Is It That Difficult to Spot A Potential PN17 Stock?

Posted by Blogger Dali, Smells & Look Like ...

• Countering The BS: Really hate it when people speak and they bypass their faculties. People think I say mean things, no, I just like to put idiots in their place or else idiots will be running riot. I can be an idiot too, just call me on it when I do stupid stuff. This is the Remisiers association, and their advice to Bursa is to appoint or talk to an investment bank first before putting a company to PN17 ???? I am sure the view is NOT shared by the majority of remisiers.
  
  The Bursa has clear guidelines on when a company goes into PN17, it is not arbitrary or without warning... (do read rest of his wonderful posting here.

What was initially published on Bernama was indeed truly shocking.

• The Remisiers Association of Malaysia (Persama) has urged Bursa Malaysia to consult investment banks before putting a company under Practice Note 17 (PN17) status, said president Sam Ng Soon Lee.
  
  “We (Persama) would like to suggest that next time Bursa Malaysia wants to put any company under PN17 status, they need to consult an investment bank first. This will protect investors and it will be fair to the listed company,” he said after the association's AGM on Saturday.
  
  PN17 refers to a company in financial trouble because successive losses have eroded its shareholders' funds or the company has ceased its business operations. A PN17 company is required to regularise its condition within a certain timeframe, failing which the stock would be suspended from trading and face delisting procedures.
  
  According to Ng, more than 100 companies have been delisted. On the outlook for the local bourse, he said: “It is positive provided that the policy on PN17 is amended. PN17 policy has affected investor confidence.”
  

That set of comments were truly shocking. I mean, is it really that difficult to spot a poor performing stock?

Hmm... one of the newest entry into this sector is Liqua Health.

Let's have a quick look at this stock.

From klsetracker:

Look at the massive amount of losses posted by this company.

Surely, one could easily tell that the quality of this stock is lacking.

And this is Liqua's most recent reported quarterly earnings: Quarterly rpt on consolidated results for the financial period ended 31/12/2007. Liqua reported total net losses of 11 million. Accumulated losses are more than 108 million!

The below is the screenshot of Liqua's Balance sheet then.

Again, is it difficult to conclude that the quality of Liqua as a stock is lacking and that massive risk will be involved if one decides to 'invest' in Liqua?

Is it?

And I fully agree with Dali on the following point.

• Putting more companies into PN17 does NOT rob the market of its confidence, if anything it restores confidence to the maketplace as regulations are properly imposed and carried out, not just wishy-washy rules being skirted or never used in reality. In fact, I still feel companies are still not being delisted quickly enough even now. You want 600 decent companies rather than 1200 so-so companies. The longer these dying companies stay around, most will end up being syndicated plays on their last legs - only if you want that scenario to dominate the local markets, then by all means prolong the PN17s.

Yes Dali, I do smell the stench!