More On Asia Media (AMedia)

Interesting comments from the posting Regarding Asia Media (AMedia)

solomon said...
Did u buy for quick gain or fundamental?

If the company is convinced for profit growth, I think justifiable to accumulate on bear market.

My remisier has not recommend any stock because I want to be clear minded when I put my bet. In mike case, I would say mike has 50:50 chance to win, but the remisier sure win when u buy and sell.

Wish u luck, mike. Hold the stock and don't buy more. There could be more opportunity ahead.

lofan73 said...
oh yeah go ricky ..go ricky,u have a supporter here from steven.

bro,how do they get their revenue??

is it easy to collect fr the advertisement??..hve u ever thought of 'beli 1 commercial,free 5 commercials? or buy 2 free 20??..ini macam pening kepala la..bottom line macam mana mau cantik??..somemore do they hve strong cashj flow?

K C said...

“Where got such big fat frog jumping everywhere?” Amedia selling at 23 sen now but TP is RM3? Mike, you just can’t blame me for having the above feeling. Looking at the price chart, Amedia is about its lowest price now since listing. TA followers would have dump this stock as it has “broke through a resistance level”. No, I am not a follower of TA. I would have bought some at this level as it might be “cheap” now, but not until I have seen a few years of good past performance which shows that it is worth much more than 23 sen. However, there is no such information and I am not the one who simply believe in a future rosy growth story. Moolah has reservation about its business model, which I believe in too. Better not catch a falling knife and be a victim of pump and dump. Steven, there is no such thing as "sure win" in investment. Even there is convincing past records of good performance and a good story, I would buy some but would not put all my eggs in one basket. Dollar cost averaging is a fallacy. Its usefulness as an investment and risk management strategy has long been debunked (One can just goggle about it). It has more pitfalls and disadvantages. Only that it is still been propagated by brokers, unit trust agents, and also so called financial adviser (licensed ones with CFP), either for their personal interest, or they simply just do not know.

STEVEN said...

Friends, heard that it's quarter results will be out soon, possible this month. Should be impressive from from it's past reports & records. If the report is good, then it's worth putting more money into it I suppose. With a PERatio of 5.2 for 2011, 4.3 for 2012 & 3.5 for 2013, I presume it's worth picking more to hold. Your comments please.

My comments:

Steven:

Asia Media was listed on Jan 2011. and Asia Media's one and only one quarterly earnings announcement was made on Feb 2011 and that quarterly earnings was for the period ending Dec 2010. Which meant that earnings was pre listing earnings.

Here's the link to the earnings report: Quarterly rpt on consolidated results for the financial period ended 31/12/2010

I for one, would NOT take much consideration from this set of earnings. It's pre-listing earnings and many times these earnings doesn't mean much at all. And furthermore it's only one set of earnings. How could anyone logically conclude anything much from it? Do I dare say it's lousy because of one set of earnings? Or do I dare say it's best in the world based on this one set of earnings?

Yeah, the ability to pick out future earnings of course is very desirable. This separates the real winners than others. However, you do need some sort of evidence to prove that the company can perform as a listed company. Yes. the key word, the ability to perform as a listed company.
Many a times, many companies can perform wonderfully prior to listing and once listed, their performance seems to slide. Haven't we seen such incidents many times before?

Now back to Asia Media. Let's just look. If you open the pdf file attached to that quarterly earnings, look for page 9.

Quote: "The contribution of PBT from the current financial quarter under review to the year-to-date's PBT is lower due to the non-recurring of exceptional gain on negative goodwill of the Acquisition in the second quarter, amounted to approximately RM4.87million, which forms a major part of other operating income of the Group."

I would note 2 things from here.

1. The earnings was boosted by exceptional gain (gain from negative goodwill). It's a one time gain.
2. I would be worry for the fact that PBT is actually 'lower'.

That's about it.

I cannot draw much on the balance sheet cos the numbers is pre-listing numbers and they did not include the money that was raised from Asia Media's listing exercises and we won't know how much Asia Media has used.

And again that's about it.

Nothing more.

And so Amedia said it made 10.283 million and if you minus out the one time exceptional gain of 4.87 million, Amedia earnings is only around 5.413 million.

Now Amedia has 228 million shares. You can verify it with the screen shot below.


Which means that we are looking at an EPS of round 2.4 sen only.

So how much of a fair value do we want to place on such a stock based solely on PE?

Remember in the earlier posting Regarding Asia Media (AMedia) , RHB said the following: "

Applying a target FY11 PER of 6x, we arrive at an indicative fair value of RM0.29. Our target PER is at a 60% discount to our target CY11 PER for Media Prima of 16x, mainly to reflect its significantly smaller size, in terms of market capitalisation and revenue base."

RHB felt the PER ratio used should be 6x. ( Hahaha... some would argue why so low? Well, RHB's market leader, Media Prima, only trades at a PER of 16x)

Ok, I know RHB is using FY 11 earnings. Which should be correct because a stock should be worth based on its future prospects but let's take a step back. And first let's look at the current and then only the future. Is this acceptable?

If so, let's look at current.

Current eps is only 2.4 sen. (remember we had taken out the exceptional one time gain for our computation of eps)

If one used a PER of 6x, then the fair value based on an eps of 2.4 sen should be 2.4 x 6 = 14.4 sen only.

Ok.. stop staring and glaring. :P

Let's now use future earnings.

Ah... RHB forecast is 13.8 million for Amedia's fy 2011. Is this number acceptable or is too optimistic?

Think about it.

Here's what one can do. 13.8 divided by 4 would be 3.45. So RHB is suggesting that Amedia's earnings per quarter should be around 3.45 million.

Amedia's earnings in Feb said it earned some 2.17 million only. Which means to meet RHB's expected earnings of 13.8 million for fy 2011, Amedia's earnings this month should increase by some 1.28 million ( how i get this? 3.45 minus 2.17 = 1.28 ) or an increase (or growth) of 58%!!!

How?

To meet RHB's expectations, Amedia's earnings needs to increase by 58% when one compares it to its previous quarter.

Now I am not saying that this is not possible.

Why? The numbers are really, really, really very small!

Any company can easily have their earnings increase from one million to two million. Or from 2 million to 3 million. Yes it's possible.

But to keep it in perspective, the suggested numbers are saying that Amedia's growth should be explosive.

How? Is it possible?

I don't know. There's only one quarter of earnings. I, for one, cannot make any sensible remarks if such earnings expectations is possible or not.

So to protect and safeguard ourselves (from being too optimistic) perhaps it's best to use a lower set of numbers.

Say 12 million. Yes, let's use a lower earnings estimate of 12 million.

Is this acceptable?

Ok how about 3 set of numbers? Use 8, 10 and 12 million.

With a share base of 228 million, we are looking at eps of 3.5 sen (based on 8 million profit), 4.4 sen (based on 10 million profit) and 5.2 sen (based on 12 million profit).

RHB's uses a PER of 6x.

Which means we are looking at fair values of 21 sen (based on eps of 3.5 sen), 26.4 sen (based on eps of 4.4 sen) and 31 sen (based on eps of 5.2 sen).

So which set of numbers are you comfortable with?

Remember all these numbers are already based on expectations of higher growth from Amedia and some might argue that this might be a huge task because Amedia had already suggested that their PBT numbers were lower in their Feb quarterly earnings.

How?

Again... numbers are numbers. I can sit here and punch in all sort of numbers (like for example, why on earth is a PER of 6x only? Why so little? Why not 10x?) but in all honesty, I think it doesn't mean anything much because there's not enough financial data from Amedia itself. It's really way too early to say anything.

Me? If I am really interested, I would really study in great detail the sustainability of Amedia's business model. Take a bus ride on any of the Rapid bus in KL. Watch their tv or Amedia's tv. Is it impressive?

ps: I am actually amazed by the number of response on this ACE market stock. Why this one? Why the urge to choose this company which has yet to have any proven track record as a listed company?