Megan

For those that know me would realise that I am extremely prejudiced against Megan Media for as I view it as an unreal potential investment trap. Why an investment trap? Yes, Megan reported earnings does looks interesting given its current traded share price (rm 1.04) but there are just simply too many faults within the company’s fundamentals.

Why the continued interest in it?

Err..case studies on shares like Megan Media are simply great for it teaches the investor what to watch out for and to understand the potential pitfalls in an any investment.

Hence, it was no surprise that I paid some kind of attention on today’s write-up in Star Business: Megan Media

I almost die-larfing when I read the following…

To handle the repayment of its RM385.45mil borrowings (incurred to fund the expansion of its production lines), Dr Adam said: “We are cash rich and should not have any problems.”

So how does one define being cash rich?

First of all, the initial statement isn’t even correct!

Take a look at Megan’s total borrowings as stated in Megan’s own earning notes:

Click here

Doesn’t it not state that Megan’s total net borrowings totals 634.871 million?

Isn’t it such a blatant shenanigan?

So how much does Megan has in its piggy bank? Err… 24.160 million.

Sooooooooooooooo u have 24.160 million… but u have loans totalling 634.871 million. Like this u call cash rich ka? ( click here )


Amazing isn’t it?

And if u look at the above cash-flow link again…another classical example of another company which consumes cash more than it can generates!

Company announced in its lastest quarterly earnings that it made 12.969 million ( down from 21.1 million a quarter ago) for the first quarter of this current fiscal year.

Cash at the start of the quarter was 29.571 million. Cash at end of the period was only 24.160 million. So despite saying it made 12.969 million, the bottom-line, the company’s piggy bank shrank by some 5.411 million.

Worse still…if I compare based on a quarterly basis, total borrowings increased by some 41.88 million if i compare with Megan’s previous quarter. The piggy bank moola shrank and the bank loans increased.

Net profit margin shrank.

And then their trade receivables increased by some 17 million to an unbelievable 270 million! Holy moo-moo cow! What kind of business is Megan running? Selling without collection?

So when this bugger PROMOTES Megan in the media by proudly proclaiming that Megan is cash rich and should not have any problems handing their debts…

Err…. isn’t it just way too farnee????

Me thinks so lah!

Oh, given that Megan’s core product is technology based, shouldn’t there be a concern if its product has a sustainable competitive advantage?

Think of the current situation: Megan is consuming cash faster than it can generates. The Godzilla-sized debts issue. The trade receivables build-up issue.

Given such issues and concerns…say if I am a potential investor… if these issues represent the clear and present issue that Megan has to address… what’s left for me, the kuci-kuci mai investor if Megan's product suddenly gets out-dated? Technology mah.

How?

What about this thing called the thumb drive? Isn’t it such a handy little new thingy? Isn’t it so easy to use?

How?

Do u think it is wise to invest in Megan?

Surely there is another much better alternative investment out there for me and me moola.

Tiok boh?