mDR Holdings (formerly: ACCS)

[Musicwhiz]

It's easy to "double" earnings when you start from a very low base!

The Straits Times
Nov 11, 2011
mDR profit more than doubles to $1.6m

By Robin Chan

Mobile phone distributor mDR reported a 112 per cent surge in net profit to $1.6 million in the third quarter from a year earlier.

This was the eighth consecutive quarter of profit for the company, formerly known as Accord Customer Care Solution.

Its revenue grew 8 per cent to $83 million, in the three months to Sept 30, mainly due to its distribution and prepaid card business.

For the first nine months to September, net profit was 80 per cent higher at $5.7 million and revenue grew 21 per cent to $262 million.

The company's fortunes have been revived since the appointment in 2005 of new chairman Philip Eng, the former managing director of Cycle & Carriage, and a slate of new management hires.

Its business and reputation had been badly burnt after its former management was found to have grossly overstated its revenue and earnings. Some of them were thrown into jail after investigations.

In an interview with The Straits Times yesterday, Mr Eng said: 'In the last eight quarters we have managed to turn the company around. We have basically repaid all our lenders without a haircut. And I would say we are one of the very few companies that got themselves into trouble and have been able to bounce back.'

Since 2005 the firm has undergone a major restructuring, closed down its overseas operations, and raised funds to pay off its lenders to put it back on a stable footing.

From owing about $55 million to its bankers, the company is now sitting on $18 million in cash with no borrowings, Mr Eng said.

It did two rights issues in 2006 and September 2011 and fully repaid its borrowings at the end of September.

After scaling down, the company currently employs 350 staff across its retail stores and after-market repair services, and operates 62 retail stores.

'Today marks a new journey for us. We are out of the shackles of our lenders. It gives us an opportunity to get to another level,' Mr Eng said.

The firm's share price closed unchanged at 0.4 cent.

[dzwm87]

Briefly looked into MDR, got to say this can be a great opportunity for a turnaround business.

As the article posted by Musicwhiz stated, problems from accounting frauds have caused a serious earnings loss which the company had to write off. In fact, such an issue had actually taken MDR (under chairman Philip Eng) 5 years of losses before the company can "start afresh".

Recently, they have paid down all of their bonds & bank loans - mainly via share placement - and now stands in net cash (0 debt) position.

Their business is pretty simple - retailing of mobile phone (high volume, low margin concept).

What caught my attention is the recent added stake by Kevin Wong (CEO of Keppel Land). Through its investment vehicle (of which unknown what it's called), he had increased his deemed stake from 6.47% to 10.48% (an added investment of S$1.2 million).

At current 0.5 cents & trading at around 5.6x P/E & 1x P/B, if the turnaround situation is as true & strong as it gets, MDR can be a potential 2-bagger?

Anybody has more insight on this stock?

[valuenewb]

Hi dzwm87,

since it's a high risk high return sort of play, i would suggest you consider the warrants. They last till 2014 and it should give them good time to turn around the business. If the mother is a 2-bagger, the warrant can get you a 6-10 bagger.

NV (yet)

[dzwm87]

Hi Valuenewb,

Correct me if I'm wrong but the warrants are currently trading at 0.1 cents & has an exercise price of 0.5 cents? how is that able to get a 6-10 bagger if hypothetically, MDR is a 2-bagger?

I will see it more of sacrificing the additional 0.1 cents gain to reduce more on downside risk.

but I'll agree with you, this penny stock is a high risk & high return game! There might be lots of factors which retails investor might miss out. I might just wait and see its FY11 results and whether there might be more dilution to come.

*Not vested*

[valuenewb]

Hi dzwm,

hmm.. maybe it's more like 5 bagger. In my haste, I might have compared apples to oranges but here's what I'm thinking of.

Buy MDR
1. Spend $1000 buying 200,000 mdr shares at 0.5 cent.
2. Share price doubles to 1 cent.
3. Sell 200,000 mdr shares at 1 cent for $2000.
-> 2 bagger

Warrants
1. Spend $1000 buying 1,000,000 mdr warrants at 0.1 cent. MDR shares at 0.5 cent.
2. MDR Share price doubles to 1 cent.
3. Warrant should be priced at 0.5 cent (1 cent - exercise price) or slightly more, due to option value
4. Sell 1,000,000 mdr warrants at 0.5 cent for $5000
-> 5 bagger

Of cos, it's all hypothetical. Alternatively, you can risk less capital for the same gains if you buy the warrant. Say if you expect price to double and you want to profit $1000 from it, you can just commit $200 if you buy the warrants to get that $1000.

All these assuming they are not going to pay dividends as well.

[sgd]

when they were in debt they had 2 rights issue, they have 6.7billion shares, raise money pay off debts

now they are out of the woods the danger of this is they could do a reverse split,

an example say at half cent 10 - 1 reverse price will become 5 cts

logically your shareholding will remain the same but the price usually after reverse may trade downwards.

be very careful

[dzwm87]

hmm sounds like dirt cheap penny stocks aren't the safest way to go

[Musicwhiz]

hmm sounds like dirt cheap penny stocks aren't the safest way to go

Well turnarounds usually don't turn...

Or even if they do, the share float is so massive that the EPS is tiny, so the valuation also becomes horrendously high. Oh well, a share consolidation may do the trick, but then again it's like cutting a pie into 4 pieces instead of 40 pieces. Still the same pie!

[dzwm87]

warrants went up 200%...

Keppel Land's CEO bought several more warrants recently.

Abit risky to enter now given the poor business moat but on retrospect, I am not certain what catalysed the surge in price. Could it be remisiers or brokers manipulating with the shares?

*not vested*

[phandal]

Ok just FTR, I know this is a crap share to buy, however I do own some legacy shares of the company from way back when they were Accord, (horrendous paper loss of course ) and so I still follow it from time to time.

In their latest financial statement, (and their preceding ones), there is this clause;

"Although the Company does not own any of the equity shares of MDR Golden, and consequently does not control any of the voting power of those shares, the Company is of the view that it has acquired de facto control over this company via its joint venture company MDR Myanmar on the basis that the Group has the power to direct the relevant activity of MDR Golden, has rights to variable returns from its involvement with this entity, and has the ability to affect those returns through its power over the entity. Accordingly, the financial position and results of MDR Golden are included in the consolidated financial statements with effect from August 2014"

Co announcement on MDR Myanmar: http://www.m-dr.com/doc/3467_Incorporati...ompany.pdf

BT Article: http://www.sg-electronics.com/SingleNews...one+market

"mDR will hold a 51 per cent stake in the JVC, which will provide after-sales services of telecommunication devices to consumers in Myanmar. The JVC will also be involved in the mobile devices and accessories distribution and retail businesses via its provision of exclusive consultancy and retail franchisee procurement services to Myanmar-based Golden Myanmar Sea Co Limited (GMS)."

Group Structure taken from website

[Image: GroupStructure.png]

So from what I gather, MDR has a JVC with 3 Myanmmese companies called MDR Myanmar of which it owns 51%. However this JVC only "consultancy and retail franchisee procurement services to MDR Golden", and does NOT own any shares in MDR Golden, which holds all the contracts to distribute phones and also privide aftermarket services. If this is true, then why is revenue from MDR Golden being recognised by MDR??

Does anyone know exactly what is this arrangement that is mentioned here? Or is there anywhere I can get a better description of the relationship between MDR and MDR Golden?