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Saturday, May 19, 2007

OSKVI - Earnings

In a previous post, a reader commented that ...

"OSKVI quater reports might coming out in this few days. It might be the key to drive OSKVI to uptrend or even more downtrend ... Let see... "

I think it is possible to estimate OSKVI earnings for Q1/07. My personal expectation is that it will be worse, simply because OSKVI has not reported to Bursa a realized gain (for its 4 large Mesdaq associates) for Jan 1-Mar 31 period. I could be wrong, but my rough estimate, after reading the reader's comment, is around $4-5M. If true, this is likely to be a dissappointment from last year's earnings of $7M+.

It is also possible that the market knows this dissappointed result based on the declining price trends over the last fortnight.

The downtrend can clearly be seen in last fortnight at the least.

On the other hand, as I mentioned previously, OSKVI has realized gains in GPACKET on 19 April. This should be reflected in Q2/07 result. Even though Q2/07 is not yet over, the odds are better than 50/50, that it will be better than Q1/07 result (and even Q2/06), simply due to the large realized gain on 19 April. The odds of this happening is better than 50/50 to put it modestly.

You may not believe this, but based on an unusually large revenue (most likely due to large realized gain) in Q3/06, one one could almost predict that Q3/07 is likely to dissappoint, if management do not realize an equivalent amount of gains in Q3/07. However, since Q3/07 is not here yet, it is safer not to trade assuming this will be true, as management can choose to realize its substantial paper gains at any time during Q3/07. Take 1 quarter at a time.

But a question - should earnings reflect just realized gains? Does paper gains not matter? As investors, do you feel happy if your realized your gains (and keep your paper losses)? For me, I don't.

However, the reader is correct, in the sense that if the market believes that reported earnings is accurate for OSKVI, then, it is foolish to bet against the market. Until there are signs that perceptions changes (and TA is the best tool for this), it may be wiser not to enter, if one has a shorter term horizon.

To me, I have different reasons for owning the stock. Unfortunately, due to time constraints, I am unable to write further. But the interested investor is referred to research up OSK's holdings in OSKVI over the last 3 years - there you can see that OSK is steadily accumulating OSKVI's shares. Further, study its dividends pattern over the last 3 years - there you should see a steadily increasing dividends. Further, there may be a move to move to market value accounting by the end of this year, but I am not an expert in this area and merely speculating. Now, all these patterns could mean nothing at the end of the day. Further the time to realization of value could be a long way away, and we could be talking 1, 2 or maybe 3 years. So, time your entry carefully (using TA if you know how), and don't invest more than 5% of your stock portfolio in this, as the stock has the potential to tie up capital for quite some time.

Happy investing!

Disclaimer: As usual, use your own judgement and invest (buy, hold, sell) at your own risk. I am not an employee nor affiliated with OSKVI, but merely a retiree. My opinions are based purely on publicly available data, and so, it could be incomplete and wrong. Be cautious since the market is rarely obvious, and is likely to fool most people over the long term. For a more accurate timing of entry using TA, please consult an expert, as I do not consider myself as one, but merely a student (and likely a lifetime student) of TA. And please read past OSKVI posts and disclaimers for context.