MAS net loss in Q2 down 36pc

GLC, MALAYSIA Airlines (MAS) is one step towards achieving its goal of the full year net loss projection of Rm630million.

The Business Time (30/8/06) has reported that MAS has announced:

• that it has reduced its net loss 36 per cent to RM176.5 million for the second quarter ended June 2006, on a 5 per cent increase in revenue to RM2.95 billion. The loss registered in the second quarter was RM84 million or 32 per cent lower than an earlier estimation of RM261 million losses targeted in its business turnaround plan.
• For the cumulative six months period, net loss increased to RM496.46 million against a net loss of RM164.35 million in the last corresponding period. This was achieved on a 2.5 per cent revenue growth to RM5.92 billion from RM5.77 billion previously.

MAS managing director Idris Jala remained optimistic that the airline will be able to meet its full year net loss projection of RM620 million, as stated in its turnaround plan.

Incidentally, just in case you are not keeping track, here’s a little bit of history:

• MAS reported a RM1.26 billion net loss for the financial year ended December 31 2005 and
• Under the turnaround plan unveiled in February 2006, the carrier aims to narrow its losses to RM620 million this year, followed by a RM50 million net profit in 2007 and RM500 million net profit in 2008.

Well, I can remember what Idris Jala said that in his previous company, Shell Bhd that all their executives are concerned with the Profit and loss impact, I think that it’s high time that GLC companies need to be more focus in this area.

I do not mean to solely focus at profit and ignore the public’s need.

I mean things like cost awareness/management , focused strategies, Return on Investment, etc

Deloitte KassimChan, Hwang-DBS reprimanded

Deloitte KassimChan, an affiliate of Deloitte Touche Tohmatsu which is the world’s Big Four has been reprimanded by our Securities Commission(SC).

 

It is understood that this is the first time an accounting firm has been reprimanded by the SC.

The Securities Commission (SC)  has described Deloitte KassimChan’s  non-disclosure of material facts during the restructuring of Ocean Capital Bhd  as “an extremely serious dereliction of duty”. The SC in fact banned Deloitte and will not accept for six months all submissions under Section 32 of the Securities Commission Act 1993 where Deloitte acts as the reporting accountant.

As reported in the Business Time (30/8/06), the details are as follows:

 

• Deloitte was the accountant for Pasaraya Hiong Kong Sdn Bhd, while Hwang-DBS was the principal adviser for Ocean’s restructuring scheme;
• It was revealed that the audited accounts of Pasaraya Hiong Kong and the accountant’s report submitted to the SC in relation to the proposed restructuring had contained false and misleading information;
• As audited by Deloitte, the company had registered a turnover of RM198.7 million and an after-tax profit of RM8.5 million for its financial year ended March 31 2003. But it was later discovered that Pasaraya Hiong Kong had overstated its sales by RM7.7 million. This amount of overstated sales did not have a corresponding cost attached to it, thus the whole amount was booked to profit;
• If this overstatement being revealed, there would have been significant shortfall in the profit of the company, thus affecting adversely the restructuring scheme of Ocean;
• Deloitte Tax Services Sdn Bhd, the tax agent for Pasaraya Hiong Kong, was fully aware of the overstatement of the sales figures from a tax investigation and settlement but the the information was not made known to the SC by Deloitte.

 

 

Questions raised are:

Whether over  Deloitte’ side, is there large communication gap between their tax and audit department?

Or

Is it really a collusion of sort between the accountants and the client arising from fees/pressure from client?

Or

Is it a blatant ignorance of the importance of material representation to the Authority.

GLC’s Proton Holdings Posts Another Quarter’s Loss

Much controversy has been reported about Proton, our ailing automobile manufacturer which is one of the government-linked companies.
One undeniable fact is that Proton has been on the limelight simply because it has a reputation of slipping in and out of profit over the past year as it reported that it is still struggling to reverse a steady decline in market share as a result of intense competition from foreign car makers.
Recently, the ailing national carmaker has achieved once again the slippery performance by posting more red ink to its first quarter results:

• It chalked up a 58.6 million ringgit (US$15.9 million) loss in the first quarter to June 2006 compared to a lower loss of 12.35 million ringgit in the same quarter last year;
• Its sales slumped to 1.42 billion ringgit against 2.05 billion ringgit a year ago;
• For the first quarter, Proton’s car sales stood at just 32,200 units compared to 44,367 in the same period last year;
• Its financial year end May 30 2006 result came with a dismaying disappointment which posted a profit of 47 million ringgit (US$13 million), just one-tenth of the earnings recorded in the previous year and
• Proton’s national market share declined to 41 percent in 2005 from 60 percent in 2002. Its managing director Syed Zainal Abidin Syed Mohamed Tahir again blamed the latest poor result on declining car sales in Malaysia and a lack of new models, with the next contenders due to hit the streets only next year.

By the way, its latest model is Proton Savvy which was launched last year with disappointing results, and now we have a newcomer which is Proton Satria. One unfortunate part is that Proton has been struggling with a reputation for producing shoddy and unimaginative models.
It is hoped that Proton can emulate exemplary example like the recent Sime Darby’s positive results so that GLC’s image would not be tarnished.

GLC- Sime Darby Bhd – Achieve Strong Results

Further to the key performance indicators implemented by the Government on GLC, Sime Darby Bhd has indeed achieved some remarkable results.
According to its group chief executive Datuk Ahmad Zubir Murshid the positive results were attributed to the planned strategies executed two years ago, which saw the group focusing on its core business, disposing of its none core assets and optimising on its capital structure.
Incidentally for the for the year under review, the group has achieved the following results:

• For the financial year ended 30/6/2006, it reported a 40 per cent surge in net profit to a record RM1.12 billion against RM801.2 million before, on the back of an 8 per cent revenue growth to RM20.16 billion and
• In the fourth quarter, it registered a 61 per cent rise in profit to RM401.7 million from RM250.1 million previously, on a 6 per cent revenue growth to RM5.41 billion and
• Sime Darby announced a total gross dividend of 30 sen per share, a 15 per cent rise from 26 sen per share previously. This translates into a RM575 million payout from the group or a payout ratio of 51 per cent.

As part of GLC, Sime Darby is indeed walking the talk to achieve its key performance indicators. Let’s hope other GLC are following suit.

Charms,Talismans And Meaning

CONTENT – CHARMS

 

Acorn	Angle	Arrowhead	Axe	Bamboo & Serpent
Cornucopia	Fish	Heart	Key	Knot
Ladybird	Owl	Tau	Four-leaved clover	Grass-hopper
Horseshoe

Recognizing Revenue Tricks

This is an old article regarding the trick in using revenue recognition to artificially inflate sales figures with the main objective of  bloating  the bottom line.

 

KFH To Persuade Govt-linked firms To Unlock Assets Into Islamic REITs

As we are aware that GLC hold a sizeable chunk of the nation’s assets. Hence, the government by unlocking the GLC’s assets into REIT might prove to be an alternative to privatization.
Recently at the Malaysian Islamic Finance Issuers And Investors Forum 2006.
Malaysia’s first foreign Islamic bank Kuwait Finance House (KFH) managing director Salman Younis said GLCs are sitting on huge assets like the plantation ad real estate business that can be unlocked into I-REITs.
Salman Younis further elaborated on:

• The need to have the “size” to attract investors especially from the Middle East who are interested in syariah-compliant REITs;
• He is now in discussion with several GLCs to promote this idea as there is a need to access to this pool of assets;
• Advising that REITs does not mean only shopping centres where in US, there is even prison REITs;
• Middle East investors presently are investing in US and Australia but he felt that their choice should be in Asia, Japan and Singapore

PWC Japan Unit Suspended Over Kanebo Fraud

Since the collapse of Arthur Andersen over the Enron case, recently there is another big accounting fraud which badly hit Chuo Aoyama, one of four large accounting firms in Japan, affiliated with the global network of PricewaterhouseCoopers.

Chuo Aoyama, reportedly audits over 2 thousand companies, including such heavyweights as Toyota, Sony, and Nippon Steel Corp. This fraud might lead to the collapse of Chu Aoyaman leaving only 3 accounting firms in Japan.
What is this accounting fraud all about?
The accounting fraud relates to the Chuo Aoyama’s PricewaterhouseCoopers’ three auditors abetting with the top executives of Kanebo Ltd to falsifying earnings of 200 billions yen for the four years from 2002 to 2005. It has even been reported that the three auditors not only turned a blind eye to the falsified books and certified them, but they offered their expertise and worked together with the Kanebo executives to produce false consolidated financial statements covering up the losses.
 

As a result of this fraud:

• The three (3) ex Accountant from Chuo Aoyama PricewaterhouseCoopers, Kuniaki Sato, 64, was sentenced 18 months in prison, Kazutoshi Kanda, 56, and Seiichiro Tokumi, 59, received one year in jail;
• Chuo Aoyama PricewaterhouseCoopers was ordered by the financial watchdog, Japan’s Financial Services Agency  to halt its statutory auditing services for its largest clients for two months from July. This rules applies for listed companies and those capitalized at ¥500 million (US$4.56 million) or more, affecting some 2,300 client companies. This is the first time a major accounting firm was ordered to suspend the core auditing business in Japan. The choice of July and August for the suspension appeared to have been aimed at minimizing the impact on major companies’ earnings reports. Most big Japanese companies end their financial year in March.
• ChuoAoyama PwC’s chairman and chief executive Akio Okuyama has announced he will resign to take the blame for the firm’s role in the Kanebo scandal and
• Earlier in March 2006 the same Tokyo court handed suspended jail terms to a former Kanebo president and his deputy in the same conspiracy.

 

Background as follows:

• In October 2004, Kanebo Ltd., a cosmetics and textiles maker, admitted to have falsified financial statements for the five years through March 2004 by bloating its earnings improperly by more than 200 billion yen or $1.37billion. Instead of reporting net assets of 926 million yen(7.9 million dollars) in the year to March 2002 and 502 million the year after when Kanebo was actually over 80 billion yen in debt;
• Kanebo’s overstatement means that the company actually had a negative net worth for fiscal years 1999 through 2003;
• The move caused the company’s stock price to plunge and sparked an investigation by the Tokyo Stock Exchange, whose rules require a firm to be de-listed after posting a negative net worth for more than three years;
• Kanebo was placed in rehabilitation under the state-run Industrial Revitalization Corporation of Japan(ICRJ) in March 2004.
• The cosmetics business was later split off from the food, drugs and daily products divisions and sold to a group led by Japanese toiletries and household goods maker Kao.

World Bank Blows Whistle On Graft Scandal In Indonesia

Indonesia being regularly rated as one of the most corrupt nations in the world has been hit again when World Bank exposed corrupt practices linked to three loans for infrastructure projects in Indonesia, cancelling them and demanding millions of dollars in refunds.
The three loans were for a regional transport project in eastern Indonesia in 2002, and another for a separate roads infrastructure project in 2003 and 2004
World Bank in a letter to Finance Minister Sri Mulyani said:

• loans totalling 1.5 million dollars yet to be disbursed were dropped over alleged bribery in the hiring of consultants;
• it has found evidence supporting allegations of bribes and the making of other illicit payments in respect of three consulting contracts entered into by the Indonesian government;
• the loans were made through the Ministry of Public Works with consultants WSP International Ltd. No details were given about the consulting company;
• the bank has also requested refunds worth a total of some 4.6 million dollars which had already been disbursed under the agreements;
• World Bank’s integrity department had received allegations from a contractor that WSP had paid bribes worth 356,703 dollars to government employees in connection with the three contracts.

Incidentally, in May 2005, the World Bank exposed corruption in the implementation of a 203,000-dollar poverty-busting grant in Indonesia and blacklisted five individuals and two firms.

Samsung Group Chairman Involved In Illicit Transfer Of Wealth

According to Asia Pulse(14/8/06)
State prosecutors  may soon summon  Samsung Group Chairman, Lee Kun-hee  for charges of  illicit transfer of wealth. Earlier last week, Hong Seok-hyun, former chairman of the JoongAng Ilbo and former South Korean Ambassador to the U.S., was called in for questioning about why the daily newspaper, a shareholder of Everland, eventually gave up taking over the Everland convertible bonds in 1996. Also late last year, the former and incumbent presidents of Everland were convicted for arranging the illicit bond sale
 

However, until today, no one in Lee’s family has so far been investigated in regard to the case which triggered criticism over the procesecutors’ relatively lenient stance toward the family.

The irregularities involved:

• A deal in which his only son Lee Jay-yong and three of his sisters were able to buy convertible bonds issued by the amusement park operator Everland, Samsung Group’s de facto holding company, at a below-market price in 1996; Everland, South Korea’s largest amusement park, is the largest shareholder of Samsung Life Insurance Co., which owns the biggest single stake in Samsung Electronics. The electronics giant in turn is the largest shareholder of Samsung Card Co., and the card company holds the controlling stake in Everland

As a result of the this deal, it allowed the 38-year-old son to gain control of South Korea’s biggest family-owned conglomerate who  is now senior vice president of Samsung Electronics Co. (KSE:005930), the world’s largest computer memory chip manufacturer .