Zelan Hit By Massive Losses

In the posting, So What Is OSK Saying Now About MMC, one of the stuff mentioned was the continued losses in Zelan.

Zelan announced its earnings last Thursday, 27th May 2010.

I was expecting losses from Zelan but the size of the losses were staggering! 184 million in losses for the quarter and over 254 million in losses for the fiscal year!

What was glaring for me in Zelan's balance sheet was its trade receivables. It stands at a whopping 621 million and needless to say the massive decline in cash balances as shown in the balance sheet snap shot below.


Back in 2008, it changed it's financial year end. See earnings report on May 2008: Quarterly rpt on consolidated results for the financial period ended 31/3/2008

See how Zelan's receivables simply exploded when once compares Zelan's receivables ending at 31st March 2008 with 31st Jan 2007? 31st Jan 2007, Zelan's receivables was at 206 million. At 31st March 2008, receivables blew up to 805 million!

A year later in 2009, Zelan recorded its first annual fiscal losses. Quarterly rpt on consolidated results for the financial period ended 31/3/2009

It's receivables 'fell' or 'improved' to some 705 million. And cash balances is now at 92 million.

Today receivables is at 621 million. Cash balances at 43 million.

How?

On one hand, we can say Zelan's receivables have indeed been 'improving' since May 2008. But at 621 million, the receivables is a lot. the size of the receivables is a worry. Why? Because the longer it remains in the balance sheet, the receivables do have to be reevaluated and if it cannot be collected, it has to be reclassified as bad debts and ultimately Zelan would be hit by bigger losses caused by provision for bad debts. (Yeah, some would ask how did the amounts receivables got so big in the first place?)

And due to the size of the losses, Zelan the stock, is getting hit big time. At this moment of time, Zelan last traded at 47 sen.

Here's Zelan's most recent 3 year stock chart.