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AWise: The Mauling of
By Andrew Ho

26/3/2001 7:31 am Mon

[Lagi satu syarikat yang gah bising pada awalnya yang dikendung oleh Vincent Tan kian berciciran. kini dihenyak masalah dan mungkin terpadam dalam kebisingan juga.

Apakah rakan karibnya yang bergelar doktor itu akan datang menghulurkan tangan? Sama-samalah kita memantaunya bukan sahaja diwaktu malam, malah di ketika siang juga.

Nampaknya banyak sentuhan Vincent Tan berakhir dengan kemusnahan yang memalukan. Yang peliknya mengapa doktor masih tidak berhenti menyayang. Apakah ini satu pendidikkan yang berwawasan yang mahu diajar kepada semua penuntut universiti tempatan?
- Editor

The Mauling of

By Andrew Ho, AsiaWise

22 Mar 2001 14:30 (GMT +08:00)

What a difference a year makes -- just ask Tan Sri Vincent Tan.

Last March he announced he was taking over electrical manufacturing company Dijaya Enterprise from his brother, renaming it and converting it into an investment and holding company focused on the Internet. He said he expects it to become "the mini-Softbank of south Asia."

A month later the real Softbank entered the scene and announced it would take a 10% stake in for 103 million Malaysian ringgit.

That sent the stock price into orbit -- its 286% increase last year was the best performance on the Kuala Lumpur Stock Exchange. The stock started the year at RM 1.25 and peaked at RM 14.00. It currently trades at RM 2.70.

All of this has generated a lot of press and a lot of investor interest but so far not much else - results to date have been dismal. In the six months ended December 31, the company posted an operating loss of RM 13.8 million, compared with an operating profit of RM 2.5 million last year. The net loss for the six months was RM 14.1 million and what little turnover there was came mainly from the electrical equipment business remaining from its previous incarnation.

What of the RM 260 million poured into dotcoms and strategic stakes in Malaysian, U.S., Hong Kong and Singaporean software and e-solutions providers?

Consider Internet consultancy and DotCC, an agent for registering .CC domain names. They forecast revenues of RM 16 million and RM 40-50 million, respectively, in their first year of operations, but MOL's December results fail to reveal significant contributions from either subsidiary.

Even the Softbank deal hasn't been entirely positive. The investment was announced in April and closed in September. Softbank ended up with 11% of MOL at a cost of RM 68.1 million, largely due to the softer share price.

Tan sold Softbank his personal shares and the RM 68.1 million that flowed into his pockets has since been plowed back into MOL. The latest balance sheet shows RM 106.2 million 'Due to a Director and a Director of a Related Company' -- an increase of 69% from last year.

Other cracks began to appear late last year when Michael Soh, the CEO of, the cornerstone of MOL's Internet strategy, resigned six months after joining the company. This was followed by substantial layoffs -- numbers vary but start at 100 and rise from there.

According to a former employee, who spoke on condition of anonymity, current employees number 70, down from a peak of 500. As with the others laid off, he was given marching orders in November with two months salary as compensation. Paul Ting, MOL's Executive Director says fewer staff members were laid off, but admits there has been a reorganization within MOL.

Although the numbers are in dispute, its clear that costs have been cut -- at least in the form of staff salaries. Does that mean the worst is over for MOL? No, says the former employee. He estimates that 80% of MOL's 32 vortals (vertical portals) have either closed or will be closed and he expects operations to be consolidated into one vortal as the company tries to maintain its current service offerings.

We visited MOL's site,, to get an idea of the situation and two things struck us -- the slow speed and the postings by users enquiring if the site was still live as there have been no updates of late.

Staying power is the key in today's environment and with funds drying up for Internet investments, existing dotcoms have to dig in and start relying on cash flows generated from operations.

How is MOL doing on that front?

The balance sheet paints a grim picture. MOL has a current asset to liabilities ratio of 0.93x resulting from net current liabilities of RM 9.4 million. A current ratio of less than one implies lack of liquidity and working capital -- no surprise, with short-term borrowings totaling RM 83.5 million and another RM 106.2 million in advances (read loans) from Directors.

MOL's gearing is a hefty 1.5x -- and jumps to 3.4x if advances from Directors are classified as long-term debt. With a paltry cash balance of RM 3.2 million and negative cash flows from operations, banks are unlikely to extend more credit.

Things are getting worse though. To date, MOL has merely reported operational losses arising from the dotcom investments.

If it were to recognize losses on the former employee's estimate of 80% of its investments, RM 208 million would disappear from its balance sheet, wiping out MOL's current shareholder's funds of RM 54.7 million and leaving it with a RM 153.3 million deficit in net tangible assets (NTA).

MOL is likely to resist any write down of its investments since it could result in their de-listing. Malaysia's Securities Commission requires listed companies with negative NTA to top up shareholder's funds within one year or lose their listing on the KLSE.

Despite what appears to be a state of denial at MOL, its days may well be numbered given its faltering financial health. Its demise would certainly rock the industry and earn headlines -- perhaps to the same degree as its launch barely a year ago.