Wednesday, January 17, 2007

Snippets, Snipes & Snides - 3rd Week Jan

MAS - Possibly the most expensive airline to fly. MAS fares are priced like the Patek Phillip is to watches, but in reality MAS offers a service level that is akin to Swatch. Fair enough that the new management have its work cut out for them thanks to the inefficient management of the past (with some still lingering around in the boardroom), and Jala will never get a better chance to turn this Titanic around with the current bull markets. So, I must tip my Aussie Baggy Green cap off to Jala for quickly coming out to sell shares to fund the turnaround - that was the smartest move since his appointment. Shares of Malaysian Airline System Bhd. fell sharply yesterday, a day after the company said it plans to sell 1.6 billion ringgit of shares to improve cash flow. MAS plans to sell 418 million new shares and an equal number of redeemable convertible preference shares, or RCPS, at a possible 45% discount to the ex-rights price. The share issue will be earnings dilutive but seriously, when you have severly impaired earnings, how dilutive can that be. What MAS needs is a recapitalisation, and this is vital and timely and appropriate. The stars seem to be all aligned for Jala, oil price whacked down, bullish market allows for big share sale at a good price. I am a bit bullish on MAS but I still think there are other better investments in the market place.

Resorts World/StarCruises - Stanley Ho Hung-sun is poised to buy up to a 10 percent stake in Star Cruises, which will then get the rights to build and operate a casino in Macau in exchange, probably the Galaxy consortium, where the majority shareholder have been notified that he needs to selldown his stake. Its a hedged bet for both sides. Ho's son and Packer junior are also building in Macau under the Melco/PBL banner (which lost out in Sentosa IR). It looks silly for Stanley Ho to get into Star Cruises, if Star Cruises ends up with a stake in Galaxy. It would make better sense for Star Cruises to buy a stake in Melco/PBL, and allow Stanley Ho to take a 10% stake in Star Cruises - Ho will get a backdoor entry into Sentosa IR via Star Cruises. I would not rule out a further share sale to Melco/PBL as well as Star Cruises needs to raise a lot of funds. Its a win-win situation for both sides, and they could actually collude to control gaming in Asia, and with James Packer's push into gaming, this triumvirate (Ho, Genting, Packer) could very well form a cartel in Asian gaming plus the Australasia region as well. What are the dangers, if one were to examine the business plans of the Sentosa IR and the Macau gaming licenses, all winners are highly geared, and most would be selling shares or going to IPO to raise funds. While gaming is a solid industry, the playerscannot have major hiccups in operations as any cash flow setback will be felt severely very fast. Their plans rest on the Asian gaming industry continuing to flourish, hence dangers to this sector would be any sudden major economic correction in Asia, or unmanageable-risk-events such as bird flu outbreaks.

Proton - General Motors Corp., the world's largest automaker, is ``legitimately'' interested in a stake in Proton Holdings Bhd, so the report goes. Volkswagen AG and PSA Peugeot Citroen are also in talks with the state-controlled carmaker. Proton ended a 21-year alliance with Japan's Mitsubishi Motors Corp. in March 2004 and is seeking a new partner to revive revenue, which fell to the lowest in at least seven years in the quarter ended Sept. 30. GM is expanding in China, India and other Asian emerging markets, as sales slump in its home U.S. market. Readers will remember my recommendation a few months back to buy Proton below RM5.00 as they will have to get a partner. Plus any deal will have to be priced near its NTA which is at least RM9.00 (given some discounts). The collection in Proton-CA over the past 5 weeks have been too obvious - insiders have been collecting like crazy. The current price of Proton-CA assume a done deal that Proton would be zipping to RM8.50 at least.
GM increasingly will depend on overseas markets to boost its global sales total and last year sold 55 percent of its models outside the U.S. GM's sales increase in markets such as China, where the Buick Excelle is the second-most popular car, contrasts with an 8.8 percent drop in the company's U.S. sales last year.Wagoner is under pressure to show improvement in the carmaker's finances after last year rejecting an alliance with Renault SA and Nissan Motor Co. proposed by GM's then largest individual investor, Kirk Kerkorian.

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