Cinema-Blend-whereiszemoola

Now K-Star shares have been doing 'poorly' lately.

On the Edge Financial yesterday: http://www.theedgemalaysia.com/in-the-financial-daily/178118-k-star-tdr-listing-beneficial.html

• K-Star: TDR listing beneficial
  Written by Kathy Fong
  Monday, 06 December 2010 14:22
  
  KUALA LUMPUR: The management of K-Star Sports Ltd is still puzzled by the big plunge in its share price as it soared to a record high only to tumble to its lowest ever in just a matter of one week.
  
  “We are surprised with the selling on K-Star shares. We are not aware of any corporate development that will affect the share price movement, other than the proposed TDR (Taiwan Depository Receipts) programme that we had announced to the stock exchange,” K-Star’s chief financial officer Lim Yeow Eng told The Edge Financial Daily over a phone interview.
  
  “We don’t want to speculate what the reason is behind the selldown,” he commented when asked about the heavy selling of K-Star shares recently.
  
  Lim said the proposed TDR programme should be positive news to the company.
  
  “Most companies’ share prices go up when they announce their plan to undertake the TDR programme,” he said. Lim also reiterated that the company’s operation was intact and was performing up to expectations.
  
  The China-based sports shoemaker had on Nov 27 unveiled a proposal to seek a second listing in Taiwan. It is the second company on Bursa Malaysia to do this after XingQuan International Sports Holdings Ltd. K-Star intends to float 100 million shares, equivalent to 29.24% of its enlarged share capital, comprising 75.6 million new shares and 24.4 million existing shares, on the Taiwan Stock Exchange via the proposed TDR programme.
  
  In Singapore, there are a growing number of companies seeking dual listing in Taiwan via the TDR programme, for instance Super Group Ltd, United Envirotech Ltd, Yangzijiang Shipbuilding (Holdings) Ltd and Osim International Ltd, the latest to jump on the bandwagon.
  
  Share prices of these companies rallied after announcing the TDR listing. For instance, instant coffee manufacturer Super Group’s share price soared 40% after announcing its TDR programme.
  
  Similarly, news on the dual listing exercise lifted United Envirotech’s share price by over 60%. Usually there is a price disparity between the shares that are listed in Taiwan and Singapore. Shares in Taiwan tend to trade higher than those listed in Singapore.
  
  Lim said the proposed TDR programme is a positive move as the company could raise fresh capital for expansion at lower costs.
  
  However, there have been concerns over shareholding and earnings dilution since K-Star will issue 75.6 million new shares, which are equivalent to 28.4% of its existing issued share capital, compared with XingQuan’s 15%. On this, Lim said with the new capital, raised at lower costs, would be invested to expand K-Star’s operations to enhance the company’s earnings in the future.
  
  The latest results announcement showed that K-Star’s net profit rose 27% to RM14.3 million for 3QFY10 ended Sept 30 from RM11.3 million a year ago. Revenue grew 25% to RM88.36 million against RM70.4 million. For the nine-month period ended Sept 30, its accumulated net profit amounted to RM30.3 million or 0.39 sen per share compared with RM29.9 million or 0.5 sen per share previously.
  
  Lim added that the dual listing in Taiwan would also help to increase the liquidity of the stock and raise the company’s profile and its brand name further. K-Star’s share price surged to a record intra-day high of RM1.21 on Nov 30 but the stock succumbed to intense selling, subsequently plunging to end at 45.5 sen last Friday — the lowest close since its debut on Bursa.
  
  Trading volume surged to 27 million shares last Thursday. Over the last three trading days, some 70 million shares or 26.3% of K-Star’s issued capital changed hands.
  
  According to Lim, the moratorium which was applicable to 83% of the company’s shareholding expired last Saturday. K-Star International Ltd is the major shareholder controlling a 58.4% equity stake. Some pre-initial public offering (IPO) investors hold the remaining 24%.
  
  “The moratorium (on K-Star shares) is one of the highest on Bursa Malaysia,” said Lim.
  
  However, under the proposed dual listing scheme, pre-IPO shareholders who have held shares in the company for over 12 months could sell part of their stakes via the TDR programme in Taiwan.
  
  Among the pre-IPO shareholders who can dispose their shares in Taiwan are Skylitech Resources Sdn Bhd, A1 Capital Sdn Bhd (former Golden Eagle Resources Sdn Bhd), Yap Son On and Fortune United Investment Ltd.
  
  This article appeared in The Edge Financial Daily, December 6, 2010.

Ah yes... K-Star the share SOARED recently before it's 'tumble'.

The bigger picture shows it...

The 1 for 3 stock split done at end Oct gave the share 'Kar Yau' factor!!

Posted on 7 Sep 2010: K-Star Wants To Split To Enhance Liquidity And Marketability. Let me reprooduce the entire posting in full here:

>>>

Posted on 25th Aug 2010. A Look At K-Star Sports

It was a simple posting, highlighting the rather optimistic earnings growth projection made by OSK.

What was also interesting was that K-Star appeared in the local news saying it wanted to raise more funds. I found it amusing and I wrote...

------------
According to that OSK report, K-Star raised some 32.9 million for its IPO and K-Star was listed on the 4th June (postponed from 31 May 2010).

It's now 24 Aug 2010 and on today's Star Biz, there was an article on K-Star: K-Star looks to raise funds

• It is looking at options such as rights issue, share placement and even a dual listing in Taiwan

K-Star wants to raise funds???????????????????????

Errr.... is the Malaysian investing public an atm machine?

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

Yesterday, K-Star made an announcement. Instead of the rights issue. share placement or dual listing talk mentioned earlier, K-Star said it wants to do a 1 into 3 stock split!

oO

It's reasoning... enhance liquidity and marketability....

• The Proposed Share Split is expected to enhance the liquidity and the marketability of the K-Star Shares on the Main Market of Bursa Securities and will indirectly encourage a wider spread of public shareholders, ranging from different and diverse type of investors. The Proposed Share Split will also enable the existing shareholders of K-Star to hold a larger number of ordinary shares in K-Star while maintaining their equity interest.

This means that K-Star number of shares would be enlarged from 88,800,000 to 265,400,000 shares.

This is how K-Star had performed since listing...



Yeah... the 'chart' shows that it's 'stock' performance had been rather lacking!

Can a stock split 'improve' and 'enhance' the stock?

LOL! LOL! LOL!

They cannot be serious can they?

Perhaps K-Star should ask some of Mr.Sotong's deep fried associates if they could comment a culinary chef.

Or perhaps K-Star should look at their own earnings performance for the clue why their shares lacks marketability!

As mentioned in the earlier blog posting: A Look At K-Star Sports

• Now K-Star reported its earnings on the 20th August 2010.
  It was K-Star 2nd quarter earnings and K-Star only managed to make 5.94 million, giving it a half year earnings of only 16.467 million. ( see K-Star posts lower 2Q net profit at RM5.94m )

Yes, prior to the listing, K-Star made the following earnings announcement on 31 May 2010. Quarterly rpt on consolidated results for the financial period ended 31/3/2010

It said it earned some 10.542 million.

Then in Aug 2010, after being listed, K-Star's earnings came in at 5.94 million! ( See Quarterly rpt on consolidated results for the financial period ended 30/6/2010 )

Yup!

You said it WALOEHHHHH!!!

And best of all OSK's said in its IPO notes for K-Star listing was that K-Star is projected to earn some 52 million! Yup, OSK based its fair value for K-Star at rm 2.63 based ON that rather optimistic earnings projection!

Apparently, the market currently disagrees with such a valuation!

No wonder... K-Star 'feels' its shares lack marketability!

LOL!

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

Yeah... thanks to the share split and of course the bubbly market, K-Star the share got all the marketability it wanted. It received the 'Kar Yau' factor and the stock soared up, up and away.

But the company was not 'satisfied'.

Perhaps it was aware that...

• Share prices of these companies rallied after announcing the TDR listing. For instance, instant coffee manufacturer Super Group’s share price soared 40% after announcing its TDR programme.

So it too, joined the bandwagon!

But K-Star's TDR involves a massive dilution in earnings!

• K-Star will issue 75.6 million new shares, which are equivalent to 28.4% of its existing issued share capital

Ahem... 28.4% dilution.

Err..... seriously!

What on earth are they even thinking about???? How could they ever possible come up with such a proposal?

Posted last Aug 2010: Ogawa World: Investing In Turnaround?

One of the issues in regarding to investing in turnaround is the 'sustainability' of the turnaround.

• Spotting a turnaround, investing in the turnaround and profiting from the turnaround, is exteremly difficult. The biggest stumbling block is usually the sustainability of the turnaround.

Ogawa reported its earnings recently. It suffered some minor losses. Now this could be tricky. The 'turnaround investor' is now left wondering if the current result is a minor blip or if the turnaround simply could not be sustained...

Here's the updated numbers...

And the balance sheet..



Recent news clip on the Edge.

• Ogawa targets Thailand and India, dips into red in 1Q
  Written by Daniel Khoo
  Friday, 26 November 2010 11:32
  
  KUALA LUMPUR: Ogawa World Bhd, which fell into the red with a net loss of RM135,000 in 1QFY11 ended Sept 30, will expand its market to Thailand and India by the end of its current financial year ending June 30, 2011.
  
  “Yes, we are in talks with distributors in those countries. Our style is to appoint one main distributor who will then in turn appoint the sub-distributors,” its executive director Louis Chong tells The Edge Financial Daily.
  
  The company, which mainly sells massage chairs, is aiming to increase its overseas revenue to 60% of total sales in three years from 45% presently.
  
  Ogawa currently sells its products in China, Hong Kong, Australia, Singapore, Indonesia, Vietnam and Saudi Arabia.
  
  “I see very bright prospects in the Middle East because the lifestyle there is such that they do not have massage parlours unlike here in Malaysia. We see the opportunity there,” Chong said.
  
  “Our (massage) chairs are very popular in Saudi Arabia and we are planning to move into Syria, Bahrain, the United Arab Emirates and Kuwait which will be done by the coming year,” he added.
  
  Chong also said that all their overseas investments are profitable to date and are positively contributing to its bottom line.
  
  He said the company is expected to spend more on advertising and promotion for the coming financial year from about 5% of its revenues to about 8% of its total revenues to gain the upper hand in the competition.
  
  Ogawa does not manufacture its products but instead licenses them out to contract manufacturers based overseas such as in China and Vietnam.
  
  In its 1QFY2011 ended Sept 30 results released yesterday, Ogawa reported a net loss of RM135,000 from a net profit of RM84,000 a year ago.
  
  Revenues for the 1QFY2011 however, inched higher to RM38.24 million from RM35.21 million. Basic loss per share was 11 sen versus 7 sen in the same period a year ago.
  
  Net assets per share as at Sept 30 stood at 53 sen.
  
  The group’s last quarter of loss was 3QFY09. For FY09 and FY08, it recorded net losses of RM12.43 million and RM8.37 million respectively. In FY10, it climbed back into the black with net profit of RM8.3 million.
  
  Quarter-on-quarter, revenue fell 19.8% from RM47.7 million in 2Q to RM38.24 million in 3Q. The group registered a profit before tax of RM120,000 compared with RM5.18 million in the immediate preceding quarter as a result of lower sales and lower margin.
  
  The company said the decline in performance was due to higher operating expenses which resulted in lower operating profit.
  
  “Every first financial quarter, we will usually see slowest growth, then it will usually pick up in 2Q and will remain flat in 3Q and our 4Q will usually be the best performing,” Chong said.
  
  He attributed this to the seasonality factor of its products which will usually see good sales during Father’s and Mother’s Day celebrations.
  
  “Some kids who are already well established usually buy our products for their aging parents as well. That is why we usually see good growth in sales during these times”.
  
  In the notes to its financial results, the company said that retail market conditions remain difficult for the time being and that it will be cautious in managing these challenges as it focuses on executing its medium to long-term growth strategies.
  
  
  This article appeared in The Edge Financial Daily, November 26, 2010.
  
  

Back in early Aug 2010, I gave AirAsia credit. Yeah I did. LOL!

In the posting Positive Move That AirAsia Defers Their AirBus Order, I said the following...

• However, let me say this, I have to give AirAsia some credit for eating the humble pie and for successfully persuading AirBus to allow them to defer the delivery of the air crafts and more so, this move really gives them a fighting chance to survive and to overcome their insanity of building a company which was clearly over burdened by the immense corporate debts they took upon to finance the building of their business.
  
  Yeah.. AirAsia should be ok for the next one year or so... yeah.. this is a POSITIVE CORPORATE exercise... it's certainly extremely crucial that AirAsia made this postponement of delivery.... but... deferring is only a postponement.... and in regardless, these air crafts order still needs to be delivered!
  

And AirAsia the stock had done fairly well since then. (LOL! That would be some major understatement for some)

Air Asia announced its earnings last week.

Was it good?

Everyone thought it was fantastic.

But... but... was it really spectacular for me?

Now since Air Asia had 'borrowed' or perhaps the more elegant word to use is 'financed' its success via massive borrowings, I for one, thinks that it's rather crucial to pay attention to its balance sheet and observe the cash/debts level. And also, since Air Asia had committed itself to a massive aircraft order, observing the capital commitment level is just as crucial.

( * for the record: AirAsia became the world's biggest customer for the Airbus A320-200 after placing an order for 175 aircraft in December 2007, with an option for 50 more. *)

Mentioned in that Aug posting...

• Anyway... a postponement is a postponement is a postponement. Come 2014 (last August AirAsia deferred 8 AirBus to 2014) and 2015, these air crafts still needs to be delivered. Which means, from now till then, AirAsia still needs to ensure that it builds up its cash flow to ensure it can accept delivery of these air crafts that they had ordered. Unless of course, AirAsia can pull off another miracle by asking AirBus to allow them to defer yet once more. :P
  ps: yeah, AirAsia X listing would indeed help AirAsia financials. It too is required. And it is the ONLY OTHER logical and sensible option for AirAsia to rescue its dire balance sheet

Here's AirAsia updated numbers.. (the format of the table would be the same as in the posting Just How Profitable Is AirAsia Since Listing? )

* fy 2007 numbers is a mess because AirAsia changed its financial year end *

Now I may be wrong but I would NOT discount the following from AirAsia earnings. Yes, the earnings table above includes all of these...

1. Forex translation gains
2. Derivative gains/losses in oil hedges
3. deferred tax benefit granted to AirAsia
4. I am lazy! :P

( the forex translation gains is a lot for this quarter, yes? )

So AirAsia 'total earnings' for fy 2010 Q3 stood at some 327.286 million. How impressive is that?

The cash/debt level, has it improved?

The c.c or capital commitment column 'improved'. Would I pay attention to the value? Or should I pay attention to the number of aircraft to be delivered?

To put this capital commitment into simple perspective, on June 2010, from the posting How Good Is AirAsia's Latest Earnings?

• So far, AirAsia has received 70 of its A320 aircraft on order, with another 105 aircraft to be delivered through to 2015. ( Read more: AirAsia seeks to slow down A320 deliveries )

But some would compare current Q3 cash/debts versus end FY 2009 numbers. Yes, some would compare the current balance sheet versus what AirAsia had end of last fiscal year and when one makes such comparison, AirAsia balance sheet certainly had improved, yes?

But.... then.... one should also take into consideration that AirAsia raised some 509.217 million from its share placement sale done end FY 2009.

And then the Amount Owed By AirAsia Subsidiaries! issue.

The current Q3 earnings notes showed that there is certainly much improvement in this area. Yeah, its subsidiaries is paying back the money owed...

The financial (cost)/income table is certainly interesting eh? ( see page 25 of AirAsia's earnings notes)

They said the stock was cheap. It was trading only at 3x earnings only.

They said the stock had potential because '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.'

And so with all these 'right' ingredients, the stock flew up, up and away. ( Chart belows shows P&O when the posting, Regarding P&O: The Stock That Flew Into Orbit, was made on 31st July 2010)


The local media added more fuel by publishing the following article. Prudential UK eyes P&O takeover

Since then... the Prudential deal was discontinued without much explanation. ( Here's P&O announcement: Proposed divestment of an equity interest in Pacific & Orient Insurance Co. Bhd. )

And the cheapness in earnings?

KN blasted out loud that P&O could earn some 32.87 million for fy 2010, when the company was sitting on half year losses of 1.4 million. However, it did not based P&O target price based on its earnings estimate of 32.87 million but it based it on fy 2011's earnings estimates of 43.47 million!!!! And KN based the 3x earnings cheapness on that 43.47 million! ( See Regarding P&O: The Stock That Flew Into Orbit , And So P&O Earnings Are Said To Be Inline With Expectations and For which fiscal year did P&O earned more than 30 million? )

P&O reported its Q4 earnings last week. Its 2010 earnings came in at some 21 million.

KN's estimate again? 32.87 million for fy 2010 and 43.47 million for fy 2011.

So naturally, the earnings was way, way below estimates.

Meanwhile the stock....



Ahem...

How?

And not forgetting in the middle of all this.... a 10% private placement was done...

Some 'interesting' comments from KN from its reported dated 1st Dec 2010.

• Disappointing quarter with full year net profit of RM21.3m (65% of our RM32.9m estimates) due to a huge set back from unexpectedly high effective tax rate of 50% thus dragging group’s performance. During the quarter, the group took a RM8.7m reversal of it’s deferred tax assets that saw DTA down to RM5.8m from 3QFY10 of RM14.5m and hence contributed to higher than expected tax expenses. However, pretax profit of RM42.3m was inline with our forecast of RM43.8m.

Ahem... 65% of our RM32.9 estimates...

• We are taking conservative stance after a dismal FY10. FY11F is reduced 21% to RM34.6m and 28% for FY12 PAT of RM37.7m as we reduce our premium sales assumption to 6-8% from 15% previously.

Conservative stance? FY2011 is reduced 21% to rm34.6million??!!! LOL!

• Target price is reduced to RM0.84 (from RM1.15 previously) based on 6x FY11 while recommendation is also reduced to a HOLD from BUY previously. This values the group at 6x revised FY11 EPS of 14.06sen, which is at the low end of the 6-15x 2010/11 PER of Malaysian general insurers.

Target price is reduced to rm 0.84?!! LOL!

Actually, by itself, P&O performance for this year had been incredible. I have to say that. Take a look at the posting For which fiscal year did P&O earned more than 30 million? again.

P&O 2010's earnings of 21.3 million is the best ever performance from then since 2000.

But the way KN declared the cheapness in the stock was really something else.

Update to the posting Regarding JCY International

On 25th Nov 2010, CIMB 'warned' the potential glitch in earnings...

JCY reported its earnings on 30th Nov 2010.

It wasn't just weak it was horrific!

Yesterday, 1 Dec 2010, CIMB gave it a huge downgrade!

JCY's target price which was 1.88 on 25 Nov 2010 was lowered to just 0.92!!!!!!!!!

Holy cow!

Err.... well on one hand it's certainly GREAT to see CIMB Research realising the potential humongous shortfall in earnings from JCY and forewarned its readers on the 25th but....... the size of the downgrade is certainly difficult to swallow!!!

CIMB yesterday lowered its forecast for JCY's 2011 earnings to just 168.8 million

Lets compare and refer to the posting Regarding JCY International

1. During IPO or April 2010: JCY earned some 207 million for its fy 2009. CIMB says times are good in 2010, so JCY should earn some 359 million! And 2011, JCY earnings will be even more super. JCY should earn some 441 million by then!
2. 21 May 2010 - Target price lowered! fy 2010 earnings is now lowered to 297.3 million and fy 2011 earnings is now lowered to 370.8 million
3. Monday, 23 Aug 2010 - CIMB to earn some 263 million for its fy 2010. And ....... for fy 2011, JCY is now projected to earn only 304.7 million

How?

Incredible isn't it?

During IPO, April 2010, CIMB valued JCY target price of 2.68 based on 2011 earnings estimate of 441 million.

It's now only Dec 2010. CIMB has slashed JCY target price to just 0.92 based on 2011 earnings of just 168.8 million.

From the posting: Regarding QL Again

• K C said...
  
  Is debt bad?
  Corporations borrow money to do business and investors earn amplified returns from the financial leverage. There is an option value of a leveraged business. Hence borrowings is not a bad and in fact it is good thing provided that the borrowings is not excessive and it earns a return higher than the after tax cost of borrowings and that EBIT is able to pay the interest costs comfortably. In QL Resources case, with a relative high leverage of 2.35, QL obtains an excellent ROE of 22% (>15%). ROIC is about 13.5% (>12%), showing a good utilization of capital. Times interest earned is 10 and with good cash flows from operations. Hence I think the management of QL has done a good job in growing the company with proper utilization and management of debt.
  

Many thanks K C for sharing your opinions.

Let me just share it here so that everyone can have a more 'balanced view'.

More outflows seen...



And that's 30 weeks of continious fund outflows seen. Americans are simply taken out more and more money from their domestic equity funds.

Does it matter?

Does 94 billion taken out since 28 April 2010 matters?



Past postings:

• Another Week, Another Outflow
• More Fund Outflows Seen
• Equity Fund Sellers: They Are Baaaaack! 87 Billion Redeemed
• Equity Fund Outflows Shrinks Once Again
• Smallest Outflow Seen In Equity Funds
• Shh.. Remember The Market Is Getting So Hot...Let's Not Mention The Fund Outflows
• Shh.. Market's Going Higher, Let's Not Mention The Fund Flows Or Better Still Let's .....
• 20 Consecutive Weeks Of Fund Outflows And 71 Billion Withdrawn From Equity Funds
• More Money Redeemed From Equity Mutual Funds65 Billion Outflow From Long Term Equity Funds
• 58 Billion Reason Why Americans Thinks Their Stock Market Sucks!
• Americans Pulled USD 53.279 Billion Out Of The Equity Markets
• Stocks Rally And US Equity Investors Rallied To Get Out Of the Equity Markets
• Main Street Telling Wall Street That The Equity Markets Stinks!
• Stocks Are Flying To The Orbit But Investors Keeps Cashing Out!
• Since 28th April 2010, Americans Pulled USD 42.116 Billion Out From Equities!
• more here