previous commentaries were suspicious of ARBB increasing sales and screaming fake revenue due to high Account Receivables. But the recent quarter show a drastic drop in Account Receivables meaning a lot converted to cash. Outstanding AR is less than 60 days. Something new

RE: longtermvalue Cloud based business booming – ARB BERHAD (KLSE: 7181)

https://www.malaysiastock.biz/Blog/BlogArticle.aspx?tid=24912

This article listed 3 comparable companies and I had a quick look at their financials compared to ARBB. In this chat ARBB has been blamed for its share price underperformance due to: ICPS, long overdue AR, operating cashflow not good, high intangibles assets, etc

We will see how much better these companies fare compared to ARBB since their share prices are higher than ARBB:

1, Intangible assets/goodwill as a % of total asset:- Arbb(23%), Censof (37%), Dnex (45%)

2, AR more than 12 mths (non current asset):- Arbb (95mill), MyEg(197mill)

3, Operating cashflow :- Arbb (+6mill), Censof (-3mill)

4, ICPS - no comparison.

Based on the above, in my view the things blamed on ARBB for its share underperformance is just red herrings as ARBB has some favourables compared to these companies.

https://www.bdo.co.uk/en-gb/news/2021/bdo-wins-international-sap-audit

kimi21 Why total share of 30 largest shareholders only 27%? Why so less

Answer:

1. you need to understand the many roles of ICPS.
2. You cannot look at ordinary shares in isolation.
3. Just look at one shareholder, Dato Liew if he convert his ICPS to ordinary shares he will be holding 29.8% of ARBB assuming all other ICPS are converted at a later date too. That is for one shareholder. I did not look at the other shareholders. He alone will in the future potentially hold more than the current 27% top 30 shareholders.
4. The next question is why doesn't he convert? The short answer is why does he need to convert now? By holding ICPS the cost of holding and controlling the company is cheap until near the maturity of ICPS. Potential raider will know they need more than 30% to take control of ARBB.

andytfyap Compared to all the comments, i personally will side @Ngcheekeong's comments as they might be close to the truth, and thanks to Ng for highlighting such wonderful ICPS mechanism which can get the shares for free, my salute and also feel scary,

Andy, I think you are right! ICPS is not meant for you.

Just for information.

The 2 major SHH acquired their shares at 0.145. in 2019.

Serious?
As per latest Annual Report the boss still holds 1021 million ICPS and no announcement of conversion since then. So far he only converted 40million shares - only once- mid last year.

Good try.

andytfyap @rapparesh could it be the other way round?
major SHH after converting, they have shares in hand to dump and force the price down all the way , and when ikan bilis panic seeing the price falling and falling, they let go the share at much lower price, then the major SHH will buy back at prices much cheaper than what they sold earlier.

My Take:

The total new ICPS conversion of 132.7 million from Apr-Jun 2021 is not from the major SHH otherwise there will be announcements on their shareholdings changes. Last announcement on conversion by major SHH was 04 May 2020. There are only 2 major SHH- Dato Liew and Dato Chin Kok Fong.

These conversions could be done by other big investors(not major) who are holding long term. Short term players would buy the mother shares directly which is cheaper. That begs the question why not buy the mother shares from the market which is cheaper even for long term players. One possibility is that these investors are currently holding big quantities of ICPS and they are using non cash options to convert as their cost was 0.01.

That leads to another question, why convert now? One can only speculate as to the reason which is probably the rights issue may be coming soon and for them to take advantage of.

With current market condition I am not surprised to see the price fall. Having invested long enough in this counter I have seen the price dropped to 0.05 and rise to 0.20. Up to this point I don't think this counter is under a syndicate(personal opinion). The plus point to me is since Q4 2015 the company has recorded profit every quarter, though may be small.

Every stocks have the positive and negative points. It is up to us to decide in our personal view which outweigh the others based on the experience we have gained.

Best of luck!

Ngcheekeong336 ... fisrt you read the 26th feb 2021 ageson announcement apply icps ..ageson use the peoject development at sungai kelian baru batang padang perak ..this ageson boss fatty liew duplicat again at his another counter annum berhad ...please read annum berhad 5th may 2021 announcement ..fatty liew use the same project tittle to apply icps ..... he is cheating bursa and shareholders

Ans: Is this intentional & malicious lie or pure lack of knowledge

Fact 1: Ageson has a JV with MBI Perak to develop a piece of government land. In this case Ageson is a Developer.

Fact 2: Annum won a sub contract to clear the land and do earth work. If the work refers to the same piece of land is that cheating?

Please get the facts right before accusing.

Whether it is value investing or not boils down to the non current Trade Receivables(TR or AR) as far as ARBB is concerned. Only on hindsight one can brag on one's decision.

- If they are good debt meaning they are recoverable/collectible on due dates(2022) then it will turn out to be value investing except that the credit period is exceptionally long. So in the next 2-3 quarters the non current AR will continue to increase as there won't be any payment as I am assuming a credit term of at least 12 months. As such we wont be seeing any provision or impairment loss on the non current AR in 2021(my guess, until we get more clarity or the customer collapsed before due date)

-if the debts are mostly irrecoverable later on(2022) then it can fall under fraud or bad business risk. That will be a subject for another day.

The main problem is the lack of clarity on the nature of the non current AR. That is causing the jitters and uncertainty.

To me the PA is a non issue but actually helps in the company cashflow. To counter the increasing conversion the company just need to earn more to offset the dilution.

As such investing in ARBB at this point is a calculated risk as to how one perceive the non current AR.

It is reflected under the Receivables under cashflow (3.6mil)
Without the breakdown of Other receivables & deposits I have to assume the Other receivables is reduced by 7.1 mill via collections.

The Receivables movement= 102.1+40.9-64.1-68.2-7.1=3.6(unfavourable)

Or alternatively looked via revenue & collections=49.5-38.8-7.1=3.6

You will never see the 38.8 mil in the financial statements as most numbers are netted off.

If the credit term of 12 months or more is the new business model, short term the cashflow will not be nice until things regularise after 12 mths. Then the regular pattern will set in. This is sort of initial investment period and very much dependent on the financial stability of the customers.

Possible scenario:
Revenue of RM49.5mill is made up of RM38 mill sales with credit term of 12 months or more and RM11.5Mill sales are with credit term of 6 months+/-
The qtr AR collections are RM38.8mill
Dec'20 non current assets AR=64.1 mill & current Assets AR =68.2Mill

Non current Asset trade receivables =64.1+38=RM102.1Mill since no collections made due to 12 mths credit term or more

Current Asset trade receivables =68.2+11.5-38.8= RM40.9Mill

So in total for the quarter there are revenue of RM49.5 mill with collections of RM38.8mill.

If the trade receivables under current assets are not paid after more than 12 months they will still stay under current assets and not transferred to Non current Assets. Maybe under this scenario there will be impairment lost.

For the non current trade receivables we wont be seeing any impairment loss until year 2022, if any.

True the sore thumb is Trade receivable. But if you understand a little deeper you may have a different opinion. The basic problem is the annual report lacks explanatory notes to the accounts receivables.
A few points need to be noted:
1, Dec 2019 trade receivable was RM29.7Mil
2, Dec 2020 trade receivable was RM132.4Mil of which RM64.1Mil was non current
3, 2020 revenue was RM219.5 Mil

My view:
A, The 2020 accounts receivable accounted for 60.3% of the 2020 revenue meaning the balance was settled.
B, The 2019 account receivable I can assume as fully settled otherwise they have to make a provision.
C, The issue, if I may call it, is the non current account receivable of RM 64.1Mil. This I have to assume as not overdue but more like a credit term of more than 12 months which you normally find in construction companies. Could this be the IOT project tie in to construction company?
D, If you are to look into IJM annual report you will find under non current assets the "long term receivables" that amounted to RM220.7Mil. I believe there is similarity to it and do we classify IJM as risky in terms of account receivable?

What we need is more information on the account receivable in the annual report.

As regards to individual project details I doubt other listed companies provided such info.

Dato Liew is not a very significant shareholder of the company and will he be motivated to continue to push the company performance?
Well, you have to be aware that he is currently holding 343Million units of ICPS of the remaining 606 million outstanding ICPS and he has not sold a single unit!.

Those familiar with Accounts Receivable measurement, yes it is high as the DSO is at 182 days. High for a normal trading company but due to lack of information on the nature of the contract terms it is hard to properly evaluate.
For comparison purposes, Awantec that recently shot above RM1 has Account Receivables DSO at 470days and without earnings to boot

The market can ignore a performing company in the short term but if the company continues to perform, the market can't continue to ignore.
Furthermore the earnings are through regular business and not spiked by unusual or one time non recurring earning.

Kenanga "In fact, we expect 1Q19 to post more “normalised” levels of profits, on the back of it also being a seasonally weaker quarter given the monsoon season"

What is "normalised" when Q1 and Q4 are classified as monsoon season while Q4 generated EPS of 10.1sen? Basically Kenanga is assigning expected Q1 EPS of 3 sen!

Excluding last 3 years of O&G turmoil the Q1 EPS results of 2014 and 2015 is about 4sen each and Kenanga is assigning a lower earning?

Even if the Q1 EPS drop to 5 sen then Dayang is still worth RM2!