O'Mighty Capital Articles Archive
SAPNRG More Pain Indeed
See the original (here)
Well, you might have seen out previous post (here) talking about the major rise from 40 cents which isn’t the turning point from the bottom for Sapura Energy.
The quarterly report is finally out and walla! RM 2 billion more in impairment losses. So many assets to be written off so little revenue to be tapped on. The previous write off was huge but it goes bigger and bigger.
Financial Analysis
Forget about the latest P&L as mostly we can’t quite value operational efficiency anymore due to a huge loss from impairment.
Comparing to a year ago, the company is literally burning cash and the non current assets are valued much lower than what it was a year ago. (asset impairment)
This time around, we see retained earnings are left with merely RM 54.8 million which is alarming. Relatively speaking when retained earnings becomes negative, it is almost similar to eating up the existing paid up capital by investors. This part of the balance sheet had turned as fragile as ever!
Cash Creation – BAD
So if you argue that impairment is merely a loss on paper and no cash transaction were involve then the following comparison might show a different picture.
The cash creation had turned bad where cash generated from operations declined by RM 1 billion. This was due to revenue declining RM 1 billion since comparing to Q4 2016.
With fragile balance sheet, low cash creation, problems looming in revenue growth. We think that there’s just too many things to be factoring in. Foresee stock price to go back 40 cents in the next quarter.
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Discussions
Be the first to like this. Showing 18 of 18 comments
hahaha............when politics mixed with business sure go to hell everything no matter how good you managed it.
2018-03-28 14:55
my concern is also....Company says impairment is non cash item...Good for future earnings......tell people to buy for future earnings.....
got work or no work? If got work why need to impair? Company playing with accountants and analysts?
2018-03-28 22:19
Sapura Energy is in technology based oil and gas business. Looking at the current diminishing situation, the morale and the efficiency of the company will definitely be affected. Just look at the once market leader, Seadrill and its fate.
2018-03-29 22:33
sifus why Omighty must pick SAP to study? Why not study on other counters as well? Pls reply as I am newbie.
2018-03-30 04:51
Dear qqq3,
In accounting term depreciation is addition cash flow as any fixed asset (depending on class of asset) is allowed to charge depreciation cost over a given fixed period of year. Since TAX is charge on taxable income (Earning after depreciation and interest expense) thus yours Tax payable will be less.
Fixed asset can only be write off if you have accident (Fire , Flood, Earthquake or any man-make/natural disaster) causing your asset unable to perform as intend (scrap). So what is this asset impairment mean in accounting term and how can this improve your future earning when without depreciation cost your taxable income will be higher and you have to pay more tax.
Hope your accounting professional knowledge will enlighten us.
Thank you
2018-03-30 07:05
Depreciation is accounting stuffs.....In tax terms it is called capital allowances..computed separately and independent of each other.
whatever it is , impairment is also purely accounting stuffs...no impact on operations and cashflows....so analysts are trained to ignore impairments.
lots of questions....bottom line is...investors should not reward companies for playing games with accountants and analysts. If there is large impairments, means the companies have blundered ....don't reward them.
2018-03-30 08:06
but I do hope somebody takes up the issue with the MIA, MICPA, SC, MSWG....................if the journalists don't do it.
https://klse.i3investor.com/blogs/qqq3/152156.jsp
analysts are not going to do it...analysts love impairments....after the share have fallen the way Sapura did...it gives the share an excuse to go up.
2018-03-30 08:18
Dear qqq3,
Just google the internet;
https://www.hasilnet.org.my/capital-allowance-types-rates/
“Capital allowances consist of an initial allowance and annual allowance. Initial allowance is fixed at the rate of 20% based on the original cost of the asset at the time when the capital expenditure is incurred.
While annual allowance is a flat rate given every year based on the original cost of the asset. The annual allowance is given for each year until the capital expenditure has been fully written off, unless the fixed asset is sold, scrapped or disposed, in which case a balancing allowance or balancing charge will be calculated.”
Does capital impairment qualify as Capital allowance to be used in the subsequent financial accounting year as tax credit?
Thank you
2018-03-30 09:12
Whether your depreciation high or low, it will not affect your tax payable for income tax, because depreciation is a non-deductible item in corporation tax. However, the impairment of asset, will affect the "deferred tax liability", it will definitely reduce your deferred tax liability. Just basic accounting knowledge.
2018-03-30 10:36
Does capital impairment qualify as Capital allowance to be used in the subsequent financial accounting year as tax credit?
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its possible....all the qualifying sums not claimed previously can be claimed immediately if the asset is scraped.....
2018-03-30 10:42
angelol > Mar 30, 2018 11:03 AM | Report Abuse
Yes, impairment is not scrapped, scrapped means "written off".
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you also right lol
its like provision for bad debts vs bad debts written off.
2018-03-30 11:12
the accounting profession need an accounting standard for impairments................
In this case, they delay the impairment until the share price hits 50 sen , in the meantime, the Directors most likely already know about it at least 12 months ago when the share price is much higher.
2018-03-30 11:17
pain has been changed into joy because analysts love impairments on a share that have drop from $ 4.00 to 50 sen.......
that is why share market follows its own laws......
2018-03-30 18:05
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this company is another Felda in the making. Sure got alot corruption inside.
2018-03-28 14:28