Complacency. I learned this new word when MM Lee spoke about fugitive terrorist Mas Selamat’s escape. Investors too are prone to complacency as we found out when several of them lost money from the Jade Technologies (Jade) saga. The thought of a sure-win situation left investors in disbelief when Jade’s shares fell like dominos. Hedge funds were not spared either, which proves that nothing is certain in the financial markets, even when the CEO or chairman offers to buy over the company.

Recently, several companies have changed their names or bought over new businesses to change their overall business strategy. Shares Investment (Singapore) would like to discuss about Tri-M Technologies’ (Tri-M) meteoric rise as its share price rose over 700% in the past month.

CLOSELY WATCHED
Tri-M Technologies is a diversified Electronics Manufacturing Services (EMS) provider which provides services in product design & development, prototyping, full turnkey manufacturing & total supply chain management. On 5 March 2008, the Singapore Exchange placed Tri-M on the Watch-List as it incurred pre-tax losses for 3 consecutive years and has an average daily market capitalization of less than $40m over the past few months. Tri-M’s losses for FY07 were $11.9m due to a 65.6% revenue drop and additional provisions made for depreciation. Tri-M was given 24 months to restore its financial health or risk being delisted or suspended. Tri-M’s auditors Ernst & Young added in its FY07 report that Tri-M faced doubts about its ability to continue as a going concern as the company has not complied with certain loan covenants of the credit facilities agreement with one of its bankers.

FORAYING INTO A DIFFERENT BUSINESS
In an attempt to boost earnings and maintain its listing, Tri-M signed a non-binding MOU to acquire Kingworld Resources, which will engage in the business of exploration and production of crude oil. The latter is owned by Tri-M’s chairman Tan Sri Datuk Tiong Hiew King and executive director Tiong Kiu King. Earlier in November 2007, Kingworld Resources signed a contract with China National Petroleum Corporation on the joint development and production of hydrocarbon resources at Block 1 of Fuyu in the Songliao Basin, with crude oil being its end product. According to Kingworld Resources, about 35 sq km of concession area will produce about 32.8m tonnes of hydrocarbon.

SHARE PRICE JUSTIFIED?
On March 17, Tri-M announced that it would raise approximately $4.15m through a private placement of 40 million new shares priced at $0.109 each to Tri-M’s majority shareholder Surreyville, owned by the Tiong family, to fund the proposed acquisition of Kingworld Resources. Tri-M’s shares rose more than 200% to a high of $0.39 on 20 March 2008 and rocketed to a high of $0.82 on 9 April 2008. While the change of business into energy plays is considered attractive, the sudden rise in Tri-M’s share price is purely speculative, especially since the acquisition is not yet a done deal. Another interesting fact is that the trading volume during its rise in April was very thin.

CAUTION IS THE WORD
Whether Tri-M would retain its printed circuit boards business remains to be seen. However we would like to remind investors that there are no free lunches in the world as proven in Jade’s situation. Investors should not be complacent and wait for further announcements from Tri-M to find out where it is headed. For those who have missed the boat before the surge, do not hop into the bandwagon as the share price is already very high.