Malaysian Steel Works - Temporary Suspension

PublicInvest

Publish date: Tue, 12 May 2015, 10:03 AM

The trading of Malaysia Steel Works (Masteel)'s shares will be suspended effective today until further notice, triggered primarily by its delay in the audit completion of its FY14 financial statements and the release of audited financial report for FY14. Pending the outcome of the audit results, we maintain our call and target price.

To recap. On 27th April, the company clarified that they had been informed by its external auditor, Messrs Nexia SSY that they are not able to express an opinion on the financial statements of the company for FY14 due to various issues raised. Hence, the management has taken initiative to engage UHY Advisory (KL) S/B to conduct an independent and comprehensive review of the issues raised by its external auditors in order to facilitate the external auditors' provision of an opinion on the FY14 financial statements. The “special review” is expected to be completed in six weeks. The board had made an application to Bursa Malaysia to seek an extension of time up to 30 June 2015 to issue the audited financial statement 2014.

Negative impact. Since the announcement of a potential delay in submitting the audited financial statements, the share price has tumbled more than 25% as questions are being raised on the state of the company's financials.

What could it be? The 2014 unaudited financial statements have seen receivables jump a substantial RM92.5m from RM239.4m last year to RM331.9m currently, though that can also be explained by its revenue growing at a similar quantum. That said, a 1-for-1 increase is uncommon, implying inexplicably long credit terms given. Either that, or some overdue receivables may be deemed irrecoverable by the auditors, suggesting the need for some impairments in the accounts hence a possible “disagreement' between company and auditors, resulting in the latter being unable to express an opinion on the financial statements. Management has been accessible when we sought clarification, but understandably tight-lipped on the issue given its sensitivities. The postulation is merely an expression of opinion made on face value based on its unaudited financial statements. Or it could be much ado about nothing, of which the company's share price could rebound as its fundamentals remain relatively intact.

Source: PublicInvest Research - 12 May 2015

MASTEEL (5098)

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Be the first to like this. Showing 9 of 9 comments

ks55

Can it be just like Transmile, where previous quarters profits were all dubious?
International MNC with big four as auditors like Enron could cheat for many quarters, so nothing is impossible for Malaysian companies.

2015-05-12 11:10

ks55

A good buy at 60 sen. Public Invest Research gave TP at 1.12 even after the announcement Masteel not able to provide audited account.......
Really a world class analyst that can bring you to holland faster than anybody else.....

2015-05-12 11:14

TengkuFaisal

all the profit are fake. how could steel manufacturer make profit when China is dumping steel below cost all over the world.

2015-05-12 11:17

r°Moi

Posted by r°Moi > May 4, 2015 02:32 PM | Report Abuse X

Based solely on the 4Q14 results announcement.. r°Moi think the two most likely shits would be....

1. Bad debts not accounted for...

How 1MDB's cash flow problem messed with the goverment pocket is well known.... It is well known too properties sales have slowed.... and these will cause contractors and developers alike to face with tight cash flow problem. This will in turn work its way up to the suppliers of materials.....

In MASteel... its customers in fact have actually slowed down in paying up...

Got bad debts or not??

2. Plant and machinery overstated...

This.. if true.. will involve the making of police report and possibly MACC too. Very very very messy.

Bills ok or not?? Some tangible parts are like not so tangible leh??

It would be brilliant but totally ruthless... totally ruthless... if part of that money had been used to convert the warrant recently.

These are just guesses not allegations.

What could it be? The 2014 unaudited financial statements have seen receivables jump a substantial RM92.5m from RM239.4m last year to RM331.9m currently, though that can also be explained by its revenue growing at a similar quantum. That said, a 1-for-1 increase is uncommon, implying inexplicably long credit terms given. Either that, or some overdue receivables may be deemed irrecoverable by the auditors, suggesting the need for some impairments in the accounts hence a possible “disagreement' between company and auditors, resulting in the latter being unable to express an opinion on the financial statements. Management has been accessible when we sought clarification, but understandably tight-lipped on the issue given its sensitivities. The postulation is merely an expression of opinion made on face value based on its unaudited financial statements. Or it could be much ado about nothing, of which the company's share price could rebound as its fundamentals remain relatively intact.

Source: PublicInvest Research - 12 May 2015

Bad debts not accounted for... r°Moi and PublicInvest Research in agreement

Or it could be much ado about nothing,.... much ado about nothing would take 7 weeks???

Posted by r°Moi > May 12, 2015 11:20 AM | Report Abuse X

r°Moi is posting for sharing....... nothing else.... don't take it wrongly please

2015-05-12 11:26

ks55

If it is just a simple problem of receivables, special audit team need 6 weeks to do the job?
How many members are in this special audit team?

Having reasons to believe:-
1. Multi-layering similar to money laundering is involved.
2. Account has to trace back for last few FYE to check on dubious revenue/ profit/ inventories.
3. Account could involve many "trading partners" in different countries -- a typical money laundering operation.

With all the uncertainty. Public Invest Research still maintain buy with TP 1.12
###The trading of Malaysia Steel Works (Masteel)'s shares will be suspended effective today until further notice, triggered primarily by its delay in the audit completion of its FY14 financial statements and the release of audited financial report for FY14. Pending the outcome of the audit results, we maintain our call and target price.###

Really a research house with no integrity/code of ethic. Should THP please look at you IB???????

2015-05-12 11:29

TengkuFaisal

ask any good financial controller, and with any "rule abiding" auditors who is friendly enough and business minded enough.

any profit can be reported, for multiple years.

i know because my background from auditing.

2015-05-12 11:29

ks55

Creative accounting ma....

2015-05-12 11:41

TengkuFaisal

my master degree thesis was on Creative accounting.

2015-05-12 11:42

ks55

Are you having practical experience in forensic auditing?
Creative accounting just bending the laws, money laundering is breaking the law.
Many advisors/consultants to IPO practice creative accounting to the highest order.
So you will see company after listing will have deteriorating performance.

2015-05-12 12:05

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