How Green Was My Valley

Green Packet Bhd reported 24% higher revenue of RM122.84mil for the year ended Dec 31 (FY07). Despite the higher revenue in FY07, Green Packet's pre-tax profit fell almost 90% to RM30.99mil against RM58.56mil in FY06. Puan said the drop in earnings towards the second half of last year was due to a slowdown in sales in China and continued heavy investment to build the converged telecommunications business of its unit, Packet One Networks (M) Sdn Bhd. It was also attributed to share of losses from non-core businesses via associated companies and higher provision of costs made in the discounted telephony subsidiaries.

What is it about the colour green? First Evergreen, now this Green Packet. The massive share buyback activity by Green Packet is destined to fail (please search for article on Share Buybacks). My mate Moolah has trashed them to death already, check out his posts on Green Packet at:

http://www.whereiszemoola.blogspot.com/

Revenue has jumped from RM98.9m in 2006 to RM122.8m. Net profits has dropped from RM50.1m in 2006 to RM33.0m in 2007. Where are the trouble spots:

1) Development costs has surged from RM8.5m to RM27m

2) Other long term investments has ballooned from RM14.8m to RM34.4m

3) Inventories has surged from RM3.3m to RM13.5m

4) Other receivables has risen from RM9m to RM20.3m

One good thing though, their cash balances has risen from RM63.8m to RM176.4m - hence the share buybacks, I guess.

Indicators are strong that they are at another stage of development. However there is a disconnect between the previously lofty valuations and strategic plans. Investors are not buying the plan. Hence the sell down, hence the buyback. Avoid just like Evergreen but for different reasons.