Misleading investors?

There are companies that provide actual true information, and be frank about things - not very many of them in Malaysia.

There are companies that do not provide much information, so much so that their Annual Reports are pretty much copy and paste from previous years. We can forgive them for not knowing about corporate responsibility and not doing the right job of informing - these probably covers the most companies in Malaysia, the number of companies under this category decreasing (improving) though.

Then there are companies that continues to mislead - time again and again - quite a few of them. One cannot just feign ignorance as some of them are pretty clever. If one knows how to mislead, they cannot claim ignorance.

Just read below and try to identify which category this company comes under.

It says here, clear market leadership position. I am wondering how does it justify that? There is www.mudah.my, does it have more adverts than mudah.my?

Read my previous article then one can probably figure out the actual intention. The announcement in September 2014 was not meant to be executed, is it true? The announcement was to tell people of their stocks value through subsidiary / associate holdings. But they can't sell as there probably has not much market to sell to. That announcement caused their shares to rise.

Just an example iProperty.com, see below 5 years performance. Even the one year, it made profit in 2013 was due to an accounting entry. (Ironically the profit was mainly due to its sale of iCar, which it claimed accounting profits)

Will iCar experience the same trend as iProperty? That is a very high chance, given the competition and poor ability to charge in this business. Maybe even worse as developers have money to spend, by advertising with iProperty. Second hand car dealers are poorer. For the second hand car market, most - if not almost all adverts are free. That's the problem.

5 years of performance of iProperty

Again if you look above, do you see any thing that's amiss. Revenue increase was followed by costs increase, hence EBITDA does not improve much. (you see good companies do not use EBITDA, but in this case, I just provide that chance, since they use EBITDA to tell their story).

If you looked at Jobstreet many years ago (unfortunately Bursa now just limit to 5 years), revenue increase would have commensurate with profit increase, almost in the same quantum. Why? Because dotcom business like Jobstreet, pretty much has their costs remain - things like building, staffs costs, electricity etc. Their fixed costs remain pretty stable. There are not much variable costs.

I do not see that in iProperty.

Is RevAsia counting chicken before it is hatched?

Came across this story when reading Focus Malaysia this evening. Catcha Media morphing into another name now, Rev Asia is probably at it again - playing with investor's ignorance? It has just announced - well on the 9 September 2014 - that it is selling its entire stake in iCar. Besides the news by TheEdge and several other news daily, do read the below carefully.

The company proposes to sell. Usually, it highly unusual for a company to announce its intention to sell and start to provide valuation on its potential sale. In fact, it has yet to have found a buyer. Compare this to another deal that I had covered, Jobstreet's sale to Seek. It is a confirmed sale, subject to some conditions.

In Rev Asia's sale, it is claiming that it intends to sell its entire stake which in its announcement could probably be worth RM238 million assuming that the sale was at AUD1.54. A day after the announcement of its intention to sell, the share price of iCar actually dropped substantially, signifying that the owners were not serious on the business but only waiting for the moratorium period to be due (11 Sep 2014).

My question is:

1. Why bother announcing when you have yet to have found a buyer?
2. Will the company be reducing the stake partially with carsales.com Ltd owning 22.90% while Rev Asia owns a slightly higher stake of 27.9%?
3. In the announcement, it says that it is allowing itself to sell the stake at a price not more than 25% of its prevailing market price. If the stake is a significant stake with control, why at discount? Could it be that iCar is not worth that much in its opinion? If a company negotiates a significant stake sale with relinquishment of control, why discounted price? Rev Asia has some well known directors with one ex-head of Accenture Malaysia - they surely could do better. Or could it be to mislead investors?

Surely, with the announcement, investors is made to think that there is value in RevAsia. Look at the sudden hike in price, a day after the announcement.

The fact of the matter is that the value is not real until it has confirmed a buyer. In fact, iCar's share price went the other direction after the announcement.

My personal feel is that RevAsia or Catcha is at it again and just paying an investment bank to announce the intention is a waste of shareholders money. Gain for the majority shareholders, while loss to small minorities.

The right thing to do is to announce only you have found a buyer, not when you think you want to sell, as 27.9% stake is not a small stake. One may not be able to find a buyer especially for a company which makes losses to the tune of more than AUD6 million.

Catcha Media: When a Press Release is not really that useful

Press releases in Bursa are supposed to summarize and help identifying to investors important areas where we want to know on the operations of the business. But the press release by Catcha Media is hardly that. Instead of telling us the performance of the company, it releases something which is of less significant. I wanted to know the current performance of its business as well as where it sees it is heading.

The profit from its disposal is supposed to be one-off and of less significant, but yet this is what we get. Why waste Bursa's space?

In the actual results, what is more important is the one boxed in red as below. Instead, it highlighted the results boxed in yellow.

Also notice the cash reserves after 1-1/2 year of listing. The company just went on a spending spree.

Today, the company is worth RM57 million in the market, but there is hardly anything in the balance sheet.

Catcha Media: In the eyes of an analyst vs mine

Catcha Media reported its earnings yesterday. I originally thought of writing something today, however before that, I read an analysis from a local investment banking firm. It says as below:

 

To summarize, basically it says Catcha is not doing well and below their expectation. It in fact made losses over half year 2012. However, the investment banking firm expects the company to turnaround with better results due to the following:

• its foray into online regional auto (via iCar) portal looks good in the future;
• its acquisition of an online e-commerce business Haute Avenue looks good as it promised a profit guarantee of SGD1.5m per annum.

The Investment Bank values the company at a price of RM0.77. Catcha is trading at RM0.52 currently. Hence, it calls for a Buy.

My analysis

I am looking at the perspective of business. How it will trade I do not know as the company seems to be short on float. Hence it is easier to manoeuvre the share price by traders.

Catcha Media is a company which has not shown any strong potential. Its drop in revenue as well as registering losses despite its expectation of doing much better after its listing really disappoints. Over the last year, after its listing it has gone on acquisition (Haute Avenue) and exercise (iCar listing in Australia) to boost up its revenue and future. Those are exercises, but not something of substance as yet.

If it is claiming its foray of having a regional car web portal will succeed - that I have yet to be assured of. It is not that there are no automotive portal. Jobstreet acquired Autoworld.com.my years ago. For a company which has much cashflow than Catcha and already has proven ability in terms of building a dotcom business is not able to turn the business into something worthwhile. The most followed blog / portal for cars in Malaysia is www.paultan.org. I do not see Paul Tan making much despite he is very much widely followed. (I respect his ability to pull crowd though - it's not easy)

Success in Malaysia does not mean success in any other parts of South East Asia. Jobstreet is largest in Malaysia and Philippines. JobsDB is most successful in Singapore, Thailand and Hong Kong. Seek.com is largest in Australia.

I do not see an online portal on high end fashion been able to prove successful in any parts of the world. How is Haute Avenue being foreseen to be so?

For now based on the below financials as at half year 2012, it is showing more pain than gain. Its cashflow does not seem good as well with less than RM3 million cash remaining. Its listing in Australia for iCar may have raised it some cash for the South East Asian portal but making it successful is different from convincing investors to put in cash.

My question is, how is the analysis by the investment bank going to be prove us otherwise?

The only one substantial is iProperty.com which to some extent increased its presence nicely. However, if you look at the expenses, it has much revenue from other sources which is event management. Hence iProperty made much from event management as well as online services (although its Annual Report does not tell us anything). And in fact, iProperty still loses money despite it trying to expand at a vigorous speed.

Just in case you are interested, below is the Proforma Income Statement for iCar which is expected to be listed in Australia.

Genting: Much more left to be desired

The story of a man who hailed from China, came to Malaysia during his teens, built a business empire which is valued at almost RM40 billion today may not turn out to be that nice a story for investors as yet. That same man who almost went bankrupt building a dream castle on top of a nice little hill was doing most things right during his days. His gaming, oil, properties, plantations and many other ventures turned out to be the right call. Maybe it is luck, perhaps it is perseverance - whenever there is a call for certain business decisions, shareholders believed in the call from that man who did not finish schooling but just pure business sense, belief and experience to call from. But, investors continued to believe in this man.

Note: Yes, we may not realise it but it takes a whole lot effort to bring people up to a hill to gamble despite the license, especially the early days!

Now, that man has passed and after transferring his businesses to the second and third generations a decade ago, there are several calls made by his children and grandchildren that let us want to have the same believe, but could we? First, there was this "boo boo" of building one of the largest fleet of cruise liners in the world which caused them to lose billions until today. Then came other project such as the gaming business in UK where until today and after 5 years they could not justify the viability of the purchase to investors.

To top off with that, the humble man's son (who is now the Chairman) pays himself RM113 million last year to top the CEO's remuneration ranking far wide from any other CEOs in Malaysia. That figure was exactly 4% Genting's total profit attributable to shareholders. Is that justified?

Yes, he has done one big right decision which is the gaming business in Singapore but that story is going stale. Why is that?

Just read the below first quarter 2012 announcement:

"The (Genting) Group registered total revenue of RM4,421.1 million compared with RM4,889.2 million in the previous year’s corresponding quarter (“1Q2011”), a decrease of 10%. Lower revenue was recorded from all the business segments except for the Property Division. The Group’s profit before tax decreased by 23% to RM1,456.9 million compared with RM1,890.6 million in 1Q2011."

Why am I saying that Genting's performance is appalling. Against its only other competitor in Singapore, it could not better that competitor. Compare Sands performance (announced below) against Genting, what to you managed to decipher? Sands' performance up, Genting's performance down. In a land of duopoly, how is that happening? This is on top of Sands was at its most bruised period after the US crisis. Imagine when the other large gaming companies managed to pull out of their doldrums especially when Las Vegas manages to find its footing, how will Genting compete, I wonder? Remember, casino business is global, not local especially in the era of vast international travelling.

Sands first quarter 2012 performance
"Las Vegas Sands experienced a strong performance from its domestic resorts and in Singapore, where casino revenue increased 51 percent to $701.3 million in the quarter. The Marina Bay Sands there averaged 98 percent occupancy at $341 a night, the company said."

If Genting cannot better Sands in Asia, I am wondering how is it going to better many more competitors in US (New York and Miami to be exact) where it is venturing billions into right now? Yes, it is trying to pull itself into becoming a behemoth in the gaming business globally. But their many failures more recently, are pulling sceptics on how well they can compete.
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Then, I am reading another story of the third generation of Genting (supposedly to be the potential next in line). Let me point you to one story of him buying into Catcha Media. (Look at where Catcha is now!) Shareholders, how are you to entrust your money on this new gen of Genting if they can't get decisions right by buying into a "so-so" small media company? Or is this new gen more interested in allowing a run on the Catcha stock as that was what happened during his purchase?

Catcha Media: The company which only cares about revenue but forgot that it lost money?!

If you are a shareholder of Catcha Media, try reading the below announcement.

Catcha Media Records Revenue Growth in 2011
Kuala Lumpur, Malaysia; 29 February 2012 - Catcha Media Berhad (“Catcha Media”) today announced its results for 2011, with revenue for Q4 2011 increased by 26% as compared to Q4 2010. This follows its previous announcement that its Q3 2011 revenue also showed an increase of 20% as compared to Q3 2010.

Said Mr Patrick Grove, CEO Catcha Media, “After experiencing growth through 2011, it is very exciting to see our business grow in Q4 2011 by another 26% as compared to Q3 2010. The internet and new media environment is moving very rapidly, and we are glad Catcha Media is remaining at the forefront of the industry.”

He continued, “Moving towards 2012, we anticipate even better financial performance, with significant growth in our e-commerce revenues. We are well positioned after a year of achievements and investment in 2011 to capitalise on the growth in the online and new media industries through the coming months and years, and have positioned us to expand in the new year. The overall operating result of the company for 2011 was affected by a number of non-recurring, one time charges and are natural for a new public company, though we are extremely pleased to have the company continuously growing at such an impressive rate.”

Catcha Media recently entered into an agreement to acquire Malaysia’s leading car classifieds website, Carlist.my. This acquisition came not long after the successfully completion of the acquisition of Hauteavenue.com, a leading luxury flash sales website. These acquisitions, coupled with the existing market-leading position held by Catcha Media including exclusive partnerships to operate Microsoft’s online properties in Malaysia and Lowyat.net, gives the company almost 10 million Malaysian online customers and users on a monthly basis.
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Issued by:
Catcha Media Berhad


Note the word "revenue and growth" mentioned few times. BUT, where is the word loss or profit?

Then look at the financial performance for FY2011 below. I think they forgot that if you mentioned revenue and growth and things look so nice and dandy, then you forgot to tell your investor you carry losses for the period.

Is this a case of misreporting and misleading the shareholders? Can SC please look at this? Call a spade a spade, do not try to mislead investors!

Serious Investing!