Top of Ze World: Part V

Back in 2001... that was the year Top Glove was listed on KLSE. On Oct 2001, they announced their 2001 q 4 earnings. (it would good to note the announced their very aggressive ambition, Top Glove Forecasts 40% Sales Growth two days after releasing their 2001 results)

total sales. 138.662 million
net ytd profit. 17.217 million
Cash & equiv 9.824 million
total debts 13.958 million

Did it deliver? A year later on Oct 2002, they announced their 2002 q4 earnings.

total ytd sales. 181.055 million
total ytd net profit. 18.036 million
Cash & equiv 21.214 million
total debts 13.440 million (net cash 7.774 million)

Sales revenue increased a lot but profit were flat. Ahh.. cash grew nicely.

Under the title of Margin Pressure, dated 22 Oct 2002, Surf 88 wrote the following...

• Margin squeeze. In our previous result commentary (see ), we highlighted that Top Glove (RM2.12, stock code 7113) could have locked in rubber stocks at lower prices and hence the impact of higher rubber prices would only manifest in Jun-Aug 2002. This appears to be the case, as operating margin dropped to 13.9% in Jun-Aug 2002 from 16.0% in the preceding quarter. As such, pretax profit only rose 6% despite 19.0% turnover growth. Deferred taxation further depressed net profit to show an 11% decline.
  
  Results in line. Overall, the full-year results were within our expectations, where topline growth was largely driven by a 23% capacity expansion but profits did not keep pace as margins fell from 17.3% to 14.9% due to higher raw material costs.

And here is a snippet from a Star interview back in 2002...

• According to Lim, Top Glove’s second factory in Thailand is scheduled to begin operation next month while the one in China will start in March next year. Top Glove currently also has five factories in Malaysia.

New 2nd factory starting in Thailand... the start... the begining of the explosive, promised growth in earnings.

Here is Top Glove's 2003 Q4 quarterly earnings.

total ytd sales. 265.089 million
total ytd net profit. 25.222 million (ahh... ze big jump in net earnings!!!)
Cash & equiv 22.051 million
total debts 39.289 million (net debt of 17.238 million)

point to note... last fiscal year, Top Glove was in a net cash position. To achieve the jump in net profit, from 18.063 million to 25.222 (or an an increase of 7.159 million), Top Glove went from a net cash position of 7.774 million to a net debt of 17.238 million.

So, a year later... the big jump in earnings happened and Top Glove delivered.... but alas.... Surf 88 sudah bungkus by then .... anyway we now see that this company has really, really been aggressive. Many new production lines were set-up, new plants... and most of all.... we have Ze birdie thingy!

Ahhh.... good birdie fortunes + aggressive expansion = fantastic growth for 2003.

Now, here is Top Glove's 2004 Q4 quarterly earnings.

total ytd sales. 413.967 million
total ytd net profit. 39.509 million (wow.. bigger jump in net earnings!!!)
Cash & equiv 30.226 million
total debts 63.063 million (net debt of 32.837 million)

again some points to note... last fiscal year, Top Glove was in a net debt position of only 17.238 million. To achieve the 'additional growth', from 25.222 million to 39.509 (or an an increase of 14.287 million), Top Glove went from a net debt position of 17.238 million to a net debt of 32.837 million. (or it increased its net debt position by 15.599 million). How was their expansion justifiable?

anyway how was Top Glove achieving its super duper Top Glove? Here is some RHB notes which indicates that the growth is via acquisitions of new factories and starting of new production lines...

• It has commissioned two new lines each in Factory 5 in Ipoh and Factory 6 in Phuket at end-August 2004. In Factory 5, Ipoh, the target is to install 10 new lines, bringing its capacity to 175m pieces a month, from the current level of 110m pieces a month. In Factory 6, Phuket, the plan is to replace the existing seven production lines with 10 advanced production lines, lifting capacity from current level of 35m pieces a month, to 65m pieces a month. Meanwhile, installation of new lines in Factory 10 is in progress while construction of Factory 11, Klang is going on full steam. It aims to commission a total of at least 155 production lines with annual capacity of 13.0bn pieces a year by end-2005. It has identified two new sites for two new factories which will be constructed in CY2005 and CY2006, respectively.
  
  It has completed the acquisition of the remaining 40%-stake in Factory 7 in Hatyai, Thailand on 11 October 2004. Plan is in place to increase its capacity from current level of 1.08bn pieces a year to 4.8bn pieces a year by end-FY06. Its proposed acquisition of the remaining 45%-stake in the China plant is expected to complete by end-1QFY05.

How?

ok ... let me try to give an unbiased view on what is happening... :D.... try hor...

Firstly when there is huge spikes in sales & net profit, the first thing i always check on is whether there was any company acquisition which might have caused the spike in earnings.

Well, what i saw is TG is simply a very aggressive and ambitious company. It started off by buying a couple of factories in Malaysia and started expanding its production lines. It then moved on to Thailand and it even moved into CHina.

So over the years, TG focus was simple. Aggressive growth thru acquisitions and organic growth. And plans to stick to this gameplan for the next few years.

And of course all this has been helped by the birdie issue in 2003.

And the end result, although we are seeing the fantastic growth in earnings, TG is paying a hefty price for their expansion.

And last year, Oct 2005, Top Glove reported its 2005 Q5 quarterly earnings.

total ytd sales. 641.827 million
total ytd net profit. 58.141 million (wow.. earnings still very good!!!)
Cash & equiv 31.755 million
total debts 154.191 million (net debt of 122.436 million!!)

How?

Let's look at those issue or rather those points again.... last fiscal year, Top Glove was in a net debt position of 32.837 million. To achieve the 'additional growth', from 39.509 million to 58.141 million (or an an increase of 18.632 million), Top Glove went from a net debt position of 32.837 million to a net debt of 122.436 million. (or it increased its net debt position by 89.599 million).

How was their expansion justifiable?

Which was why I blogged that posting in Oct 2005. And let me repeat the main issues.

Sooooooooooo despite it’s great sales and net profit growth… it’s bottom-line certainly ain’t too top-looking for me.

Btw…in my opinion, the need to have some sort of understanding of the explosive growth in Top Glove is kinda important.

So far, it looks to me it has been 'quite' prudent in the number of factories it has been adding per year. Yes, adding a new factory per year is indeed aggressive but i think it has not been too aggressive. (tiok boh?) From a management point of view, consideration should be given regarding the ability for Top Glove to manage the growth in its factories. (Layman's view: Buying and managing a business is always manageable, but if u buy 'too much' businesses, then the very obvious issue, is can we manage all these factories?) Yup, the issue of managing and cordination of all factories in a profitable and efficient manner becomes a concern if the company increases the number of factories too fast.

Whereas, the increment in production line should be a much easier task to handle compared to the number of factories. (tiok boh?)

Now one probably ask why all this? Growth in a company is always good however commonsense would tell us that excessive growth might pose some danger too. As such, this is why I am not discounting this issue.

Which is what is happening in Top Glove isn’t it? The company is expanding and expanding and expanding. Buy/adding a new factory here and there… but all these capex comes with a huge borrowing cost… and in me opinion…i the end result just does not justify all these expansions. Take a look at their Thailand and China segmental results. Does it justify all the moola spend expanding into these markets?

How? What say u?

Am I too prejudiced against what Top Glove has achieved so far?

Is all my mumblings not valid? Or am I mumbling just for the sake of mumbling?

:D

Top of Ze World: Part IV

Last edit: 6th April 9.35 am

Found the following comment in my blog entry Top of Ze World: Part III

• Strictly followed Ben Graham, "a good company is a company made more money than it spend", i have no objection to this. But, sorry to say that this statement is too general. Stocks are different from each other, we cannot apply this rule across the board. On the Topglove case, i am of opinion that a good company should employ the profit/equity wisely, either thru' business expansion or returned to shareholders. I personally prefer business expansion. Pertaining to debt, a am of the opinion that some manageable debt is acceptable. Of course borrowings come with a cost. I do agreed with U that the pace Topglove is expanding is to fast.

And here is my reply:

• You see, yes I do agree very much that a good company should employ their profit/equity wisely, which as you have said, either thru business expansion or returning the excess cash back to the shareholders.
  
  And this is the very issue here in Top Glove.
  
  Is Top Glove expanding their business wisely?
  
  Take a very good look at their cash flow.
  
  Based on current numbers... Top Glove recorded a record half year earnings of 38.360 million.
  
  And the very same question I asked back in first posting in Oct 2005, I asked again yesterday, where is the Money? Where is the wealth generated?
  
  In this quarterly earnings, Top Glove mentioned that it's piggy bank cash at the start of the year was 24.812 million. At the end of this quarter, yes cash increased to 46.220 million BUT this was aided by an increase in borrowings of 42.873 million. If you minus out the borrowings, where did that earnings of 38.360 million go? And what if you take into consideration of the depreciation charges of 12.804 million?
  
  Should one be worried that in Top Glove example, we are seeing a company that has been constantly consuming more cash than it generates?
  
  And then what about the end results from Thailand and China?
  
  And asked in the blog postings: 'And how did their current Thailand and China plants results appeal to you?'
  
  Now these are the issues I have raised...
  
  What's one opinion on it?
  
  Do you agree or do you disagree?
  
  For some.. they get worried... company cash flow has not been positive for a long time already, so is it wrong to be worried? Is the justifications to be worried valid?
  
  However... ahhh... the differing opinions.... :D
  
  For some.. it is considered OK.. since they consider that because Top Glove is expanding and has the inspirations to be the TOP GLOVE MAKER in the world. And to be no.1, some sacrifices needs to be made. The company has to use their cash flow to fund the expansions. And if that is not enough, the company has to borrow more to fund the expansions.
  
  Ahh... do you see the differing opinions?
  
  Which is right?
  Which is wrong?
  
  I have no idea... me just raised the issues only via my mumblings...

here's a reply from 2nd brother on this issue.. 6th April 8.00 am

• Accordingly to Robert Hagstrom in (The Warren Buffett Way) and Phil Fisher in (Common Stock Uncommon Profit), how a company employ its cash depend on the stage of a company/business. At Topglove, it is at growing stage (Stage 2). It is growing so fast, every dollar they made have to plunge back for expanding the business. The profit itself is not sufficient enough for increasing production capacity, Topglove need to borrow more money to expand. Therefore, cash in hand is not a good tool to measure the company.
  
  As business expand, of course the increased of working capital is a by-product. Strictly follow the latest quarter report, there was an increse of 30++million in working capital. Another 45 millon was spend on the production lines.
  
  Althought the cash flow is not "pretty enough", i personally feel that it is not a alarming sign yet.
  
  What i want to say is all these cashflow/ debt level are depend on the stage of a company.
  
  Strictly followed Phil Fisher and Micheal Porter, low-cost producer would win especially in the commondity game. Since Topglove is the low-cost producer, i think they would win in this game.
  
  In glove industry, scale of economy is crucial. Topglove yet to achieve scale of economy in China, so the reported profit would not be impressive. Maybe we would see some improvemnt in the offing.

Reply (April 6th 9.35 am):

For me, it depends on what one seeks for when they invest in a company. Now as mentioned many times before, the key to a successful investing is pretty much simple. One seeks to invest in a good company at a cheap price. And obviously the very key to this simple statement is the definition of 'good' and 'cheap'.

Now let's take the issue of good. What is considered good? Some wants to see the creation of wealth and on the other hand, one wants to see the company simply grow. And on the other hand, some see both as a must in their definition of a good company. They want to see the creation of wealth and they also want to see the company grow. And of course, such opinion simply varies.

Me? I would want to see the creation of wealth but yet I also want to see growth... LOL!! ... yalor.. I am way too demanding... :D

Ahh... am I wrong to be so selective?

For sure, some finds it acceptable to have an aggressive company, deploying every single cash back into the business for the sake of expansion. And if they have to, borrowing is needed. As mentioned again, such sacrifices is a must if the company wants to grow.

For some, they might ask if such management practise is prudent? For they would argue that expansion is a must BUT it must not be made at all costs. Spending all the cash flow and incurring loans to fund such expansion might be considered excessive. The arguement is that nothing truly great is made via fevered acquisitions of companies and that frequent acquisitions are a sign of weakness, of misplaced priorities and of the inability to enhance worth from within. For them they would rather see their company grow from their own funding. For them this is the real worth. Else they consider it as artificial engineered growth.

How?

Two school of thoughts. Yes?

Well, since I am one that wants to see the worth and yet one want to see the growth, perhaps it would be better if I explain more in terms of my views on what is happening in Top Glove.... (sorry.. let me start a whole new posting else this posting will be way too long..!!)

~~~~~~~~~~~~~~~

ps... I have turned this into a whole new blog posting into a discussion and if any1 wants to have their say, you are more than welcomed......

Top of Ze World: Part III

* edited 5th April 2006 *

Past postings:

• Top Glove..
  Top Glove: Part II

Flashback:

In the first posting, I wrote the following..

• However….what puzzles me is… where is ze Moola?
  
  Mana pergi tok?
  
  If i remember correctly, Jason Zweig stated somewhere (cannot remember which page lah) in the Fourth Revised edition of the legendary Benjamin Graham’s book, “The Intelligent Investor”…the best definition of a good business is that the good business generates more cash than it consumes.
  
  The good business is generating more cash of the company’s piggy bank and the company’s piggy bank grows at a healthy pace.
  
  Think about it.
  
  Isn’t this what we want for our investment?
  
  Now if a company keeps growing in size and expanding and expanding….sales is growing lah, net earnings is also growing at a fantastic rate….but then... somehow the end result is not there.. cos the company’s piggy bank is NOT reflecting the excellent result. Yup, company sales are increasing, net profits are increasing BUT cash is depleting. And in some drastic cases, the company’s loans are increasing too.
  
  And this is my current prejudice against Top Glove.
  
  Where is ze Moola?
  
  Top Glove announced it MADE a net profit of 58.1 million for the current fiscal year 2005.
  
  Fantastic! Bravo! Superb!
  
  However.. open the company’s earnings excel file.. and look at the CF worksheet.
  
  
  Line 41: Cash and cash equivalent at beginning of the year was 16.168 million
  
  Line 43: Cash and cash equivalent at end of end of period was 4.616 million.
  
  Ahem.
  
  4.616 million wor… and according to the company it MADE 58.1 million. Isn’t the company consuming MORE cash than it generates? How? Would u justify Top Glove being a top business?
  
  And Top Glove’s total borrowings now total 154 million. Errr… a year ago… how much ar?
  
  Sooooooooooo despite it’s great sales and net profit growth… it’s bottom-line certainly ain’t too top-looking for me.
  
  Btw…in my opinion, the need to have some sort of understanding of the explosive growth in Top Glove is kinda important.
  
  So far, it looks to me it has been 'quite' prudent in the number of factories it has been adding per year. Yes, adding a new factory per year is indeed aggressive but i think it has not been too aggressive. (tiok boh?) From a management point of view, consideration should be given regarding the ability for Top Glove to manage the growth in its factories. (Layman's view: Buying and managing a business is always manageable, but if u buy 'too much' businesses, then the very obvious issue, is can we manage all these factories?) Yup, the issue of managing and cordination of all factories in a profitable and efficient manner becomes a concern if the company increases the number of factories too fast.
  
  Whereas, the increment in production line should be a much easier task to handle compared to the number of factories. (tiok boh?)
  
  Now one probably ask why all this? Growth in a company is always good however commonsense would tell us that excessive growth might pose some danger too. As such, this is why I am not discounting this issue.
  
  Which is what is happening in Top Glove isn’t it? The company is expanding and expanding and expanding. Buy/adding a new factory here and there… but all these capex comes with a huge borrowing cost… and in me opinion…i the end result just does not justify all these expansions. Take a look at their Thailand and China segmental results. Does it justify all the moola spend expanding into these markets?
  
  How? What say u?
  
  Am I too prejudiced against what Top Glove has achieved so far?

Top Glove announced its quarterly earnings tonite.

Let's look at their cash flow...

how?

And again.. Where is Ze Moola?

Did Top Glove's cash flow improved?

Was my earlier concern still valid?

Take a look at their balance sheet...

See how the total loans have increased a lot?

Short term Loans is now 47.934 million. Long term borrowings is now 81.544 million and Top Glove has issued bonds amounting 70 million.

And how did their current Thailand and China plants results appeal to you?

And how would one evaluate the following past comment below?

• Which is what is happening in Top Glove isn’t it? The company is expanding and expanding and expanding. Buy/adding a new factory here and there… but all these capex comes with a huge borrowing cost… and in me opinion… the end result just does not justify all these expansions. Take a look at their Thailand and China segmental results. Does it justify all the moola spend expanding into these markets?

Am I Wrong?

Btw... Top Glove is now at 7.70.... and all this is a mere mumbling from me... i have no idea what the share will do... will the so-called improved earnings seduce some demand today? I have no idea dude...

Megan: Part XIV

Saw that Standard and Poors had a research note on Megan:. 3QFY06 results. Upgrade to Sell (from Strong Sell)

Upgrade to Sell from Strong Sell? LOL!! This I really do not understand.

So what's a difference between a Sell and a strong Sell?

Is it like Sell means that you should slowly sell the stock, while a strong Sell means you should Sell all asap? ;p

Anyway here is Standard and Poors definition:

• Sell: Total return is expected to underperform the total return of the KLCI or KL Emas Index respectively, over the coming 12 months and share price is not anticipated to show a gain.
  Strong Sell: Total return is expected to underperform the total return of the KLCI or KL Emas Index respectively, over the coming 12 months by a wide margin, with shares falling in price on an absolute basis.

Here is their reasoning on their recommendation.

• Recommendation & Investment Risks
  · We raise our recommendation to Sell from Strong Sell. In our opinion, the company remains challenged on multiple fronts: (i) relentless product pricing pressure, (ii0 rising borrowing costs and (iii) strengthening MYR vs. the US$. That said, we also believe that these negatives are, to a certain extent, reflected in the share price, which has declined by 38% in the past six months.
  · We have adjusted our FY06 and FY07 earnings forecasts upward by 63% and 116%, respectively to incorporate the change in depreciation policy. We have also cut our EBITDA forecasts for FY06 and FY07 by about 10% and 20%, respectively as we take on lower ASP assumptions, partially mitigated by lower polycarbonate prices.
  · In light of the accounting changes that have increased the reported earnings (but not affecting the fundamentals of the company), we switched our valuation methodology to one that is based on EBITDA instead of earnings. Our revised 12-month target price is MYR0.66 per share (vs. MYR0.70 previously), based on 2.5x EV/EBITDA (FY07 forecast) which we think is fair given the difficult operating outlook.
  · Risks to our recommendation and target price include a reversal in the trend of ASPs for DVD-Rs, faster than expected decline in prices of raw materials and an unexpected decline in interest rates.

here are some of my opinions...

• In our opinion, the company remains challenged on multiple fronts: (i) relentless product pricing pressure, (ii0 rising borrowing costs and (iii) strengthening MYR vs. the US$. That said, we also believe that these negatives are, to a certain extent, reflected in the share price, which has declined by 38% in the past six months.

ok... Standard and Poors reasoned that because of the relentless product pricing, rising borrowing costs and the strengthening of MYR vs the USD are the main issues that the company faces. And because of these issues, this had caused the sharp decline in share price of 38%. And because of this 'to a certain extent, reflected in the share price' a justifiable reason in itself?

Take the main concerns.. pricing pressure. It is still there. It has not improved. And with sales revenue being down, doesn't it mean the product is having problem selling?

Rising borrowing costs. Well it is still rising isn't it?

Now if both the main concerns got worse... was the justification to a sell from a strong sell justifiable?

Or should one take into consideration that the share price had already suffered a sharp decline? And because it already had suffered a sharp decline...it gives justification to their recommendation. Do you accept such thinking? Now what if these conditions really worsen? Not possible?

Anyway, from a business perspective... if the product is having difficulties selling and there is an issue with product pricing, doesn't this STRONGLY indicate that this product itself is in huge troubles?

And when one puts the increasing borrowings into perspective.. doesn't it not indicate that such a business requires constant, increasing borrowings to stay competitive in the game?

Doesn't it not indicate strongly that this is a rather rotten business to be in?

Think about it... in a business, when you increase the capex, surely you want to see an increase in your profitability. Right or not? Else it makes no sense in making those godzilla-sized capexs. Right? So what do we see in Megan? Huge capex and no results to show!

• We have also cut our EBITDA forecasts for FY06 and FY07 by about 10% and 20%, respectively as we take on lower ASP assumptions

See? They realise the ASP (average selling price) problems and are lowering their EBITDA forecasts!

• · In light of the accounting changes that have increased the reported earnings (but not affecting the fundamentals of the company), we switched our valuation methodology to one that is based on EBITDA instead of earnings

Ah... can you see what I see? Can you see that Standard and Poors are trying so desperately to be nice and generous in their write-up?

Look at what they are saying.

Despite the accounting changes, which increased the reported earnings (but not affecting fundamentals of the company)...

LOL!!!... aren't they implying that despite Megan FUDGING their reported earnings, there has been NO changes in the fundamentals of the company??

Yes mah.. as mentioned before, there was no creation in wealth at all and in fact the fundamentals actually worsen!

• We have adjusted our FY06 and FY07 earnings forecasts upward by 63% and 116%, respectively to incorporate the change in depreciation policy. We have also cut our EBITDA forecasts for FY06 the depreciation rate of its optical assets in its key Malaysian subsidiary has been halved to 10% (management believes that this would better reflect the useful life of the assets). This resulted in a sharp fall in depreciation charges to MYR18.1 mln in 3QFY06 vs. MYR42.9 mln in the preceding quarter.

ps... according to Standard and Poors, this change in accounting has resulted in depreciation charges to rm18.1 million in 3QFY06 vs rm42.9 million in the preceding quarter.

Ahem... a simple shift in accounting numbers have resulted a drastic swing of 24.8 million in 'reported earnings' for Megan.

LOL!!!.... Am I wrong to say 'a rm24.8 million profit' was made by a change in depreciation rate??

How?

ps...

these are all UNAUDITED earnings... I wonder... if and when these earnings are audited... will their auditors be so kind to allow such huge changes in depreciation rate?

StudioTraffic Forum Is Now Closed!

Brilliant!

First these buggers shut down their main site and then these buggers have now shut down their forums.

This is the link to their forums. http://www.studiotraffic.org/forum/index.php

If you click on it.. you will see the following message.



Constant abuse and mistreatment resulting in lack of forum staff.. and because of this they have shut the board down?

LOL!!!

What a lame excuse!

What do they expect from all the forum members who have lost money in the scam?

Do they expect them to say, thanks for cheating my money?

Now conside this... by denying access.. the StudioForum is denying access to all the evidence of their cheating ways, isn't it?

Saw this posting in talkgold forum describing in detail of the scam.

• I have joined ST last year I knew about it from a co-worker his account level was $200 when I knew about ST then I decided to join but before that I did some research and found out about the Studiotraffic forums and saw a thread name "I have been paid" and saw scans of people being paid (small amounts of money only in the hundreds"
  
  So I joined upgraded my account to $2,500 compounded and my account level grew (I am not gonna disclose that nice try though DanP) then I decided to request my very first withdrawal on Oct 1 2005, I read their TOS it says I should get the payment within 5-7 says so I said to myself okay sweet I will have extra money to use for x'mas..
  
  But then 2 weeks have passed so I was wondering why my payment is still not in my studiopay account (which is verified I have followed SP's every instructions) so I talked to someone on Live Help Desk, she told me to submit a ticket to the Payout Department, so I did,, It took then 1 1/2 weeks to respond now they saying that
  
  "We are doing a audit if you are in profit there is gonna be a delay on your payment" I ask them an ETA when I should get my money but they cannot give me a straight answer so, I waited..
  
  October has passed and still no sign of the money I replied to the support ticket, now they tell me to talk with a guy on msn@studiotraffic.com I did that and guess what he told me? he said "we are doing everything we can you just have to be patient the audit should be done soon"
  
  I have been contacting ST like this (being passed to Live Help Desk, Support Ticket, Chat now they have another one called voiceroom!!) for a good 2 month's and STILL no sign of the payment..
  
  This point I said I would give them two weeks and me MORE patient, two weeks have passed still no sign not even a DIME, so I said screw it I will just ask for withdrawal so I contacted LHD once again I get told to submit a ticket I did and IT HAS NOW BEEN more than 3 weeks and still no word from them... ohh and guess what the person who referred me got paid 10 days after WE BOTH made withdrawals at the same time... that is how PONZI scams work take the money from people who have put thousands then use that money to pay the people who have low account level so they will be MORE enthusiastic and promote Studiotraffic THAT IS HOW A CLASSIC PONZI SCAM OPERATES..

Quick reference to past blog postings on Studio Traffic:

• Is StudioTraffic a scam?
  Is StudioTraffic a scam?: Part II
  Is StudioTraffic a scam?: Part III
  Is StudioTraffic a scam?: Part IV
  Is StudioTraffic a scam?: Part V
  StudioTraffic Is Now Closed!

How?

Think we can learn from all this?

And what about stock scams?

Are you in internet stock forum/stock message group/stock message board/private emailing groups getting hot stock tips from your so-called guru?

Think about it hor... think why and how you could end up a sucker!

:D

Studio Traffic Is NOW CLOSED

Yup closed. Here is their website. www.studiotraffic.com

Click on it... and you will see the nice message. Nope, this is not an April Fool Joke dude...

Before I continue, here are some past postings on this Studio Traffic.

• Is StudioTraffic a scam?
  Is StudioTraffic a scam?: Part II
  Is StudioTraffic a scam?: Part III
  Is StudioTraffic a scam?: Part IV
  Is StudioTraffic a scam?: Part V

It has just came to my attention that the Studio Traffic website is now closed. I read it from this froum posting: http://www.studiotraffic.org/forum/showthread.php?t=44688

• That is what we see for www.studiotraffic.com
  
  This Account Has Been Suspended
  Please contact the billing/support department as soon as possible.
  
  Lucky that we didn't buy the share or does ST anotther website to login?

Remember in Is StudioTraffic a scam?: Part IV , I mentioned that a new plan was proposed. An option to buy share of the company?

Guess what? Have a look at this posting: http://www.studiotraffic.org/forum/showthread.php?t=44724

• U've Been Scaammed Once More~!!!!!! U Guys Just Cant Wake Up From Dreams. Want To Continue Support St? Go Ahead

And of course, the right and logical thing to do is to make a police report, right? http://www.studiotraffic.org/forum/showthread.php?t=44581

• are we going to let John do whatever he wants and get away with it? i was wondering maybe some of you thought of just letting John get away with everything he got. I'm not-in-profit, has funded thousands of dollars and not even earned a single penny! Does anyone has made a police report?

A majority of the members have created a new forum. See this thread. thread

And some of the members have turned active in this froum, which I thought contain a bunch of really good discussion on this issue: http://www.talkgold.com/forum/forumdisplay.php?s=497f22ec703627025a1a2fdc2c0ff3c3&f=58.

For example, this thread contained proof that the so-called John Horan (OWNER OF st) does not EXIST!! http://www.talkgold.com/forum/r85671-.html

How?

How about doing the first thing... make that police report?

Think about it...

Megan: Part XIII

In Part XII , I have made the following statements...

• For me, I believe that an investor's primary objective is to invest in only the good, quality companies at a reasonable price. And if that is the case, then the share price or the market reaction to the company's earnings is not in the equation. For the focus is always on gauging the quality of the company. ( If one puts the share price in the equation, the investor focus gets muddled because the likelyhood is that the investor might be focused on what the share will do in the market, will the share go up or will the share go down. And the actual focus on the quality of the company is soon forgotten. )

Ah... in the share market, can it work if one merely focus on the issue of the quality of a company?

Now before I continue, I have to ass-u-me one thing, and that is, me and you, the reader of this blog posting, we believe in investing. It makes no sense to continue reading if one believes otherwise. Right?

So as investor, do you believe that the main objective is to invest only in the good company at a cheap price?

And if so, the key issue is always on the quality of the company. And needless to say, if the company is NO LONGER GOOD, then it makes no sense that we continue to stay invested in the stock, right?

Now, how am I going to prove this issue to all?

Ah, for those that really knows me, I have simply been a big bad bear on Megan (and ... LOL... they are bored stiff reading my comments on Megan!)

Since when?

Well... I believe since 2003... since the very day, Megan decided to play that funky corporate music by purchasing MJC, a funky corporate exercise which saw Megan purchasing MJC, a company owned by its own majority shareholder.

Let me prove to you. Have a look at this screenshot of an old chap-lap forum. (the forum is closed hor).


That was posted on Sept 2003.

And here is another proof. Click here or have a look at the following screenshot. (Click on the picture to have a bigger view)

That was posted in May 2003.

The opinion back then was the Megan shareholders was using the company as a tool to enrich themselves. They, the Singaporean shareholders, used Megan Media, a listed company in Malaysia, to purchase a company in which they have own vested interests. And they sold the company at a premium and with the sale, the existing debts of MJC were sold to Megan.

As mentioned before, when I purchase a stock, I consider myself being a part owner of the business. A business partner. So when my business partner places their ownselves before me, how could I trust being a part owner of such a company? And most important of all, do I see myself benefiting in such a partnership? Can meh? How can I benefit when the owners main priority is to enrich their ownselves?

Hence, how would I rate such a company? How can I possibly value a company that I cannot trust?

Is it wise to buy and hold such a stock forever and ever?

Take a look at this Reuters chart. (do try to verify the accuracy of the chart hor...)

How?

Three worthwhile things to note...

Firstly, I have mentioned many times before (it would be too tedious to prove this also) that there was some real justifications to invest in Megan but this was in 2001. And as can be seen in the chart above, the early investor would have been rewarded nicely for their investment in Megan.

Secondly.. when Megan played their funky music in May 2003, wasn't it a good time to exit the investment?

Was May 2003 a good time to decide to AVOID/EXIT/STAY AWAY from Megan Media?

Ahh... as can see clearly from the chart, perhaps May 2003 wasn't the perfect time to exit Megan and that perhaps maybe Jan/Feb 2004 would have been a better time to exit Megan.

Yup.. it wasn't perfect.... but.... heyyyyyyyyyyyyyy..... was it shabby to exit Megan back in May 2003?

Lastly, buy and hold... if the company quality is no longer good.. is it wise to HOLD and HOPE that it becomes better? Well the best answer for that question is to look at this chart below.. see the devastating result for holding and hoping?

Ahh... yes... some could argue that all this is nonsense and irrelevant already because this is all past. And it's really make no sense to constantly looking at the rear view mirror when one drives... right?

So what lies in the future for Megan?

How will happen to the share price?

Ahh... let me say this again... I have no idea... but as an investor... my issue is simple.

How do I rate the quality of this company?

Now consider these issues.. the depleting cash, the rocketing debts, the rocketing inventory and the extreme high level of trade receivables, the integrity of the management...

and now we have the issue of how Megan accounts its profits (ie the issue of the depreciation rate)..

how? how do you rate the quality of Megan? Do you even think that Megan is an investment grade stock?

If no... why should you bother with the share price?

:D

Megan: Part XII

I would like to share my dialogue with Grow_Thru_Life in the blog posting, Megan: Part XI

Grow_Thru_Life:

• Looks like the price went up as expected. I'll have to agree with Moola to 'show me da moneyzz' when it's loan increased and cash flow is decreasing.
  
  Well, I'd decided not looking anything about it until its next quarterly report. There should be other stocks more worth to study on...
  
  Anyway, I just wonder whether technical traders will buy in, seeing it's in uptrend. It'll be an interesting study on investor's behaviour for this.I wonder do they teach about investor's behaviour in uni?

My reply:

• Yes, when a company reports such a surge in corporate 'earnings', it is pretty likely that the share could see some demand in the market, resulting in a sharp rise in the share price.
  
  So how does this all this translate to the market player?
  
  For me, I believe that an investor's primary objective is to invest in only the good, quality companies at a reasonable price. And if that is the case, then the share price or the market reaction to the company's earnings is not in the equation. For the focus is always on gauging the quality of the company. ( If one puts the share price in the equation, the investor focus gets muddled because the likelyhood is that the investor might be focused on what the share will do in the market, will the share go up or will the share go down. And the actual focus on the quality of the company is soon forgotten. )
  
  Now if one is a market player, looking constantly to find a way to make money in the share market, then the study of the market behavior and also the market trends is utmost important.
  
  Which is a total different ball game.
  
  Yes?
  
  Which is right and which is wrong or which is the best way.. will always depend on the individual.
  
  Right or not?
  
  Anyway.. here's another food for thought.. ie... if your focus is on the company... ;-)
  
  Megan reportedly 'earned' some 20 million ringgit this current quarter. And yet this 20 million did NO good at all for the company. As argued, there is NO creation of wealth at all.
  
  How?
  
  How much do you reckon that Megan will need to earn?
  
  How much do you reckon that Megan will need to earn to seduce some real investors?
  
  40 million?
  
  60 million?
  
  And let's put that debt issue into perspective. Despite earning 20 million, debts has increased by another 25 million.
  
  How? Will Megan be able to setttle their 750 million debt?
  
  And at this rate... LOL... Megan will soon become a billion dollar company... a billion dollar in debt company! (Not possible? Or am I being too cynical? )
  
  And then, the implications in the issue of the sharp rise in inventory and the extremly high trade receivable is extremely serious and cannot be discounted at all.
  
  Why is the inventory increasing so much?
  
  What kind of inventory are we talking about? And since Megan's products is high tech, we really need to find out if the rise in inventory is caused by 'dead' stock.
  
  And what is so bad? Well.. what if Megan needs to write-off these inventory? 102 million wor. No small amount.
  
  And then the trade receivables.
  
  Such an extremely high trade receivables in Megan's books makes its sales/earnings questionable.
  
  Yes?
  
  No seriously sane businessman conducts their business in such a manner. Now when you consider that their ytd earnings for 3 quarters is only some 36 million, which sane businessman would have a trade receivable totalling more than 320 million? Doesn't one suspect that something is wrong somewhere?
  
  Ok, let's give Megan a benefit a doubt...
  
  Let's consider that there is no hanky panky here and that the company really does have some 320 million in trade receivables.
  
  Now the question then is why isn't the company collecting it?
  
  Is there a problem collecting money from these so-called receivables?
  
  But since the trade receivables have been constantly increasing, would one be wrong to conclude that Megan is seriously having problems collecting money?
  
  And how about putting their debt issue into perspective.
  
  If Megan could collect all these debts, then Megan need not borrow so much money, right?
  
  And since Megan had to borrow so much money, then isn't there a strong likelyhood that sooner and not later, Megan will have to write-off these trade receivables as doubful debts?
  
  Hmm... 320 million...and if they write-it off... how much losses do you reckon Megan have to record?
  
  Hmm... could I be wrong?
  
  Of course it is possible... but what if I am correct?
  
  And worse still... what if I am correct on both counts?
  
  What if Megan's inventory and trade receivables has to be restated? (320 mil + 102 mil wor!!!)
  
  Double whammy?

Quick ref:

• Megan
  Megan: Part II
  Megan: Part III
  Megan: Part IV
  Megan: Part V
  Megan: Part VI
  Megan: Part VII
  Megan: Part VIII
  Megan: Part IX
  Megan: Part X
  Megan: Part XI