Ezion Holdings thus far is probably the largest investing mistake I have made so far. So perhaps its good to do an after action review of it.
Turn of Events- The straw that broke the Camel's back
The recent announcement of Ezion not having obtained its working capital financing is the most damaging issue. My mistake was that I had assumed when Ezion paid its lenders on 3 July 2018 the consent fee to obtain the working capital loan, it would have meant that the loan will be given soon after; however, it seems not to be the case.
7 Months on, Ezion has not obtained a working capital loan and is in a liquidity issue. This has resulted in its liftboats not being able to rented out because customers do not trust if Ezion can service and operationalise its lifeboats. As for the jack up rigs, Ezion has not been able to repair without the working capital.
As a result of not being able to obtain working capital loans, Ezion's revenue forecast is likely to be set back an entire year. This will affect its profit realisation to a great extent.
Lesson Learnt- A restructuring does not mean a complete restructuring
Lesson 1: Wait until the full restructuring has taken place- yes, the consent fee to banks may have been paid, but banks can still delay upon giving them the loans. Hence, I guess should I invest in distressed companies, it will be important to wait until the balance sheet is entirely cleared off its liabilities; no doubt the rewards may be lesser, but so too is the risk.
Lesson 2: Liquidity affects your customer perception of you- customers may be afraid that you are unable to fulfil your terms of agreement and as a result, return you your goods. This results in a loss of business for you.
AS for the valuation, given the unknown limbo it is in now, it is impossible to value the intrinsic value of the company any longer
i have learn my lesson from young, only invest in blue chip and divert across them, not other counter listed in SGX, all are suxker..ReplyDelete
I do kind of agree, most of Singapore SGX companies outside the blue chips and GLC are poorly managed. THis is why activist investors are appearing to demand fairer treatment as minority shareholders or unlocking values of companies because they don't trust the management of smaller companies. I think Singapore's regulators are oblivious or even turning a blind eye to this problemDelete