Wednesday, August 19, 2009

The Nation's Editorial on Global Economy and its Financial Statement

The Nation

Editorial "Economists cannot provide any answers":

Like most economists, Krugman can't get out of the hole into which he has dug himself. He somehow believes that the global economy will return to its growth path, similar to what happened over the past few decades: The exporting nations, armed with excess production capacity, will continue to produce manufactured goods for global consumers. This excess production and excess consumption will continue forever, or so it seems, so that planet earth will experience joy and prosperity. Krugman and the world's economists believe in the sustainability of global capitalism and global financial capitalism even though they are teetering on the edge of a cliff.


But how can governments come up with further stimulus programmes when they are already saddled with debts amid growing business bankruptcies? Excess production and excess consumption have reached a point where we actually need radical restructuring so that we can get back to our original shape.

We can't continue to produce and consume excessively, buoyed by paper wealth that does not correspond to the fundamentals. Sadly, no economist can admit this reality, including the policy-makers, who are all tempted to introduce stimulus programmes for short-term gain.

The only way out of this crisis is to undertake restructuring in a painful way. We might witness a New Economy emerging. The old global capitalism is dead, for good.

I suspect Thanong wrote the editorial.

I doubt he was talking about his own company--even though he should.

The Nation's financial statement is one that shows a company that has been run into the ground.

It is saddled with short-term debt and long-term debt. Put simply, it is over-leveraged and it is losing money hand over fist.

Here are some of the bad parts of The Nation's financial statement:

(in thousand baht)

Working Capital

Current assets 1449049
Current liabilities 1445740
Total 3309

Working Capital per baht of sales

Working Capital 3309
Total Sales 560000
Total 0.00590893

Current ratio

Current Assets 1449049
Current Liabilities 1445740
Total 1.00228879

Acid Test ratio

Current Assets 1449049
Inventory 374000
Current Liabilities 1445740
Total 0.74359774

Debt to equity ratio

Total Liabilities 2535573
Shareholders Equity 701072
Total 3.61670841

These numbers are not good.

It keeps borrowing short-term money to pay its bills.

Another horrifying number is that current liabilities are almost triple revenues and revenues don't even cover the operating expenses.

The equity in the company is exponentially shrinking.

You'd have to be a fool to buy this company's stock. It is at the point where it can't borrow anymore because its current assets already equal its current liabilities. When you subtract inventory, it is a even more dismal picture.

It has very little working capital to make more money.

Thanong better send this editorial to his publishers or he will be out of a job soon, though I suspect if the company goes bankrupt everybody will be running over to the state run media, or to the Manager Group.


Anonymous said...

I'll help you out Fonzi w/ the financial analysis becuz you are commenting like you are not really sure:

(a) Annual revenues of NMG had been steady at (in million baht) 3,474 (Y2005), 3,088 (Y2006), 3,208 (Y2007) and 3,020 (Y2008. Year09 for six months were terrible however at 1,200.

(b) NMG losses were horrendous as follows : 332Million loss (Y2005), 154Million loss (Y2006), 798million loss (Y2007), 55Million loss (Y2008) and 111Million loss (Y2009 6 mos).

(c) Accordingly NMG's equity had deterioriated rapidly from Baht 2,130 million end of Y2004 to Baht 657 million by Jun2009.

(d) But surprisingly NMG managed to reduce its total liabilities from Baht 3,636 million at end of Y2005 to Baht 2,535 million by Jun-2009. Obviously they could NOT have paid liabilities out of profits (NMG had none) and in a company making regular huge annual losses, usually funding should have come from more borrowings because NMG's paid up capital had not changed since Y2004. So how did NMG manage this near-Houdini feat?

(e) The reduction of total assets from Baht 5,4453 million at end of Y2005 to Baht 3,236 million by Jun2009 is how! NMG had been disposing assets left and right to fund their perennially losing operation! That means NMG could no longer get any new lender, nor, could NMG secure any new capital from existing or new shareholders.

(f) And that tells the story of NMG. Financially it is doomed. No more sources of new loans or equity capital (even its existing shareholders won't increase their exposure). Operationally NMG is a sinking ship with losses year after year.

(g) It is possible NMG is cooking its books to report declining losses during Y2008 - Y09, trying to give hope of a financial recovery to entice would-be lenders or new providers of capital. Best of luck to them.

(h) Their Houdini-feat of financing losing operations by selling assets obviously could not go on forever.

(i) That means 'THE END' for NMG may just be just around the corner.

Now Fonzi, does that make you drool with glee?

Why don't you make a financial analysis of Bangkok Post next?

Fonzi said...


Thanks for being more articulate and thorough than me.

I don't know if I was unclear or not. I just looked at the numbers and did a few quick basic investor calculations.

Thanks for going further back in the past.

If I had known it was that bad, I would have given Thanong a bigger lashing.

As for (d), I think it is because they sold the Nation building that gave them the cash infusion, as you pointed out, it has been hocking things to stay in business.

Anyway, when all is said and done, you have to wonder why the shareholders haven't revolted and fired everybody.

There is no Thaksin money this time to bail out the company, like when he bailed out iTV, after The Nation ran that company in the ground.

Mr. Wrigley said...

What would we say are the main factors destroying the company?

(a) atrocious content
(b) global decline of news companies brought about by technology changes
(c) current global crisis exacerbating an already poor situation
(d) managerial incompetence

How does the Nation stack up to its competitors?

Also, I just got linked in to Thai TV through the Internet (in US). One of the channels I can link into is ASTV. I watch for a few minutes and then when it got to the commercials segment I couldn't happen but notice the ASTV logo on all of the products, ranging from rice to toothpaste! What is going on here? Anyone have more details? It it the making of Sondhi society. I eat ASTV rice, wash with ASTV soap, and brush with ASTV paste. WHen I die can I hire ASTV to do the funeral and cremation. Can I get a ASTV urn for the ashes with a special blessing from Sondhi for a large donation to the ASTV society?

Fonzi said...

Mr. W--

(A) I agree, atrocious content. But that is a result of bad management, bad editorial decisions, bad training.

(B) I definitely agree that the news business has changed, and Nation Group, with all its faults, is not alone. However, even though many media corps are hemorrhaging money, you can tell that they are aggressively trying new ways to develop revenue streams. The Nation is just resting on its laurels and hoping for the best. Management should have been fired a long time ago.

(C) From looking at the financial statements, it looks like there is a correlation between the general economic situation and revenue. But, as Vichai/Matty pointed out, The Nation was losing money in good times as well. The losses were worst before the recession hit.

(D) Definitely managerial incompetence, on both the publishing and editorial side.

But The Nation reflects Thai management/sakdina culture. The puuyai are always right. It is better for the company to self-destruct rather than have a puuyai cough, Suthichai Yoon, cough lose face. I am sure there are underlings who are completely tapped into the new media culture and everything it has to offer, but do you think they'd ever challenge the dinosaurs?

A few years ago, I think The Nation could have probably been saved from itself with aggressive action from the Board of Directors by firing the management, but now it is in so much debt and has virtually no goodwill to sell, that unless there is a Thai politician with deep pockets who wants his own media empire, the chances of survival are nil.

As for ASTV, who can blame Sondhi Lim for going after every satang he can find? He already went bankrupt once. At least he is aggressive in contrast to the Nation Group.

(c) 2016 Written by Andrew Batt said...

Both The Nation and Daily Xpress are published by a limited company (NMG News Co. Limited) which, as far as I can establish, is not part of Nation Multimedia Group Public Company Limited. There's certainly no mention of this company in any of the latest data published to the Stock Exchange of Thailand.

Fonzi said...


With all due respect, if you are right, then why hasn't the corporate website changed?

(c) 2016 Written by Andrew Batt said...


Yes, agreed. It does say both newspapers are part of the listed group on the website, however you have to question why it also says 'Published by NMG News Co. Limited' in each edition, and has done for at least a year.

I'm seeking clarification on the relationship from the IR department at NMG however I am not holding out much hope as my first email attempt bounced back undelivered.