Let me show you what's wrong with Asia Media

Asia Media is a company which I was tracking, but I sensed something wrong with the company way before i.e. during the time when it was listed. But I could not determine the wrong. The financials seems attractive, but again it was too good to be true - to me. If there is a tweak in the accounts, it is a job of a pro. But recently, the company's share price dropped ridiculously. No company drops this way except that they want it to be or there are some bad unwanted news. Of course the majority shareholder sold 9% was the reason, but buyers were just waiting for him to pull the trigger. Look at what happened to the share price.

Private placement as well as the trend for the last 10 months

If you look at the P&L, it seems believable. The first section, let me tell you why. The Profit has a good trend. Its business has good revenue growth as well as Profit growth. It has very good margin as well.

The operating cashflow is very good as well. However, if you notice, the company does not generate free cashflow. It is using up all the operating cashflow that it has generated. See below. On the onset, the capital expenditure seems fine, but there are some of the trend which does not seem so fine.

The above looks like there is nothing wrong? Notice the high net cashflow from operatings against net profit. It is higher by RM30 million, if you noticed. It does not seem right. It is unusual. The net cashflow from operations in fact is higher than revenue if you notice. Very weird. Co-incidentally that one huge number is the increase in other payables. What is the RM30 million about? How is the other payables so high? It was not explained. It was not a P&L item either - which means that it does not affect the profit. Big question here...

Let me show something else as below.

PP&E increased substantially

Asia Media invested RM52.8 million into an item mentioned as capital work-in-progress of which it is a huge  73% of its total PPE. My question is if it is a work in progress and such huge number, why the need to sell by the major shareholder so early? I am sure, the owner would want to wait for the investments to bear fruit first. RM52.8 million invested. The business of Asia Media is in putting up broadcasting equipment, computer monitors for sale of media advertising space. How much do we think these equipment will costs? RM52 million? Nothing is explained here.

A RM500 million investment in the ETP

How long will the capital work in progress continue to be non-depreciable?

Capital Work in Progress - non depreciable

Hence, firstly from the much higher cashflow from operations compared to Net profit and even revenue to very high non-depreciable capital investment which is not explained, this numbers does not seem right. And I do not know where it came from.