Friday, March 24, 2006

Mis-Steps By Khazanah, Bursa & GLCs
Things That Make Me Mad

In less than 24 hours after my glowing write up on the reintroduction of short selling, I have been inundated with disappointing news of what transpired over the last 2 days involving the headlined companies and institutions. Sigh...

Short Selling - Apparently after PM Badawi made the announcement, almost every single CEO of the local funds got a phone call telling them that short selling is not "permitted" for local institutions. So, short selling is only for foreign institutions, where is the logic?? Why handicap the local funds? Of course, the actual rules and regulations have yet to be announced, please.... be logical and have a bit of brains and allow short selling for ALL, including members of the public. You cannot have one set of rules for some, and another for the other group - this is not NEP, this is supposed to be a world class financial capitalistic market place!!!

KPIs - Apparently people in the Bursa were running around like a chicken without a head as GLCs suddenly announced their KPIs. Are KPIs material information? How should the Bursa view them? I mean, the Bursa is organising the bloody conference with CIMB, surely they would be informed that KPIs would be presented and talked about during the conference. GLCs were instructed to announce the KPIs prior to the conference so that they would not breach any rules with regards to talking about material market moving information. The Bursa should have been smarter by knowing what KPIs are, and whether they represent material information into the market in the first place - then they would not have to had so many emergency meetings.

Execution Risk - This is what I call a lack of execution ability. Haphazard management of things and events, failure to be detail oriented, management by crisis (no crisis, no management). Surely, parties involved in the planning of the conference and the subject material should have covered the bases better than what happened in the last 48 hours. Buck up people, work doesn't mean just showing up.

Some Horrible KPIs - Some of the KPIs are decent but some are just meaningless. Let me criticise the bad ones first: Golden Hope - ROE of between 8%-12%, why the big gap, its a 50% gap, that is not a KPI, that is a very forgiving rule of thumb (there is nothing KEY or PERFORMING about that), its like telling your son to get between 50-75 marks out of 100!!!; then there is MRCB - obviously an underperformer for the past 3 years, being set revenue and PBT growth of 50% - the figure is so high it renders it meaningless, already by setting such a high rate, it tells me you are talking of a very low base to start with, so the KPI would be meaningless, MRCB could very well make 50% or 100% or even 300%, it wouldn't surprise anyone coming from such a low meaningless base.

Going Private - Then Azman Mokhtar had the nerve to go and say that some GLCs may be taken private, and that share sales of GLCs by Khazanah is unlikely. First, the share sales, please refer to my previous blogs on share sales. Secondly, taking companies private. When do we take companies private??? When the real instrinsic value is way below market valuation, or in simpler terms when market cap is way below NTA, or when earnings multiples is grossly low compared to future earnings growth, or a combination of those factors.


No, there are plenty of GLCs underperforming, overvalued, very fat, inefficient - thats why the KPIs were introduced, am I right or ... am I right!!? Then nothing is undervalued, then why do you go and talk about taking them private?? In which case, taking any of the GLC private would be admitting that they are beyond help, that they cannot muster any more investors' interest, that they cannot borrow from banks anymore .... so, please.... sigh.... I am so sad and angry... I don't know what else to say.

p/s Well after the ranting, there is ONE stock under Khazanah that should be taken private, its Faber (please read blog on Faber as one of my top buys of 2006). Even though it may save a lot of embarressment to take MAS or Proton private, the bill could be too much at a time when Khazanah wants to invest abroad. Of course Khazanah could take a couple of the construction stocks private, but why, they are low brow construction stocks, nothing much to restructure, they are cheap because its a cyclical industry they are it. As for CIMA, sell the company already, there are bids on the table. So, its unlikely to be UEM World or Opus. ..... So, is Azman saying he is going to take Faber private? Looks like the best possiblity.

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