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FINANCIAL CHRONICLE™ » EXPERT CHRONICLE™ » Touchwood Case Review

Touchwood Case Review

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seyon


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Unofficial information that the expected Touchwood case against Sri Lanka Accounting and Auditing Standards Monitoring Board(SLAASMB) next hearing will be on 26th May 2011. Yes everyone looking the favorable outcome. Today, there are rumors that outcome will be favorable to the company and some brokers recommend to buy at current price. I could see some collection (about 820,000 shares) was made @ 23.60 levels.

I just did some research on the Touchwood Case. It looks like decision will be favorable to company. (This is not a promotion, just merely to getting your views. To be honest I do not have TWOD shares at the moment.)

We all know about the case related to the valuation of biological assets. I extracted some facts from SLAASMB website of case information to start from beginning.

The Sri Lanka Accounting and Auditing Standards Monitoring Board has determined that the estimates of fair value of biological assets used by Touchwood Investments Limited in its financial statements for the years ended 31 March 2005 and 31 March 2006 are clearly unreliable. The Company has also not been able to provide the Board with any other estimates which are reliable. Further, the method of valuation used for the year ended 31 March 2005 was not in accordance with International Accounting Standard, IAS 41 Agriculture, which the company has purportedly adopted.

As the company has purportedly adopted International Accounting Standard, IAS 41 Agriculture, the Board has concluded that the biological assets should have been valued at a value which approximates cost in accordance with paragraph 24 (b) of IAS 41 or at cost less accumulated impairment in accordance with paragraph 30 of IAS 41. Based on such valuation the company would not show a net profit for the relevant financial periods.

As the impact on the financial statements is substantial the Board has decided to refer the non-compliance to the Attorney General. The Board has also decided to investigate the compliance with auditing standards by the auditors in relation to the audit of the financial statements of the Company.

Based on the above information I can see in the absence of Sri Lanka Accounting Standards, company uses International Accounting Standards 41, Agriculture for the valuation of biological assets. But SLAASMB argument is that estimates of fair value of the biological assets in not accordance with IAS 41 and the financial statements are unreliable.

Further I have received BASL News Letter (Bar Association) of December 2010, there talked about some legal judgment (I attached the newsletter in our research forum http://research.srilankaequity.com/t96-touchwood-case-basl-bar-association-news-letter-judgement-views , refer page 4 for the Touchwood case). There they briefed about the case and given their views. Based on that, Board had not statutory power to challenge the valuation of the Petitioner on non compliance with IAS 41.

Further company received the Certificate of Compliance by the Institute of Chartered Accountants of Sri Lanka for the Annual Report Awards 2010. This certificates covers the CSR, Financial, Presentation and Compliance. Therefore, this reveals that the company practice in valuing biological assets in accordance with IAS 41 as the certificated awarded by ICASL which is the statutory for setting the Accounting Standards

Followings extract from Touchwood website

Certificate Of Compliance

January 24th 2011

We are proud to announce that our Sri Lankan office, Touchwood Investments PLC has been awarded the “CERTIFICATE OF COMPLIANCE” by the Institute of Chartered Accountants of Sri Lanka for the Annual Report Awards 2010 - at the ceremony held on 7th December 2010.

This award is granted by the Inst. of Chartered Accountants of Sri Lanka every year. They evaluate and grant awards in key areas such as - CSR, Financials, presentation, compliance, etc.

This certificate emphasizes that all requirements are being met in order for us to achieve our goals and serve our investors with industry leading standards.

For the year to come Touchwood Investments PLC has its goals set on the CSR awards to be handed out in the 2011 ceremony.

Thank you to all our accounting and administration staff who made the award possible.

http://www.touchwood.com/news/certificate-compliance

So Guys, Based on the above information and facts, to me the decision would be favorable to company. How do you all look into that..

Pls Share ur thoughts and views

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Post Fri Jul 08, 2011 10:08 am by mono

@LoveMoney wrote:@Duke, no. I think the customers get a share of the profit according to the period of time the customer want to hold the investment, other than that customer doesn't own the trees or he can't go and cut it Very Happy. Customer only can visit the plot and nurture the trees, if he or she feels like.

They also guaranteed a return. I can't remember the details. My father was very suspicious about the whole thing so he invest only a small amount. I'll see if i can dig through our files to find out what the exact numbers are

Post Fri Jul 08, 2011 10:09 am by Chinwi

In the case of TWOD, it was always a gem for the shareholders who bought it at correct times.
In early days shareholders earned lot of money by getting bonus shares; I think many times.
Tree owners who are the real source of yearly cash flow have to wait years to get a return.
( vanilla investors already get income)

If you take the value of a tree promised to the owners, they (the Directors) were smart enough to make it only a part of the future selling value.

Hence, IF the business become a success in the future , when those trees are matured enough to cut and sell to get the real inflow, the shareholders are to get more benefits.



Post Fri Jul 08, 2011 10:12 am by mono

@Chinwi wrote:In the case of TWOD, it was always a gem for the shareholders who bought it at correct times.
In early days shareholders earned lot of money by getting bonus shares; I think many times.
Tree owners who are the real source of yearly cash flow have to wait years to get a return.
( vanilla investors already get income)

If you take the value of a tree promised to the owners, they (the Directors) were smart enough to make it only a part of the future selling value.

Hence, IF the business become a success in the future , when those trees are matured enough to cut and sell to get the real inflow, the shareholders are to get more benefits.




Chinwi i think tree owners also got some shares on top of a guaranteed return after maturity. Not sure though. In anycase TWOD is getting way more than a simple management fee

Post Fri Jul 08, 2011 9:04 pm by Marketinvest

Do we have any update on twod

avatar

Post Fri Jul 08, 2011 9:37 pm by seyon

Hi Small

Please Can u update ur tech charts and ur views. This would be the great helpful

chamith

Post Fri Jul 08, 2011 9:55 pm by chamith

Touchwood Case Review  - Page 5 Captur10


http://www.fool.co.uk/news/investing/investing-strategy/2009/09/09/touch-wood-its-a-good-investment.aspx

Marketinvest

Post Sat Jul 09, 2011 12:08 am by Marketinvest

Does anyone have the todays technical for TWOD

chamith

Post Sat Jul 09, 2011 12:49 am by chamith

Recently TWOD 21day MA met the 200 day MA after long 7 months. Its seems to be moving upwards. This is a buy signal which long term buyers use.

MACD and RSI shows positive sings, but faster stochastic Oscillator shows near oversold signs.

avatar

Post Wed Jul 13, 2011 5:51 pm by seyon

@chamith wrote:Recently TWOD 21day MA met the 200 day MA after long 7 months. Its seems to be moving upwards. This is a buy signal which long term buyers use.

MACD and RSI shows positive sings, but faster stochastic Oscillator shows near oversold signs.


Hi small & chamith

Pls share with us about the technical chart of Touchwood and ur comments on that.

Marketinvest

Post Wed Jul 13, 2011 8:57 pm by Marketinvest

Does not have a update on the case

rijayasooriya

Post Wed Jul 13, 2011 9:14 pm by rijayasooriya

My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

avatar

Post Wed Jul 13, 2011 11:37 pm by seyon

@rijayasooriya wrote:My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

I don't think rijayasooriya as per the recent quarter financial statement the case is finally fixed on 18.07.2011. see the wording

"The said Supreme Court Case No SPL LA 42/10 had been postponed on numerous occasions and finally it is fixed for hearing on the 18th of July 2011".

stumpy

Post Wed Jul 13, 2011 11:39 pm by stumpy

@seyon wrote:
@rijayasooriya wrote:My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

I don't think rijayasooriya as per the recent quarter financial statement the case is finally fixed on 18.07.2011. see the wording

"The said Supreme Court Case No SPL LA 42/10 had been postponed on numerous occasions and finally it is fixed for hearing on the 18th of July 2011".

"hearing" or "verdict"

I don't know...

Seyon, pls chk PM...Wink

Marketinvest

Post Thu Jul 14, 2011 12:12 am by Marketinvest

Ok lets see both extremes.
1. If the verdict is given and the case is won what would be the share price.
2. If the case is postponed what would the share price again.
3. If case is lost what would be the effect on share price.

Everyone Pls share ur thoughts.

m2_yapa

Post Thu Jul 14, 2011 10:46 am by m2_yapa

If 01 or 03 happen price rice to where it should be...if answer is two it will stagnate and come down again due to low interesting

rijayasooriya

Post Thu Jul 14, 2011 11:53 am by rijayasooriya

@seyon wrote:
@rijayasooriya wrote:My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

I don't think rijayasooriya as per the recent quarter financial statement the case is finally fixed on 18.07.2011. see the wording

"The said Supreme Court Case No SPL LA 42/10 had been postponed on numerous occasions and finally it is fixed for hearing on the 18th of July 2011".
Yes seyon that is what I think, expect and pray to happen.

sas

Post Thu Jul 14, 2011 2:08 pm by sas

@xhora wrote:thought there would be a easier way Smile
@ xhora,chamith, dimuthubas,

sorry this is off the topic, but i thought you would like to know,
scrolling windows can easily captured & edited using "snagit software"

links: Techsmith.Snagit.v10.0.0.788.Full Hypnox.rar (29.87 MB)
http://www.mediafire.com/?uqmthktwyaa

avatar

Post Fri Jul 15, 2011 1:17 pm by JennyFunny

what will happen to case on monday?

innam

Post Fri Jul 15, 2011 4:57 pm by innam

well this has been an interesting discussion with traders waiting for the "magic" court case to be resolved, finally there is some official confirmation on the supreme court website that the hearing on granting of leave to appeal the case S.C. SPL L.A. NO. 42/10 C.A. NO. 323/07 is sceduled for Monday. It says "top of the list" so this may get resolved one or the other.
http://www.supremecourt.lk/index.php/daily-court-list/2011/45-july-2011/209-18thjuly2011.html

the case number tallies with what's given in page 4 of the TWOD financial statements http://www.cse.lk/cmt/upload_report_file/631_1306836847436.pdf

avatar

Post Fri Jul 15, 2011 5:45 pm by seyon

@innam wrote:well this has been an interesting discussion with traders waiting for the "magic" court case to be resolved, finally there is some official confirmation on the supreme court website that the hearing on granting of leave to appeal the case S.C. SPL L.A. NO. 42/10 C.A. NO. 323/07 is sceduled for Monday. It says "top of the list" so this may get resolved one or the other.
http://www.supremecourt.lk/index.php/daily-court-list/2011/45-july-2011/209-18thjuly2011.html

the case number tallies with what's given in page 4 of the TWOD financial statements http://www.cse.lk/cmt/upload_report_file/631_1306836847436.pdf

Thanks innam

So the case will not be postponed, lets wait for the results..

stumpy

Post Fri Jul 15, 2011 7:45 pm by stumpy

Very Happy

xhora

Post Fri Jul 15, 2011 11:15 pm by xhora

@sas wrote:
sorry this is off the topic, but i thought you would like to know,
scrolling windows can easily captured & edited using "snagit software"

links: Techsmith.Snagit.v10.0.0.788.Full Hypnox.rar (29.87 MB)
http://www.mediafire.com/?uqmthktwyaa

Thank for the info. Will try this some time

Marketinvest

Post Fri Jul 15, 2011 11:59 pm by Marketinvest

@innam wrote:well this has been an interesting discussion with traders waiting for the "magic" court case to be resolved, finally there is some official confirmation on the supreme court website that the hearing on granting of leave to appeal the case S.C. SPL L.A. NO. 42/10 C.A. NO. 323/07 is sceduled for Monday. It says "top of the list" so this may get resolved one or the other.
http://www.supremecourt.lk/index.php/daily-court-list/2011/45-july-2011/209-18thjuly2011.html

the case number tallies with what's given in page 4 of the TWOD financial statements http://www.cse.lk/cmt/upload_report_file/631_1306836847436.pdf
since its under grant for leave section wouldnt it get post poned again

avatar

Post Sat Jul 16, 2011 8:44 am by JennyFunny

hmm interesting developments..

avatar

Post Sat Jul 16, 2011 9:09 am by rizjiji

@rijayasooriya wrote:My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

So dude why are you spreading RUMORS...lol

avatar

Post Sat Jul 16, 2011 9:55 am by seyon

@rizjiji wrote:
@rijayasooriya wrote:My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

So dude why are you spreading RUMORS...lol

Don't worry guys, i checked with the consultant about the meaning of Top of the list.

Top of the list means it will be taken up before the other cases and will not be postponed unless lawyers on both sides agree to a postponement. So we can most probably hear some good news about TWOD on Monday.

Let's wait for good results.

Hawk Eye

Post Sat Jul 16, 2011 10:02 am by Hawk Eye

I cant understand
So how much is the share worth if the case won ?

Marketinvest

Post Sat Jul 16, 2011 10:14 am by Marketinvest

@seyon wrote:
@rizjiji wrote:
@rijayasooriya wrote:My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

So dude why are you spreading RUMORS...lol

Don't worry guys, i checked with the consultant about the meaning of Top of the list.

Top of the list means it will be taken up before the other cases and will not be postponed unless lawyers on both sides agree to a postponement. So we can most probably hear some good news about TWOD on Monday.

Let's wait for good results.
thanks seyon for the update its very useful information.

rijayasooriya

Post Sat Jul 16, 2011 12:52 pm by rijayasooriya

@seyon wrote:
@rizjiji wrote:
@rijayasooriya wrote:My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

So dude why are you spreading RUMORS...lol

Don't worry guys, i checked with the consultant about the meaning of Top of the list.

Top of the list means it will be taken up before the other cases and will not be postponed unless lawyers on both sides agree to a postponement. So we can most probably hear some good news about TWOD on Monday.

Let's wait for good results.
Thank u very much seyon. I am really relieved.
To rizjiji,
Do not misunderstand. I am not spreading rumours. Even the facts may come as a rumour. That is why I want to get ur ideas of that rumour.

stumpy

Post Sat Jul 16, 2011 1:01 pm by stumpy

@seyon wrote:
@rizjiji wrote:
@rijayasooriya wrote:My broker(capital trust) told me that there is a RUMOUR case MAY be postphoned again. Sad

So dude why are you spreading RUMORS...lol

Don't worry guys, i checked with the consultant about the meaning of Top of the list.

Top of the list means it will be taken up before the other cases and will not be postponed unless lawyers on both sides agree to a postponement. So we can most probably hear some good news about TWOD on Monday.

Let's wait for good results.

Keep up the good work buddy Wink

yeah! Let's hope for the best!

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