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Showing posts from 2005

Singapore's Best Motivator - Malaysia's GLCs

The horrendous mis-steps by a few GLCs exemplify what is sorely lacking in our top management. We must be doing something wrong, either the incentives are not lucrative enough, or the punishment meted out is nothing to shout about, or our top people are not really that good professionally - or all of the above. This is a fair statement, I believe. Rather than cringe at the message, please do something constructive with the experience, if the ones that matter are reading this.

SIA makes good profits in their current FY, compare that to MAS. Telekom is ambling along, about 10 years behind SingTel in overseas ventures. Singapore produces ZERO number of cars, their COEs makes more money than Proton. Singapore has almost all but closed out their steel operations, one can import them, cheaper than the price set by the government in Malaysia to support the local steelmakers.

If we were to generalise, Malaysians are great dreamers, strategists... but poor executors. The MSC, brilliant, the exec…
How To Make A Bad Thing Worse - PROTON

Tourists always head to Petaling Street when they come to Malaysia. No need to go to Petaling Street, KLSE also can. Well, getting something lelong for ONE Euro probably takes the chapati, and after only buying it for a year! We all know that it was an investment which turned sour, and Proton's management has already written down the book value, and that one Euro was just a token as it will stop the rot (share of losses and liabilities) on Proton's books. Just take the pill and lie down, wait till you get better.

Now, why would the spokesman want to come out a few days later and blurt out in a headliner "PROTON TO RECORD NO LOSS ON DISPOSAL". As if now, we will go aaahhhh, actually sell something for one Euro also can have zero losses, so smart lah Proton!! What are we,....... idiots??


The actual announcement …

T+7.... Fears, Myths & Benefits

Some people were aghast at the Bursa for allowing broking firms to offer T+7 facility to their clients. Are we luring back the risks of the early/mid 90s? Here's my take:

T+7 is no big deal. In actual fact, Maybank Securities offered an even better T+10 back in, wait for it, August 2003. Mayban Securities introduced T+10 facility, a short-term financing facility, which provides longer contra period. Collateral requirement, margin calls and force-selling terms remained the same but the extra days for the transaction would be free from contra charges. Besides Mayban Securities, TA Securities Bhd and Botly Securities Sdn Bhd had also introduced a T+6 settlement facility.

Extending contra period will not add substantial risk to the market. Whether it is T+7 or T+10, the risk is mitigated as all brokers will have their clients come up with some form of collateral/deposit. Unlike the days back in early/mid 90s when you can actually buy RM100,000 worth of stocks from each of your 3 remise…

KUL-SIN - Why Are We (Still) Subsidising The Two Airlines???

Malaysia announced yesterday that it will not allow more Kuala Lumpur-Singapore shuttle flights ahead of the Asean "open skies" policy which will come into effect in 2008. As reported in The New Straits Times (6/12/05). Malaysia is not in favour because the benefits accruing to MAS from liberalising the route will be limited, according to the authorities.

"SIA and possibly SilkAir will be able to fly to Kuala Lumpur and several other destinations in Malaysia when all present restrictions on passenger flights between Asean capital cities are lifted by 2008.

"But for MAS, Singapore will remain just one destination. The benefits derived from liberalisation will not be the same.

"Under the circumstances, Malaysia has no choice but to stick to the present schedule of the KL-Singapore shuttle flight," said a transport ministry official here.

MAS operates 14 flights a day, and SIA, which operates 12 flights, will sustain the virtual joint monopoly to account for 182…
PMB & MAS Need To Give Up The Domestic Routes, Among Other Things...

Up until the Widespread Asset Unbundling (WAU) exercise in November 2002, Malaysia Airlines had been booking massive losses from its domestic air services division. At one point, losses amounted to RM360m a year. Under the WAU, the ownership of the domestic operations was transferred to Penerbangan Malaysia Berhad (PMB), with Malaysia Airlines retained as the operator. Since the transfer of the domestic division to PMB, these losses are no longer reflected in the national carrier's accounts. By the financial year ended March 31, 2003, the losses had narrowed to RM150 million, but a huge financial burden for PMB to bear nonetheless. Although the domestic division is of little concern to shareholders these days, how much longer should PMB/the government subsidise the operations. Is the WAU a temporary measure or a special purpose vehicle?

Most of the losses to the rural air services in Sabah and Sarawak. MAS cont…

Lessons From The Current Oil Shock

I came across one of the smartest article in Newsweek (31/10/05) written by Ruchir Sharma (co-head of global emerging markets for Morgan Stanley Investment Management) on the present oil shock. Many are confounded by the lack of calamity owing to the recent surge in oil prices. Sharma cited some clever insights and I would like to add to them:

a) The present oil price bull market is due to demand-surge factors and supply growth that could not cope. This is very different from previous oil price rallies which were more likely due to supply shocks (e.g. wars, embargos, cartel behaviour). What this means is that a very strong global economy is pushing demand for oil, and the usage of oil is more for production of goods which has an end market demand. Hence oil consumption is largely for "productive means". The higher cost of oil is more easily absorbed or passed on along the production and consumption processes.

b) It used to be that higher oil prices meant that we are lining the…

Need To Quicken The PN4/PN17 Process Even More

As reported in The Star (10/11/05) a public listed company that is financially distressed and makes little effort to restructure within the new time frame set by Bursa Malaysia faces de-listing. If, in the past, Bursa has been lenient in extending time for companies to restructure, that would no longer be the case. A specific time frame, for instance eight months, will be given. If nothing is done in that time, the exchange would no longer be “generous’’ in allowing extensions.

In the past, the exchange had often been lambasted for being too slow and too lenient in its actions to penalise companies that did not conform with listing requirements, e.g. negative shareholders’ funds. Previously, companies that were financially distressed were categorised under Practice Note 4 and given a lot of time to regularise or restructure.
There were times when up to two years' grace period was granted by Bursa for companies to restructure while minority shareholders of those companies held on to …

How Not To Do A Deal - Modular & Blue-I

As reported in The Edge Daily, Modular Techcorp Holdings Bhd has obtained the approval from the majority of the shareholders to buy a major stake in telecommunications services provider, Blue-i Network Sdn Bhd for RM21.5 million cash. Some shareholders had queried Modular's board over the acquisition of the 70% stake in Blue-i. The EGM, which was held in Kuala Lumpur on Nov 2, lasted over four hours. The acquisition of Blue-i will be funded by bank borrowings of RM10 million and the balance from its internally generated funds.

Dali: Why was the deal in cash? Would it not be better to issue new shares to Blue-I vendors? Or a part cash, part shares deal?

... and why was the meeting held on the week of Deepavali/Hari Raya holidays.. isn't it more prudent to have hold the meeting during a time where the public would not be taking extended leave... or is it that the company wanted less people to attend... I believe, if the deal is solid, and the terms are fair, plus the deal is value…
Divine Intervention As A Corporate Strategy

MAS incoming managing director, Idris Jala, plans to tap into talent inhouse at MAS using the same five “ingredients” he used to turn around Shell MDS (M) Sdn Bhd. His 5-prong plan to turn MAS around include:

1) Going for the impossible
2) Anchoring everything (ranging from strategy, plan, activities, processes, structure and culture) on a profit and loss statement
3) Instituting discipline in action in a rigorous and relentless manner
4) Changing one’s leadership style depending on the team development
5) Praying for divine intervention

As he was addressing a group of academics, plus the fact that he is NOT officially managing MAS yet - I will give him a bit of leeway in his plan to turn MAS around (it is still full of generalities). I have no problem with Points 2, 3 and 4. Point 1 - Going for the impossible - sounds a bit like a someone's been to too many "self-improvement" courses (if you know what I mean)... I think I will start …

Rebuttle To 'King Of Emerging Markets' On Liquidity

The KLCI traded sideways for the past few weeks. One after another, foreign research units have downgraded Malaysian equities in preference for other bourses (e.g. Merrill Lynch, UBS and CLSA). Mark Mobius is the closest thing "emerging markets" will get that resembles Donald Trump. The traveling emerging markets' hero could easily pass as a "baddie" in a James Bond movie. Yet, what he says is followed closely by the international media... cos ... there is no one who champions the emerging markets quite like Mobius. The savvy self-promoter does very well for himself and his company (Templeton Emerging Funds Inc) - the firm probably lets him have a high profile as that would bring in the business, no doubt.

The Edge did an interview with Mobius (Oct 17, 2005 issue) and he highlighted a few interesting factors to explain why foreign funds are shying away from Malaysian stocks.

MM: " lack of liquidity ... need to grow the market... need to privatise the pension…
Buy "ME" Pleaaassseeeee ...

What is this fixation with certain Malaysians that foreign funds MUST/SHOULD buy Malaysian stocks... is it a patriotic kind of thing, somehow "they love us more" if they do,... and if they don't buy, it means "we are not worthy... enough". Get out of the pre-independence, second class citizenry, developing country mentality. Stock markets are just a structure where shares are bought and sold, whether foreign funds come in or not DOES NOT mean we are running companies with "world's best practices/standards" or we are making strong strides in the respective industry's competitive landscape. NO, it does not mean that, one way or another.

People buy stocks if they think it is going to make them money - even if we have very good companies, people might not buy because we might be overvalued already. There are tons of options for the global investors, and Malaysian market is just a little thing. Get over yourself.…
Of Road-Shows, Dream Teams, Foreign Funds & Research

ECM Libra and Merrill Lynch led 'a dream team' to make pitches to players in London on Sep 12 and New York a day later. The team was led by our Prime Minister Datuk Seri Abdullah Ahmad Badawi, atgged along by Azman Mokhtar, the head of state investment agency Khazanah Nasional; Lim Kok Thay, the head of gaming conglomerate Genting; Francis Yeoh, the owner of power and infrastructure company YTL Corporation; Ralph Marshall, the chief executive of satellite TV provider Astro All Asia Networks; Ahmad Zubir Marshid, the chief of Sime Darby; George Ratilal, the finance head of oil company Petronas; Nazir Razak, the head of investment bank CIMB; and Tony Fernandez, the chief of budget airline AirAsia.

A week after the road show, Merrill Lynch downgraded Malaysia to 'underweight' while upgrading that of South Korea. The Singapore Business Times opined: "With one voice the global investment bank Merrill Lynch sings pr…

Equity Research In Malaysia – A Review

(Please note that this letter was published in The Edge 2Q2004)

Putting aside the exchange rate control for the ringgit – the Malaysian equity market is quite open. In our Financial Masterplan to further expand and liberalise our financial markets, an important aspect has not been touched upon much, and that is equity research. If we aim to make the Malaysian bourse into one that has truly international best-practice, we need to address this issue.

Research has always been seen as a cost. No one is willing to put funds into it unless it can yield significant benefits. The universal broker concept has reduced the number of broking firms in the country significantly. How many have a viable research department? How many listed companies are actually covered? Most research units cover 20-30 of the Main Board stocks, and even then only the big ones usually. Added to that, they may cover a smattering of 10-20 stocks for various reasons. That is out of over 1,000 stocks that is listed. If we l…