KNM: Of Profit Guidance And Corporate Governance

From the posting: And So KNM Reported Its Earnings ..

• K C said...
  KNM's ebitda for the half year 2011 is 78 m, and if annualized, 156 m. That EBITda amounts to less than half of the management guidance. KNM is a "big head devil". If you look at its earnings, 6 month pretax earnings is 8 m, or just 0.8% of the turnover. What is its ROE? 0.5%! Having more than a billion total debt, it just needs the interest rate to go up by 100 basis points to wipe out any profit! Some more the management keep on giving false hope to investors, just to do the wrong thing; to boost up share price. Do you want to invest in this type of company? KNM is too expensive at 50 sen is one of the most outrages investment understatements of the year

Some more the management keep on giving false hope to investors, just to do the wrong thing; to boost up share price

Flashback March 2008: Some Musings on KNM Reports

In that posting, I pointed out that in RHB's report, RHB mentioned the following:

• Management is giving guidance that FY08-09 net earnings to be around rm450million and rm700 million respectively.

Let's compare KNM's guidance versus actual performance.

• fy 2008, KNM made 336.175 million. (KNM guided 450 million)


• fy 2009, KNM made 257.847 million. (KMM guided 700 million)

And judging from this set of quarterly earnings it looks like KNM will come up very short against its own guidance.

And like K C said..."the management keep on giving false hope to investors, just to do the wrong thing; to boost up share price "

I totally agree!

Its simply shambolic that the management makes empty promises to the investing public!

 And this is not the first time KNM had done this!

So let me ask the gatekeepers a simple question : "Does this represent good corporate governance that a company management makes empty promises to deliver profits to the investing public?"

Think about it..... seriously.

Do you want every single company to make bold statements that they will make XYZ profit but only to fall terribly, terribly short?

Company X will say in their profit guidance 'I will make 20 million' in a briefing to the investing public.. What do you expect the analysts in the briefing to do? Do you expect to come out and say... 'Nah, company X is totally BS!' or 'In your dreams! Those profits are not achievable!'

No you don't!

The analysts would be obliged to value company X based on that 20 million.

And since the 20 million is already a very extremely optimistic guidance, the share price of Company X will have to be upgraded!

But then ... when.... fiscal year comes... that 20 million is no where to be seen!

Now let me ask... has company X made a mockery of the market?

Isn't K C spot on by saying "the management keep on giving false hope to investors, just to do the wrong thing; to boost up share price "



Just to boost up the share price... the company management give the investing public false hope.

And so I ask... does this represent good corporate governance?

Or do you think KNM should be censored for making such wild profit guidance?

How?

I wonder if the gatekeepers are aware of what's happening.


And yeah the earnings again...


Can you see that the pretax profit is less than the after tax profit?

Why? KNM's got a nice fat tax benefit!!! ( Do read past postings )

And if we minus out the tax benefit, can we see how ridiculously small KNM's profits are????

( ps: K C, yeah the balance sheet is actually even weaker compared to its previous quarters. Loans increased, receivables increased a lot.... )