Still Have My Concerns On KNM

After having a few more hours to ponder over KNM's results, I am still uncomfortable. As nice as the figures present itself for KNM, there is still niggling doubts over the "authenticity of foreign earnings". Let's say I am not comfortable yet as the figures seem 'too well-rounded'. The majority of KNM's earnings still come from their overseas operations. If there is even a hint of impropriety it would have to come from that. For the time being, we have no inkling on the auditors working on those components. It may sound petty, but in an environment where earnings have been trashed left, right and center, it would seem prudent to want more information and verification when the majority of earnings are from overseas. I repeat, if there is one area that can be compromised, it would have to be foreign earnings component. Hence, until more clarity is presented, I would still avoid KNM.

The other niggling thing which has been weighing increasingly heavily on my mind was the lack of research coverage by foreign banks. Previously I wrote:
"On more research, I found that the company is not "open and welcoming" enough to foreign research houses. Its only local and Singapore broking research which carry the research. Only Nomura sticks out like a sore thumb. On speaking with some of the analysts, the main issue has been the company's lack of cooperation and appreciation of the need for deeper information. That is surprising considering that foreign shareholders hold a substantial amount of shares in KNM, at times in the 20%-30% range. When you are "not so willing" to be open, you may be perceived as having something to hide. As they say, the silence is deafening. In fact, this issue would trigger a big red alert to me."
Pondering more on that, I came to the conclusion that maybe why the company has not been that welcoming to foreign research houses was the fear that these houses may be able to cross-check and try verifying the foreign operations of the company. It would be "easier" for them to ask their counterparts in other global offices to solicit more information. I could be wrong, but in my view, its a big red flag. We certainly need more assurances.


p/s photo: Fan Bing Bing