I blame it on myself to even consider it as this stock is highly risky. Firstly, if you look at the below which was last year's annual report I thought that it is a cheap company with its new management having a view to make things right.
With the takeover, I was thinking that it could have changed fast. It definitely has proven that is not easy to turnaround a company even with the change in management, change in name and changing the way business is done. In fact, they were so adamant to change that they changed to a Big 4 auditor (may not be a good thing). How many sub-RM100 million companies in Bursa has a Big 4 auditor?
With this, I thought since YFG is in a space where there are opportunities, it would have a good chance for growth. But the company's past probably still haunts the company. If you look at the accounts, its biggest challenge is the amount due from contract customers.
I am pretty sure that YFG cannot afford the hit totalling that amount of RM20.908 million, as if it does the company will go under PN17. Usually, if it potentially is a bad debt, many parties may opt to take the hit slowly - I think this could be the case for YFG. As YFG has substantial projects in hand, I would think that they would be able to absorb the impact especially where they have stronger major shareholders now.
But it will take a longer time to recovery. And not as fast as I would have envision.
Probably for the company, the fastest way for it to get back on track are just to do these 2 things:
- raise more capital - capital injection via private placements or another rights. It may also consider acquisitions of contracts (but at this traded price, probably not the best thing to do for now);
- write off whatever that is doubtful.
There is no point dragging over these issues as its business continuity is at stake.
And I think the reason for the health reasons for the CFO to retire is a bit coincidental judging from the amount mistakes on this case i.e. underestimating the amount to write off from one of the projects which ran into a change in management, non-ability to address the qualifying statement by KPMG early and the poor cashflow management as well as having to suspend the stock trading due to the company's quantum of impairment.