December 20, 2012, 12:12 am
Filed under: Airlines, Corporate Governance, Rakyat's concerns | Tags: , , ,

It was certainly amusing to see the Singapore authorities scrambling to contain the “Olam” fall-out arising from the ‘Muddy Waters’ attack on Olam’s perceived strong financial standing.

That’s because Temasek (the Singaporean equivalent to Malaysia’s Khazanah), the Singaporean government investment arm, has a significant stake in Olam, a commodity supply chain entitiy listed on the Singapore Stock Exchange, SGX.

To scramble means there must be credence in the view taken by Myddy Waters’ head, Carson Block…..that the manner Olam accounts for its profits and strong financial position…..tantamounts to what Carson Block describes as ‘legalised fraud’!

Of course the more polite ones would call it overly aggressive accounting.

Whatever one would call it, the profits aren’t real…..i.e. the money’s not in the pocket….although the company’s financial statements call it profits!!!

Hey, has the sub-prime mortgage loan fiasco, which precipitated the economic crisis in the US an Europe, been forgotten?

It certainly was interesting when Bloomberg quoted Carson Block (of Muddy Waters) about companies recognising the future profits of an asset (just acquired) in the current financial year…..causing these companies to perpetually buy such assets, if they can!

Well, Air Asia, for one, CAN!

Notice their recent announcement of acquiring another 100 planes…..leading to close to 500 planes in the pipeline!

Click HERE for MA Wind’s excellent coverage of the Olam matter in his CGMalaysia blog-site.

Is it no wonder that the Hongkong Stock Exchange has dis-allowed the inclusion of such unrealised profits in the computation of “profits” in order to qualify for listing?

Shouldn’t the same principle be applied in the valuation of a company’s share in the computation of ‘Earnings per Share’ and correspondingly, the ‘Price Earnings Multiple’?

Reading a set of financial statement of a public listed company is certainly NOT like what it used to be!


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