New Info, Old Info - The Muhibbah Surat Khabar Lama Man

This is an extension of the previous post : The Muhibbah Fiasco : How Lousy Disclosure Cost Shareholders Monies. 

Muhibbah made an announcement just now that :

With reference to the articles in the Singapore Business Times on 15 June 2011 regarding the appointment by CIMB (the financier of APH project) of receivers and managers for APH, the Company wishes to inform that according to APH, they have identified an investor, and are in negotiations with the investor to fully finance the completion of the APH Project, including making due payments to contractors.

As this is a oil and gas project with a secured business and the said investor due to finalise its financing transaction with APH, there are reasonable grounds to hold that the receivables are recoverable in due course.

Muhibbah shares recovered a bit today, I am not sure how much of it is due to this announcement. But, is this piece of information, a new information? I don't think so. You see, way back in 14/12/2010, CIMB Research  in a report titled -"Muhibbah Engineering- Dig In" - said this:

Management optimistic about favourable outcome. This is positive and consistent with our channel checks. We gather that negotiations for a new anchor foreign investor have been finalised. We believe that the new investor is likely to bring in RM700m-800m, being the estimated additional funds needed to restart the project. Given the size of the capital injection, we would not discount the possibility  of the investor taking a substantial equity stake in APH. It appears that it is crossing critical milestones on the road to a final resolution. Management believes that it could be a done deal by as early as 1QCY11. We do not think this is too optimistic as the process of getting the land-lease agreement, loan syndication and development order is typically swift  provided there is a firm heads of agreement to secure the new funds.

First and foremost, I think all the information written by our Bursa finest CIMB analyst is actually told by the management to him as I believe most sell side analysts in Malaysia actually do not understand the term "research". If we benchmark the quality of their so-called research against some very top notch and creative research I have seen from the hedgies in the West, our sell side analysts probably can get a grade like Z--- for their "research". It is probably attributable to the fact that our Bursa finest spent more time selling than researching. The compensation structure, I guess, is skewed towards selling, so, it is usual for this sort of thing to happened. So, we should not call them analysts, probably should just call them "reporters" as their role is to report what the management said. CIMB Research should be renamed "CIMB Reports" or "CIMB Public Relations" since they always report good things only-like a PR firm does. CIMB should also consider a takeover of Utusan after completing the RHB Cap deal, since, the reporters in Utusan have some amazing spinning ability.

Another troubling fact is that, the management actually told more stuff to the reporter-cum-analyst-cum-public relations officer than the disclosure in Bursa. This create an unfair advantage to those people that have access to CIMB Research versus those that do not have accessed to the research. This is the sort of things that make me disappointed with our system, there is just too many things that is being disclosed to the select few and we depend on this select few Public Relations Officer-cum-Analyst to tell us the story. The same crap is happening across Asia. We need our very own Reg FD- Regulation Fair Disclosure.

But, the most troubling fact, which gives the title of my post "New Info, Old Info", is that, the disclosure is an old information. Way back in December, the management told our reporter from CIMB that the issue would be resolved by 1Q2011, which is hmmm...like almost 3 months ago. How credible is this piece of new disclosure in Bursa? This is coming from people that tell you that the issue would be resolved by Mid-2010, which is like one year ago. This is coming from a management which sells their stock like no body business when the news of receivership status of APH have not reached the general public. They may be speaking the truth this time, I don't know. But, I think we all have been thought that, when someone lied too often, it is safe to not trust that person. 

Since the disclosure is so limited, we also need to play some devil's advocate. You see, the APH project is delayed because of cost overruns. Question that one would asked is that, did  Muhibbah portion of the project faces cost overruns as well? More importantly, did the Muhibbah portion of that project have a "cost pass-through" clause whereby any cost increase would be passed to APH? If not, can part of the cost increase be passed to APH? What is the profit margins in the project going forward? Would there be a case whereby, even if Muhibbah manage to recover the RM300-odd mil, they will face losses just to complete the remaining 60% of the project? Lol, I don't know. I hope our reporter from CIMB do help us ask this sort of question.

So, the Muhibbah people reminds me of that fella from the EBITDA Positive By XXXX guy from Green Packet. Do you trust these guys? It is your own judgement.

P.S.: A prudent company over-provide rather than under-provide or worst, in Muhibbah case, do not provide any write down. When Deepwater Horizon well blew up, BP over-provided for their liabilities. This is prudent accounting. But, in Malaysia, we have our very own 1Malaysia-style accounting that is unique.