Here's an extremely good reply to the posting: And Muhibbah Comes Crashing Down.
Friday, June 17, 2011
The Muhibbah Fiasco : How Lousy Disclosure Cost Shareholders Monies
This is an extension of the discussion I have in Moolah blog post : And Muhibbah Comes Crashing Down. Since it is too long of a reply and it has attachment and stuff, I have to do it here. Do give his blog post a read.
First and foremost, this whole thing is preventable if one take a good look at the annual report. But, poor disclosure standard in Bursa as well as what I think is some non-compliance of Bursa Listing Rule by Muhibbah reduces the chance of shareholders of discovering the receivables issue. But, it is alright, I have my own fair share of stupid preventable mistakes.
Early last year, I made an investment into Choada Modern Agriculture (0682:HK) despite my brain tell me to do otherwise as there are a tad bit too many aggressive accounting practices and some dubious management actions.
However, the numbers like PE and ROAs and stuff looked a bit too good and I just drank a dose of Jim Rogers that I rationalize everything that is wrong with the company. By the middle of last year, I am starting to get a bit too uncomfortable and think the whole thing is a fraud as they have been avoiding to answer or deflecting some of the questions that I asked. So, I sell and took a 20+% loss. On hindsight, I have some really good luck as this whole Chaoda thing is being discovered a fraud by HK Next magazine this year and I would have lost my pants if I had not sold it at a loss. With the Chaoda experience, you would have think that this idiot will learn some lessons.
But, this idiot again make an ill-thought out blog post stating that I may go long on China MediaExpress without actually looking much into the company and try to rationalize too much. China MediaExpress turn out to be another fraud. I am again lucky that some kind soul actually talk me out of going long after reading my post. The key lesson learnt is to always read the footnotes, bring your brain with you when analysing companies and do not rationalize too much.
Lousy Financial Reporting Standard
That aside, back to Muhibbah. If one actually take the opportunity to read their disclosure in their annual report, one would not have face this problem. In their FY 2009 audited account, Muhibbah actually discloses this:
A trade debt of RM337.0 million (including retention sum of RM22.5 million) and an amount due from contract customer of RM28.3 million in relation to a project undertaken by the Company for the engineering, construction, installation, commissioning and completion of a bunkering facility has been outstanding for more than a year.
The project has temporarily ceased during the financial year ended 31 December 2009 due to financing difficulties encountered by the project owner. The last progress payment received by the Company was in February 2009.
The project owner has continued to approve the progress billings submitted by the Company and had acknowledged its obligations under the contract signed with the Company. The project owner has informed the Company that it is in the process of arranging an alternative source of financing and expects the arrangement to be completed by mid 2010.
The Directors have evaluated the situation and other evidence available, including the assessment of the status of the project owner’s refinancing arrangements, and are of the view that no allowance for doubtful debts or a write down in the amount due from contract customer is required at this moment.
The account is audited by KPMG and is issued at 30/4/2010. KPMG, short of qualifying the account (for those of non-accounting background: Unqualified means good, qualified means bad), actually emphasize the issue in their audit opinion in addition to the disclosure in the notes. The audit opinion, meanwhile, is something that most investors do not read although most bad stuff that the auditor do not agree with the management normally end up there.
Take note that by the time this audited account is being issued to shareholders, APH (the trade debtors) has not paid Muhibbah for more than a year. Plus, by the time the audited annual account is issued, it has reached mid 2010, the time frame that the whole financing thing supposed to be done. The fact that the opinion of the auditor remains the same means that the financing is not being completed yet.
In addition, pay attention to the management reason for not providing for any doubtful debts : APH acknowledge the obligation under contract signed by the company. It is just an acknowledgement. A normal thing.
It did not elevate Muhibbah position in the debtors packing list or provide them with any security. Just because APH acknowledge the debts, Muhibbah decide to not write down even a single cent of the thing. If say, the RM300mil debt is by different parties rather than one party, one may presumably would have write down the debt.
It is still okay if you hold on to the company at that point of time, as it is the first time the disclosure actually appeared.
But, I would not be comfortable to invest at that point and if I invest, I would be constantly bugging their IR for progress. To be fair to our super star Bursa's finest analyst at CIMB, they do touch on the issue in their 19-page initiating coverage of Muhibbah with one paragraph out of that 19 pages of crap and do not discuss the serious damage done to their equity in the event of a default but rather put a positive spin on the whole thing.
They maintain that the issue will be resolved within 1-2 months. Note, by the time that the initiating coverage is being produced, it is already in mid-November, well beyond the timeline stipulated in the audited account.
Our Bursa finest continued to report that the issue will be resolved within 1-2 months for one or two more reports until he conveniently forgotten about the issue in the subsequent buy call that he issued thereafter. Perhaps, it is 1-2 months too long.
Then, on 29/4/2011, Muhibbah issued another audited accounts, this time for FY 2010. The same crap again is being said..blah blah blah...acknowledge its obligation..blah blah blah, but this time, one sentence is being altered:
The project owner is confident that alternative arrangement can be completed in 2011, as negotiations with interested party have reached an advanced stage.
Last time, they says that it is mid-2010, now they says is in 2011. No early, mid or late, just 2011. Take note also that all this while, it is the project owner says, not Muhibbah says. Muhibbah is a good lender.
I do hope that they have a loan sharking division, if I ever end up borrowing money from loan shark, I will borrow from them.
If I delay payment for two year plus, I think any loan shark would probably chop my hand off or something. But, this Muhibbah is apparently fine with more than two years of delay in payment. No provision, not even a single cents is being provide against this possible default.
If you are a shareholder, if you saw this together with the sudden disappearance of reassuring words from our Bursa finest analyst on the issue, you should just sell. If you didn't, that is really padan muka.
The reason that shareholders may not have paid much attention to the issue may be due to something that I just found out today about our financial reporting. Apparently, in the audited accounts released by Malaysian listed company, there is no need for companies to report their account receivable ageing analysis.
Initially, I thought it was Muhibbah that purposely do not disclose only to found out that other listed companies in Malaysia do not disclose their accounts receivable ageing. No wonder there are so many receivables-related blow up in Malaysia.
Listed companies in SGX, HKEX ,even Indonesia and I believe the Philippines have to disclose their receivables ageing like this picture:
This sort of easy to read disclosure would certainly make shareholders pay attention to the RM337 million that pop up at the past due for more than 2 years column.
Apparently, in Malaysia, we do not need to produce such disclosure. If the situation is very serious like Muhibbah case, we are flooded with a long chunk of text that regular, non-accounting background investor, may be too intimidated to even read it.
If situation is serious, but not that serious, we may not even have a disclosure. You would have thought that, with so many receivables-related blow up in our country, those overpaid and useless buggers at our accounting standard board would adopt the best practices of their regional neighbours like Indonesia, but, instead, they are busy convincing the press that they should not be blame for any sort of fraud. Rather, the management should be blame, they say.
It is like Polis Raja Di Malaysia attributing their inability to catch any thief by blaming the thief for stealing.
It is the thief's job to steal, it is also the job of some questionable management to steal from shareholders. Sometimes, it makes you wonder why we need this sort of useless auditors.
The Change in Auditor
Another interesting point is that, Muhibbah actually change their auditors. They downgrade from a big 4 auditor- KPMG to a tier-two auditing firm Crowe Horwath. If a company upgrade their auditors, from a tier-two firm to a big 4, it is usually fine. But, if they downgrade, you need to pay attention.
It could be that KPMG is too afraid to sign the accounts because the receivables size is too bloody big, so, they drop Muhibbah as a client. Sometimes, companies will give you crappy explanation like the big 4 is overcharging them, so, they drop them to save shareholder money.
Most of the time, this is not the case. If Big 4 do not like the risk of auditing your accounts, they will purposely inflate the auditing cost to a price that you could not afford, a decent way for the Big 4 to tell you that, "we do not want to audit your company, it is too risky".
As there are 4 big 4 auditors out there, it is impossible for them to raise the prices too high as there is always competition. When high prices is being used as a reason for switching auditors, you should be careful.
That is the case if a company provide any explanation for changing auditors. In Muhibbah case, they did not even tell you that they change their auditors! This lack of disclosure by Muhibbah, I believed, have contravene our Bursa Listing Rule Chapter 12 Rule 1201.1(3) :
Each Participating Organisation shall notify the Exchange, in writing, of any change to -
(a) the date of its financial year end; and
(b) the name of the statutory auditor who will furnish the Annual Report
Since the wording is "name of auditor", rather than "auditor", I am not sure whether any rules is broken. But, if there is no rules being broken, then, our Bursa Listing Rule have another grey areas that need to be plugged. Most, if not all, regional exchanges discloses their change of auditors.
Muhibbah also changes their company secretary, someone who should be responsible for all this disclosure stuff. Did Muhibbah purposely replaces an experience company secretary to a not-so-experience one? Lol, I don't know.
The Non-Disclosure and Management Selling Stocks Like Nothing Have Happened
Another point that troubled me is that, according to the CIMB report, the receiver on APH is being appointed in May.
So, it is already one month.
You would think that, when a customer enter into receivership, it is almost close to bankruptcy.
Since Muhibbah have so much uncollected receivables from APH, it is their duty to disclose this. But, they seems to think that it is business as usual, nothing have really happened.
It took a report from Business Times Singapore to brought our attention to that matter. Till now, still no news from Muhibbah.
It is really nothing have happened?
Well, at least something is happening. As highlighted by Moolah, the management is selling off their stock more frequently within this month than any other month in the year.
Here's the snapshot from Bursa website:
Don't you think the timing is a bit suspicious?
In a more litigious society like the US, these buggers may get sued from the shareholders.
But, in Malaysia, shareholders law suit are way too costly to bring these buggers to court. Even if these buggers are brought to court, you may not know whether the judicial system is clean enough to give a fair hearing.
So how? Shareholders just lost 20% in a day and those folks at CIMB still call it a buy even though, if there is a real default, as they are unsecured creditors, they may take a huge hit in their equity.
BTW, the CIMB analyst, I think he should learn some accounting, I think he mixed up asset and liability. He said that this whole crap will not affect his valuation because it had been provided it in the liabilities.
I think he did not understand what is asset and liability. When people owe you something, it is a liability according to this analyst. By the same reasoning, Greece would be the richest country in the world.
I look at his valuation, he did not provide for impairment either in his valuation, it makes you wonder where he come up with that crap.
When I was younger, some old man tells me that SC and Bursa have very stringent ruling. But, as time goes on, I could not help but feel that our regulation is actually much shitter than those of Indonesia and the Philippines.
Come to think of it, that old man is a MLM fella, he may try to convince me that Bursa has stringent ruling and that his company is listed means his MLM company is good.
It is probably the reverse case, Bursa sucks and his company sucks too. Just another day in the very uneven playing field called Bursa Malaysia....haiz..
P.S.: I just realised that the CIMB analyst that I always make fun of in this blog is the same person..lol..so not all their analysts are funny like that guy.
Shareholders of Muhibbah, if you have not sold your shares, meanwhile, should pray for another government bailout of APH.
Snowball,
Many thanks for the posting. As mentioned to Mun Wai , my last look at Muhibbah was back in 2009.
Muhibbah had been a nice stock for me back in 2006 to 2007. Made some. :)
But back in 2009, things changed and my perception of the stock turned negative. The first warning came back in Feb 2009: Quarterly rpt on consolidated results for the financial period ended 31/12/2008.
It made some huge loss which was rather unexpected and Muhibbah said the following in its earnings notes.
The Group achieved a consolidated revenue of RM804.0 million for the quarter under review as compared toRM488.8 million consolidated revenue in the last quarter, representing a 64% increase.
The consolidated loss before tax for the Group is RM26.4 million for the current quarter under review.
The loss is mainly due to the revision made for revenue and estimated costs on prudence basis for the construction division in view of the challenging economy condition resulted from high oil price, escalated construction material cost and volatility in foreign exchange rates during the period.
I wasn't impressed at all.
Sales increased substantially. A 64% increase was too damn impressive. However, how and why they posted loss was a big no-no for me.
And it was the year 2009.
And the biggest warning came from its receivables. ( Yeah, the good old receivables indicator)
Receivables stated at the end of the quarter showed 738.662 million. The previous quarter ( Quarterly rpt on consolidated results for the financial period ended 30/9/2008 ) , the receivables was only some 546.775 million. Ok, it was not a 100% get out warning but it was rather dodgy for me.
The following quarter, in May, Muhibbah reverted back to profits - it earned some 14 million, however, I was not convinced and in Nov 2009, Muhibbah reported losses again. Quarterly rpt on consolidated results for the financial period ended 30/9/2009. Receivables had now soared to some 841 million.
On Feb 2010, Muhibbah continued to post losses. Quarterly rpt on consolidated results for the financial period ended 31/12/2009. Receivables now stood at 941 million.
How?
That was more than being dodgy.
It's rather scary. Just way too scary for me. And that was the last I watched Muhibbah.
Now remember, my first warning came in Feb 2009.
Look at the following Muhibbah chart from Jan 2009 to Feb 2010.
See the incredible run from March 2009? Muhibbah had a low of 0.645 sen then. That run peaked around 1.66+.
How?
The company's fundamentals worsen but the stock soared as if it was on a misson to the moon.
How?
Cows don't jump over the moon, do they?
That was what I thought and yes, I have not seen Muhibbah books since Feb 2010.
ps: Here's the nice big chart of Muhibbah - note the price is already adjusted for its split cum bonus issue back in 2007.
Posted by Moolah at 6:17 AM
Labels: Muhibbah
4 comments:
snowball said...
Hi Moolah,
Thanks for highlighting :-)
7:44 AM
Moolah said...
snowball: No.. thank you. :)
Anyway, I have edited and add in some comments below your posting.
8:53 AM
The Contrarian said...
well said, where are consistency in standards of reporting i question!! anyways if aged debtors analysis is compulsory you'll probably not invest in MANY Gov linked Entities :X how to raise capital like that !!
9:38 AM
The Contrarian said...
MALAYSIA boleh Muhibbah Selalu
http://whereiszemoola.blogspot.com/2011/06/featured-post-muhibbah-fiasco-how-lousy.html
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Thursday, June 16, 2011
Muhibah- feel the wrath of a hungry bear!
What happened in Muhibah today is depressing. You have an upside breakout which was swiftly followed by a selldown. This is not the exception.
We have seen quite a number of such bull trap sprung on traders in the past few weeks. Be careful out there. With each passing day, one feels the wrath of a hungry bear breathing down your neck.
Back to Muhibah- we can expect support at the medium-term uptrend line at RM1.55-1.60 and the 100-day SMA line at RM1.60 (so soon!!!). Overhead resistance at horizontal line of RM1.65 & then RM1.75. Since the play is over, we should aim to sell into this rebound. Aim for RM1.75 or near to it.
Chart: Muhibah's 30-min chart as at June 16, 2011_12.00pm (Source: Quickcharts)
Note: The drop in Muhibah is attributable to the downgrading of this stock by a few research houses. One of them is Kenanga, which posited:
News reported that CIMB Bank is pulling out the financing for APH. This could lead the potential write off for Muhibbah amount due from APH amounted up to RM370m as per audited account 2010. Based on the report, to date APH has drawn down up to RM840m loan from the RM1.4b bridging loan facility by CIMB, which secured in 2006.
At present, APH’s main shareholders are KIC Sdn Bhd (40%), PTP Sdn Bhd (35%) and Trek Perintis Sdn Bhd (15%). We view this news as negative to Muhibbah in the short-term.
As such, we downgrade our call from BUY to HOLD (due to the uncertainties) but maintain our Target Price of RM2.24, as we keep our forecast unchanged at this juncture, pending for further clarification on the issue.
Posted by Alex Lu at 6/16/2011 12:03:00 PM
16 comments:
AlwaysWin said...
Hi Alex
Could the recent gap be sn exhaustion gap?
Thursday, June 16, 2011 2:49:00 PM
Alex Lu said...
Hi AlwaysWin
What recent gap? How recent?
Thursday, June 16, 2011 3:45:00 PM
AlwaysWin said...
Hi Alex
On 10jun there was a gap up with volume
Thursday, June 16, 2011 4:16:00 PM
Alex Lu said...
This post has been removed by the author.
Thursday, June 16, 2011 4:29:00 PM
Alex Lu said...
Hi AlwaysWin,
There was a gap on June 10. It could be interpreted as a breakaway gap or an exhaustion gap. Normally, a gap would provide some support on a re-test. This one totally collapsed today. We can only say that it was an exhaustion gap.
Thursday, June 16, 2011 4:36:00 PM
din said...
gua beli 1.72 cut loss 1.42..rugi 4k plus...
Thursday, June 16, 2011 7:19:00 PM
primepeng said...
I seldom see this kind of fall in a single day. like may seven crash
I got out of it at RM1.70 from RM1.80 purchased price after hearing weird thing happening that morning. I believe it might still go back up to RM1.9 giving it some time to adjust.
Thursday, June 16, 2011 8:24:00 PM
Alex Lu said...
Hi din
Sorry to hear about your loss.
Thursday, June 16, 2011 8:27:00 PM
Alex Lu said...
Hi primepeng
I agree. It was very sudden & extreme. I can imagine everyone rushing out to sell - from the new buyers as well as the 'older' shareholders. This created a vacuum where the share just plummeted. A very ugly scene!
Thursday, June 16, 2011 8:33:00 PM
ben said...
Alex, you did no wrong. For all fellow investors, Alex is giving is opinion. No one is point a gun to your head to trade on the shares he covers. If there is free $$ to be earned do you think people will still be working at their 9 to 5 jobs and facing the crappy jams in KL?
Thursday, June 16, 2011 8:36:00 PM
AlwaysWin said...
Alex
Anyone who trades via TA would have agreed your reading on Muhibah was a correct one.
The price did move out from 1.78 to 1.91. I had wanted to trade on the gap up, the thing that held me back was the weak US market(which you did warned us on 02jun11)
Hence you pointed out to us the probability of a trade, and the choice was 100% our own.
I am pointing this out before that Ass... Samgoss gloat about this ...
Alex , keep up the good work... You are good in what you are doing.
We need more people like you...
Thank you
Thursday, June 16, 2011 9:49:00 PM
AlwaysWin said...
Alex
Every who trades should know that there is no perfect trade. We do not know what news is coming out tomorrow. If we do then we do not need fundamentals and TA at all.
If we had been watching the trade maybe the gap down at open with Muhibah in oversold area should have prompted us to be careful.
As usual it is the greed factor that kept one in the trade.
Alex, do you think this will impact CIMB in a way, cos they do some financing for APH
Thursday, June 16, 2011 10:01:00 PM
Simon Low said...
Hi Alex,
I would like to ask whether is it worth to continue to keep the muhibbah share in hand or sell it out since the impact of yesterday APH's news was quite "dangerous"
Thx.!!
Friday, June 17, 2011 8:33:00 AM
Alex Lu said...
Hi Simon Low
Many may have gotten into Muhibah as a trade. While cutting loss is the proper thing to do, most people may not notice the plunge until much later.
For these people, I would recommend that you hold for a period of 4-5 weeks in order to allow the share to recover some of its losses before you make your exit (which will probably be at a loss). To exit at the present depressed prices is not sensible as the worst case scenario has already happened. Everyone who is holding this stock was thinking of selling yesterday & will probably think the same today & next week. After the selling has subsided, the price should recover somewhat & then you may exit.
Friday, June 17, 2011 10:08:00 AM
David said...
Muhibah is coming back to life!
Friday, June 17, 2011 10:35:00 AM
din said...
apa mahu buat saya sudah banyak takut,1 hari sudah rugi banyak..kalau tunggu beberapa hari tak rugi ini macam.
kadang kadang panic bikin orang takut.
saya takut dulu sudah kena sama scomi,ingat ini pun sama.
4k plus ...
Friday, June 17, 2011 11:05:00 AM
************************
hursday, June 16, 2011
Muhibah- further thoughts on a trade that went wrong
Looking at Muhibah's detailed Financial Statements for QE31/3/2011, I must admit that there is two glaring items that I have overlooked- the Receivables of RM903.6 million & the Amount Owing by Contract Customers of RM386.6 million. If the latter is offset against the Amount Due to Contract Customers of RM256.6 million, then the total sum owing by Debtors and Contract Customers would be RM1.034 billion. Compared that with the turnover for QE31/3/2011 of RM394.3 million, Muhibah's Debtors' Collection Period is about 239 days. That's a serious problem.
If 20% of the above amount were to turn bad, the loss would be RM207 million. That would reduce Muhibah's Shareholders' Funds to RM372 million and push up its Debts to Equity ratio to 1.2 times. Based on the research note from Kenanga, it seems that the amount to be written off from one customer, APH is about RM370 million. As a result, Muhibah's Shareholders' Funds would be reduced to RM209 million and its Debts to Equity ratio pushed up to 2.1 times. If I paid more attention to these two items, I would not have posted on Muhibah. However, I wish to point out that my post did not end with an unqualified recommendation to buy. To wit:
Although trading at a high PE multiple & having a relatively weak financial position, Muhibah is a stock worth tracking. Its financial performance has improved steadily over the past 4 quarters. More improvement is likely given the activity in the construction and O&G sectors. The main selling point of this stock is the improvement in the technical outlook. The stock is almost at the point of starting its next upleg.
Nevertheless, I would like to apologize for anyone who has gone into this trade because of the post, especially since I failed to highlight the severe Debtors' Collection problem experienced by Muhibah.
Posted by Alex Lu at 6/16/2011 02:38:00 PM
13 comments:
Pulasan said...
muhibah can't be that bad! What about the big order book?
all analysts should close shop
Thursday, June 16, 2011 3:48:00 PM
Buyer said...
Alex,
You are nice guy!
No worry, no one are perfect.
No one can guarantee 100% win even buffet!!
Thanks for all the thought
Cheers
Thursday, June 16, 2011 6:06:00 PM
Jimmy said...
Please ignore all the negative comment from those troublemaker. I enjoy reading your post everyday.
"No one force him to read, why he want to read when he don't like to. He should directly go and buy his own stock. Why he still come here read?"
I am glad he admit Alex is an analyst!
Thursday, June 16, 2011 6:18:00 PM
Nick said...
Hi Alex,
Good analysis, Thanks
Thursday, June 16, 2011 8:28:00 PM
Alex Lu said...
To Buyer & Jimmy,
Thank you for your kind words. This reminds me of the old saying: Success has many fathers while failure is an orphan.
To Pulasan,
What more can I say...
Thursday, June 16, 2011 8:37:00 PM
malira_zainal said...
I'm new to yr blog. Being in the market for more than 27 years, having experience the up & down of the market yr writing is really interesting to follows.
The main point in the market is to make money be it analytical or otherwise.Never blame anyone for the decision made.I pickup the stock tdy even before I came across yr blog and looks like I'm going to lose if I were to contra. But for long term might be different.
Keep up yr frank comment don't bother others might feel or says.
Thanks. zein
Thursday, June 16, 2011 9:16:00 PM
luckystock2 said...
Hi Alex ,
What do you think about HSL and KKB? This 2 Sarawak companies seem having well run business and strong financial position but the share price just can't go up anymore.
Tx for ur precious opinion!
Thursday, June 16, 2011 10:06:00 PM
spot4value said...
I salute u sifu Alex, not many willing to admit their mistake when they r wrong, but you r an exception, keep up the good work!
It's very hard to find someone who r all rounded nowsaday, who can read both TA and FA.
Thursday, June 16, 2011 10:13:00 PM
AlwaysWin said...
Hi Alex
Like I said before, there is no perfect trade. We do not know what news is coming out tomorrow.
Your analysis on Muhibah was correct and the first rule we must acknowledge is to put a stop loss on any trade we make.
You have done the first step of highlighting a probable trade for us. To buy or not to buy is purely our own decision.
Thanks Alex. Keep up the good work.
Thursday, June 16, 2011 10:58:00 PM
AlwaysWin said...
Hi Alex
I notice you are rather prompt in your replies. This blog takes up a lot of your time ya?... very kind of you ..
Thursday, June 16, 2011 10:59:00 PM
Richard Chin said...
Hi Alex,
I am proud of you being honest to your readers and have bravely admitted the overlooking.
Good job! Thumbs up for you!
Friday, June 17, 2011 2:32:00 AM
Ivan said...
Hi Alex,
I salute you!
Your blog is updated most of the time, on average 1 article/ day. It come FREE!
And yet, I believe thus blogger who follow your call is the decision maker for our trading/investment call. We should not blame anyone.
Good job, Alex
Friday, June 17, 2011 9:55:00 AM
Sharinginfoz said...
muhibbah's share (trading halt for one hour) until 11.39a.m, Muhibbah confident of receiving receivables.
http://nexttrade.blogspot.com/2011/06/muhibah-further-thoughts-on-trade-that.html
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Muhibbah Engineering Bhd has been rocked by reports that it will be forced to write down as much as RM300 million due to its involvement in the Asia Petroleum Hub (APH) project in Johor.
The stock yesterday fell 38 sen sen to RM1.52 a share, while its subsidiary, Favelle Favco Bhd, also slumped on the negative buzz surrounding its parent. Favelle Favco shares shed 19 sen to RM1.61 a share.
CIMB Research, in an early morning report yesterday, said that such a writedown will mean that Muhibbah will suffer a loss in the current financial year.
Muhibbah was awarded a contract worth RM820 million to undertake marine piling and jetty works for APH. However, escalation of cost due to APH funding issues led to the stalling of payments due to Muhibbah.
"The unpaid amount has accumulated to RM300 million, which does not include RM187 million worth of outstanding works as at end-2010.
"Muhibbah has not made any provisions for the project as the project is still deemed viable," CIMB analyst Sharizan Rosely wrote in the report.
"The worst-case scenario for Muhibbah is a writedown of the RM300 million due from APH, which would push Muhibbah into losses for 2011," Sharizan added.
On Wednesday, the Singapore Business Times reported that APH, the developer and operator of the APH oil terminal in Johor, has been placed under receivership.
The company had in 2006 secured a RM1.4 billion three-year bridging loan but has been looking for RM2 billion in additional funding following the escalation of the project cost.
APH's main shareholders are KIC Sdn Bhd with a 40 per cent stake, PTP Sdn Bhd with a 35 per cent stake and Trek Perintis Sdn Bhd with a 15 per cent stake.
The CIMB report, citing sources, said that as at end-2010, APH's cumulative capital expenditure amounted to slightly over RM1.4 billion while the physical completion of the project was about 64 per cent.
It is understood that APH has been put under receivership mainly because it could not come up with other investors to help fund the development and repay its debt.
It is further understood that APH has been placed under a receiver, namely the accounting firm BBDO-Binder.
Meanwhile, Kenanga Research said the potential losses could lead the company into PN17 status as the severe losses would erode its shareholders fund by more than 75 per cent. "We believe this is less likely to be the case as the company may not need to write down the full amount of RM370 million," the research house said.
According to Kenanga, assuming the full provision for APH is at RM370 million, this will bring down its forecast for Muhibbah from a net profit of RM64 million to net loss of RM306 million for the financial year ending December 31 2011.
Read more: Muhibbah, Favelle Favco shares slip on APH project http://www.btimes.com.my/articles/muhix/Article/#ixzz1PVnow0eA
THIS ONE WORTH READING。。。。。
原来早在2009年。。。。就有人说这是另外一个PKFZ。。。巴生港口自贸区。。。大丑闻！！！！
SUNDAY, FEBRUARY 08, 2009
Another PKFZ in the making ...
Asia Petroleum Hub, Johor
The Malaysian Insider, here, has quoted a Singapore The Straits Times (TST) report today that a worsening ownership battle for a planned Malaysian bunkering facility on a reclaimed island in Johor (photo) to rival Singapore’s is threatening to derail the project and could hurt CIMB, one of the country’s largest commercial banks.
It appears that the project leader, a little-known private company called KIC Oil and Gas, has so far drawn down nearly half of its RM1.4 billion financing facility from CIMB to fund construction work. But it has failed to resolve problems with another key shareholder of the project, Seaport Terminal, which owns both the Johor ports of Pasir Gudang and Pelabuhan Tanjung Pelepas (PTP). This has prompted CIMB to consider suspending further funding for the construction.
Questions are now being raised over the viability of the project because the government has decided to hold back on its pledge to put in place the necessary infrastructure, valued at roughly RM350 million for roadworks and other utilities, until the shareholder row is resolved.
KIC insists that it is the rightful developer of the planned petroleum hub after it won rights to lease the island in July 2005 from the Ministry of Transport, but Seaport is disputing the award on grounds that the MoT's move to lease the 40ha reclaimed island to KIC violates an earlier privatisation agreement the company had with the government.
TST has also reported that in a bid to resolve the stalemate, the Malaysian government has decided to dictate the shareholding structure for Asia Petroleum Hub (APH), the company which was awarded rights to build and operate the bunkering facility.
Under the plan, KIC was awarded a 40 per cent interest in the project, while Seaport Terminal was given a 35 per cent shareholding. The remaining 25 per cent in APH was split between two other entities. All four parties have yet to sign a shareholders’ agreement but KIC has led construction work for the project with funding from CIMB. Who is behind MoT's decision to award rights to lease the reclaimed island to KIC and why the funding was released before the ownership problems are resolved remains unclear.
Its crystal clear to me, old bean.
LOGGED BY THE ANCIENT MARINER AT 21:45
6 COMMENTS:
Anonymous said...
Captain!
Nothing is going to happen to CIMB. It belongs to the little brother of you know who and besides it wont be the first time the gomen has bailed out this bank.
Like you said: greed to the fore!
9 February 2009 05:50:00 GMT+08:00
nightcaller said...
Captain, Thks for the highlight. Being a nincompoup in marine works, i am just wondering out loud why PTP/Pasir Gudang did not have its own bunkering facilities which will be more viable and feasible as compared to the construction of Asia Petroleum hub. Is Seaport losing its political clout?
Which also leads to another question. It was widely circulated that the higher Malaysian marine fuel price prompts the vessels to bunker in our southerly neighbour.
Putting the pieces together, is this another "KLIA- east" project pushed through "midnight regulation"? I sincerely hope that Cap can track the APH progress as it may be another of those "scam the public" project...
Till then...G'nite M'sia...wherever u are...
9 February 2009 08:09:00 GMT+08:00
Anonymous said...
Wow. Dies it mean CIMB will have 1.3B RM NPL coming up.
How come no cabinet decision on this?
10 February 2009 08:23:00 GMT+08:00
Zawi said...
Captain,
If not for the blogs, nothing like this will be known however massive the scale is. Such fiascos will definitely bankrupt the nation. Some people will still benefit though.
11 February 2009 13:03:00 GMT+08:00
Anonymous said...
Capt there is also another one which is under the radar which is the LPK quarters along per raja muda musa.This one is worth looking at as it also has links to perak monarchy.
The whole project was suppose to be with 2 tower blocks for housing but only the shops were done.
11 February 2009 21:07:00 GMT+08:00
Kuat kencing said...
A KIC Oil & Gas affidavit filed in Singapore High Court ...
KIC's admitted using fake documents to obtain RM120M loan from Ministry of Finance, MDV
http://www.docstoc.com/docs/4788631/KICs-admitted-using-fake-documents-to-obtain-loan-from-Ministry-of-Finance-MDV.
Was this the reason about their PDZ pull-out?
28 March 2009 00:21:00 GMT+08:00
POST A COMMENT
Dear Reader,
This blog promotes freedom of speech and I invite fair comment. This is not a chat room and I would appreciate if you could identify yourself. However, if you prefer to remain anonymous please note that remarks that are deemed grossly inappropriate, maliciously defamatory, extremely vulgar or ad hominem attacks (against my person) will be deleted.
Thank you for visiting and commenting.
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这是一个股票经纪所写的评论：
About Muhibbah ....
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News that its major client Asia Petroleum Hub (APH) could possibly be facing receivership. It had been reported by the Singapore Business Times that APH had been placed under receivership by CIMB Bank. APH had been placed under receivership mainly because it could not rope in other investors to help fund the development and to repay its debt. However, an industry source said that the receivership notice had yet to be served on APH.
APH is the developer and operator of the APH oil terminal in Johor. It had awarded Muhibbah the marine piling and jetty works worth rm820 million. In 2006, APH had secured a rm1.4 billion three year bridging loan bit it needed additional rm2 billion funding due to the escalation of project costs.
Market players worried that Muhibbah would not be able to receive payment for works that it has done. Sources say cost escalation in 2008 led to fund issues for APH and the stalling of payments due to Muhibbah. The unpaid amount to Muhibbah had accumulated to about rm300 million, which did not include rm187 million worth of outstanding works as at end 2010. Muhibbah had not made any provisions for the project as the project was still deemed viable.
However, industry sources noted that the APH project is a viable project and strategically important to the country, and as such is unlikely to be abandoned. The main issue was the project’s funding and control. The construction was already at a very advanced stage and only a few hundred million ringgit more is needed to complete Phase 1. As such, the move to put APH under receivership was akin to finding a new shareholder and management to move the project forward, rather than a liquidation exercise where creditors will get a haircut.
The silver lining in this (potential receivership) is the project may perhaps move forward faster under different management, and as result its creditors will finally get paid. A favourable outcome for the APH project would enhance Muhibbah’s net profit by an estimated rm12 million per annum in the form of savings from the rm300 million outstanding from APH as Muhibbah separately funded the project. The worst case scenario for Muhibbah was a writedown of the rm300 million due from APH, which would push Muhibbah into losses for Fy2011. However, it is believed that in a scenario where the receivership takes over management of APH, it may come up with a scheme to repay a large portion of the amount due to contractors, which reduces the risk of a huge writedown.
Some industry observers say while the latest development is a slight disappointment, they are not overly concerned as the group’s fundamentals are still intact, backed by the buoyant construction and oil and gas sector. Furthermore, the potential provisions would have no impact on RNAV as the amount is reflected as liabilities.
JIT News - Muhibbah ...
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Asia Petroleum Hub (APH), the developer and operator of the APH oil terminal in Johor, faced receivership. As one of the contractors for APH, Muhibbah was awarded the marine piling and jetty works worth RM820 million. The receivership status for the APH project was a negative surprise. However, it should not be a major concern at this juncture as APH is likely to negotiate for more time to resolve the matter and rope in a new investor. The worst-case scenario for Muhibbah is a write-down of the RM300 million due from APH, which would push Muhibbah into losses for FY11. However, there is no impact on RNAV as the amount is reflected as liabilities.
muhibah.....
最大的问题是：很多的报道都说有关的债务没有大问题。。。。之前，还说即将可以收回有关的款项。。。。
还很有信心，同时还会使到MUHIBAH马上获得大量的款项。。。
太有信心了！！！
这带来一个值得大家关注的问题，那就是。。。。超过半年的款项是不是要当成坏账？？？
拨备？？？
作为挂牌公司，更有必要诚实。。。。。。。。。。
MUHIBAH 所带出的信息是：董事会有信心可以收回有关的款项。。。。。。。。。一直在玩“障眼法”。。。。。。。。
投资者，股友该如何警惕呢？？？？
当局应该指定所有挂牌公司必须以大字。。列明。。。这些“未收款项”。。。。。还有本身所欠的款项。。。。。
为何到了今天，挂牌公司。。。。还那么不够透明化。。。。。。很多人说----马来西亚的股票公司。。。。很多是骗子在操作。。。。
甚至挂牌公司的高级职员也那么说。。。。。。。。
BURSA。。。。就是捕杀。。。。。专门捕杀可怜的股友。。。。。。。。。。。。
如果当局还不加强对付这些不诚实的挂牌公司。。。。。。。。将会有更多人认为马来西亚的挂牌公司信不过。。。。。如果马来西亚人都不相信本身的挂牌公司。。。。。外国人。。。。就更不用说了。。。。。。。。。
MUHIBAH。。。。。的“阴招”。。。。连很多老手，股票经纪也被蒙在鼓里。。。。。。。。。。。。。。。。
Asia Petroleum Hub (APH), the developer and operator of the APH oil terminal in Johor, faced receivership。。。。。。。。。
之前不是还在由大人物开幕吗？
Projects
Asia Petroleum Hub
In May 2006, the Govenment of Malaysia has mandated the Group's subsidiary namely Asia Petroleum Hub Sdn Bhd (APH) to develop and operate a Regional Petroleum Hub and Bunkering Facility on the government's reclaimed island at Tanjung Bin, Johor.
The Hub will have a 1 million m3 storage capacity with jetties that will receive VL class vessels. The Hub, which will be operational 24 hours, will have adequate space for dedicated multiple users. It will also meet international standards in blending various petroleum products as per clients’ specifications. With the approval of the Development Order in August 2007, this Landmark IDR Project is still under construction.
On 5 July 2007, YAB Dato’ Seri Abdullah Ahmad Badawi, the Prime Minister of Malaysia, officiated APH’s Commencement of Construction Works Ceremony.
http://www.cyusof.blogspot.com/2009/02/another-pkfz-in-making.html
SUNDAY, FEBRUARY 08, 2009
Another PKFZ in the making ...
Asia Petroleum Hub, Johor
The Malaysian Insider, here, has quoted a Singapore The Straits Times (TST) report today that a worsening ownership battle for a planned Malaysian bunkering facility on a reclaimed island in Johor (photo) to rival Singapore’s is threatening to derail the project and could hurt CIMB, one of the country’s largest commercial banks.
It appears that the project leader, a little-known private company called KIC Oil and Gas, has so far drawn down nearly half of its RM1.4 billion financing facility from CIMB to fund construction work. But it has failed to resolve problems with another key shareholder of the project, Seaport Terminal, which owns both the Johor ports of Pasir Gudang and Pelabuhan Tanjung Pelepas (PTP). This has prompted CIMB to consider suspending further funding for the construction.
Questions are now being raised over the viability of the project because the government has decided to hold back on its pledge to put in place the necessary infrastructure, valued at roughly RM350 million for roadworks and other utilities, until the shareholder row is resolved.
KIC insists that it is the rightful developer of the planned petroleum hub after it won rights to lease the island in July 2005 from the Ministry of Transport, but Seaport is disputing the award on grounds that the MoT's move to lease the 40ha reclaimed island to KIC violates an earlier privatisation agreement the company had with the government.
TST has also reported that in a bid to resolve the stalemate, the Malaysian government has decided to dictate the shareholding structure for Asia Petroleum Hub (APH), the company which was awarded rights to build and operate the bunkering facility.
Under the plan, KIC was awarded a 40 per cent interest in the project, while Seaport Terminal was given a 35 per cent shareholding. The remaining 25 per cent in APH was split between two other entities. All four parties have yet to sign a shareholders’ agreement but KIC has led construction work for the project with funding from CIMB. Who is behind MoT's decision to award rights to lease the reclaimed island to KIC and why the funding was released before the ownership problems are resolved remains unclear.
Its crystal clear to me, old bean.
LOGGED BY THE ANCIENT MARINER AT 21:45
6 COMMENTS:
Anonymous said...
Captain!
Nothing is going to happen to CIMB. It belongs to the little brother of you know who and besides it wont be the first time the gomen has bailed out this bank.
Like you said: greed to the fore!
9 February 2009 05:50:00 GMT+08:00
nightcaller said...
Captain, Thks for the highlight. Being a nincompoup in marine works, i am just wondering out loud why PTP/Pasir Gudang did not have its own bunkering facilities which will be more viable and feasible as compared to the construction of Asia Petroleum hub. Is Seaport losing its political clout?
Which also leads to another question. It was widely circulated that the higher Malaysian marine fuel price prompts the vessels to bunker in our southerly neighbour.
Putting the pieces together, is this another "KLIA- east" project pushed through "midnight regulation"? I sincerely hope that Cap can track the APH progress as it may be another of those "scam the public" project...
Till then...G'nite M'sia...wherever u are...
9 February 2009 08:09:00 GMT+08:00
Anonymous said...
Wow. Dies it mean CIMB will have 1.3B RM NPL coming up.
How come no cabinet decision on this?
10 February 2009 08:23:00 GMT+08:00
Zawi said...
Captain,
If not for the blogs, nothing like this will be known however massive the scale is. Such fiascos will definitely bankrupt the nation. Some people will still benefit though.
11 February 2009 13:03:00 GMT+08:00
Anonymous said...
Capt there is also another one which is under the radar which is the LPK quarters along per raja muda musa.This one is worth looking at as it also has links to pera monarchy.
The whole project was suppose to be with 2 tower blocks for housing but only the shops were done.
11 February 2009 21:07:00 GMT+08:00
Kuat kencing said...
A KIC Oil & Gas affidavit filed in Singapore High Court ...
fake documents to obtain RM120M loan from Ministry of Finance？？？
http://www.docstoc.com/docs/4788631/KICs-admitted-using-fake-documents-to-obtain-loan-from-Ministry-of-Finance-MDV.
Was this the reason about their PDZ pull-out?
28 March 2009 00:21:00 GMT+08:00
POST A COMMENT
Dear Reader,
This blog promotes freedom of speech and I invite fair comment. This is not a chat room and I would appreciate if you could identify yourself. However, if you prefer to remain anonymous please note that remarks that are deemed grossly inappropriate, maliciously defamatory, extremely vulgar or ad hominem attacks (against my person) will be deleted.
Thank you for visiting and commenting.
