Kingsmen Creatives

[camelking]

I read that AC has notified CAD about the issue
Is there something else?

Who can give personal guarantee to sub-contractors?
I don't think normal project managers can give such guarantee.........

[violinist]

Don't know got chance to buy at $0.60 or not?

[Musicwhiz]

This is a time when shareholders and investors should take things in stride and re-assess their investment – it is also a reminder to all of us how important a margin of safety is to guard against unforeseen events (be it fraud, Acts of God etc.).

The pertinent question to ask would be – does this event permanently and irrevocably impair the fundamentals and prospects of the Company? Is this a “one-off” event which the Company will survive, or will this singular event be the catalyst for the long-term decline of the Company?

Based on the facts reported and the amounts mentioned, I am inclined to believe the former. Though I must admit that there may be more cockroaches in the closet, fraud and dishonesty on the part of employees is part and parcel of doing business. Just pick up the local newspaper and read about the numerous instances of fraud committed at banks and other companies, and you will realize that fraud constitutes business risk (the risk of investing in the business).

As long as the fraud was not perpetrated by a very high level employee (whose absence may severely impact the normal functions of the Company) and the amounts are not material (in this case, about 8.9% of FY 2011’s NPAT), I believe the Company will survive this and at the same time, institute stronger internal controls to prevent a recurrence.

Another issue which may be brought up is that of weak internal controls, and concern that the Company may face other future instances of fraud which would undermine investor confidence. My view is that where there is collusion involved, and in working with so many parties (contractors, sub-contractors), it would be difficult if not impossible to prevent fraud. The fact that the external auditors and audit committee managed to pick this up is already a testament to effective controls, as such frauds are usually only discovered by a superior or employee of the Company (sometimes through internal audit checks). So I would give the auditors credit for discovering this and reporting it to the CAD.

Other views are welcome.

[Some-one]

First of all, I must say that I am disappointed with the company for such lapses especially when it is a Singapore company. However, I must also applaud the stern action of the Audit Committee (AC) for the company. I shall be cautious here and has sold half of my holdings with 12% profit. I shall wait and see what would happen.

[edragon]

This is a time when shareholders and investors should take things in stride and re-assess their investment – it is also a reminder to all of us how important a margin of safety is to guard against unforeseen events (be it fraud, Acts of God etc.).

Where is this margin of safety? Net profit is only about 5%. Not much room for errors, I think.

[Musicwhiz]

Where is this margin of safety? Net profit is only about 5%. Not much room for errors, I think.

Are you talking about NPM?

[Kelvin]

buying opportunity.

so far buying during 'crisis' has always proven right.


look at the property counter rebound, semb corp marine rig tilting etc

its interesting how a fraud case can turn enthusiatic GO offer discussion to selling cos the fundamentals may be shaky.

[edragon]

Where is this margin of safety? Net profit is only about 5%. Not much room for errors, I think.

Are you talking about NPM?

Yes.

[Musicwhiz]

Hi edragon,

NPM is about 5% to 7%. As for room for error, this is a fraud after all and not about business management of expenses and/or debt.

What I mean by margin of safety - purchasing at a valuation where you factor in potential unforseen events so as to minimize chances of permanent capital loss.

[brattzz]

It's good to take profit off the table, and be conservative/cautious with investment.

I remain positive on KMS, wants to see their counter-action plans for internal controls, and hope to buy in more when the price takes a beating!!