Sunday 17 April 2016

Valuable Info That You Can Only Get From AGMs

It is Annual General Meetings (AGMs) galore these 2 weeks. For most of the past 18 years that I have been investing, I have given AGMs a miss. It was only in the last 2 years that I began to attend AGMs, and I find that there are valuable information that you could only get from AGMs.

For a start, very few CEOs are going to volunteer bad news in their Annual Reports or financial statements. However, some are sanguine enough to give you an honest assessment of the prospects of the business when asked. Secondly, there are experienced shareholders who have done a lot of homework before coming to AGMs. By listening to their queries, you can learn more about the business. Below are some of the information that I garnered from attending last year's AGMs.

How Bad is the Oil & Gas Slump?

MTQ is in the Oil & Gas (O&G) industry. I attended its AGM in Jul last year. At that time, the oil price was around US$50. The Chairman, who had many years of experience in the industry, had this to say about the state of the industry: the current slump was the worst he had ever seen, even worse than in the 1990s, when oil price was trading near US$10. It was just a very simple statement, but it gave everybody present in the AGM a very clear idea of the tremendous challenges facing the O&G industry.

Is Share Consolidation A Good Deal?

Many companies whose share prices are trading below $0.20 are undergoing share consolidation to meet Singapore Exchange's minimum trading price requirement. During Ellipsiz's AGM where this issue was put up for vote, a fellow shareholder mentioned that based on his observations, the share price would actually continue to drop after consolidation. He questioned the need for the consolidation, since companies could choose not to consolidate but move to the SESDAQ board. 

Are Further O&G Write-offs On the Cards?

This question is specific to PEC, which is also in the O&G industry. Shortly after it announced its financial results for the year ended Jun 2015, it announced that one of its clients had gone into receivership and it had to write off receivables of about $19 million. In the footnotes of the company's Annual Report, there were total receivables of $26.1 million which had been past due for more than 60 days. The corresponding figure for the previous financial year was $1.6 million. The CFO assured shareholders that the receivables had since been collected and no further write-offs were expected.

Getting the Most of AGMs

The above information are very valuable information that could not have been obtained elsewhere. I would encourage every investor to attend AGMs to gather such information.

In order to get the most out of AGMs, you need to ask questions. If you do not ask, you would not get the answers to the burning questions that you might have. Secondly, do not get too fixated over the numbers in the financial statements. Some fellow shareholders drill very deeply into the numbers, asking why the profit margins of certain segments have reduced over the past year. I suggest you do not do that. Financial numbers vary from year to year, and are sometimes out of control of the management. As investors, we should be very familiar with this issue, as our returns vary from year to year. What is important is not the numbers, but qualitative issues such as what are the prospects of the business, how well the company is executing its strategy, whether there are any risks, etc. The 3 examples of AGMs that I cited above belong to this category of questions. Do note that not every AGM will yield valuable information, but when you do get one, it will make all your efforts worthwhile. 

I will not be attending the AGMs in the coming 2 weeks, as my project has started to ramp up. Nevertheless, I encourage everyone to attend them as much as possible. There are valuable information that you can only get from AGMs. And if you do have such information, please remember to share with your fellow investors.

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  1. Hi Chin Wai,

    the worst in oil and gas have yet to come. I said this early last year to many of my colleagues but they are not listening. Now this colleagues not taking action back then, all were almost retrenched!

    As for me since last year, I was already mentally prepared for the worst....

    Even when I am off, I will not feel sad at all now. Because I am already all prepared and know exactly what I am going to do if the worst happened.

    I reckon in stock investing it is quite similar.

    MTQ is still a good company with a good leader. A CEO with the experience climbing from scratch to C level in PSA and yet also the Son of a prudent founder cannot be that worst off.

    Nonetheless being young, they are always more ambitious and that is y u see all the wrong acquisition at not quite the right time. Imagine they acquire neptune now compared to then!

    Just my thoughts as I know MTQ business quite well.

    1. Hi Rolf,

      Thks for sharing your views. I agree with you. We're probably just starting to see the impact of the slump on the financial statements. Ezra has reported massive losses and Linc has gone into voluntary administration. There'll be more losses surfacing from now.