Saturday, 12 December 2015

Sweet Talks By Public Listed Companies

Author: Icon8888   |   Publish date: Fri, 28 Aug 2015, 10:23 PM

1. Minho (M) Berhad

This afternoon, Minho announced net profit of RM1.62 mil, an 85% decline from previous quarter's net profit of closed to RM11 mil. As a result, share price took a beating and declined by 26 sen (18.6%) in the afternoon trading session.

To be fair, what happened to Minho is not unique. Sometime, PLCs' results do come in below expectation. That is the nature of doing business. Sometime you make more, sometime less.

What made this case so special and created a lot of discontent was Minho's commentaries in its March 2015 quarterly report.

In the "Prospects For Current Financial Year" section in its March 2015 quarterly report, it said the following things :-

The key word was "slightly lower". 

The impact of that statement should not be underestimated. It implied that the coming June quarterly result would be closed to the RM11 mil reported in the March 2015 quarter.

Probably as a result of the expectation created, Minho share price rallied during the month of July and August.

Of course, as we all found out this afternoon, RM1.62 mil is definitely NOT "slightly lower" than RM11 mil. 

I think Minho owes many investors an explanation. 

2. Denko Industrial Corporation Bhd

On 16 July 2015, I wrote an article about Denko. 

The reason I paid attention to that company was because it delivered a strong set of result in March 2015 quarter.

Not only that.

In that quarterly report, the company made the following comments about its prospects :-

I am not trying to blame the company. But the red highlighted statement above played a major role in motivating me to buy into Denko. 

On 24 August 2015, the company announced its June quarterly results. Net profit came in at RM0.4 mil, 83% lower than previous quarter's net profit of RM2.83 mil.

Of course, it was a big disappointment for me.

I flipped to its commentary section, and this is the company's explanation :-

Please note the statement "The turnaround result expected to be shown in the following quarters".

Basically, the company was trying to comfort investors that things will be better going forward.

Guess what was my reaction ? I told myself "You go and fly kite lah. Fool me once, shame on you. Fool me twice, shame on me."

Too many excuses.

When come to investing, shareholders need concrete results, not promises.

The next morning, the first thing I did when market opened was to dispose of all my Denko shares, at a loss.

I deleted the stock from my watchlist and vowed that I will never look back.

3. Concluding Remarks

I have never owned any share in Minho. I simply didn't find their business operation appealing.

As for Denko, maybe I was a bit drastic in my reaction.

To be fair, Denko's case is a bit different from Minho. Maybe the company meant what it said. Maybe in the coming quarters, their results will indeed improve. Maybe I was too early to give up on them. Maybe I am a bit too harsh on them.

Or maybe not.

There is no way I can find out. We will have to wait for next quarter result.

Still, the lesson is the same - Public Listed Companies sometime give out some positive signals. Some of them are genuine, some of them will later turn out to be not achievable. Some are downright misleading.

Most of the time, the release of such statements or information do not breach any guidelines or break any laws. 

It is also difficult to establish that they are unethical or bear ill intention.

The only thing I can say is that we need to take those information with a pinch of salt. 

But don't be too cynical also. Not all are meant to fool us. 

We need to be vigilant. But we also need to continue to keep our mind open, or else we miss out real opportunities.

This is all part and parcel of investing. 

Welcome to the stock market.

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