How Much Fine For Cooking Your Books? Part IV

This one?

In Chinese, if I am not mistaken, it says 'Big Pan'!

• Directors jailed, fined over Suremax share manipulation
  Written by Financial Daily
  Thursday, 13 January 2011 14:23
  
  KUALA LUMPUR: The Kuala Lumpur Sessions Court yesterday sentenced Datuk Phillip Wong Chee Kheong and Francis Bun Lit Chun to 24 months’ imprisonment and a fine of RM3 million (in default six months’ imprisonment) and three months’ imprisonment and a fine of RM2 million (in default six months’ imprisonment) respectively for their involvement in the manipulation of Suremax Group Bhd shares.
  
  Judge Komathy SM Suppiah said: “The court has to set imprisonment terms as the new benchmark in securities cases. The securities market should be real and genuine. Market manipulation is a serious offence affecting the confidence of investors and thus an imprisonment sentence should be meted out.”
  
  In a statement issued yesterday, the Securities Commission (SC) said that on Jan 7, 2011, Wong, 48, and Bun, 41, were convicted under s84(1) of the SIA for creating a misleading appearance of active trading in shares of Suremax by trading in nine accounts without any change in the beneficial ownership of the shares on the stock exchange. They had been charged on Oct 25, 2005 with 38 witnesses called by the prosecution. Both accused testified when their defence was called.
  
  The SC stated that it would take whatever action necessary to protect investors and to maintain a fair and orderly capital market.
  
  “We will continue to proactively pursue market misconduct cases because such activities severely undermine investor confidence and tarnish the reputation of the Malaysian capital market,” it said.
  
  
  This article appeared in The Edge Financial Daily, January 13, 2011.
  

Err... "a fine of RM3 million (in default six months’ imprisonment) and three months’ imprisonment and a fine of RM2 million (in default six months’ imprisonment) "

Err... errr ...... liddis also can ah??????????????

So how brown cow?

Anyway, me still confuse hor.

The other case. The Mems case. How Much Fine For Cooking Your Books? Part III

• MEMS was to rectify the financial statements by excluding RM49.183 million from its revenue for all the three financial statements.
  
  The basis of the SC's directive was that the amount was derived from transactions that never took place in the respective financial years and period.

Because of these transactions that NEVER took place, Mems were rated as a high growth stock, yes?

Wasn't that NOT the case?

And because it was deemed such a growth stock, the market valued MEMS favourably.

yeah... Mems were worth some 512 million plus!

And then.... now.... today... we learn these so-called transactions never took place.

(ps. recording transactions that never took place, this one serious or not serious? )

Eerrr.... how much the fine?

• a six-month imprisonment term and a fine of RM300,000 each!!

Err...

Errrrrrrrrrrrrrrrrrr ......

How ah?

Read more...

How Much Fine For Cooking Your Books? Part III

On today's Business Times:

• Heavier sentence for 2 ex-MEMS directors
  
  Published: 2011/01/12
  
  THE High Court has allowed the Securities Commission Malaysia’s (SC) appeal against the Sessions Court’s sentence of RM300,000 fine each on the former directors of MEMS Technology Bhd, Ooi Boon Leong and Tan Yeow Teck.
  
  The High Court retained the Sessions Court’s original fine and enhanced the sentence with a six-month imprisonment term each following the appeal by SC for a higher sentence in view of the severity of the offence.
  
  In February last year, Ooi and Tan, had pleaded guilty before the Sessions Court and were fined RM300,000 each for authorising the furnishing of misleading information to Bursa. — Bernama

Only a six-month imprisonment?

Posted 9th Oct 2010: Lack Of Punishment For Corporate Crimes!

• And then the Mems Technology fiasco!
  
  I could be wrong but I felt it was important because Mems Technology was highly regarded by the local brokerage houses. All of them gave the stock a high recommendation.
  In the posting MEMS Told To Correct Its Financial Statements!, I noted that ".. by overstating its earnings by a mere 8 million, based on market capital, Mems managed to value itself 531 million. ". Mems on the date of that posting, on 28th Oct 2009, has a market capital of a mere 42 million!"

30th June 2010: Have You Taken A Look At MEMS lately?

• MEMS was to rectify the financial statements by excluding RM49.183 million from its revenue for all the three financial statements.
  
  The basis of the SC's directive was that the amount was derived from transactions that never took place in the respective financial years and period.
  

Transactions that NEVER took place!

YES! That bad!

Insane isn't it?

All one need to do is add in sales transactions that NEVER existed and the stock market will value your company by some extra 500 million!

500 million!

And your fine?

300,000 fine and a 6 month jail term?

Is that enough?????

See also: How Much Fine For Cooking Your Books? and How Much Fine For Cooking Your Books? Part II

Read more...

Have You Taken A Look At MEMS lately?

It was October 2009 that I last wrote on Mems: MEMS Told To Correct Its Financial Statements!

Key issue pointed by the news article was the following..

• In a statement issued yesterday, the SC said it viewed MEMS' non-compliance with the FRS118 "Revenue" "very seriously".
  
  On August 4 this year, the SC directed MEMS to rectify and reissue its accounts for the financial years ended 2007 and 2008. MEMS was also to rectify and announce to Bursa Malaysia its unaudited condensed consolidated income statements for the six months ended January 31 2009.
  
  MEMS was to rectify the financial statements by excluding RM49.183 million from its revenue for all the three financial statements.
  
  The basis of the SC's directive was that the amount was derived from transactions that never took place in the respective financial years and period.
  
  Investigations by the SC revealed that the group's revenue of RM53.699 million reported in the 2007 financial statement contained bogus sales of RM13.007 million, while the revenue of RM71.994 million reported in 2008 contained RM24.161 million sales which did not take place.
  
  For the six months ended January 31 2009, MEMS reported revenue of RM37.366 million, of which RM12.015 million sales had not been transacted.

Transactions that NEVER took place according to SC!!

Yeah. That bad.

Last night Mems reported its quarterly earnings. Its review of performance was interesting for me.

• For the quarter under review, the Group generated revenue of RM0.29 million, representing a decrease of 98.50% from the revenue of RM19.27 million recorded in the corresponding period of the previous year. The Group posted a loss before tax (“LBT”) of RM3.17 million for the quarter ending 30 April 2010 representing a decline of 489.68% against a profit before tax (“PBT”) of RM0.81 million for the corresponding period of the previous year.
  
  The Company provided full impairment of assets in its Penang plant as the management do not intend to resume operations after its cessation in September 2009. The Group has resumed operations of its Johor and Singapore plants albeit at a substantially reduced scale pending the restructuring of the Group.

The full impairment of assets issue was rather interesting.

You see, many investors like to find 'value'. Yeah, everything has some sort of value. Good or bad, there's some sort of value. As long as one buy cheap enough, one can make.

Well, I don't totally disagree. Take a broken laptop. As badly broken itself, if you can find someone offering some money for it. Not a lot but some, maybe 10 or 20 bucks! (I am not too sure ok, so don't take that statement as the holy grail because conditions do vary!)

So for stocks, good or bad, there is some sort of value in the stock. Heck, some even dare say that the listing status could be sold if the company is lucky and manage to find a kind buyer.

So some people invest in stocks using yardsticks like NTA or RNAV.

Now back to Mems. Mems is now saying it has provided full impairment of assets for its Penang plant.

Now if one look at Mems most recent 5 quarterly announcements, one would find a very interesting read. (10 Q3 earnings was reported last night)

Here are my comments on the numbers

1. Sales. Company's most recent quarterly sales is now only 29 thousand!!!!! Holy cow!!!

And this is a listed entity? A stock? And yeah.. during its peak, Mems had a traded market value of over 530 million! I wonder how much did the 'transactions that NEVER took place' helped the stock to trade so highly!

2. Earnings. 4 quarters of losses. Even without the write down, sales is only 29 thousand. How much profit can Mems make in the future with such sales revenue?

3. Cash. 288 thousand????

4. Debtors or Trade receivables. 09 Q4 and 10 Q1 saw the company write off the bulk of their high trade receivables. Again point to note that when trade receivables soars too high, sooner rather than later, it will be written off as bad debts. And the company will suffer losses! And the losses could be really huge if the debts to be written off is huge!

4. Plants.

Yes... that's the most glaring thing now.. the assets!

Look at the last column, Plants or plant and machinery stated in Mems 09 Q3 earnings was worth 90.265 million. Now since the company said it did not intend to resume operations since its cessation in Sep 2009, by logical reasoning, the plants and machinery is certainly worthless! Which means, the company has to write off the plants and machinery! Yup impairment of assets.

The bottom line? The assets of its plant and machinery stated in its 09 Q3 earnings was 90.265 million. Today, Mems plant and machinery is only worth 28.925 million!

The chunk of impairment made on its assets was rather drastic, yes?

And this is where the potential risk/danger in investing based solely on NTA. Yes, on one hand, to know the company has tons of assets is certainly a plus. However, sometimes, in rotten cases (remember Megan? loans taken to buy non existent factories and plants?), the assets can be written down big time!

Read more...

The Receivables Issue, MaeMode, Mems And Megan

Comments from the posting MaeMode And Its Receivables Again!

• solomon said...
  With receivables 1.5x of shareholder equities and the company's RM300 million loans, I think this company financial is very very weak.
  
  From the company cashflow statement, interest paid per quarter is RM7million x 4 quarters = RM30mil annually. The cash balance of RM31mil is only managed to pay off the one year interest.
  
  Brother Moolah, "pi po pi po" I think this company need a financial doctor ASAP.///If the bankers pull the brake, could it be the next LCL? Please advise me.

I actually feel that it's difficult to predict if any company would be the next company 'like' LCL. Nothing in life is ever truly certain and in the corporate anything that might happen could happen. And the unexpected could certainly happen too.

So would MaeMode turn into a LCL?

The issue of trade receivables is so simple for me. Company makes sales, company should collect them sales. All of it. A sale is never a sale until ALL the money is collected.

Which is why when I look at a company's balance sheet, I would not like to see high receivables increasing.

Obviously this would suggest to me that 'most likely' the management is either lousy because the company is not able to collect the money due to them. (yes, I would not complicate things here by suggesting fake sales - so for simplicity sake, let's assume all sales and receivables are legit).

And to make matters even illogical is when I see the company's debts increasing at the same time too.

It just does not make sense.

Why borrow more from the bankers when there are already so much money owed to the company?

Why can't the company collect these money instead of borrowing more?

And from a business point of view, if one is offered to be a co-owner of such a business, would such a business proposition appeal? Won't the logical answer be NO? Why would one want to be a co-owner in a business which requires more and more funding when it cannot collect the money owed to them?

And since I equate investing to owning a business, I would always, always shy away from such business opportunity. No matter what future prospect the company says it could achieve because in the long run, for me, without collection, such a business would most likely go no where.

Of course, having said that, I understand I could miss out on one or two opportunities! Such mindset is never 100% fool proof because because sometimes the wheel of fortune could really turn for such a company but this is something I would not want to bet on it because I am merely speculating that changes out of the blue could happen. I would rather forgo such an opportunity and invest in a company which has no such risks.

And sometimes, being safe, does work. Ok, I am not bringing out the goats from the farmville and let them gloat all over this posting but let me show an incident where investing using such a mindset did work out. It did prevent the investor from losing their money.

Here's my most famous example written way back on Oct 2005, Megan

• 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?

Yup, the classical selling without collection and debts increased soared too. Rest were history as Megan turned into one massive accounting fraud!

Or how about Mems technology. Yet another deeply troubled company too. From the posting Mems Tech Directors Charged!!

• A couple of months later, I wrote A Brief Look at Mems Latest Quarterly Earnings
  
  It was astonishing! All the warnings signs were lit. Trade receivables were insanely high when compared to its sales revenue. Cash depleted to a mere 3.191 million and loans increased by 7.441 million to 50.796 million!

Now coincidentally Mems reported its earnings last night.

It lost an incredible 21.1 million!

And the main culprit? A 20.9 million provision for doubtful debts!!!

Yup, as mentioned in yesterday's posting MaeMode And Its Receivables Again!

• And I wonder, since it's the receivables are in MaeModes books for so long, what if these receivables are scrutinised and review in depth? What if a huge portion needs to be reclassified as doubtful debts??? And when this happens, due to size of the receivables, won't MaeMode get hit by huge loss provision for these doubtful debts??

Again this is a possibility yes?

Maemode's receivables is at a totally unreal 355 million!

It's simply way too much!

And for the long term investor the risk has got to be what if these debts needs to be reclassified as doubtful debts??? Won't MaeMode get hit by huge loss provision for these debts???

Read more...

MEMS Told To Correct Its Financial Statements!

On Business Times:

• THE Securities Commission (SC) has instructed microelectronics maker MEMS Technology Bhd (MEMS), for the second time this year, to comply with the applicable financial reporting standards by adjusting its reissued financial statements dated October 7 2009.
  
  The regulator is giving the ACE Market-listed company 14 days to do so.
  
  The statements issued were for MEMS' financial years ended July 31 2007 and July 31 2008 as well as the quarterly report for the six months ended January 31 2009.
  
  MEMS is also required to announce to Bursa Malaysia the adjustments made, reasons for the adjustments and their detailed effects on the company's financial statements.
  
  The decision came after MEMS' admission in its reissued financial statements that they were not in compliance with the financial reporting standards, FRS118 "Revenue".
  
  In a statement issued yesterday, the SC said it viewed MEMS' non-compliance with the FRS118 "Revenue" "very seriously".
  
  On August 4 this year, the SC directed MEMS to rectify and reissue its accounts for the financial years ended 2007 and 2008. MEMS was also to rectify and announce to Bursa Malaysia its unaudited condensed consolidated income statements for the six months ended January 31 2009.
  
  MEMS was to rectify the financial statements by excluding RM49.183 million from its revenue for all the three financial statements.
  
  The basis of the SC's directive was that the amount was derived from transactions that never took place in the respective financial years and period.
  
  Investigations by the SC revealed that the group's revenue of RM53.699 million reported in the 2007 financial statement contained bogus sales of RM13.007 million, while the revenue of RM71.994 million reported in 2008 contained RM24.161 million sales which did not take place.
  
  For the six months ended January 31 2009, MEMS reported revenue of RM37.366 million, of which RM12.015 million sales had not been transacted.
  
  These sales were recorded in the financial statements of MEMS' wholly-owned subsidiary, Senzpak (M) Sdn Bhd.

Yup!

This is one reason why I do not take SALES growth seriously. Sales revenue means nothing when the sales growth does not improve a company bottom line.

Anyway, I seriously believe MEMS Tech should be SANCTIONED for what they did.

By including these revenue that HAD NOT been transacted, it gave the ILLUSION that Mems tech were a HIGH GROWTH company.

And don't we all know how the stock markets love high growth.

5th April 2008, I wrote Mems Technology Again!

• So by overstating its earnings by a mere 8 million, based on market capital, Mems managed to value itself 531 million. And if compare to the present value market value of 95 million, this overstating of earnings caused the company to be over valued by as much as 436 million!!!
  
  How?
  
  Overstate your earnings by a mere 8 millions and the stock market could reward you by valuing it an extra 436 million!!!

Mems present day 28th Oct 2009, has a market capital of a mere 42 million.

So the question that needs to be asked... DID MEMS TECH BENEFIT FROM INCLUDING TRANSACTIONS THAT HAD NOT OCCURED INTO ITS ACCOUNTS?

My answer is a clear YES!

Past postings on Mems: here

Read more...

Mems Tech Directors Charged!!

Mems had been featured many times on this blog. In fact, the first posting ever made on this blog was based on this stock, way back in Oct 2005!! :D

If you would indulge with me, let's take a trip back in time.

1. Mems..
2. Mems: Part II
3. Mems: Part III
4. Mems: Part IV
5. Mems: Part V
6. Mems: Part VI

I had questioned the extremely bullish earnings expectations for the stock from folks like S&P, OSK, and CIMB. Hard to fault them entirely as the company itself was making extremely optimistic statements in press conferences. (see Mems: Part IV ).

And I highlighted very fact that the cash flow balances were so questionable! ( see Mems: Part VI )

Then on 21 November 2007, OSK Research did a rarity by making a warning on MEMS. Yes, it did and I was impressed with what OSK did. (See OSK comments on Mems )

Six days later, all hell broke loose! Update on Mems Accounting Issue

• In light of the above, and after due deliberation, the Board has resolved not to recognize revenue of RM19.72 million. As a result of this, the unaudited consolidated revenue for the financial year ended 31 July 2007 will be revised to RM53.7 million. This will consequently result in the unaudited profit after tax for the financial year ended 31 July 2007 to be reduced from RM21.47 million as announced on 27 September 2007, to RM13.45 million.

The amount was not HUGE at all but the implication was so crucial.

Without the disputed 8.02 million (Mems on that day said its earnings was reduced from 21.47 to 13.45 million), this would mean it changed the whole complexion for the stock.

The stock would HAD NEVER been branded as a GROWTH stock and with it, the higher earnings expectations (see initial posting on Mems on S&P high earnings expectations on Mems in the posting: Mems.. ) and the higher earnings multiple.

In layman terms, the stock should never had traded as high as it did!

And so I wrote on More on Mems Restating of Its Earnings and made another update posting, Regarding Mems Again...

And the point I made was..

• So if the market valuation now is about fair for a company making only 13 million, then Mems is worth only some 163 million. However, due to the overstated earnings, MEMS was valued as much as some 531 million!!!

All thanks to overstating of the earnings by a mere 8.02 million!

And a couple of months later, on 12 Feb 2008, I wrote Unnamed Sources Strikes On Mems!. The stock surged by an incredible 42% thanks to unnamed sources mentioned on the Edge article ( see The said article on Mems ).

• A business weekly reported last weekend, citing unnamed sources, that new information had surfaced that may soon get the company out of the problems it is in

But no OFFICIAL news was released by Mems itself! And on 25 Feb 2008, the stock fell back to 13 sen! See What now for Mems Technology?

And the most glaring issue during this period was AKN Equity disposing tons of Mems shares during this period! ( See Unnamed Sources Strikes On Mems! )

Here's the announcement posted on Bursa: Changes in Sub. S-hldr's Int. (29B) - AKN EQUITY VENTURES SDN. BHD. See the massive disposals made by AKN Equity from 11 Feb 2008 to 13 Feb 2008!!

And on 29th Feb 2008: Mems Technology Will Be Suspended!!!!!!!!

Suspended until further notice!!!!

By April MEMS Tech: Still Unable to Produce Quarterly Earnings!. I even made a review on Mems again. See Mems Technology Again!

A month later, Mems finally announced its quarterly earnings. See A Look At Mems Technology Again

And it was incredible that on 31 May 2008, Mems Asks For Support!!

• Executive director Tan Yeow Teck said its board of directors has explained all the circumstances of the accounting issues to the shareholders present at the meeting.
  
  "On hindsight, we believe this whole thing may not have happened if we've talked to the auditors up front," Tan said, referring to its external auditor KPMG, which raised concerns about certain transactions relating to the firm's revenue, property, plant and equipment last year.

A couple of months later, I wrote A Brief Look at Mems Latest Quarterly Earnings

It was astonishing! All the warnings signs were lit. Trade receivables were insanely high when compared to its sales revenue. Cash depleted to a mere 3.191 million and loans increased by 7.441 million to 50.796 million!

And finally today we read that Mems Tech directors charged!!

• Mems Tech directors charged
  Written by Sharon Tan
  Thursday, 16 April 2009 12:23
  
  KUALA LUMPUR: Mems Technology Bhd (Mems Tech) directors Ooi Boon Leong and Tan Yeow Teck separately pleaded not guilty in the Sessions Court here today to a charge of furnishing misleading statements to Bursa Malaysia Securities Bhd.
  
  The duo were charged by the Securities Commission (SC) under Section 122 of the Securities Industry Act 1983 for knowingly authorising the furnishing of a misleading statement concerning Mems Tech’s revenue of RM73 million for the 12-month period ended July 31, 2007 to Bursa Securities.
  
  Judge Rosbiahanin Arifin fixed the joint trial for Oct 5 to 9, 2009. If found guilty, Tan and Ooi can be fined a maximum of RM3 million each or jailed up to 10 years or both.
  
  The court set a bond of RM200,000 for each defendant with two sureties. Tan and Ooi were also required to surrender their passports but could make an application to the court for their passports if they were required to travel for business.
  
  Ooi, 48, a director of the Mesdaq Market company, was appointed to the board on Nov 30, 2000. As of Feb 13, 2000, he held a direct stake of 4.82% comprising 31.61 million shares in Mems Tech. Ooi is also a director and group chief executive officer of AKN Technology Bhd.
  
  According to the company’s annual report, Tan, 48, was appointed to the board on June 28, 2006. He is the executive director and also the chief financial officer of the company.
  
  Mems Tech’s substantial shareholders include AKN Equity Ventures Sdn Bhd with a 10.42% stake comprising 68.35 million shares and Lembaga Tabung Haji with a 9.95% stake or 65.25 million shares.
  
  Mems Tech, which is involved in microelectromechanical systems products, had failed to finalise the audited financial statements for financial year ended July 31, 2007 and quarterly report for the period ended Oct 31, 2007. The audited income statement for the year was later announced on April 24, 2008 containing a disclaimer by the company’s former statutory auditors, KPMG.
  
  On Dec 24 last year, Mems Tech announced that the suspension of trading of its securities and the commencement of the delisting procedures against it was deferred pending the decision on its application by Bursa Securities. It is asking for a waiver to submit a regularisation plan. The stock yesterday fell 0.5 sen to 8.5 sen with 1.67 million shares traded.
  
  Earlier in March, the SC charged Tan Chin Han, the former chief executive officer and executive director of Welli Multi Corporation Bhd, for knowingly authorising the provision of a misleading statement to Bursa regarding Welli Multi’s revenue.

Read more...

A Brief Look at Mems Latest Quarterly Earnings.

Mems reported its earnings on 30th June 2008 and I decided to have a brief look at the concerns mentioned on the blog posting Mems Asks For Support!!

Let me repost briefly what was said then. I will add in new comments in red fonts.

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

2. How is Mems doing now? I took a look at Mems finally released quarterly earnings early this month, A Look At Mems Technology Again

• Now that Mems had finally reported its earnings and resumed its trading, I thought I take a look at Mems again.
  
  Quarterly rpt on consolidated results for the financial period ended 31/1/2008
  
  Net earnings was only 1.434 million from sales revenue of 16.464 million. Only 1.434 million. This is utterly smallish eh? ( Net earnings decreased to 79 thousand from sales revenue of 19.913 million! Rather poor yes? )
  
  Let's look at the Balance Sheet.
  
  

  
  Trade receivables now totals at 34.998 million. ( Trade receivables has increased to 41.283 million!!!!!!!!! Given the fact that Mems reported a net earnings of a mere 79 thousand, the receivables increased by a whopping 6.285 million! Something is terribly wrong here! )Reported period is at 31st January 2008. Compare to the column on left, receivables were only 22.824 million. Which means receivables increased a whopping 12.174 million. Which is extremely massive when the company's net earnings is only 1.434 million for this reported period.

  Cash and bank balances as at January 2008 shrank to 9.874 when compared to July 2007's balance of 18.995 million. ( Cash balances shrank to 3.191 million! )

  And the below table highlights Mems' liabilities:

  
  Total loans as at 31st Jan 2008 is at 43.355 million compared to a loan total of 34.267 million in July 2007. An increase of 9.088 million in loans. ( Total loans is now 50.796 million. Increased by 7.441 million! )
  
  How?
  
  As it is what do you see?
  
  I see its net earnings as rather extremely small with low profit margins with a rather below average set of balance sheet. Receivables and debts are increasing while cash is shrinking!

How?

Well, earnings got even worse. Cash balances shrunk while loans increased. And the trade receivables are totally unreal at 41.283 million!!!!!!!!

Mems last traded at 0.085!

Read more...

Mems Asks For Support!!

Published on BTimes, MEMS Tech asks for investors' support

• The board of directors has explained all the circumstances of the accounting woes to the shareholders, says MEMS executive director
  
  MEMS Technology Bhd, a microelectronics maker marred by accounting issues and a patent infringement complaint, has asked for investors' support as it faces a bumpy period ahead.
  
  In a shareholder meeting in Petaling Jaya yesterday that lasted almost three hours, directors and management dealt with a vocal crowd as minority shareholders demanded explanations on the cause of the accounting woes that have come to light late last year.
  
  The episode has tainted its public image as the Securities Commission said it started investigation on the firm's possible financial irregularities, resulting in the stock losing almost 70 per cent of its value since late November last year. MEMS Tech last traded at 12 sen yesterday.
  
  Executive director Tan Yeow Teck said its board of directors has explained all the circumstances of the accounting issues to the shareholders present at the meeting.
  
  "On hindsight, we believe this whole thing may not have happened if we've talked to the auditors up front," Tan said, referring to its external auditor KPMG, which raised concerns about certain transactions relating to the firm's revenue, property, plant and equipment last year.
  
  MEMS Tech's accounts had to go through a special audit due to the irregularities.
  
  KPMG did not seek re-appointment at the company's annual general meeting yesterday.
  
  Tan also said that it has written to Bursa Malaysia, requesting for the uplift of the GN3 status on MEMS Tech.
  
  "GN3 usually classifies those companies that are financially-distressed. Our circumstances are different," he said.
  
  As it was embroiled in the accounting issues, a competitor has filed a patent infringement complaint against MEMS Tech with the International Trade Commission. MEMS Tech is defending its position and the case may drag on until next year.
  
  "We hope to put this behind and move on. I believe the shareholders are supportive," chief executive officer Kathirgamasundaram Sooriakumar said.
  
  "The management has been stretched and stressed by events of the past few months but remains committed and motivated to entrench this exciting micro-electro-mechanical systems technology in Malaysia," the company said in a press release yesterday.

Comments:

Support is such a massive word in the investing world.

Yes, it's great to see that the board is finally admitting that they could have done much better to avoid this shambolic event.

However, for the minority shareholder to pledge their support, there are couple of issues worth considering.

1. Support means total trust from the minority shareholder. There was one glaring issue that needs to be considered which was mentioned in a posting back in Feb 2008, What now for Mems Technology?

• Previously blogged on Feb 2008, The said article on Mems
  
  For the first time since accounting problems emerged at MEMS Technology Bhd, new information has surfaced indicating that the company may soon get out of the quagmire it is in.
  
  The much-awaited special audit report, which was commisioned by MEMS and done by Atarek Kamil Ibrahim & Co, has been completed and presented to MEMS' external auditors KPMG.
  
  According to MEMS' chairman and controlling shareholder Datuk Ahmad Kabeer Nagoor, the (external) auditors have some queries on the report. He says these are being discussed by MEMS' independent committee. Ahmad Kabeer declined to elaborate, saying that more details will be revealed soon.

Now what was most glaring was how Mems traded that week.

Article was published on the Edge on Feb 11th. See how the stock surged 42%?

Now consider this, the said much-awaited report and clarification on what happened in Mems accounts wasn't revealed soon as mentioned.

And by the 25th Feb morning, the stock crashed early morning by as much as 18.7% to 13 sen.

Now the biggest issue for me is this one: Changes in Sub. S-hldr's Int. (29B) - AKN EQUITY VENTURES SDN. BHD.

See the hige disposal by AKN Equity Ventures on the following dates.

Disposed 11/02/2008 1,200,000
Disposed 11/02/2008 1,700,000
Disposed 12/02/2008 1,050,000
Disposed 12/02/2008 2,000,000
Disposed 13/02/2008 100,000

Big news article on the Edge and the stock surges and in the same time, big shareholder dumps their share!

How? Is this issue not a concern?

2. How is Mems doing now? I took a look at Mems finally released quarterly earnings early this month, A Look At Mems Technology Again

• Now that Mems had finally reported its earnings and resumed its trading, I thought I take a look at Mems again.
  
  Quarterly rpt on consolidated results for the financial period ended 31/1/2008
  
  Net earnings was only 1.434 million from sales revenue of 16.464 million. Only 1.434 million. This is utterly smallish eh?
  
  Let's look at the Balance Sheet.
  
  

  
  Trade receivables now totals at 34.998 million. Reported period is at 31st January 2008. Compare to the column on left, receivables were only 22.824 million. Which means receivables increased a whopping 12.174 million. Which is extremely massive when the company's net earnings is only 1.434 million for this reported period.

  Cash and bank balances as at January 2008 shrank to 9.874 when compared to July 2007's balance of 18.995 million.

  And the below table highlights Mems' liabilities:

  
  Total loans as at 31st Jan 2008 is at 43.355 million compared to a loan total of 34.267 million in July 2007. An increase of 9.088 million in loans.
  
  How?
  
  As it is what do you see?
  
  I see its net earnings as rather extremely small with low profit margins with a rather below average set of balance sheet. Receivables and debts are increasing while cash is shrinking!

How?

Considering these two issues, would you give your support to Mems?

Read more...

A Look At Mems Technology Again

Now that Mems had finally reported its earnings and resumed its trading, I thought I take a look at Mems again.

Quarterly rpt on consolidated results for the financial period ended 31/1/2008

Net earnings was only 1.434 million from sales revenue of 16.464 million. Only 1.434 million. This is utterly smallish eh?

Let's look at the Balance Sheet.

Trade receivables now totals at 34.998 million. Reported period is at 31st January 2008. Compare to the column on left, receivables were only 22.824 million. Which means receivables increased a whopping 12.174 million. Which is extremely massive when the company's net earnings is only 1.434 million for this reported period.

Cash and bank balances as at January 2008 shrank to 9.874 when compared to July 2007's balance of 18.995 million.

And the below table highlights Mems' liabilities:

Total loans as at 31st Jan 2008 is at 43.355 million compared to a loan total of 34.267 million in July 2007. An increase of 9.088 million in loans.

How?

As it is what do you see?

I see its net earnings as rather extremely small with low profit margins with a rather below average set of balance sheet. Receivables and debts are increasing while cash is shrinking!

Back in July 2007, Mems was trading around 81 sen with a market capital of 531 million.

Oh yes by that much!

Given the current data, do you reckon that Mems justified such valuations?

Mems last traded at 14.5 sen, with a market capital of only 95 million!

And would you consider this as a clear decisive destruction of market capital???

Here is a newsclip on Mems:

• 07-05-2008: MEMS up 2 sen, heavily traded on re-quotation
  by Cindy Yeap
  
  KUALA LUMPUR: Shares of MEMS Technology Bhd were heavily traded on re-quotation yesterday after a nine-week suspension for failing to submit its annual report in time.
  
  The stock rose as much as three sen or 20.7% in early trade to 17.5 sen, but ended the day at 16.5 sen, up two sen or 13.8% from the 14.5 sen it last closed at on Feb 29.
  
  The Mesdaq-listed wafer fabrication and packaging company led the most active list yesterday with 30.51 million shares done, just ahead of Keladi Maju Bhd’s volume of 29.2 million shares.
  
  In retrospect, MEMS shares had plunged 16 sen or 44.44% to 20 sen on Nov 28 last year after the company said it was not able to issue its audited financial for the year ended July 31, 2007 in time as its external auditors had “expressed concerns” over certain transactions relating to its revenue as well as some of its assets.
  
  Its board had then ordered a special audit and decided not to recognise RM19.72 million revenue, which resulted in its unaudited net profit being cut to RM13.45 million from RM21.47 million. MEMS made RM13.11 million net profit on the back of RM53.7 million in revenue for the said financial year, according to its audited accounts submitted on April 24.
  A trade suspension on its shares, imposed on March 3, was lifted after MEMS submitted its annual report on Monday. The annual report was due for public release by Jan 31 this year.
  
  In its report, the company’s external auditor KPMG said the company’s accounts are “not subject to any other qualifications” apart from the several points it made pertaining to MEMS’ wholly owned subsidiary SenzPak (M) Sdn Bhd.
  
  MEMS has proposed to appoint Atarek Kamil Ibrahim & Co as its external auditor at its upcoming AGM as KPMG did not wish to seek re-appointment. The company’s AGM will be held on May 30.
  
  MEMS and its unit SenzPak are still under investigation by the Securities Commission, according to its 2007 annual report.

Read more...

Mems Technology Again!

Wrote about Mems and how it's still unable to produce quarterly earnings!last night.

I'm disgusted, really.

Here are some interesting facts.

1. Company that was plagued by accounting issues, in which MEMS net earnings were overstated by a whopping 26.8%. Net profits were reduced from 21.47 million to just 13.45 million!!

2. Overstated amount was 8.02 million only.

3. Let's consider the impact of the overstatement of the overstating of the earnings. Without the overstatement of the earnings, there would have been zero growth for this stock. And without growth, the stock would never be able to command a high earnings multiple trading price.

4. Using the peak done in July 2007 (on an adjusted basis, Mems actually traded as high as 1.05 in Jan 2005 but since that was early days of its listings, I would not use that figure) of 81 sen Mems had a market valuation of 531 million.

5. At that moment time, based on the OVERSTATED earnings of 21 million, Mems had an eps of 3.3 sen or an earnings multiple of 24.5x. However, given a previous year growth of 55% based on these OVERSTATED earnings, perhaps there were justifications for the stock to trade at 81 sen.

6. And given the fact the impressive growth caused by the OVERSTATED earnings, the market were pricing in earnings expectations of 34-37 million for coming fiscal year.

7. Now the growth is gone. Earnings were overstated. Which means eps is only 2 sen an zero growth.

8. Based on an eps of 2 sen, that 81 sen stock price would have meant that Mems was trading at a whopping 40.5x earnings. For a stock with zero growth that was insane.

9. Mems last traded price before it's suspended is 14.5 sen. Market capital is now only 95 million.

10. So by overstating its earnings by a mere 8 million, based on market capital, Mems managed to value itself 531 million. And if compare to the present value market value of 95 million, this overstating of earnings caused the company to be over valued by as much as 436 million!!!

How?

Overstate your earnings by a mere 8 millions and the stock market could reward you by valuing it an extra 436 million!!!

How?

And not forgetting last night announcement saying that Mems cannot produce its quarterly earnings for the 2nd consecutive quarter!

See why I am so disgusted?

And the following picture shows the trail of destruction of market wealth!

Read more...

MEMS Tech: Still Unable to Produce Quarterly Earnings!

Mems Technology announced the following statement:

• As announced, the Company failed to issue its Audited Financial Statements for the financial year ended 31 July 2007 (“Audited Financial Statements”), Unaudited Quarterly Report for the first quarter ended 31 October 2007 (“First Quarterly Report”) and Annual Report for the financial year ended 31 July 2007 for public release within the stipulated timeframe pursuant to Rule 9.22 and 9.24 of the Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) for the Mesdaq Market (“MMLR”). Further, the Company’s securities had been suspended since 3 March 2008 due to the fact that the Company has not issued its Audited Financial Statements by the due date pursuant to Rule 9.24(b) of the MMLR, i.e. 29 February 2008.
  
  The Board of Directors of MEMS (“the Board”) wishes to announce that the Company is also unable to issue its Second Quarterly Report for public release within the stipulated timeframe pursuant to 9.22 of the MMLR which was due on 31 March 2008 (the Audited Financial Statements, First Quarterly Report, Second Quarterly Report and Annual Report shall hereinafter collectively referred to as “the Outstanding Financial Statements”).
  
  The Board noted that in the event the Company fails to issue the Outstanding Financial Statements within the timeframe pursuant to Rule 9.26(6) of the MMLR, i.e. by 31 May 2008, in addition to any enforcement action which Bursa Securities may take, de-listing procedures shall be commenced against the Company.
  
  However, as announced, the Company is now in the final stages of finalising the Audited Financial Statements with its external auditors.
  
  The Board will use its best endeavours to ensure that the Company issues the Outstanding Financial Statements as soon as possible.
  
  This announcement is dated 4 April 2008

What's going on?

How hard is it to announce its quarterly earnings?

This is simply disgusting, isn't it?

Read more...

Mems Technology Will Be Suspended

Mems made two announcements tonight: MEMS TECHNOLOGY BERHAD (“MEMS” or the “Company”) - STATUS OF ISSUANCE OF AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 JULY 2007 (“AUDITED FINANCIAL STATEMENTS”) AND UNAUDITED QUARTERLY REPORT FOR THE FINANCIAL PERIOD ENDED 31 OCTOBER 2007 (“UNAUDITED QUARTERLY REPORT”) (COLLECTIVELY REFERRED TO AS THE “OUTSTANDING FINANCIAL STATEMENTS”)

• The Board of Directors of MEMS (“Board”) wishes to announce that the Company is still in the process of deliberating the special audit report by Messrs Atarek Kamil Ibrahim & Co. with its external auditors. As a result, the Company is unable to issue the Outstanding Financial Statements on 29th February 2008. The Board will use its best endeavours to ensure that the Company finalises and issues the Outstanding Financial Statements as soon as possible.
  
  As the Company is unable to issue the Audited Financial Statements on 29 February 2008 (being 3 months from 30 November 2007), in addition to any enforcement action that Bursa Malaysia Securities Berhad (“Bursa Securities”) may take, Bursa Securities shall suspend trading in the securities of the Company. The suspension shall be effected on the market day following 29th February 2008 and shall be uplifted on the market day following the issuance of the Outstanding Financial Statements unless otherwise determined by Bursa Securities.

And MEMS-IMPOSITION OF SUSPENSION

• Pursuant to Rule 9.26(4) of the MMLR, if a listed company fails to issue the outstanding financial statements within 3 months from the expiry of the timeframes stated in Rules 9.22 and 9.24 of the MMLR ("Relevant Timeframes") (the last day of the 3 months period shall hereinafter be referred to as "Suspension Deadline"), in addition to any enforcement action that Bursa Securities may take, Bursa Securities shall suspend trading in the securities of such listed company. The suspension shall be effected on the market day following the expiry of the Suspension Deadline.
  
  In view of the above, kindly be advised that the trading in the above Company’s securities will be suspended with effect from 9.00 am, Monday, 3 March 2008 until further notice.
  
  Pursuant to Rule 9.26(6) of the MMLR, if a listed company fails to issue the outstanding financial statements within 6 months from the expiry of the Relevant Timeframes, in addition to any enforcement action that Bursa Securities may take, de-listing procedures shall be commenced against such listed company.

Suspended until further notice!!!!

Whatever happened to the said article on Mems that was published on the Edge Weekly that states that...

• For the first time since accounting problems emerged at MEMS Technology Bhd, new information has surfaced indicating that the company may soon get out of the quagmire it is in.
  
  The much-awaited special audit report, which was commisioned by MEMS and done by Atarek Kamil Ibrahim & Co, has been completed and presented to MEMS' external auditors KPMG.
  
  According to MEMS' chairman and controlling shareholder Datuk Ahmad Kabeer Nagoor, the (external) auditors have some queries on the report. He says these are being discussed by MEMS' independent committee. Ahmad Kabeer declined to elaborate, saying that more details will be revealed soon.

How?

Look at the chain of events. A huge write-up in the Edge Weekly which sees the stock then surges a whopping 42% and NOW THIS. WOW!

So...

Why isn't Mems able to issue their financial statements?

And just what's so complicating in their accounts?

How?

Anyway warnings were given earlier : What now for Mems Technology? , The said article on Mems , Unnamed Sources Strikes On Mems! , Update on Mems Accounting Issue , More on Mems Restating of Its Earnings , Regardings Mems Again.. and OSK comments on Mems

Read more...

What now for Mems Technology?

No news is rather bad, isn't it?!

Previously blogged on Feb 12th, Unnamed Sources Strikes On Mems! , it was noted that Mems surged some 42% on the 11th feb 2008. And the article that was the catalyst for the stock surge was published on the Edge weekly, The said article on Mems

• For the first time since accounting problems emerged at MEMS Technology Bhd, new information has surfaced indicating that the company may soon get out of the quagmire it is in.
  
  The much-awaited special audit report, which was commisioned by MEMS and done by Atarek Kamil Ibrahim & Co, has been completed and presented to MEMS' external auditors KPMG.
  
  According to MEMS' chairman and controlling shareholder Datuk Ahmad Kabeer Nagoor, the (external) auditors have some queries on the report. He says these are being discussed by MEMS' independent committee. Ahmad Kabeer declined to elaborate, saying that more details will be revealed soon.

The following trading data highlights what has happen before and after the said article was published.

Stock had went from 13 sen to a high of 21 sen. All thanks to one single article! And on the day after the article was published, the stock surged 42%! The power of our financial press.

And since there has been zero news on the stock.

Which is rather nerve wrecking for the minority investors of Mems. ( Given all the current issues, I wonder why the still want to be a long term investor in this company? Do they still trust the company?) This is because as stated by the company, the company will be suspended if it fails to release their Audited Financial Statements by 29th Feb 2008.

• Nonetheless, if the Company fails to issue the Audited Financial Statements by 29 February 2008 (being 3 months from 30 November 2007) and Unaudited Quarterly Report by 31 March 2008 (being 3 months from 31 December 2007), in addition to the enforcement action that Bursa Malaysia Securities Berhad (“Bursa Securities”) may take, Bursa Securities shall suspend the trading in the securities of the Company. The suspension shall only be uplifted, unless otherwise determined by Bursa Securities, on the market day following the issuance of the above financial statements

And this morning, Mems is currently down a whopping 18.7% at 13 sen!

How?

Do you think Mems would be able to release their Audited Financial Statements in time?

Makes me wonder about that Edge Weekly article yet again.

For example, if Mems is in the clear and that there is absolutely nothing wrong with their financial statements, surely Mems would want to release it as soon as possible, right? And the longer it takes, the longer its share price would be in the doldrums, yes?

How?

Read more...

The said article on Mems

Here's the link to the said article posted on the Edge Weekly: 11 Feb 2008: Corporate: Special audit on MEMS completed

• 11 Feb 2008: Corporate: Special audit on MEMS completed
  By Risen Jayaseelan
  
  For the first time since accounting problems emerged at MEMS Technology Bhd, new information has surfaced indicating that the company may soon get out of the quagmire it is in.
  
  The much-awaited special audit report, which was commisioned by MEMS and done by Atarek Kamil Ibrahim & Co, has been completed and presented to MEMS' external auditors KPMG.
  
  According to MEMS' chairman and controlling shareholder Datuk Ahmad Kabeer Nagoor, the (external) auditors have some queries on the report. He says these are being discussed by MEMS' independent committee. Ahmad Kabeer declined to elaborate, saying that more details will be revealed soon.
  
  Once touted as a company on the cutting edge of microelectronics, MEMS shocked the market when it announced late last November that it was hit by accounting problems. Just last week, it said its stock may get suspended if the company fails to furnish its audited figures for FY2007 ended July 31 by Feb 29 and 1Q2008 ended Oct 31 by March 31.
  
  This is no doubt a grim prospect for shareholders of MEMS. "It has been a while since the problem surfaced but the company has chosen to remain silent on it. This is very troubling for shareholders who need to know how deep the problem is," notes a disgruntled shareholder.
  
  Investors have sold down MEMS shares since the company announced its accounting problems on Nov 27 last year. The stock is now trading at 13.5 sen, which is a far cry from its heyday of RM1.04 on Jan 18, 2005. However, MEMS shares were hovering at 40 to 60 sen just before it was announced that the company had overstated its accounts. This was partly because investors had expected better earnings from MEMS since its listing in August 2004.
  
  To recap, on Nov 27 last year, MEMS' board of directors said the company was not able to issue its audited financial statements for FY2007 ended July 31 because its auditors had "expressed concerns over certain transactions relating to revenue and property, plant and equipment".
  
  The board said in the light of this, it had resolved not to recognise the revenue of RM19.72 million. As a result, MEMS' unaudited consolidated revenue and profit after tax for FY2007 were revised to RM53.7 million (from RM73.4 million) and RM13.45 million (from RM21.47 million).
  
  Some insiders reckon that it was a case of auditors over-reacting to a technicality relating to the licensing of one of MEMS' factories. One possibility is that the licence was still pending approval from the authorities and would have been given eventually. If this is the case, the market has punished MEMS unnecessarily, with investors treating the stock like another Megan Media or Transmile.
  
  But can they be blamed? With little information coming out of the company since its announcement of accounting problems, investors were naturally rattled.
  
  "What's there to say that it is not worse than that?" asks a shareholder.
  
  Whatever the case, the fact remains that MEMS is a fast-growing manufacturer of microelectro-mechanical system-based products, such as pressure sensors, accelerometers, thermopiles, binary lens, thermopile arrays, application-specific integrated circuits and silicon microphones. It operates out of its facilities in Singapore and Johor and has been described as the most technologically savvy of Malaysia's listed companies. It has supply contracts with major multinational corporations and is operating at close to full capacity. It also owns a string of patents. Companies in this sector tend to fetch high value in mergers and acquisitions.
  
  It is arguable that at its current price, MEMS' valuation is not demanding. Market capitalisation stands at RM88 million and the stock is trading at a historical price-earnings multiple of 6.75 times (using the revised earnings figure). But with the accounting problem hanging over the company, investors will want more clarity on what really happened at MEMS before they decide to buy again.
  
  When such information finally comes out, MEMS' story could take one or two turns. It could be that MEMS' problems are deeper than thought (think Transmile) or not that deep, in the sense that the "missing" earnings could kick in at a later date. Still, the sooner MEMS' woes are resolved, the better for the company, and Ahmad Kabeer.
  
  He is a controlling shareholder in four listed companies — AKN Technology Bhd, AKN Messaging Technologies Bhd, MEMS and AWC Facility Solutions Bhd — and a substantial shareholder in Scicom MSC Bhd. In 2004, Ahmad Kabeer had a net worth of RM340 million, based on his shareholdings in his stable of listed companies. However, his paper worth had eroded to only around RM45 million as at the end of last year.
  
  So, what transpires at MEMS in the end will weigh heavily on Ahmad Kabeer's fortunes.
  
  

Read more...

Unnamed Sources Strikes On Mems!

This was the hottest traded stock yesterday. It surged a whopping 42%. And the Business Times tried to shed some light.

• SHARES of MEMS Technology Bhd surged 42 per cent yesterday in active trade on speculation that its accounting problems may soon be resolved, dealers said.
  
  The company's shares rose by 5.5 sen to close at an intra-day high of 18.5 sen. Some 32 million shares changed hands, making it the day's most active counter.
  
  A business weekly reported last weekend, citing unnamed sources, that new information had surfaced that may soon get the company out of the problems it is in.
  
  MEMS had in late November last year announced it was hit by accounting problems, resulting in its share price plummeting.
  
  "There's talk that the company may find a way out of its troubles, but for now, this is mere speculation," a dealer said. ( link to article : here )

Ah, the weekend Business weekly.

So what do we have?

A company that was plagued by accounting issues, in which MEMS net earnings were overstated by a whopping 26.8% (ie net profits were reduced from 21.47 million to just 13.45 million!!!)

And the following point as stated in the posting, Regardings Mems Again..

• Consider the following...
  
  If Mems did not over-state their earnings, there would be no growth for 3 years!
  
  Without the growth, MEMS would have been rather unattractive and most of all, it would never had commanded such a rosy stock price.
  
  Just in July 2007, MEMS traded at a high of 81 sen, giving it a market valuation of 531 million.
  
  Now based on actual earnings of 13 million, surely this 81 sen would have been an insane stock price for Mems!
  
  Now consider this. Let me flip it around.
  
  Mems is now trading at 25 sen. Its market valuation is only some 163 million.
  
  So if the market valuation now is about fair for a company making only 13 million, then Mems is worth only some 163 million.
  
  However, due to the overstated earnings, MEMS was valued as much as some 531 million!!!

So now we have an UNNAMED SOURCES, ah the infamous source again, is suggesting that new information had surfaced that may soon get the company out of the problem it is in!

How nice. Publish an article based on UNNAMED SOURCES and the stock rockets a whopping 42%.

Kinda incredible if you asked me. I would bet many would die to want this UNNAMED SOURCES to have some hot news told on their vested stocks, yes?

And more incredible the last announcement made by Mems on Bursa was the following announcement

• We refer to the announcements dated 27 November 2007, 3 December 2007, 18 December 2007 and 2 January 2008.
  
  The Board of Directors of MEMS (“Board”) wishes to announce that the Company is in the process of deliberating the special audit report with its external auditors and as such is unable to issue the Outstanding Financial Statements by 31 January 2008. The Board will use its best endeavours to finalise and issue the Outstanding Financial Statements by end of February 2008.
  
  Nevertheless, if the Company fails to issue the Audited Financial Statements by 29 February 2008 (being 3 months from 30 November 2007) and Unaudited Quarterly Report by 31 March 2008 (being 3 months from 31 December 2007), in addition to the enforcement action that Bursa Malaysia Securities Berhad (“Bursa Securities”) may take, Bursa Securities shall suspend the trading in the securities of the Company. The suspension shall only be uplifted, unless otherwise determined by Bursa Securities, on the market day following the issuance of the above financial statements.
  
  This announcement is dated 31 January 2008.

And then you have this massive disposal of shares. Changes in Sub. S-hldr's Int. (29B) - AKN EQUITY VENTURES SDN. BHD.

• Disposed 18/01/2008 800,000
  Disposed 21/01/2008 800,000
  Disposed 22/01/2008 1,000,000
  Disposed 24/01/2008 800,000
  Disposed 25/01/2008 1,000,000
  Disposed 29/01/2008 600,000
  Disposed 30/01/2008 600,000

Tell you what.. if Mems denies what's being published by the weekend Business Weekly, then perhaps it's high time we question who are these UNNAMED SOURCES! Yeah, why are they passing misleading information to the press?

And consider the following, if the story is correct, how would you define such a leak by these sources to the Business Weekly? And I wonder did anyone profit from such action?

Hmmm....

Read more...

Regardings Mems Again..

Here is a follow-up on the blog posting on Mems: More on Mems Restating of Its Earnings.

Read the following article posted on the Edge. 14-12-2007: Major MEMS Tech shareholder disposes of 1.8m shares

• AKN Equity Ventures Sdn Bhd, a substantial shareholder of MEMS Technology Bhd which is being investigated by the Securities Commission for possible irregularities in its financial statements, has reduced its direct shareholding by selling 1.8 million shares or a 0.27% stake in the open market.
  
  A filing with Bursa Malaysia on Dec 12 showed that after the disposals on Dec 7, 10 and 11, AKN Equity’s direct interest in the Mesdaq company was reduced to 126.9 million shares or 19.35%. The share price closed at 21, 20.5 and 20 sen respectively on the three days.
  MEMS share price tumbled 16 sen or almost 45% on Nov 28 after the company told Bursa Malaysia it could not issue the audited accounts due to concerns over certain transactions.
  
  Subsequently, the counter has been hovering between 19.5 sen and 21.5 sen with an average of 5.64 million shares traded daily.
  
  On Nov 30, the company said it was not able to issue its audited financial statements for the financial year ended July 31, 2007 for public release, within the four months from close of the financial year, which falls on Nov 30.
  
  ”The board of directors of MEMS wishes to announce that the company is not able to issue its audited financial statements by Nov 30, 2007, as the company’s external auditors have expressed concerns over certain transactions relating to revenue and property plant and equipment.
  
  ”In light of the above, and after due deliberation, the board has resolved not to recognise revenue of RM19.72 million. As a result of this, the unaudited consolidated revenue for the financial year ended July 31, 2007 will be revised to RM53.7 million.
  
  This will consequently result in the unaudited profit after tax for the financial year ended July 31, 2007 to be reduced from RM21.47 million as announced on Sept 27, 2007 to RM13.45 million,” it said.
  
  Bursa Malaysia Securities on Dec 4 rejected the company’s application for an extension of 45 days from Nov 30, 2007 to submit its audited financial statements for the financial year ended July 31, 2007 (FY07).
  
  Late last month, a SC spokesperson confirmed that the company was being investigated for possible irregularities in its financial statements.

Do you like what you see in this company?

Company restates its earnings, company major shareholders dispose their shares, company not able to submit its earnings in time. Rather terrible, isn't it?

Wrote the following on Sahamas back on Nov 28th 2007.

• All this is giving us (our stock market) such a bad name.
  
  In Mems case, yes it was not as drastic as say Megan or Transmile but over stating earnings is simply unacceptable.
  
  Consider the following...
  
  If Mems did not over-state their earnings, there would be no growth for 3 years!
  
  Without the growth, MEMS would have been rather unattractive and most of all, it would never had commanded such a rosy stock price.
  
  Just in July 2007, MEMS traded at a high of 81 sen, giving it a market valuation of 531 million.
  
  Now based on an actual earnings of 13 million, surely this 81 sen would have been an insane stock price for Mems!
  
  Now consider this. Let me flip it around.
  
  Mems is now trading at 25 sen. Its market valuation is only some 163 million.
  
  So if the market valuation now is about fair for a company making only 13 million, then Mems is worth only some 163 million.
  
  However, due to the overstated earnings, MEMS was valued as much as some 531 million!!!
  
  How?

Just for the record, Mems closed yesterday at 19 sen.

Read more...

More on Mems Restating of Its Earnings

I took some time and I reflected on what I had posted on Mems before.

My first ever blog posting was actually on Mems. http://everything27.blogspot.com/2005/10/sp-coverage-on-mems.html

And the update to that posting: http://everything27.blogspot.com/2007/03/mems-part-vi.html

These two blog postings reflected the bullish projections made by S&P on Mems.

And I did a more detailed posting on Mems here: http://everything27.blogspot.com/2005/12/mems-part-iv.html

• Did Mems deserve the rather optimistic projections, assumptions from folks in CIMB, OSK and even S&P?
  
  How?
  
  For me, i believe this is a rather simple example of an overly-hyped stock which simply failed to meet their expectations. It reminds me of Warren Buffett's mumbling that when the tide resides, we will know who has been swimming naked. Well, from Mems actual reported quarterly earnings, we can clearly see the nakedness in Mems share price and of course the insane earnings projections assigned to Mems.
  
  So curious to know... since Mems has not meet these so-called expectations... i wonder... i really wonder... did Mems failed or did the market itself failed? What do you reckon?

And last but not least http://everything27.blogspot.com/2006/03/mems-part-vi.html.In which, I made the following remarks:

• That's how Mems had performed since listing, which was pretty decent i think. Yes, the cash flow is a bit questionable but all in Mems is decent. (Oooh.. cash flow looking really questionable!)
  
  Did Mems deserve the rather optimistic projections, assumptions from folks in CIMB, OSK and even S&P?
  
  How?

In today Star news report: http://biz.thestar.com.my/news/story.asp?file=/2007/11/28/business/19597516&sec=business

• Wednesday November 28, 2007
  
  MEMS Technology to conduct special audit on accounts
  
  PETALING JAYA: MEMS Technology Bhd's board of directors wants to conduct a special audit on its financial accounts as the company has overstated its revenue by 26.8% or RM19.7mil for the financial year ended July 31 (FY07).
  
  In a statement to Bursa Malaysia yesterday, MEMS Technology said its external auditor had expressed concerns over “certain transactions relating to revenue, property plant and equipment”.
  
  “As a result of this, the unaudited consolidated revenue for the financial year ended July 31 will be revised to RM53.7mil.
  
  This will consequently result in the unaudited net profit being reduced from RM21.47mil to RM13.45mil,” it said.
  
  Under the listing requirements of Bursa Malaysia, MEMS Technology was required to furnish the audited financial statements FY07, within four months from the close of the financial year.
  
  The company said it was not able to issue its audited financial statements by this Friday's deadline.
  
  The board had resolved to appoint an independent committee comprising the company's independent directors to consider the matters highlighted by the external auditors, including the mandate to appoint a professional firm to carry out a special audit.
  
  “The professional firm will report directly to the independent committee, comprising Zakaria Merican Osman Merican, Datuk Dr Mohamed Ariffin Aton, Dr Aziuddin Ahmad and Norazharuddin Abu Talib,” the company said in the statement.
  
  MEMS Technology was in the midst of applying for a transfer to the Bursa Malaysia main board.
  
  Part of the transfer requirements is to have an uninterrupted cumulative audited profit of at least RM30mil over three to five years and a minimum audited net profit of RM8mil for the most recent financial year.

How? What do you think of Mems overstating of its earnings?

And here is how Mems had traded for the past 6 months.

Read more...