Friday, 14 May 2010

Uni degrees: who needs 'em?

Uni degrees: who needs 'em?
May 14, 2010

140uni.jpgA lot of fellows nowadays have a B.A., M.D., or Ph.D. Unfortunately, they don't have a J.O.B." So said American singer-songwriter, Fats Domino. He had a point. Putting aside professions such as medicine and law where a degree is essential, much of what is taught at university today isn't useful in the workplace.

A British survey conducted in March by the Chartered Institute of Personnel and Development revealed 60 per cent of graduates are working in a field unrelated to the degree they studied. And roughly one-in-four said their degree didn't equip them with the skills they needed to thrive at work. The results in Australia would probably be similar, with thousands of people thinking the completion of a degree is the finish line, when in reality it only entitles them to stand at the starting blocks. The real work starts at work.

The most talented senior manager I've ever had was a lady who hadn't spent a day on a university campus. The most hopelessly incompetent executives were those who'd completed not only a degree but also an MBA.

This doesn't imply a degree leads to poor performance. Rather, it just doesn't guarantee success. Not all masterful trainers have a degree in Adult Education. Many of the finest journalists don't have a degree in Communication. And some of the best musicians haven't studied at the Conservatorium.

People will argue the value lies not necessarily in the curriculum but with what a person becomes as a result of completing the degree. It'll prove they can solve problems! It'll show they can work under pressure! It'll demonstrate they can organise and prioritise! All of that may be true (or not), but those same attributes can be gleaned from other areas, such as the candidates' work experience, the adversities they've overcome, and their character in general.

I asked Shayne Herriott, the president of the National Association of Australian University Colleges, for his thoughts. "Obtaining a university degree is a lot more than what is learnt within a classroom or lecture theatre," he said. "A university degree is a series of challenges testing our ability to learn new and challenging subjects in a new environment surrounded by many distractions that are greatly different from school."

Admittedly, I'm a uni drop out. I had one year left of a Business degree when I realised it was no longer beneficial. I started it when I was in the corporate world. Eager to progress up the career ladder, I was very aware of the preference decision-makers had for resumes that contained a pithy reference to the applicant's degree. Despite being a student with a distinction average, I didn't learn a thing I could apply at work. Instead, I was forced to remember a bunch of management theories developed in the 1970s, all of which I've since forgotten.

These days, many job advertisements list a degree as a prerequisite. Check out the graduate section of the MyCareer site and you'll find job vacancies for a Recruitment Assistant, a Junior Marketing Coordinator, and another in Media Sales. It's uncertain why the lack of a degree is such a deal-breaker for roles where all the learning would presumably be on the job. It seems a degree merely qualifies you for the interview. It gets you in the door. Actually being able to do the job is an altogether separate and unrelated matter.

Rising in prominence is the Mickey Mouse degree, which is a term that disparagingly refers to qualifications of little relevance in the working world. Golf management and surf science are two such obscure examples, as are more common ones such as English Literature and History. How many job vacancies do you see advertised for a historian? Currently on MyCareer: none.

And then there's the aspirational MBA. There was a time when it was regarded as a unique accomplishment. But currently it seems like every ambitious worker's got one, or is at least contemplating the endeavour. A few years ago, I was recruiting for entry-level call centre positions and was floored by the flood of resumes from MBA graduates. It used to guarantee you a job in middle management. Now it guarantees you a period of muddle management.

People who undertake a degree should be applauded. It's a huge commitment, and the intention here isn't to denigrate their achievement. It's more a reflection on the perception of degrees and their supposed relevance in the workplace. Are they really supporting business? I don't think so. Not to a large degree.

http://blogs.theage.com.au/small-business/workinprogress/2010/05/14/unidegreeswho.html

A quick look at Transmile (14.5.2010)

Stock Performance Chart for Transmile Group Berhad





A quick look at Transmile (14.5.2010)
http://spreadsheets.google.com/pub?key=t3UYetvUUuc1vbXWvCaAOTw&output=html

AVOID!!!
The company is still losing money.  It has a lot of debts.  


It's cash and cash equivalent is declining, presently at MR 86.43 million.  It is struggling using cash generated from working capital (account receivables' day decreased from 73 days to 27.5 days, and account payables' days increased from 22.3 days to 37.9 days).


At 50c per share, its market capitalisation is MR 135.06 million.  Its total equity in its balance sheet at 31.12.2009 was MR 22.26 million.  It's assets are in the planes.



Click also:
Lessons From Transmile

Thursday, 13 May 2010

Cooking the Books: Investors, be warned.

This discussion should make you better able to see the clues of fraud and remind you to be vigilant.

Managers most often cook the books for personal financial gain - to justify a bonus, to keep stock prices high and options valuable or to hide a business's poor performance.  Companies most likely to cook their books have weak internal controls and have a management of questionable character facing extreme pressure to perform.

All fast-growing companies must eventually slow down.  Managers may be tempted to use accounting gimmicks to give the appearances of continued growth.  Managers at weak companies may want to mask how bad things really are.  Managers may want that last bonus before bailing out.  Maybe there are unpleasant loan covenants that would be triggered but can be avoided by cooking the books.  A company can just be sloppy and have poor internal controls.

One key to watch for is management changing from a conservative accounting policy to a less-conservative one, for example, changing from LIFO to FIFO methods of inventory valuation or from expensing to capitalizing certain marketing expenses, easing of revenue recognition rules, lengthening amortization or depreciation periods.

Changes like these should be a red flag.  There may be valid reasons for these accounting policy changes, but not many.  Be warned.

Related:



Cooking the Books: The Auditor's Job

Just as some people cheat on their tax returns, thinking they will not be caught, some companies "cook the books" hoping auditors and regulators will not catch them either.

Like "borrowing" $20 from the till until payday, and then not being able to repay the "loan," small illegalities can snowball into major fraud.

Remember, an auditor's job is only to review systematically the company's accounting and control procedures and then sample its business transaction to see whether appropriate policies and procedures are being followed in practice. But it is quite possible for a dedicated and corrupt management to mask transactions and deceive these auditors.


Related:

Cooking the Books: Sweetening the Balance Sheet

Most often both the Balance Sheet and the Income Statement are involved in cooking the books.  A convenient cooking is exchanging assets with the purpose of inflating the Balance Sheet and showing a profit on the Income Statement as well!

For example, a company owns an old warehouse, valued on the company books at $500,000, its original cost minus years of accumulated depreciation.  In fact, the present value of the warehouse if sold would be 10 times its book value, or $5 million.  The company sells the warehouse, books a $4.5 million profit and then buys a similar warehouse next door for $5 million.

Nothing has really changed.  The company still has a warehouse, but the new one is valued on the books at its purchase price of $5 million instead of the lower depreciated cost of the original warehouse.  The company has booked a $4.5 million gain, yet it has less cash on hand than it had before this sell-buy transaction.

Why would a company exchange one asset for a very similar one ... especially if it cost them cash and an unnecessary tax payment?  The only "real" effect of this transaction is the sale of an undervalued asset and booking of a one-time gain.  If the company reports this gain as part of "operating income,": the books have been cooked - income has been deceptively inflated.  If the company purports that this one-time capital gain is reoccurring operating income, it has misrepresented the earning capacity of the enterprise.


Related:

Cooking the Books: Puffing up the Income Statement

Puffing up the Income Statement most often involves some form of bogus sales revenue that results in increased profit.

One of the simplest methods of cooking the books is padding the revenue; that is, recording sales before all the conditions required to complete a sale have occurred.  The purpose of this action is to inflate sales and associated profits.  A particularly creative technique is self-dealings such as increasing revenue by selling something to yourself.

Revenue is appropriately recorded ONLY after all these conditions are met:

  1. An order has been received.
  2. The actual product has been shipped.
  3. There is little risk the customer will not accept the product.
  4. No significant additional actions are required by the company.
  5. Title has transferred and the purchaser recognizes his responsibility to pay.
The other common route to illegal reporting of increased profit is to lower expenses or to fiddle with costs.  A simple method to accomplish this deception involves shifting expenses from one period into another with the objective of reporting increased profits in the earlier period and hoping for the best in the later period.

Cooking the Books: This is very different from "Creative Accounting."

The vast majority of audited financial statements are prepared fairly.  They are assembled in accordance with GAAP and evidence sound fiscal controls and integrity of management.  However, sometimes this is not the case and financial fraud is committed:  illegal payments made, assets misused, losses concealed, expenses under-reported, revenue over-recorded and so forth.

Cooking the books is very different from "creative accounting."

It is creative to use accounting rules to best present your company in a favourable financial light.  It is legal and accepted.

"Cooking the books" means intentionally hiding or distorting the real financial performance and/or financial condition of a company.  Cooking the books is done for a deceptive purpose and is meant to defraud.


Related:

Cooking the Books: Why do managers cook the books?

Managers most often cook the books for personal financial gain -
  • to justify a bonus, 
  • to keep stock prices high and options valuable or 
  • to hide a business's poor performance.
Companies most likely to cook their books have weak internal controls and have a management of questionable character facing extreme pressure to perform.

"Cooking the books" means intentionally hiding or distorting the real financial performance or actual financial condition of a company.

Cooking is most often accomplished by moving items that should be on the Income Statement onto the Balance Sheet and sometimes vice versa.

A variety of specific techniques can be used to raise or lower income, raise or lower revenue, raise or lower assets and liabilities, and thereby reach whatever felonious objective the businessperson desires.  A simple method is outright lying by making fictitious transactions or ignoring required ones.


Related:

Cooking the Books: Techniques to Sweeten the Balance Sheet

C. Improperly increased or shifted period income.
D. Improperly increased assets and equity.


C.  Improperly increased or shifted period income

C1.  Current expenses shifted into later period
  • C1a.  Improperly capitalized costs as inventory.
  • C1b.  Assets depreciated or amortized too slowly.
  • C1c.  Worthless asset not written off immediately.
C2.  Shift revenue and income into later periods with reserves.


D.  Improperly increased assets and equity.

D1.  Increased equity through one-time gains
  • D1a.  Report gains on exchange of similar assets
  • D1b.  Report gains by selling undervalued assets
  • D1c.  Retire debt.
D2.  Report revenue rather than liability on receipt of cash.



"Cooking the books" means intentionally hiding or distorting the real financial performance or actual financial condition of a company.

Related:

Cooking the Books: Techniques to Puff Up the Income Statement

A.  Improperly increased revenue
B.  Improperly lowered cost or expenses.

A.  Improperly increased revenue

A1.  Sales recorded before completed and final

  • A1a.  Goods shipped before sale final
  • A1b.  Revenue recorded while future services still due

A2.  Bogus revenue recorded

  • A2a.  Supplier refunds recorded as revenue
  • A2b.  Revenue recorded from self-dealing
  • A2c.  Revenue recorded from asset exchanges.

B.  Improperly lowered costs or expenses

B1.  Current expenses shifted into later periods
  • B1a.  Period expenses capitalised onto Balance Sheet
  • B1b.  Assets depreciated too slowly.
  • B1c.  Probable liabilities not accrued.
B2.  Operating losses masked in discontinued operations


"Cooking the books" means intentionally hiding or distorting the real financial performance or actual financial condition of a company.


A quick look at Maybank (13.5.2010)


















A quick look at Maybank (13.5.2010)
http://spreadsheets.google.com/pub?key=tfMoQtAgU30SEiVrx-hXdHw&output=html

A quick look at JTI (13.5.2010)



A quick look at JTI (13.5.2010)
http://spreadsheets.google.com/pub?key=tOLRl0VcERSZUqz0FX99q3g&output=html

Prospects for This Financial Year
JT International Berhad expects the challenging operating environment to continue for the remainder of the year. The key challenge that will have a significant impact on its business will be the impending prohibition on the sales of cigarette packs containing less than 20 sticks that will be fully effective on June 1, 2010.

Illicit cigarettes, which now account for one out of three cigarette packs in the market, continue to present a major challenge to the legal tobacco industry. As the growth of the illicit cigarette trade is fuelled by significant excise tax increases implemented over the years, JT International Berhad is appreciative of the Government’s cognisance of this issue, which culminated in a more moderate excise tax increase in 2009. Moving forward, JT International Berhad hopes that moderate tax increases will continue to be implemented to curb the growth of the illicit cigarettes trade. JT International Berhad is also encouraged by the increased and integrated activities of the various Government enforcement agencies to combat this alarming issue. In addition to broadening their enforcement scope to the retail level, the Government agencies are now detaining and charging illicit cigarette traders in court as an effective deterrent measure. JT International Berhad will continue to cooperate fully with the authorities in the ongoing fight against the illicit cigarette trade and is hopeful that moderate increases in excise taxes, together with the current enforcement efforts by the Government agencies will curb the growth of the illicit cigarette trade.

Amidst these challenges, JT International Berhad is committed to maintain its competitiveness and aims to deliver a satisfactory overall performance for the current financial year through continued effective investment behind its global flagship brands - Winston, Mild Seven and Camel.

A quick look at Berjaya Sports Toto (13.5.2010)

Stock Performance Chart for Berjaya Sports Toto Berhad

A quick look at Berjaya Sports Toto (13.5.2010)
http://spreadsheets.google.com/pub?key=tar1l7PRo-VcfUWjN2NE-1Q&output=html

Wilmar's Q1 net beats forecast, upbeat on Asia

Wilmar's Q1 net beats forecast, upbeat on Asia



2010/05/13

SINGAPORE: Wilmar International, the world's largest listed palm oil firm, said it is positive on growth in Asian markets such as China and Indonesia after posting a better-than-expected 6 per cent rise in first quarter profits.

Wilmar, whose operations span from palm oil plantations in Malaysia to processing plants for soya and rice in China, generates around half of its revenue from China and is expected to benefit from strong Asian consumer demand growth.

"The group is positive on the prospects of Asian economies, especially China, India and Indonesia, and will continue to leverage on its well-established presence in these markets for growth," said Wilmar chairman and chief executive officer Kuok Khoon Hong.

Wilmar said late last year it wanted to invest at least US$1 billion in Indonesia, China and Africa, including starting up a sugar plantation in Indonesia, the world's fourth most populous country, this year.

The company, which has a market value of US$30 billion (US$1 = RM3.22), earned US$401 million in January-March, up from US$380 million made a year ago. The earnings were higher than the average forecast of US$385 million provided by three analysts surveyed by Reuters.

The profit rise was the smallest in years after Wilmar's string of double-digit earnings gains even during the financial crisis.

Its first quarter revenue climbed 36 per cent to US$6.8 billion.

The company said its palm and laurics business recorded a 30 per cent drop in pre-tax profit, despite a 29 per cent rise in sales volume, as margins fell due to tight supply and relatively less competitive pricing of palm oil compared to other edible oils.

Its oilseeds and grains business also recorded slightly lower margins but registered an 8 per cent rise in pre-tax profit as sales volumes rose by 12 per cent.

Wilmar's integrated China operations account for 44.7 per cent of its US$10.3 billion assets, and it competes with China Agri Industries and China Foods in a market with more than 1 billion people.

It also has plantation assets in Southeast Asia, competing with regional players such as Malaysia's Sime Darby, IOI Group and Indonesia's Astra Agro Lestari.

Malaysia's benchmark palm oil price declined by nearly 6 per cent since the start of the year, after soaring 57 per cent in 2009 as the global economy started to recover from the recession.

Wilmar shares have risen 1.7 per cent since the start of the year, outperforming a 1.4 per cent fall in the Singapore's Straits Times Index. - Reuters

BCorp to buy 70pc of Ascot for RM525m

BCorp to buy 70pc of Ascot for RM525m


2010/05/12

BERJAYA Corporation (BCorp) Bhd has announced plans to acquire a majority stake in Malaysia's first legalised sports betting operation.

In a statement, the company said its chairman and chief executive officer, Tan Sri Vincent Tan, has offered to sell 70 per cent of his company Ascot Sports Sdn Bhd to BCorp for RM525 million in cash.

Ascot Sports has a paid-up share capital of RM80 million comprising shares of RM1 each and based on the sale price, the price per share is RM9.375.

"Ascot Sports has been re-issued the sports betting license by the Ministry of Finance which was first issued in 1987. Ascot Sports has the first-right-of-refusal in the event the Government decides to allow sports betting which it has now in view of the rampant illegal book making activities being conducted," BCorp said.

Tan has agreed to guarantee that the company will make a cumulative after tax profit of at least RM375 million for the first 3 years of operations.

To back this profit guarantee, he has offered to deposit RM81.25 million worth of listed securities and BCorp will withhold RM125 million cash from the total consideration of RM525 million which will be released annually upon achievement of profits proportionate to the guarantee.

Hence, the initial consideration will be RM400 million.

BCorp has also announced its proposal to call a rights of 8.0 per cent ICULS on the basis of one RM1 nominal amount 8.0 per cent ICULS for every eight BCorp shares held on the entitlement date.

This rights issue could potentially raise more than RM0.5 billion.

The 8.0 per cent ICULS will have a tenure of 10 years and are convertible at par by surrendering one RM1 8.0 per cent ICULS for one new BJ-Corp share of RM1 each.

A portion of the funds raised will be used to pay the initial consideration of RM400 million with the remaining to be deployed for working capital of the Group.

BCorp said Tan has undertaken to subscribe to his and his private companies’ entitlements in full which would amount to at least RM400 million.

"Tan Sri Vincent Tan will not net in any cash as he will reinvest the entire initial consideration to be received to honour his rights issue obligations," the statement added.

Ascot Sports is set to become the next big money spinner for BJ-Corp.

Comparing examples in Singapore and Hong Kong where legalized sports betting has been in operation for a number of years, the market is seeing consistent double digit compound growth rates, BCorp said.

The Hong Kong Jockey club for instance had revenues of about HK$35.0 billion (about RM15.0 billion) whilst Singapore Pools revenue is estimated at a few billion Singapore Dollars.

"By some estimates, the illegal sports betting market in Malaysia is thought to be as much as RM20 billion per annum. This represents a tremendous loss of tax revenue to the Government which Ascot Sports hopes to be able to mitigate."

"Based on the RM375 million profit guarantee, the net profit averages at about RM125 million per annum. At the implied value of RM750 million for 100 per cent of Ascot Sports, the acquisition PE multiple is about 6.0x, which is an exceptionally low multiple given the enormous potential for the industry.

"The Board of BCorp expressed its gratitude to Tan Sri Vincent Tan for having offered this remarkable 'Sweetheart' deal to the Company. The Board recognizes that typically, one would probably have to pay a high double digit PE multiple with no profit guarantee if such a business is sold with an established earnings track record," the company said.

AmInvestment Bank has been appointed the Main Adviser whilst OSK Investment Bank has been appointed the Independent Adviser.

http://www.btimes.com.my/Current_News/BTIMES/articles/20100512201745/Article/index_html

The deal:
  1. BCorp to buy 70% of Ascot from Vincent Tan for RM 525 million in CASH.
  2. Tan has agreed to guarantee that the company will make a cumulative after tax profit of at least RM375 million for the first 3 years of operations.
  3. BCorp will withhold RM125 million cash from the total consideration of RM525 million which will be released annually upon achievement of profits proportionate to the guarantee.
  4. BCorp to propose rights issue to raise more than RM 614.5 million.
  5. Rights issue will be used to pay Vincent Tan for the Ascot shares (RM 400 million) and the rest for working capital.
  6. Tan has undertaken to subscribe to his and his private companies’ entitlements in full which would amount to at least RM400 million.
  7. Tan will not net in any cash as he will reinvest the entire initial consideration to be received to honour his rights issue obligations.

Before the exercise
  • Vincent Tan owns Ascot 100%
  • BCorp owns 0% of Ascot
After the exercise

Vincent Tan owns 
  • 30% of Ascot and RM 525 million cash.  
  • RM 125 million cash is held by BCorp to be released in stages. 
  • RM 400 million cash is used to subscribe to his portion of the rights issue (ICULS). 
  • Tan will not need to fork out cash as he will reinvest the entire initial consideration to be received from his disposal to subscribe to the rights issue.
BCorp Company
  • owns 70% of Ascot.  
  • owes RM 614.5 million through rights issue in form of ICULS @ 8%.
BCorp minority shareholders
  • own BCorp which has debt (ICULS) of RM 614.5 million and asset of  70% of Ascot
  • give out of their pocket RM 214.5+ million to subscribe to their portion of the rights issue (ICULS) which is effectively a loan to be repaid at a later date.