Posted by fengtzekai > 2015-06-05 12:30 | Report Abuse

My 2 sens - stock piling with a plan in hand - brilliant. Stock piling without a plan - its a gamble. Stock piling financed by USD borrowings - is another risk to be considered.

Maybe the shareholders can ask the management team for a response in the upcoming AGM.

Posted by Icon8888 > 2015-06-05 12:56 | Report Abuse

i am also disappointed they didn't hedge their forex trust receipts in december 2014. Maybe they got caught off guard by the sudden decline of ringgit. For that, I don't defense their incompetence.

But in my opinion, forex is only an issue when a currency make a transition from one level to another level (from RM3.40 to RM3.70 during Q1 2015, for example). After it stabilise at a particular level, there will be no more impact.

Will RM fall lower than RM3.70 going forward ? If it does, there will be another forex loss. But if it strengthens, there will be forex gain. At current level, I would say that it is not clearcut that hedging will give best outcome. Unless 1MDB bankrupt Malaysia, ha ha. Who knows ? Maybe it will happen....

Posted by fengtzekai > 2015-06-05 13:35 | Report Abuse

Just a matter of illustration.

Lets say we buy a product at USD98 and sell it at USD100, we earn USD2 and we hedge the USD2 at the transaction date say at 3.7 now, our USD2 profit is a secured profit. We will have RM7.40 absolute profit.

If we do not hedge, we are facing a possibility that when the seller pay us, the USD may fall to 3.6 yielding only RM360 from the sale. On the other hand, there may also be a possibility that when we pay supplier, the USD may rise to 3.8, hence we have to pay RM372.40. The whole transaction become a loss making one as we loss RM12.40 instead of making a profit of RM7.40. This will happen if you don't hedge or you hedge wrongly!

USD rate is just too unpredictable these days.

Posted by Icon8888 > 2015-06-05 13:36 | Report Abuse

Good points. Fully agree

Posted by fengtzekai > 2015-06-05 13:51 | Report Abuse

On the flip side, of course, if it happens the other way round, then you will enjoy bumper profit on this transaction as you will stand to earn RM27.20 as your profit.

But I am a prudent guy and will always support companies doing international business with proper hedging policies in place.

Posted by newbird33 > 2015-06-06 23:36 | Report Abuse

From the above historical price chart of milk powder, it proved that the management heavy stock piling at end Dec 2014 was right as the price recovered in Q1 2015. However whether the stock piling at end March 15 is a wise decision is not certain at this moment.

Posted by cheoky > 2015-06-13 08:01 | Report Abuse

Great n details explaination. My concern is the high inventories too.. other than that, this company is showing growth and directors is buying more shares to keep refer to AR2014. Can keep long term? Lolx