In this series of posts, I will be looking at some of the more incredible gyrations of stocks in Bursa Malaysia. For want of a better word, let’s call them ‘Stupendous Stocks’ named after a certain superhero.
Surely, the most stupendous stock today is none other than Malaysian Airline System Berhad (MAS), stock ticker: 3786. On 12 June 2009, MAS finally announced its’ quarter one results for 2009 which was delayed due to its’ early implementation of FRS139: Financial Instruments, Recognition and Measurement. FRS139 is an incredible complex standard which aims to do a simple thing: i.e. reflect the gains/loss in investments by benchmarking them against market prices (i.e. marked-to-market accounting).
And the impact of this fantastic piece of accounting:
1. Quarter 1, 2009: Derivative loss of RM557mil
2. 2008 and prior: Derivative(?) loss of RM3,952mil
The total impact of FRS139 is a net loss in derivatives of approximately RM4.5 BILLION. Is this a lot of money? Hmmm…. Let’s look at the shareholders equity, shall we? Ooops, is there any shareholders’ equity left? Total equity is a NEGATIVE of RM446 million.
Granted, these losses are unrealized losses. It’s the same as me saying that just because I bought Transmile stocks at RM10 in 2006, I don’t have any losses since I haven’t sold any. Even though its’ only worth RM1.46 today, it doesn’t mean it won’t go up to RM10 in the future, right? Right on… it must be this sort of thinking that explains why the price of MAS has hardly moved today. Perhaps RM4.5 BILLION LOSSES is just insignificant compared to the MAS’s cash balances of just over RM2.9 BILLION? For those of you who can figure this out, I salute you!
For the others, welcome to the wonderful world of investing in our ‘Baffling Bursa’!