly believe that a great profitable business is extremely profitable and usually, it has an excellent growth record. And yes, the aim of course is to invest in these companies at cheap as possible. Yes, I am not the local 'bandaraya' and I do not believe in 'sapu-ing' every listed stock.

And for me, London Biscuit is looking mighty average only.

LOL!

I know, if it was me, I would stop here and move on but just to stop here and leave the review just like this, is rather.... err... tasteless.

LOL!

2. The FUNDAMENTALS of the COMPANY - Ze Balance Sheet

Yes, that's London Biscuit's balance sheet and seriously, from my flawed point of view, I really think it's awful!

That's no way how one would grow a business. I know I wouldn't if the business was mine!

And if it was me, I would have seriously walked away. There's not much reason to continue because London Biscuits does NOT look like a wonderful business to me. ;)

Sorry but this is my opinion and of course I could be wrong.

Anyway, if one have a brief look at the cash flow, one would be amazed to see what's happening in this company. (The below exercise, although rather tedious would allow one to gauge if my opinion that London Biscuit does NOT look like a wonderful business is wrong or not!)

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

Ah... in fy 2004, London Biscuit's cash was boosted to 52.385 million. This was helped by the increase in long term loans by 43 million and a share placement issue of 6 million new shares at a price of rm1.60 and a rights issue helped raised some 17.367 million.

And note the 'purchase of investment' and purchase of 'property, plant and equipment' and the purchase of investment would have scored one big fat red flag for me. :P

Think about it for a moment.

Look at the balance sheet table again. London Biscuits for its fy 2003, had 10.215 million cash and 39.506 million in loans. It raised capital by doing a share placement of 10% and a rights issue. That raised 17.367 million. And they increased their long term borrowings by some 43 million! Ok, out of the money raised, the company 'invested' 15.616 million in plants, properties and equipment but it then spend some 9.5 million in 'investments'!!!!! Well, without the money raised, would London Biscuit be able to make that 9.5 million in 'investments'????

I mean, crudely put, part of the money raised from the rights issue, ultimately went into the investments!

Now surely this is NOT a company which is showing that it is managed prudently!

Aug 2005: Quarterly rpt on consolidated results for the financial period ended 30/6/2005

Now from the earlier balance sheet table, we know that for London Biscuit's fy 2005, it's loans increased from 78.3 million to 99.46 million.

And the above table shows where the bulk of money goes to!

Ok, it the unit trust fund was withdrawn but London Biscuit investment some 11.007 million and it purchased a company for 14.818 million ( here's one such announcement. see Acquisition of shares in Kinos Food Industries (M) Sdn Bhd (“KFI”) )and 36.9 million was spend in the purchase of plant, property and equipment.

London Biscuit now have 'spend' some 17.981 million in 'investments' and yes, it's mind boggling because the money 'spend' wasn't generated from London Biscuit's operations. It 'borrowed' the money!!!!

2006: Quarterly rpt on consolidated results for the financial period ended 30/6/2006

London Biscuit's fy 2006 total loans now stood at 108 million. In fy 2003, its total loans were just 39.506 million and the cash flow were telling another horror story yet again!

First they withdrew some 10.025 million from its portfolio investments but it during this period it also invested some 4.184 in quited shares.

But the last two lines paints a horrifc picture! It disposed some 6.305 million of 'property, plant and equipment' but at the same time, it also acquired some 23.362 million worth of 'property, plant and equipment'!!! Omigosh! What is it doing? Wheeling and dealing in these?????

Aug 2007: Quarterly rpt on consolidated results for the financial period ended 30/6/2007

London Biscuit's total loans now soared to 140 million!

And apparently, the management thinks what it is doing is correct as the wheeling and dealing continues!

On 17th Nov 2006, London Biscuits invested in Lay Hong! ( Damn! London Biscuit management thinks they are Warren Buffett or what???!!! ) ( see announcement on Bursa website here )

• As announced to Bursa Malaysia, on 17th November, 2006 and 29th November, 2006, the Company has acquired 20.0% of the issued and fully paid-up share capital of Lay Hong Berhad (“Lay Hong”), comprising 9,240,000 ordinary shares of RM1.00 each, for a total cash consideration of RM9,850,413.

Huhu!

London Biscuits is now buying stakes into listed companies!

Remember where and how London Biscuit is getting their money? :P

And their quoted securities for the year...

Aug 2008: Quarterly rpt on consolidated results for the financial period ended 30/6/2008

Huhu!!!! As per the balance sheet, London Biscuit's total loans now stood at 190 million for its fiscal year 2008!

So what did London Biscuit do with the extra money borrowed???

Yes, they wheeled and dealed yet again!

That 29.119 million acquisition is to be noted...

PROPOSED ACQUISITION OF 18,420,300 ORDINARY SHARES OF RM1.00 EACH IN KHEE SAN BERHAD ("KHEESAN") REPRESENTING APPROXIMATELY 30.7% OF THE ENLARGED ISSUED AND PAID-UP SHARE CAPITAL OF KHEESAN FOR A TOTAL CASH CONSIDERATION OF RM27,630,450.00 ("PROPOSED ACQUISITION") BY LONDON BISCUITS BERHAD ("LONBISC")

• 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

Paid 27.630 million for 18.420 million shares in Khee San. (LOL! Have you even heard of this listed stock before? :P )

The purchase was announced on 17th Sep 2007.

This was Khee San earnings reported on Nov 2006. Quarterly rpt on consolidated results for the financial period ended 30/6/2006. Was Khee San such a profitable company that London Biscuit thought it was prudent to spend some 27.6 million of 'borrowed' money?

This was Khee San earnings reported on May 2007. Quarterly rpt on consolidated results for the financial period ended 31/3/2007. Khee San was losing money!

Aug 2007. Khee San reported losses for the fiscal year! Quarterly rpt on consolidated results for the financial period ended 30/6/2007

19th Sep 2007: London Biscuit explained thier purchase to Bursa: PROPOSED ACQUISITION OF 18,420,300 ORDINARY SHARES OF RM1.00 EACH IN KHEE SAN BERHAD ("KHEESAN") REPRESENTING APPROXIMATELY 30.7% OF THE ENLARGED ISSUED AND PAID-UP SHARE CAPITAL OF KHEESAN FOR A TOTAL CASH CONSIDERATION OF RM27,630,450.00 ("PROPOSED ACQUISITION") BY LONDON BISCUITS BERHAD ("LONBISC")

• The Board of LONBISC wishes to inform :-1) Basis of arriving at the consideration of RM27,630,450.
  The consideration is arrived at on a "WILLING BUYER, WILLING SELLER" basis.

Willing buyer, willing seller? LOL! I wonder if Khee San was more than willing to dispose that chunk of shares for 27.6 million?

ps: 27.630 million paid for 18.420 million. How much per share cost?

London Biscuits quoted shares for the year...

Aug 2009: Quarterly rpt on consolidated results for the financial period ended 30/6/2009

And London Biscuit does the unthinkable! It supplied the minority shareholders with the following cash flow statement!

All we can see is that another 12.9 million was used in its 'investing' activities!!!!

Their quoted shares...

Time to look for its 2009 Annual report. :P

Annual Report 2009

Aha! More wheeling and dealing in its 'property, plants and equipments'!!!

May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010

Total loans for London Biscuit is now 210 million.

So far, this fiscal year, some 42.809 million was spend by London Biscuit in its investing activities!

Seriously, mind boggling or what!

Ok, out of the 42.8 million spend, a chunk was spend on its 'investment' in TPC. ( See PROPOSED ACQUISITION OF 25,600,000 ORDINARY SHARES OF RM0.50 EACH IN TPC PLUS BERHAD ("TPC") REPRESENTING APPROXIMATELY 32% OF THE ISSUED AND PAID-UP SHARE CAPITAL OF TPC FOR A TOTAL CASH CONSIDERATION OF APPROXIMATELY RM7,680,000.00 ("PROPOSED ACQUISITION") BY LONDON BISCUITS BERHAD ("LONBISC") )

And here is TPC last reported earnings. Quarterly rpt on consolidated results for the financial period ended 31/3/2009 Yeah, TPC is losing money!!!

And this is Khee San last reported earnings. Quarterly rpt on consolidated results for the financial period ended 31/3/2009 Quarterly profit of only 207 thousand and a ytd profit of 1.104 million!!! (yeah London Biscuit paid some 27 million for this investment!)

And some 17.689 million new ESOS shares were listed recently.

Consider this, London Biscuit share base before the ESOS was 78.045 million. After ESOS, London Biscuit share base is now 95.734 million!!!!!!!!!!!

OMIGOSH!!!!!!!!!!!!!!!!

What a massive dilutive ESOS!!!!

To picture it more clearly, look at the TTM earnings of 18.343 million and for simplicity sake, assume London Biscuit to trade at a fair value based on 10x PE.

Based on 78.045 million shares and an earnings of 18.343 million, London Biscuit eps was 23.5 sen. 10x PE would means London Biscuit should trade at 2.35.

Based on 95.734 million shares and an earings of 18.343 million, London Biscuit eps is now 19.1 sen. 10x PE would means London Biscuit should trade at 1.91!

From 2.35 to 1.91!!!!

Honey dearest, London Biscuit has shrunk your eps via ESOS!!!!

And the dilution applies to dividends too! Unless London Biscuit figures a way out to pay more money back as dividends!

What a massive dilution!

How?

Does London Biscuit sound like an attractive and wonderful business?

And the most amazing thing is the 'property, plant and equipment' purchases and disposals each year!

Now if I add them up in a table, (the last couple of years, purchases were more than disposals, so the total amount represents the net purchases), this is what I get. (Now this is important, because some might try to value London Biscuit based on its NTA)

The last column is named PLANTS.

It represents the NET money, London Biscuits have spend each year on 'property, plant and equipment'.

In 2003, the property, plant and equipment was worth 79,573,688 million. NTA then was 1.56.

As per latest, the property, plant and equipment is worth a whopping 349.150 million!! NTA today as per it's last reported earnings in May is worth 2.04!

But... how much would you trust the value of the 'property, plant and equipment'???

Let's consider the 2009 annual report. London Biscuit purchases of such 'asset' was only some 32.395 million. London Biscuit disposal of such 'asset' was 19.107 million.

How?

Me? I have no idea and I wouldn't even dare invest in such a company based on its NTA. Now this is my personal opinion. Hey I am a chicken. I have no idea what on earth is happening! I have no idea why London Biscuit is purchasing and disposing so much property, plant and equipment each year!! And since I do not know, natutally I would not dare invest. And this is my flawed opinion and it's not an investment advice at all. :D

Ok?

Regarding P&O: The Stock That Flew Into Orbit

Saw the following article on Star Business: Prudential UK eyes P&O takeover

Now before I read what the article was saying, I was aware that K&N had dona a stock analysis (initiated coverage) on the stock back on 22nd July 2010 and I was well aware that the stock literally flew into the orbit.

Yeah... you know and I know... if you are reading this right now... LOL!... you are rather LATE into the party.

Don't believe?

Think I am being nasty and so black hearted and I am attempting to stop you from seeking next week's fortunes in the stock market? Well take a look...

The stock was just 0.585 sen on 21 Jul 2010. The stock last traded at 0.925 on Friday. (ps: K&N initiated coverage on P&O when the stock was trading at 63 sen. Target price stated was 1.65!! :D)

And so after the stock is well into orbit, the local media is only promoting the stock now.

How?

Could it go much higher?

And how high?

:D

I then proceeded to read what the mighty pen from our local press has to write...

• PETALING JAYA: Prudential UK is believed to have submitted an application to Bank Negara to commence talks on the potential acquisition of local general insurance company, Pacific & Orient Bhd (P&O).
  
  However, the details of the potential merger and acquisition (M&A) exercise between the two parties were still unclear....

'Is believed'? LOL! Who is believing this? And yeah... details of the M&A is... STILL UNCLEAR!

LOL!

• This has added fuel to recent market talk that P&O had emerged on the radar of potential buyers.

Well? This Star 'financial' news article is sure adding the fuel! :D

• According to Kenanga Research, the owner was contemplating a divestment in P&O in a deal that could reap proceeds that were well above P&O’s implied stock market valuations.
  
  Chan Thye Seng, the managing director and chief executive officer of P&O, holds a 51.4% stake in the company.
  
  When contacted, P&O declined to comment on the matter.
  
  When contacted, a spokesperson from Prudential Malaysia said it did not comment on market speculation.

Ah.. the K&N article ( let's see that later ) ... but ... how ironic... here we have a stock that is flying off into the orbit... and the two parties speculated to be involved in a M&A is declining to comment on the..... market speculation.

LOL!

• “Having undergone a massive change in business direction over the last two years, P&O has engineered a major turnaround in profitability,” said Kenanga in a recent report.
  P&O returned to the black in the previous financial year ended Sept 30, 2009, with a net profit of RM14.9mil compared with a net loss of RM32.6mil the year before.
  
  But, for the first six months of the current financial year, P&O slipped back into the red with a net loss of RM1.4mil compared with a net loss of RM6.1mil in the previous corresponding period.

Ah... A turnaround stock... but ... but... but... it's conflicting... :P

Look at what K&N is saying... 2008 it was losing money.. 2009 it returned to the black.. BUT.. the first half of the year... P&O is losing money again.

How would you define it?

Me?

I see a possible turnaround.. but...with P&O losing money again the first half of the current fiscal year.. I reckon it would be best that I not used that word 'turnaround'... and I would certainly not boldly call it 'a “ major turnaround in profitability” like how K&N did.

• As at March 30, 2010, its net asset per share was RM1.34.
  P&O’s main focus is on two core areas – financial services and information technology (IT).

Huhu!

Net asset per share was rm 1.34 as at 30th March 2010?? LOL! K&N Target price is 1.65! More than the net asset per share! No wonder this stock is so 'powderful' the past couple of days. :D

(ps: buy on rumours? Sell on news? :P )

Time to dig out that K&N report... (ps: this is a 15 page report. The longer the better eh? :P )

• Extremely cheap valuations. P&O is trading at 3x FY11 PER and 0.55x P/BV. There could be upside to our profit forecasts as our investment assumptions of 2.5% Fixed Deposit yields are fairly prudent to account for its RM900m near cash holding.

Huhu!

rm900 million near cash holding??????

Where are all the 'value investors'?

Time to check out some announcements on Bursa website.. ( ahh.. recently.. a stock split Entitlement - Others )

Here's P&O quarterly earnings reported in May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010

Here's a screenshot of its balance sheet asset...

hmm.. maybe I cannot understand K&N's statement "There could be upside to our profit forecasts as our investment assumptions of 2.5% Fixed Deposit yields are fairly prudent to account for its RM900m near cash holding." since I cannot find where the 900 million...

Let's look at the extremely 'cheap' reasoning from K&N again.

• Extremely cheap valuations. P&O is trading at 3x FY11 PER and 0.55x P/BV

Now... let me say again... of course I believe that a company should be valued based on what it can earn in the future. Yes... future earnings are very important...

But... but.... this is where it gets tricky.. and this is where the investing public can be fed with the incredible sky high earnings estimates... which inadvertently does make a stock appear extremely cheap. :P

Here's K&N estimates...

You need to click on the image to see a clearer and bigger view. :D

Anyway.. from the table... KN said P&O is projected to earn some 32.87 million for this current fiscal year 2010.

Well.. remember the Star Business article earlier? K&N acknowledged that for the first half of the current fiscal year, P&O have a current net lost of 1.4 million.

Now let's look at P&O announcements on Bursa website.

1. May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010 - P&O made 3.247 million for the quarter. - Current half year losses were 1.417 million. (as stated by K&N)
2. Feb 2010: Quarterly rpt on consolidated results for the financial period ended 31/12/2009 - P&O stated it lost 21.352 million for the quarter!

Now this is where I am so lost ( Yeah.. what to do since I am not an accounting expert. :P ) and confused. Q1 in Feb 2010, P&O said it lost some 21.352 million. Q2 it said it made some 3.247 million. But.. it's half year total losses was only 1.417 million.

Me? I am so lost. :P

Anway... here's a couple more quarterly earnings from P&O.

1. Nov 2009: Quarterly rpt on consolidated results for the financial period ended 30/9/2009
2. Aug 2009: Quarterly rpt on consolidated results for the financial period ended 30/6/2009

Now using the current 2010 half year net loss of reference, K&N had estimated P&O earnings for fy 2010 to be 32.87 million.

Now I know, earnings projections and estimates, are incredibly difficult. More so for me, since I am not a Sotong. :P

But... an earnings estimates of 32.87 million when the company is sitting on half year losses of 1.4 million???

Surely that's a bit too optimistic, yes?

yeah... from K&N earnings estimate table.. we see K&N using a PAT (profit after tax) growth estimate of 120%!!!

a 120% growth estimate!

huhu!

Rather incredible eh? Considering the fact P&O made 14.9 million and current half year it is losing 1.4 million. But yet, K&N states it can achieve an earnings growth of 120%!!!

huhu!

But... KN did NOT say P&O is cheap based on 2010 figures!

Instead K&N states P&O is cheap based on 2011 figures!

And what is K&N earning estimates for P&O again? 43.47 million!!!!

huhu!

Wiki Wiki!

And as stated in the earnings estimate table... this is an PAT growth estimate of 32%!

How?

Yeah babe. K&N is saying P&O is cheap based on this 2011 earnings. Only trading at 3x PE multiple based on 2011 earnings!!!

I just love how they do it.

:D

K&N report continues...

• 92% upside to base case valuation of RM 1.15. This values the group at an undemanding FY11 PER of 6x, which is at the low end of the 6-15x 2010/11 PER of Malaysian general insurers.
• M&As valuation of RM 1.65 (translating to 4.2x). Although there is already substantial price upside to our base case valuation, the stock is worth even more on M&As basis. Our M&As values P&O’s in range of 1.5-2.0x FY11 P/B V, which is in comparison with first phase consolidation of Malaysian banking sector.

waa.... two type of valuations. Base case valuation of rm 1.15 and M&A valuation of rm 1.65!

Terror la!

:P

Then I reminded myself that K&N report is a 15 page report! oO

Do I want to go thru it all?

Nah....

so how?

Would P&O continue its fly up, up and away?

Seriously? I do not know.

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

ADDUM:

regarding the 900 million near cash holding... on page 10 of the report.

• Investment Gain. However, in view of the group’s potential earnings volatility, we have factored in some prudent investment yield assumptions in our forecasts.
  
  For example, the yield for the group’s investment portfolio could be higher than we have assumed of 2.4% which attached to only 6-months Fixed Deposit rates. Its RM900m near cash/ all cash position, may generate bigger profits if increase equity exposure in any market dips rather than the small profit that we are projecting. In addition, our projected rise 2.4% yield to its RM900m cash for FY11 could prove conservative, as it is slightly lower than market expectation.

Hmm... let me look at May's earnings again: Quarterly rpt on consolidated results for the financial period ended 31/3/2010

How?

Oh.. ps: P&O does do some money lending business too. :P

• Pursuant to paragraph 8.23(2)(e) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Company wishes to announce the moneylending activities (as part of the ordinary course of business) of its wholly-owned subsidiary, P & O Capital Sdn Bhd for the second quarter ended 31 March 2010, as set out in the attachment.
  
  POB~POC (2Q 2010).doc

How Telekom Malaysia Stands To Reap A Tidy RM252 million If It Accepts Measat Global Offer?

What a bloody insult to one's intelligence!

From today's Business Times:

• Measat Global said it did not plan to maintain MGB's listed status on the stock exchange.MGB's second largest shareholder, Telekom Malaysia Bhd, which held a 15.4 per cent stake as at April 26 this year, stands to reap a tidy RM252 million if it accepts the offer.... ( Read more: Measat gets RM4.20 a share buyout offer )

What does the 'stands to reap a tidy rm 252 million' means?

Seriously!

How difficult is it to search for Telekom Malaysia's cost of investment in Measat Global?

How many clicks?

Let me count for you...

1. Bursa website to search for companies announcements
2. Click on Archives
3. Click on BY COMPANY
4. Click T for Telekom
5. Click On TELEKOM MALAYSIA
6. Search for Measat.

6 Clicks of the Mouse. How difficult can it be? I dunno but apparently it sure is difficult!

And from this 6 clicks, we have....

TELEKOM MALAYSIA BERHAD ("TM") :- PROPOSED ACQUISITION OF 60,024,010 ORDINARY SHARES OF RM0.78 EACH REPRESENTING APPROXIMATELY 15% OF THE EQUITY INTEREST IN MEASAT GLOBAL BERHAD ("MGB") FOR A TOTAL PURCHASE PRICE OF RM250,000,000.

Yup Telekom Malaysia cost of investment in Measat Global in December 2003 was 250 Million.

• The Proposed Acquisition involves 60,024,010 ordinary shares of RM0.78 each at a price of RM4.165 per share representing approximately 15% of the equity interests in MGB for a total purchase price of RM250,000,000.

Price? rm 4.165 sen.

If Telekom Malaysia decides to cash in this insane offer of 4.20 per share, Telekom Malaysia would get back 252 million.

A profit of 2 million.

And during this period... Measat Global paid ZERO dividends.

So tell me... what exactly does the financial reporter means by Telekom Malaysia 'stands to reap a tidy RM252 million if it accepts the offer'????

Glee!

I would be seriously offended and pissed if I was a Telekom Malaysia minority shareholder!

Seriously!

Postings on Measat Global's privatisation:

1. The Delisting Of Measat Global at RM 4.20
2. The Delisting Of Measat Global at RM 4.20: Part II

Hirotako: Could It Be A Hero Of A Stock?

The following news article caught my attention:

• Saturday July 24, 2010
  
  hirotako acquires stake in PA Resources
  
  PETALING JAYA: Automotive components maker Hirotako Holdings Bhd has been allotted 24.41 million shares and 24.41 million warrants in PA Resources Bhd, an aluminium billet manufacturer via the latter’s rights issue exercise. Hirotako told Bursa Malaysia the company now had a 15% stake in PA Resources for a cash consideration of RM15.79mil

Ahh... an automotive parts maker stock. :D

Now this could be interesting. LOL!

Firstly, the stock chart.

GLEE!

Yet another hot stock. Wasssap! Surely I cannot be insinuating that perhaps one should grab as much as possible a stock that is clearly shooting for the moon! Can I? (ps: the cow did jump over the moon, no?) (ps: I did write on Jan 2010: The Next Hot Stuff? )

LOL! :P

Anyway... let's leave the above acquisition alone for the time being.

I am rather interested to know what's happening in Hirotako. Aren't you interested? Why is that stock so 'geng'? :P

HISTORICAL EARNINGS PERFORMANCE

RECENT QUARTERLY EARNINGS PERFORMANCE

Those are great numbers yes?

Let's have a look at how the stock is faring on the 5 year time frame.

Not bad eh? Comeon.. it's really beh pai mah. :D

The company has also a buyback program (not too aggressive.. LOL! ... yeah.. it's not like those company who use their share buybacks to send their stocks to Jupiter! :P ) Here's Hirotako's most recent quarterly earnings announced in May 2010. Quarterly rpt on consolidated results for the financial period ended 31/3/2010 (ps: I really have to take my hats off to Hirotako's management for what they are providing in their earnings notes. It was rather clear and precise. No messing around. :D )

Here's Hirotako's report on their share buyback posting in their quarterly earnings notes.

And what to they do with these treasury shares? Well they return it as dividends to its shareholders.

• On 8 February 2010, the Group announced a distribution of treasury shares as share dividends to the shareholders on the basis of two (2) treasury shares for every twenty-five (25) shares held on 2 March 2010.

And the company do give dividends too. For example, here's one announcement: First Interim Dividend

Ok.... so that's about a brief picture of what and how Hirotako is and I guess it's not a shocker that the stock is doing so well.

Now back to the issue....

Feb 2010: Quarterly rpt on consolidated results for the financial period ended 31/12/2009

Hirotako decided to plunge into the share market!!!!!!!!!!!!!!!! (MMM HAI GUA!)

ARGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGHHHHHHHHHHHH!

Ahem.. as you can see after Hirotako purchased some 3.364 million worth of 'quoted shares' by 31st December 2009, the value of the share at market value fell to 3.146.

Hmm... you know... or rather... do you know of some superstitious Aunties? :P

Well, if you do, you know, they say it's very not so good luck (ONG!) when the very first share you buy, you sit on paper losses. (yeah.. 'sway' is the four letter word they use. :P)

Anyway... the minority shareholder or the investing public would have absolutely ZERO idea what the 'quoted shares' are. (issue highlighted many times in this blog)

Three months later, May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010

See? The Auntie ONG theory was correct! (no? )

The 'paper' losses got bigger. :P

And today or rather last night, the investing public and the minority shareholder found out what these quote shares investments are! hirotako acquires stake in PA Resources !

Here's the word file attached on Bursa website. Acquisition of shares.doc

• Rationale for the Transaction
  
  The Board is of the view that the acquisition represents a good opportunity for HHB to diversify into the aluminium industry. This will provide another avenue for profits in future and should contribute positively to the future earnings and growth of the HHB Group.
  
  Prospects of PA
  
  PA is principally involved in the manufacture and trading of aluminium extrusion and its related products. As such, the future prospects of PA are closely related to the Aluminium Industry and are dependent on the outlook of the global and Malaysian economy.
  
  Given the improving and positive outlook of the global and Malaysian economy, and coupled with the encouraging underlying growth in the Aluminium Industry, the Board expects the prospects of PA to be favourable. The Board believes that the demand for aluminium extrusion will continue to remain healthy

Now, ok... perhaps the aluminium extrusion industry might have a good future prospects.. yeah.. who am I to say NO, yes?

But why PA Resources lah.

Not a good looking stock chart, yes?

( See my first dummy question would be.. why this stock chart so... 'chey kai'? )


And then a brief quick look-see at PA Resources quarterly earnings...


Some of PA Resources quarterly earnings...

May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010
May 2009: Consolidated results for the financial period ended 31/3/2009
May 2008: Quarterly rpt on consolidated results for the financial period ended 31/3/2008

From PA's quarterly earnings reported in May 2010.

(cash depleting.. but.. it 'could' improve since PA is having the rights issue exercise)


Ok.. PA Resources is NOT the absolute horror stock... but... certainly... many would question if this would be a stock to 'invest' in... yes?

And with the subscription of PA Resources rights issue, Hirotako total investment in PA Resources would amount to some 15.9 million!

15.9 million woh.

Not a small change yes?

So if you are a minority shareholder in Hirotako, how would you feel?

Or perhaps Hirotako reckon it has some culinary chefs would are able to stir fry some Sotong very crisply!

How?

ps: I am not SOTONG and this is not a stock tip, so I clearly would NOT know if you could lose all your money if you decide irrationally to place a wager on this stock! :P