Update On Green Packet As Its Losses Increased More Than Sevenfold

On Business Times. Green Packet Q1 loss widens on broadband rollout cost

• GREEN Packet Bhd (0082), a company that develops telecommunication solutions and offers wireless broadband services, said its first-quarter net loss widened more than sevenfold despite higher revenue, due to the cost of rolling out its wireless broadband services.
  
  Net loss for the first quarter ended March 31 2009 rose to RM22.22 million from a loss of RM2.7 million a year ago. However, revenue almost doubled to RM41.5 million, aided by its growing solutions and broadband services.
  
  Green Packet group chief executive officer and managing director Puan Chan Cheong (above) said its solutions business is expected to be profitable in the second half of this year, thanks to overseas demand
  
  "We have seen some orders, but the momentum is not strong yet," he told reporters after the group's annual general meeting in Petaling Jaya yesterday.
  
  The group also plans to list its WiMAX unit Packet One Networks (Malaysia) Sdn Bhd (P1) as early as next year.
  
  P1's listing plan is one of few options the group is considering to raise funds for P1's expansion plan over the longer term. The other options include getting a strategic partner, bank borrowings, via P1's cashflow and others.
  
  "By the end of this year, P1 would be Ebitda (earnings before interest, tax, depreciation and amortisation) break-even and will be cashflow positive from next year," said Puan.

Oops. Got to add in some of my flawed comments right here.

When the CEO talks about EBITDA when the company suffers massive losses, you know what to expect from the company.

As mentioned the other day. EBITDA is earnings before interest, tax, depreciation and amortization.

And for the minority shareholder, what good is the EBITDA? Not a whole lot because the ITDA is real.

The Interest cost from the capital funding incurred by the company is real. Some call it the cost of capital. So is the taxes.

And all capital equipment will become obsolete one day. This is why depreciation costs is real.

So what's good to talk about EBITDA?

EBITDA is not profit!

The taxes has to be paid! The capital expenditure costs are real!

And to talk about year end target of break even in EBITDA is an even more uncomprehendable to me.

Show the investors the real profit!

• Green Packet is also planning a rights issue to raise funds for P1.

LOL!

A rights issue?

Oh, and wasn't it was just three months ago, in Feb 2009, What Is Green Packet Saying Here??

Let me quote again. "We have the cash ready for it and we also see cash flow coming in."

Well where is the moola now???

• The exercise involves a renounceable rights issue of up to 208.32 million new shares and 208.32 million new warrants, on the basis of one rights share with one warrant for every two existing Green Packet shares. Price per unit for the rights issue is yet to be confirmed.
  
  In its filing to Bursa Malaysia yesterday, Green Packet said the proposed rights issue is expected to raise some RM98.81 million to RM104.16 million in gross proceeds, based on the indicative issue price of 50 sen per rights share.
  
  P1 chief executive officer Michael Lai said it plans to expand its wireless broadband coverage in the country to 35 per cent by year-end. It currently has about 35,000 subscribers. - By Goh Thean Eu

How?

In a business where capital expenditure is massive and yet the return is lacking, I find it so hard to understand.

And worse still, Green Packet isn't the only company with their multi-million dollar fishing equipment trying to fish from this small pond!

And even worse still, them fish do have alternative pond to swim!!

How now my dearest Brown Cow?

Does this looks like an extremely profitable business to be in?

Here are some other postings of interests that might interest.

• Comments On YTL's RM3 Billion Broadband Venture (recommended)
• Green Packet Again
• A Look At Green Packet Quarterly Earnings.
• About Green Packet (recommended)
• What Is Green Packet Saying Here?? (recommended)