Wednesday, 30 March 2016

Bursa: world's longest bull market

Article from Bloomberg: "World's Longest Bull Market Endures Turmoil as Foreigners Return"

Some snippets in italics, with comments by me:

"Malaysia’s energy exports are tumbling, its prime minister is battling corruption allegations and corporate profits are weakening. With all that, the Southeast Asian nation is also home to the world’s most resilient bull market for stocks."

I have written before about the weakening corporate profits.

"Sentiment remains stubbornly buoyant in Malaysia, home to some of the region’s highest dividends, as the country’s $166 billion pension fund underpins demand for equities with share purchases. Even after the FTSE Bursa Malaysia KLCI Index climbed 12 percent from a three-year low in August, it trades near the cheapest relative to global equities in almost a decade."

To sum up:
  • Corporate earnings of the 30 Bursa heavyweights have been disappointing since 2012
  • Dividends are some of the region highest
  • The KLCI index has steadily climbed without a 20% correction
  • And P/B ratio is one of the cheapest in the world, having come down from about 1.4 (in 2012) to about 0.8 (currently), relatively speaking

"... the country’s $166 billion pension fund underpins demand for equities with share purchases"

“Malaysia’s bull-market run is primarily driven by institutional support, especially government-linked funds,” said Tan. From 2008 till now, the Employees Provident Fund has seen strong inflows, with assets growing by a compounded annual growth rate of almost 10 percent, he said.

This (the support by government linked funds) sounds all quite artificial, there is clearly a lot riding on the performance of Bursa, but the question is if it is sustainable in the long term.

Sunday, 27 March 2016

Grand-Flo: changing the goalposts?

Article in The Edge: "Grand-Flo: Profit guarantee for Innoceria purchase revised", one snippet:

Grand-Flo Bhd, which acquired a 50% stake in property development company Innoceria Sdn Bhd last year, said the period for the RM15 million net profit guarantee provided by the vendors will be three years instead of two as initially agreed.

The vendors had guaranteed a net profit of RM10 million in 2014 and RM5 million in 2015, but both parties have now agreed to an aggregate profit guarantee of RM15 million for a three-year period from 2014 to 2016.

"This agreement was reached after reasonable consideration of the unexpected longer gestation period in the development business which was not foreseen at the time of the acquisition," said Grand-Flo in a filing with Bursa Malaysia today.

This looks like a rather good deal for the sellers of Innoceria, a profit guarantee of RM 15 Million over three years instead of over two years. Looks like a case of changing the goalposts during the game.

Why is Grand-Flo so lenient?

What exactly is the current situation, for instance the profits over 2014 and 2015 of Innoceria?

Saturday, 19 March 2016

Poor earnings growth for Bursa listed companies (2)

I blogged before about this subject, and am updating my spreadsheet with the new results.

All FBMKLCI 30 companies have now released their 2015 results, the updated numbers per company look like (net profits in millions of RM):

The totals and growth numbers:

Some comments:
  • The Q4 numbers were slightly worse than expected, the 2015 earnings came in 6.6% below the 2014 numbers.
  • The 2015 numbers are even lower than the 2012 numbers, in other words negative growth over three years for the Top 30 companies on Bursa.
  • If we correct the numbers for inflation they would be worse.
  • For foreign investors who account in USD the numbers are even lower: -23% in 2015.
  • There are 10 companies with their year-end not in December, they have started to report their 2016 numbers already; the 2016 profit numbers of these 10 companies are RM 2 Billion lower then their comparable 2015 numbers.

All in all rather bad news, and this for the bluest of blue chips, with the Malaysian economy reportedly nicely humming along.

Eventually valuations are driven by fundamentals, if Malaysian companies want to attract foreign investors then earnings have to start growing again.

Sunday, 13 March 2016

Is MClean so clean .....? (3)

In the previous query MClean confidently wrote:

"We are confident that the medium to long-term impact will not be adverse to the Group."

In a new announcement MClean apparently changed its mind (possibly after some pressure by Bursa?):

".... the Board of Directors of MClean wishes to further inform that if in the event the claim is payable it will have an adverse financial impact to the Group."

The amount claimed by Petronas (RM 47 million) is not exactly peanuts for a smallish company like MClean, about 3.6 times the cash in hand.

Wednesday, 2 March 2016

Is MClean so clean .....? (2)

MClean was queried by Bursa, and replied, two snippets:

The Letter of Demand [from Petronas] was received on or about 22 February 2016.

MClean did not explain why they waited one full week to inform its shareholders, to me it looks like material information, getting a letter of demand from a large corporate, the claim amount being about 3.5 times the cash in the company.

We are confident that the medium to long-term impact will not be adverse to the Group.

Time will tell.