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Tuesday, May 31, 2005

ACCS @ 13 cents ( Cellphone svcs / Singapore ) 5 comments



(P.S: Sorry for any disturbances the advertisements above may have caused you)

Main issues

1.Little salvage value given that its services can be easily supplanted

2.Scandal-plagued; best to avoid


A stock that just captures the imagination of traders. A former investor darling which showed near doubling of revenues and profits since its IPO in 2002, then got called up by the CAD for investigations of possible commercial misconduct. Despite information from insiders not being forthcoming, traders were still able to bring excessive liquidity to the stock as it swung between 20 to 40 cents during the investigation.

Now Price Waterhouse has completed their in-house investigation and concluded that in fact there was gross overstatement of revenues and profits, to the effect that 2003 was just a marginal profit year while 2004 was in fact a loss-incurring year. Which means there is no meaning to the earnings multiple, while net asset base would just be 4 cents per share. Given such facts and with the CAD investigation results still pending, why would people still be buying in the stock at a share price above 10 cents? A services outsourcing business like ACCS without any intangible brand value (which is more difficult to be tainted by such management issues) can easily be supplanted, and even if there are potential buyers for the business, it is quite possible they would not want to pay much higher than the net asset value (as above, 4 cents per share). Again, caveat emptor.

References:
(1) The Nokia contract cancellation that opened a whole can of worms
(2) The CAD investigation, which is still ongoing
(3) The 2004 FY results. These are before restatements made on May 26 2005

 

 

5 Comments:

Anonymous Buffett said...

Now that's one that I agree with. Never play the actives!

5/31/2005 4:33 PM  
Anonymous charlie said...

If the share price stays steady, it might mean that there might be some upside to it. I'm going in to pick up 1 or 2 pips.

5/31/2005 4:46 PM  
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10/11/2005 9:51 AM  
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11/19/2005 9:24 PM  
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11/20/2005 4:48 AM  

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