Mlab’s active week

MLABS System Bhd has had an active week. It’s share price has shot up by some 60% and over the week, it saw a total of 240 million shares traded. The company only has 187 million shares issued.

On Friday, after its shares closed on a 52-week high of 40.5 sen, the company said it had entered into a memorandum of intent (MoI) with a company called e-horizon Asia Pte Ltd to enhance the distribution and product development of its video-conferencing offerings, which is Mlabs’ core business.

On the positive side, the new Mlabs partner boasts of having its solutions being used by leading mobile operators worldwide. But the details are scant.

It isn’t clear how much increased sales or profitability that would come to Mlabs from this deal. The deal is also merely on an MoI level. So is the share price spike justified?

In fact if you count the last two weeks, Mlab’s share price has risen by a spectacular 237%.

Mlabs financials are far from rosy. It is loss-making with accumulated losses sitting at RM4.4mil, is in negative cash flow territory and has a mere RM118,000 in cash, although it is debt-free.

A year after its listing in 2005, the company started to bleed and hasn’t stopped until now. Its latest results say that its decrease in revenue is due to lower sales of video conferencing products. Investors chasing up Mlab’s shares must believe that this new MoI will lead to a turnaround in the company’s fortunes.

In fact Mlabs, which was issued an “unusual market activity” notice from the stock exchange, says that other than this new deal with e-horizon Asia, it is unaware of any other developments to cause its share price to spike.

So if the company itself is not aware of why the share price is spiking, maybe investors ought to take note that in all probability, there is nothing extraordinary happening with the company.