Monday, June 15, 2009

Stupendous Stocks - Part I

Malaysian Airline System Berhad

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’!

19 comments:

Anonymous

Well said!

Wait until they come out with their second quarter results!

If the oil price stays at about US$70per barrel, MAS will show a "gain" of RM1.5 billion in their income statement! The champagne bottles will be out and celebration galore for MAS "turning around".

In actual fact, it is just a reversal of those "losses" in the first quarter that did NOT hit the income statement! Went straight to equity!

Looks like MAS has decided to join the likes of Tony Fernandez in cooking and spooking its books in order to look good!

Don't they realise that these kind of good things don't last?

Avatar

Dear Anonymous,

Yeah... Sometimes I wonder whether management would have done a better job, if they've decided against any sort of hedging strategy in the first place. What's the point of salary cuts for staff when entering into such disastrous hedging strategies in the first place?

As for Q2 results, I am thinking along the same line. If I were a speculative kind of guy, it wouldn't hurt to pick up a few lots, about a month before the Q2 results are out... say around beginning of Aug'09. However, being risk averse, I wouldn't :(

Cheers

Kris

MAS is like one of those US companies that deemed " too large and important" to fail.

Thus, there will always be a bailout waiting for her.

Avatar

Dear Kris,

Thanks for visiting and the comments. I tend to agree with you. Well, that's why investing in GLCs when its' share price has bottomed out might be a risky but potentially profitable idea.

Say, are you a 'Romance of the Three Kingdoms' fan? I see Cao Cao prominently as your avatar.

Rgds

Kris

Yeah..I am a Sanguo fan. I have read finish the entire novel. :P

I guess alot if not all local stocks/finance related bloggers like to remain anonymous.

I guess we are shy creatures..LOL

Avatar

Great! Another SanGuo fan. There's a new TV series on SanGuo coming out in 2010. Looking forward to it.

Didn't quite like the Red Cliff movie that came out earlier since it made Cao Cao look less intelligent than he truly was. And Kaneshiro as Zhuge Liang was not too convincing either.

Rgds

Kris

Hehe..Tv series you mean HongKong or China ones?

Sanguo is only interesting up to the short rise and fall of Jiang Wei.(zhuge liang's protege) After than, the whole 3 kingdoms seems to be in decline.

There is no much capable or outstanding individual from all 3 sides!!

Kinda anti-climax!

Avatar

It'll be a Chinese TV series. Directed by Gao Xixi, with a budget of over 100 million RMB. The series will feature a total of 60 episodes.

Yes, you are right about the dearth of talents after the death of Jiang Wei. It's strange that so many great talents arose during the earlier era of the Three Kingdoms. After that, there were no true great leaders capable of reuniting China. Even though Wei (under the rule of the Sima Clan) reunited China and established the Jin Dynasty, China did not remain reunited for long and was torn asunder after a short period.

Rgds

Hapi

hello... hapi blogging... have a nice day! just visiting here....

Kris

Cool..will certainly wait for the drama series to be released..

webay

thanks for sharing!

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