Friday, July 30, 2010

Two Amazing Foodie/ Wino/Literary Blogs

Let me introduce you to Paranoid Android first. He is obviously not a starving literary savant. He writes incredibly well, takes amazing photos, and likes to eat at the same places I like to eat. Since I am not they type that likes to take pictures everywhere I go, his blog is a wonderful place to visit. His pictures "taste" better than the real food I think.





http://paranoidandroid-in-kl.blogspot.com/

Loved the parallel review of the new Cilantro with Sage. Best posting so far has to be on Nathalie's Studio, try and stop yourself from going to eat there after reading the posting. Good job dude!

(photos from Paranoid Android's site)

This second blogger is based in HK, Diary of a Growing Boy, and I have been following him for more than 2 years. He is in the hedge fund business and probably very successful at it, you need to be judging from the wines he has in his collection and the places he frequents.


"I picked a bottle of 1991 Philipponnat Clos des Goisses from the wine list to start us off. This was an amazingly beautiful Champagne... Nose was very sweet, with lots of caramel, honey, a bit of citrus fruits, nutty and a little metallic. "




I hesitated to link his blog for the longest time as some may think I am promoting snootiness and over-indulgence. His knowledge of wines is so thorough, and that can only be from someone who is a passionate alcoholic disguised by his love for great wines ... if you are going to be an alcoholic ... be a rich, passionate, knowledgeable one la.



1982 Le Gay




http://chi-he-wan-le.blogspot.com/

I guess one can have over-indulgence as a trait. Food and wine, if you consume only the very best (life is too short, right) may sometimes blind you to be floating away from the reality of the real world - where 99.9% would probably never get to experience the indulgences you enjoy. There is a disturbing fine line between enjoying the best that life can offer, and calibrating your life's compass on the brutal realities and sufferings in the world. Too much can be numbing to the soul. Still, I salute and admire him.


1976 Petrus



I mean I won't pass up an opportunity to partake in a vertical sampling of Petrus from 1982-1993 in one night, if I can afford it ... but I can't be doing that month in month out without constantly checking and rechecking that a 'good conscience' is still in order.

Still, a brilliant food and wine blog in the luxury category.





Malaysian Musicians and Jacky Cheung

Taken from pop pop music site, written by Leslie Loh:


some highlights on this jacky cheung's mini concert double-cd:

1) rogerwang's "love scale" is played by sham, another great malaysian guitarist

2) jz8's lydia chew sings backing vocals

3) jacky sings "lover's tears" in jazz style, delicious!

4) jacky sings his own classic "lei heong lan" in jazz and sam hui's "fut tew cheong" (an elvis presley's cover) in swing

5) malaysian great drummer, lewis pragasam plays drums

6) many songs with big-band backup in the album, fun!

4 malaysians involved in this project, you all should be darn proud!

get it!

Thursday, July 29, 2010

Jerneh Revisited

Below are the two postings on Jerneh. Caveat emptor.

Tuesday, April 13, 2010

Jerneh

Jerneh shot up on a news article in Star Biz today, which reported that Singapore Business Times wrote that Jerneh Asia was poised to sell its 80% stake in Jerneh Insurance to a foreign player, likely to be HSBC for around RM700m.

Do the math backwards; 80% x RM700m = RM560m. Now you divide by the number of shares in Jerneh Asia which is 180.7m = RM3.09 per share cash. Mind you if the report is correct, Jerneh Asia would still have the listed vehicle.

The History: Jerneh Asia Berhad (Jerneh) was incorporated on 18 October 1995 and listed on the KLSE Main Board on 23 September 1996. The Company was founded as an investment holding company for the purpose of acquiring Jernah Insurance Corporation Sdn Bhd (JIC) as part of a scheme to list the latter on the Bursa. On 30 April 1997, JIC was converted into a public company known as Jerneh Insurance Bhd (JIB).
JIB commenced operations in 1971 as the insurance arm of KUOK Group of Companies and expanded to include clientele outside the Kuok Group. In 1999, the Jerneh group started to expand both locally and regionally as well as diversifying from general insurance. It began with the taking over of Paramount Assurance Berhad; that of Jerneh Insurance (HK) Ltd & Taishan Insurance Brokers in Hong Kong and 40% of Taishan Insurance Brokers Ltd in Hong Kong and Philippines; KRM Reinsurance Brokers Philippines and 40% of Generali Asia NV of the Netherlands.
In FY2000, it acquired the balance 60% of Taishan Philippines and KRM. Generali Asia is a joint venture with Assicurazioni Generali of Italy which has both life and general insurance in Philippines and Thailand. In March 2006 Generali Asia expanded to Indonesia with operations of PT Asuransi Jiwa Asia Mandiri Prima, a life insurance company.
Today the subsidiaries and associates operate in Malaysia, Hong Kong, Philippines and Thailand. The General Insurance division offers a range of products and services. It caters to the insurance needs of small and large-sized businesses and personal lines business. The range of general insurance products and services include property and pecuniary insurance, liability insurance, marine insurance, personal accident insurance, medical insurance, motor insurance, construction and engineering insurance, Foreign Workers' Compensation Scheme and Foreign Workers' Insurance Guarantee.
Kuok Brothers Sdn Bhd (36.98%); BHR Enterprise Sdn Bhd (15.47%) and Sable Investment Corporation (7.12%) are the main shareholders of the company as of 22 December 2009.
Jerneh has done well and looks good.



Sunday, March 28, 2010

Clear For Jerneh

It was a revealing article in The Edge where Jerneh Asia spokeswoman said "We are concentrating on the corporate exercise of the insurance business ... we are still in the midst of talking to the relevant parties on a stake sale.." How to deny but not really deny!



Robert Kuok does not "play up" his counters. Jerneh Asia was below RM1.50 as early as November last year. There were two big ramp up sessions, the first was a couple of months back when it went to RM2.40, and the recent one which we are in the midst of - which went above RM2.80.

There was a corporate announcement in December last year that Bank Negara had no objection in principle for it to commence talks with relevant parties keen to acquire its 80% stake in Jerneh Insurance Bhd. That looked pretty clear to me.

There could two options, a sale or a privatisation. Robert Kuok has been streamlining its business activities in Malaysia disposing the sugar unit to Felda for RM1.29bn. I think Robert is getting out of businesses where he cannot see the ability to be a major player regionally. Looking at where his net worth has been getting the bulk of the incremental wealth from - its, properties and palm oil.

There are plenty of interest now in Jerneh's business, in particular after Prudential scooping AIA. Read the Great Eastern (Overseas Assurance) article in the link below:

http://malaysiafinance.blogspot.com/2010/03/prudential-aia-great-eastern.html

The final question is what price. Its NTA is RM2.41. Looking at similar deals, they have been between 1.5x to 2.5x. Jerneh' insurance business is well managed and should be priced at a premium to recent deal but probably would be closer to 2.0x. This makes for a range of between RM3.61-RM4.82. Caveat emptor people, but it looks good.

http://img1.ak.crunchyroll.com/i/spire3/05112008/1/5/f/1/15f14712742060_full.jpg

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Revenue Per Employee



XOM - Exxon Mobil
CVX - Chevron
SNDK - SanDisk (storage card maker, memory chips)
QCOM - Qualcom
VMW - VMware

Revenue per employee is quite a useless measure. It means nothing in the general sense. Raking them would always yield two types of companies: oil and technology companies. It only starts to make sense when you benchmark them on a same industry basis.

Revenue per employee measure is more relevant for labour intensive industries and not capital intensive industries. Labour intensive would be a direct correlation between the output and efficiency of each additional employee to the company.

Oil is oil, it just gushes and it is capital intensive. However technology companies may be better bets as number of employees are not that important compared to patented knowledge and patent library.

Revenue per employee may be of use in looking at the same company trend over a period of time, in particular on a quarterly basis over 5 years. It helps to get a feel, especially when the company has a large employee base (e.g. over 10,000).

Careful use of the Sales per Employee metric can reveal a great deal about the management of a company that you might not learn from other financial measures. How much of a premium are customers willing to pay for a company’s products, how well does the company manage personnel expenses, and perhaps most important of all, how good is management’s recruiting and hiring practices?

sales-eemp


Most of the companies on the list would be familiar to most readers. A couple of companies that may be under the radar are SanDisk and VMware:

SanDisk Corporation designs, develops, manufactures, and markets NAND-based flash storage card products that are used in various consumer electronics products. Flash storage technology allows digital information to be stored in a durable, compact format that retains the data even after the power has been switched off. It offers removable cards, embedded products, universal serial bus flash drives, and flash-based digital media players, as well as wafers and components. The company’s removable card products are used in various consumer electronics devices, such as mobile phones, digital cameras, gaming devices, and laptop computers; and embedded flash products are used in mobile phones, navigation devices, gaming systems, imaging devices, and computing platforms.

As a major player in memory chips, SanDisk is widely expected to benefit from rising demand for mobile-computing devices, such as the iPad. Indeed, SanDisk shares have soared more than 40% since the beginning of the year.



VMware, Inc. provides virtualization infrastructure software solutions and related support and services primarily in the United States. The company’s virtualization software solutions support a range of operating system and application environments, as well as networking and storage infrastructures. It provides VMware vSphere, a data center platform, which helps companies along the path of cloud computing by providing compatible IT infrastructures.

http://img1.ak.crunchyroll.com/i/spire3/05312008/4/d/5/2/4d52863660cee0_full.jpg

The company offers solutions that enable organizations to aggregate multiple servers, storage infrastructure, and networks together into shared pools of capacity. It provides products that address various infrastructure needs, such as planned and unplanned downtime management, system recoverability, backup and recovery, resource provisioning and management, capacity and performance management, and security. VMware, Inc. provides various desktop products and technologies comprising View Manager that provides session management and security services; View Composer, which offers desktop image provisioning, management, and storage reduction; and VMware ThinApp that enables quick application delivery.

The company also offers client-hosted desktop virtualization products, including Workstation that enables to create multiple secure virtual sandboxes on a single computer; and Fusion that enables Windows and Windows applications on an Intel processor-powered Apple OS X Macintosh computer. In addition, it provides various support services; consulting services for implementation of virtualization solutions; and education services that provide hands-on labs, case study examples, and course materials.

Monday, July 26, 2010

Should One Buy Unisem Here

The issue and exercise price for Unisem’s renounceable rights issue of warrants have been fixed at RM0.10 and RM2.18 respectively. The rights will start trading on 2 Aug 2010. As for the bonus issue, the ex-date has been fixed on 28 July 2010.

http://www.bharatwaves.com/portal/uploads/original_Mehreen-Syed_47afebc9ae3c3.jpg

Proposed bonus issue, rights issue of warrants and ESOS. Unisem had proposed a 3-for-10 bonus issue, 1-for-4 rights issue of 5-year maturity warrants and ESOS, not exceeding 10% of its issued and paid-up share capital.

Effects of the proposals
Existing issued and paid-up share capital 518.6m
To be issued pursuant to the bonus issue (a) 155.6m
Enlarged share capital pursuant to the bonus issue 674.2m
To be issued pursuant to the full exercise of warrants (b) 168.5m
Enlarged share capital after (a) and (b) = 842.7m
To be issued pursuant to the full exercise of ESOS (c) 84.3m
Enlarged share capital after (a) , (b) and (c) = 926.9m

Warrant slightly in-the-money. The exercise price of the warrants is fixed at a 9.5% discount to Unisem’s ex-bonus price of RM2.40. This represents an intrinsic value of RM0.23. One can add 10% premium as a base to the initial market trading price = RM0.23 + RM0.24 = RM0.47

Raising some RM384.2m from warrant exercise. Unisem will be raising RM16.9m cash from the rights issue and should all the 168.5m warrants be exercised in the future, Unisem would be able to raise as much as RM384.2m. The exercise aims to match Unisem’s future capex needs, especially for its factory expansion in China, without immediately diluting the company’s earnings. This would help to keep the company’s net gearing at an acceptable level vis-à-vis its high capex business. As at 31 March 2010, Unisem had RM317.7m in net debt, which is equivalent to a net gearing of 33%. The gearing is manageable considering its 13.3x interest coverage ratio.

Mehreen Syed by laddoojana.

Unisem’s P/NTA near historical peak. In terms of valuation, Unisem’s share price - which hit a high of RM3.50 two months ago – is nearing its historical 9-year average high P/NTA of 2.2x, which raises concern whether such valuations could be sustained.

Let's say you buy 8,000 Unisem shares at RM3.10 = RM24,800
You will get a 3 for 10 bonus = 10,400 shares
1 for 4 warrants @ 10 sen = 2,600
Pay another RM260
Total investment = RM25,060

Assume on an ex-basis, market price goes to RM2.50, which mans the warrants should be RM0.57.

Net:
10,400 x RM2.50 = RM26,000
2,600 x RM0.57 = RM1,482
Total RM27,482
Net gain = RM2,422 (+9.6%)
After transaction costs the net gains should be around 7%

If the shares goes to RM2.60 after ex, the warrants should trade at RM0.68
10,400 x RM2.60 = RM27,040
2,600 x RM0.68 = RM1,768
Total RM28,808
Net gain = RM3,748 (+15%)
After transaction costs the net gains should be around 13%

What is interesting is that Unisem is scheduled to announce its 2Q results on 30 July 2010. That is just after the exercise going ex on 28 July 2010.

Major shareholders (%)
John Chia (32.0)
Tabung Haji (5.4)

The share price should move up after ex, the question is how much upside. If you had been buying below RM2.50, then I think the first week or two after ex should be a good time to wind down your massive gains.

http://malaysiafinance.blogspot.com/2009/12/why-i-like-unisem.html

http://www.janubaba.com/lollywood/models/females/MehreenSyed/Janubaba_44835_Mehreen11_WBR3.jpg

If you are buying for the next 30% upside, its still there I think but the risk is a bit higher. While the momentum on the sector is on your side. The valuations seem to be indicating towards a last leg of an upcycle. Not that its going to correct massively when that happens, but that the signal of the end of a cycle will prompt many to start unloading chips related stocks.

Sector Momentum:

Earnings:
Texas Instruments reported Q2 profits of $.62 vs. $.62 consensus and $.20 in Q2 last year. Revenue: $3.50 Billion vs. $3.52 Billion consensus, missing revenue expectations.

Rich Templeton, TXN chairman, president and chief executive officer stated, “We delivered our highest-ever quarterly operating profit,” also responding to the top-line weaker number, “we expect to grow revenue again in the third quarter.”

Was Intel’s “best quarter ever” lost on the investing public? After all, Advanced Micro Devices confirmed Intel’s belief in resurging tech demand, as it too obliterated earnings and revenue estimates. Intel, Advanced Micro… even Novellus… provided exceptional future guidance.

Option traders were bullish on semiconductors as earnings season began, and they haven't been disappointed. All four key chip-related names that have released earnings beat estimates and sounded a bullish tone on the market for their products. Each one rallied on the reports.

http://www.janubaba.com/lollywood/models/females/MehreenSyed/Janubaba_44834_Mehreen10_2MOW.jpg

Advanced Micro Devices, which makes computer processors, kept the winning streak alive yesterday afternoon when it surpassed earnings forecasts by nearly 100 percent on a revenue beat of $100 million. Like rival Intel, which demolished consensus two days earlier, AMD also had enough confidence in future demand to provide aggressive guidance.

On one hand, the companies are benefiting from the same trend of falling costs that have occurred across most businesses. But the important driver that distinguishes chipmakers from other manufacturers is that we appear to be in the midst of secular boom for their products that could make the 1990s tech revolution look like child's play.

One reason is the huge surge in wireless devices, which were still in their infancy 10-15 years ago. The second reason is globalization. In May 1999, for instance, global chip sales totaled $11.3 billion, of which $6.1 billion occurred in the Americas and Europe. Fast-forward 11 years to May 2010, and global sales had more than doubled to a record $24.7 billion, but the Americas and Europe had only inched higher to a mere $7.4 billion, according to the Semiconductor Industry Association.

Corporate spending is another driver because companies are buying both desktop computers and migrating their applications from in-house servers to cloud-computing services run by companies such as NetApp and EMC, and powered with software from companies such as VMware.

INTC's data-center segment, for instance, recorded a staggering 42 percent revenue gain versus last year. Its PC-related business grew a more modest 31 percent.

The market does a great job of digesting all of this information, and it clearly sensed the positive developments in semiconductors before the numbers were announced. Over the 20-session period ended last Friday, call volume in the sector was 78 percent greater than put volume. And, the calls were heavily bought rather than sold, which indicates a strongly bullish sentiment.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. The author may have bought shares in the company already. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.


Sunday, July 25, 2010

The New Catalyst - Banks Stress Test

IMF welcomed the publication of European bank stress tests on Friday, saying it promotes transparency and boosts investor confidence in addition to helping beef up the financial system.

http://s676.photobucket.com/albums/vv129/sgdaily7/shinoike-06.jpg

Seven of the 91 European banks examined for their strength to withstand a crisis failed, most of them in Spain. Overall, the European banks were judged to be financially sound. The key is the fact that only 7 failed, and secondly they are just Spanish banks mainly, plus a couple in Germany and Greece.

Governments are already working with the seven weak banks, five in Spain and one each in Germany and Greece, to help them shore up their finances, said the Committee of European Banking Supervisors, which carried out the stress tests. Failing the capital strength tests were German state-owned lender Hypo Real Estate, Greece's ATEBank and five regional savings banks in Spain. Germany's case is a state owned, so just rectifying one state owned bank is a non issue. Greece with just one bank is a delight, considering the mauling the economy took over the past 12 months.

'The publication of the results and the actions that have been announced to address bank capital deficiencies promise to significantly strengthen the European financial system,' Mr Strauss-Kahn said. He said these steps complemented measures already taken, including the establishment of the European Financial Stability Facility and improvements in European Union economic governance and financial supervisory framework.

US Treasury Secretary Timothy Geithner also welcomed the release of the bank test results, saying the EU 'has made a significant effort to increase disclosure on the conditions of individual European financial institutions and enhance market stability.'





Goldman Sachs had earlier expected 10 to fail. A figure higher than 10 would have been a negative catalyst. The Goldman Sachs poll of 376 respondents, including hedge funds and long-only investors, showed European banks were on average expected to raise 37.6 billion euros ($48.4 billion) in extra capital following the tests, Goldman said in a note dated July 22.

Banks domiciled in Spain, Germany and Greece were expected to raise the most fresh capital, and the source of capital was expected to be split between the public and private sector, Goldman said.


http://s676.photobucket.com/albums/vv129/sgdaily7/shinoike-11.jpg

As with any kind of stress test, there will be critics that they might be too lenient. While the modest findings cast doubt on the credibility of the bank tests -- released on Friday in a bid to restore investor confidence -- with the European economy apparently improving fast, some analysts said that may not matter.

Five of Spain's smaller regional lenders, known as cajas, failed the test and their recapitalisation will almost complete a state-funded drive to consolidate the country's network of its unlisted savings banks. They need 1.8 billion euros, the Bank of Spain said. The fact that Spain has not triggered massive downgrades like Greece or Hungary, they should be able to raise the capital to avert the problems.

Banks in Germany and Greece were also seen as weak spots and in need of restructuring, but state-owned Hypo Real Estate was the only German lender to flunk and state-controlled ATEbank was the only Greek bank to fail.

The key is that no big banks failed the health check. The Committee of European Bank Supervisors (CEBS), a previously little known group with 25 staff at a small London office that coordinated the process, said its test was more severe than the U.S. process.

Europe tested how 91 banks would cope with another recession and losses on government debt after the Greek crisis hit markets and raised fears the euro zone could unravel.

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It aimed to repeat a health check on U.S. banks last year that helped restore investor confidence and underpinned a recovery by bank shares. With latest data showing signs of a strengthening recovery in Europe, banks could find themselves in a healthier position than expected, perhaps explaining the muted market reaction.

The euro fell against the dollar as some investors cast doubt on whether stress tests were tough enough but German government bond futures fell on relief that they threw up no nasty surprises. European bank shares ended up on the week, before the results were announced, and the cost of insuring the debt of most European banks fell afterwards.

Any bank whose Tier 1 capital ratio falls below 6 percent by the end of 2011 failed the test, and would be expected to raise funds to make up the capital shortfall. Of most concern to investors was that government bond losses were only applied to trading books, and not hold to maturity bonds, as the test did not consider there was a risk of any sovereign default.

Banks' holdings of government bonds were subjected to a 23.1 percent loss on their Greek debt, a 12.3 percent loss on Spanish bonds and a 4.7 percent loss on German debt, all based on 5-year bonds and their value at the end of 2009.

The hunt for weak spots in European banking has focused on Spain's regional savings banks, as well as regional German lenders, known as landesbanks. Spain and Germany have set up funds to help weak banks recapitalise and Spain wants more cajas to merge. The Spanish banks to flunk were Banca Civica, Diada, Espiga, Unnim and Cajasur. The worst case scenario included a 28 percent fall in Spanish house prices during 2010-11.

Banks that came close to failing with a Tier 1 ratio of less than 7 percent under the most stressed scenario included Germany's Deutsche Postbank, Greece's Piraeus, Allied Irish Banks, Italy's UBI Banca and Spain's Bankinter.

http://s676.photobucket.com/albums/vv129/sgdaily7/shinoike-22.jpg

Last year's U.S. bank test helped draw a line under worries about the sector there and Europe's attempt to match it has faced splits in the 27-nation EU about how to model the test and how much to divulge. European banks have also already raised about 300 billion euros since the start of the crisis, whereas the U.S. tests kick-started the fundraising.

Saturday, July 24, 2010

A Wino's Diary




I am going to start to keep track of what I have been drinking. As one age, one tends to forget what one has drunk beforehand. I am no wine connoisseur, I only know I like it or not, don't ask me about the growth varietals, good years, etc... the subject matter is just way too wide.

Anyway, I had a mild drinking session with a couple of friends on Friday. Thought I should keep some notes.

Château Dutruch Grand Poujeaux 1996

This was the first, not knowing which of the 3 wines to taste first, we just went with the flow. It drank very well, not at all like an aged wine. The fruits were balanced. A bit salty but acceptable. (here come the snooty part) with notes of flowers and berries. Doubt the wine will get better with any more aging. Not bad 86/100.


Penfolds Bin 129 Coonawarra Shiraz 2002

One of only two Penfolds reds, Clare Estate being the other, to be matured solely in French oak - all other Penfolds reds make use of some American oak in the maturation process. Splendid wine. Can drink now and should be even better in a few years time. Tastes of black cherry and plum fruits on the palate.Like most great Aussie Shiraz, its a bit loud, voluptuous mouthfeel, oak, plum, fruit, spices, earthy. Very decent 91/100.


Campbells Bobbie Burns Shiraz Rutherglen 1995

This probably should have been drunk within its first 10 years. Now its on its last legs. Its still reasonable but the taste is mostly secondary fruit flavours (mocha, cedar, etc) all in the mix and the palate just holding on for dear life. Moderate but disappointing after being cellared so long 70/100.

Thursday, July 22, 2010

Petronas To Put Bursa Back On The Radar

Petronas is Malaysia's premier state-owned company, but as a publicly owned company it could be worth more than $200 billion and would dominate the country's stockmarket.



According to Deutsche Bank, Petronas could potentially make up 40% of Malaysia's weighting in the MSCI Asia ex-Japan index if it was to list in its entirety (MSCI is a free float-adjusted market capitalisation index that is designed to measure the equity market performance of countries in the region).

Based on a price-to-earnings ratio of 15 times, Petronas could be worth up to $207 billion, according to Investment and Pensions Europe. This would make Malaysia's largest state-owned company close to the same size as the country's total equity market capitalisation today, almost doubling the total market size to $464 billion from $257 billion.

Publicly listing more of Petronas's operations, say analysts and market participants, is critical to stimulating greater growth in the markets. According to Deutsche, if the government were to release a proposed 25% of its equity share, it could potentially bring Malaysia's weighting back on par with Singapore, which currently accounts for 6.6% of the MSCI Asia ex-Japan index. It would also put the country ahead of its biggest regional competitors, such as Indonesia, Thailand and the Philippines. Malaysia currently holds a weighting of 3.8%, but the addition of more Petronas shares to the market could raise this to 6.4%.

To put this into another context, if the government chose to only release a further 20% of its equity interest in the company's downstream operations, such as its LNG [liquid natural gas] and refinery businesses, it could result in an increase to $191 billion from $79 billion of Malaysia's MSCI weighting.



Petronas's total listed assets on Bursa Malaysia currently have a total market capitalisation of $5.62 billion. Within the holdings group, the companies that have been listed are MISC, Petronas Dagangan, Petronas Gas and KLCC Property Holdings.

In April this year, MISC, which is a key subsidiary and specialist in global marine transportation and logistics services, hired J.P. Morgan, Maybank and Credit Suisse for the listing of its marine engineering unit Malaysia Marine and Heavy Engineering (MMHE). Its IPO is now scheduled to take place in September. This follows a $1.5 billion rights issue for MISC in February, arranged by RHB Capital. A market capitalisation of about M$7 billion ($2.2 billion) is expected for MMHE, assuming a net profit of M$350 million and the company being listed at a price-to-earnings ratio of 21 times, according to analysts.

The announcement to list MMHE came as a surprise to some analysts. OSK Research, for example, had expected Petronas to list parts of its petrochemicals business instead, specifically Petronas Carigali and Malaysia LNG. OSK Research had calculated that the market capitalisation of Petronas's petrochemicals companies would be about M$50 billion ($15.1 billion). This is based on a 2009 net profit of M$5 billion for these two companies and the assumption that the shares would be listed at a price-to-earnings ratio of 10 times. Within the petrochemicals sector, a M$50 billion market cap dwarfs the local peers.

While the listing of MMHE is good news, from the analysts' perspective there is much more value for Petronas and the market if it was to list its more profitable downstream operations, such as the petrochemicals, LNG and refinery businesses. A partial listing of this nature would push Malaysia's Asia ex-Japan MSCI market capitalisation to $123 billion and the country's weighting to 5.95%.

Investors and analysts are pushing for such a listing because a move to further publicly list parts of its operations could result in other Malaysia-based companies following suit.

Staying competitive

According to Dealogic figures, the Malaysian primary equity market reached its zenith in 2002 when it raised $1.65 billion. By 2008, this volume had dropped drastically to $174 million. If you look at other signposts, such as foreign direct investment (FDI), the nation is falling behind its peers. AmResearch estimates that 35.4% of FDI flows into Southeast Asia went to Malaysia in 1980, while less than 1% went to Vietnam. By 2008, both countries attracted about $8 billion in FDI each.



However, with the roll-out of the so-called New Economic Model and a commitment by Malaysian Prime Minister Najib Tun Razak to lift the country from a middle-income to a high-income economy by 2020, the markets appear to be on the mend.

Many of the government incentives are aimed at attracting FDI. Previously, if a company was to list on the Bursa Malaysia, only a maximum of 40% could be held by foreign investors. Now, in certain sectors, foreigners can own as much as 70%. Plus, non-Malaysian investors can own 100% of a commercial property asset, if it is bought from a non-Bumiputra controlled entity.

Simply, reforms like this not only expand the investor pool but also potentially attract a more seasoned investor-base into the country.

This article was first published in the June 2010 issue of FinanceAsia magazine.

Wednesday, July 21, 2010

Road Ahead For EAH

So, EAH did very well on debut, at just below 70 sen, where can it go? One of the keys to a stock movement is to track its catalysts. One should not really look at it as an ACE stock as it is a profitable small company with traction.



Their 1Q2010 results was a good indication. Annualising its 1Q to the full year would be a 55% jump in net profits compared to 2009. Its end of July already and they should be close to announcing their 2Q2010 figures. Another strong quarter would put the company on another upward re-rating.

The company has submitted 10 tenders and some of them involve government linked firms - this could very well be another catalyst in the works. When I hinted on their banking solutions team, their pedigree makes them a notch above the crowd, and it would not surprise me if they managed to secure some major projects soon.

The sustained buying activity indicates that there are some well heeled investors in the know, who believe this is quite a different ACE company. Its a company that is going places.

If you ask me, their active RFID is miles better than the existing Touch n Go and Smart Tag readers. In terms of ease of deployment and effective cost, if Touch n Go is really keen to move to a gantry system, EA MSC's RFID solutions are right up their alley. If you are using the Smart Tag reader, you know it has a limited battery life and the reader can only capture signals provided the cars travel at a certain speed, and that there is a certain gap between the cars. EA MSC's readers are accurate and their signal capture is more efficient - you can ask them for a demo. That's why there were so many international companies wanting to represent their products at the recent EXPO on security / access at KLCC.



I have stated that the fair valuation is between 45 sen to 65 sen, obviously momentum trading and maybe some astute share accumulation is going on, and that may very well push the trading range to 70-85 sen level. Some shares may be able to sustain a premium valuation owing to the inherent product strength and upcoming catalysts.

Its unfortunate that its a small company but good fundamentals are good fundamentals. I expect EAH to continue to attract attention. Now it may be just savvy investors and connected big private investors, but whispers can drag funds to start looking into the stock as well. The fact that its a bumiputra majority owned company and a MOF approved preferred candidate only makes it more interesting.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. The author may have bought shares in the company already. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.


Tuesday, July 20, 2010

2V1G's Album Coming Out In August

The first album by 2V1G was spectacular, selling well over 10,000 copies. Unfortunately Regine has left the group. I was skeptical about her replacement. So I was very relieved when I heard the first few recordings, Jeffrey Lim was superb. You can hear his voice in the following two videos. Winnie Ho is just as spectacular, and she has slimmed down nicely, you go girl.

Roger Wang is Roger Wang, brilliant but more assured this time around, maybe he has gotten the hang of Chinese melodies. The album is coming out in early August I believe. Look for Roger's composition Love Scale, which was covered by Jacky Cheung as well in his last album.
























Monday, July 19, 2010

Why I Like EAH

As promised, among the upcoming listings, the one stock I like a lot is EA Holdings. The fact that its ACE bound should not be held against the stock. I have mentioned that most IPOs have performed poorly but there have been exceptions, one just need to do a bit more legwork.

Fiona Xie as Joleen in Calefare


Every time we come across a technology services, I have to make sure that its not just another plug and play company, or a purely systems integration services company.

At a glance, EA may look like the usual technology services company. In fact it is very much product driven. EA Holdings' wholly‐owned unit EASS Sdn Bhd was granted bumiputera contractor status by the ministry of finance in 2007. This status allows EASS to bid for tenders reserved for bumiputera companies, giving it a foothold in the lucrative government‐linked companies sector. This unit basically anchors the company's bread and butter revenue stream.


The second unit of the company is Concorde MSC, a provider of IT solutions for financial services sector. Reading that would make most of us fall asleep. They are adept at developing bank wide data warehousing, automating central bank reporting, implementing Basel II data marts and risk calculators, and implementing risk management and CRM.

Fiona Xie's Latest uZap Poster

Concorde MSC has been servicing numerous banking clients already as some of the senior team members were originally from Silverlake, a highly recognised IT solutions player in Asia Pacific. The 'bankability' of this team within the financial sector should not be under estimated.

The third prong is EA MSC which is in RFID. There is RFID and there is RFID. Most of the RFID in other listed firms like CBS Tech is about 2-3 years behind the curve. I happen to know a bit about RFID and EA MSC has its own product and patent pending as well. Theirs is in active RFID while most are still toying with passive RFID.

One of its edge is in using wireless mesh networking which save a lot on implementation costing as there is no complicated communication wiring. The bulk of the revenue comes from their popular Rain Tag which is the long range active tag. The kicker is the soon to be launched RTLS or Real Time Location System, Quatis. The product was a big hit at the recent Security Expo at KLCC.

The beauty of RTLS is that the tags are aware of its own location and its location can be tracked and logged in real time. There are competing products in RTLS internationally such as Radianse, WhereNet, PanGo and AeroScout. Quatis has a real difference, thanks to its IP. This translates into a much lower cost per standard tag. Quatis cost is about one third the average cost of the same tags under the earlier mentioned international names.

The cost factor is a significant factor as the implementation cost and tag/reader costs inhibits the "return on investment" hurdle for many businesses. This advantage will put Quatis on a highly competitive platform.

The lack of standardizing various protocols used for communication between the RFID systems and the back-end systems such as the Enterprise Resource Planning (ERP) system, Warehouse Management System (WMS) system have hindered a wider acceptance of active RFID. EA MSC technology platform conforms to IEEE 802.15.4 standards and is more widely accepted to most existing equipments.

RTLS serves in operational areas for logistics and other services, as e.g. stock grounds or storehouses, and for servicing areas in clinics and industrial plants
  • to combine identity and location of any type of items or objects
  • to combine identity of items with location of lifter placing the items
  • to ensure permanent availability of proper information about temporary placement
  • to support notification of placing of items
  • to prove proper manning of operational areas
  • to prove consequent evacuation of endangered areas
  • to make marshalling staff dispensable
  • etc.


Fiona Xie in Style Magazine April 2008 issue - 2

I can see Quatis contributing significantly to EAH's bottom line as it is due to be launched in 3Q2010. Its basically an asset location tracker and has enormous potential in security-safety-asset protection businesses.

For financial year 2009, EA's net profit surged 87.2 per cent to RM3.64 million compared with RM1.94 million in 2008. EA reported its 1Q2010 results recently and registered a net profit of RM1.39 million and a revenue of RM5.43 million. Annualising that the 2010 PAT should come to RM5.56m, a 52.7% jump from 2009. That translates to a net EPS of 3.5 sen.

Looking at growth companies, the attraction is to look at their net margins and how sustainable they are. For the 1Q2010 figures, the ICT Services unit registered a net of RM86,000 on RM1.091m revenue or a net margin of 7.8%. Software and banking solutions unit posted a net of RM367,000 on RM1.501m revenue or a net margin of 24.4%. RFID and access control systems saw a net of RM942,000 on revenue of RM2.846m or a net margin of 33%.

The ICT side is bound to have smaller margins as it is in a competitive arena. The other two are more attractive and the strong margins are indicative of the edge in deliverables. I expect the company to be on an exponential growth path for at least the next 3 years, which is why I consider the company listing itself a tad too early, giving rise to significant under valuation. They can manage to sustain such strong margins owing to "in house expertise in software banking solutions" and "own patent-pending products in RFID".

Unlike a number of "growth companies", EA does not have a "burn rate" as their products and services are gaining traction already. That is, EA is going to be building equity rather than burning their proceeds - which may explain why many Mesdaq companies find themselves in financial dire straits after a couple of years of being listed.

The bare facts to me is that the company kind of went for its IPO a year too early as I am sure it could get much higher pricing for its IPO if it was listed 6-12 months later, possibly doubling its IPO price. Its over subscription for the public portion was a healthy 19.4x.

Having said that, and judging by its good 1Q2010, the company is on a strong growth track. Its on track to make PAT of RM5.56m this year with a very good chance of hitting even RM7 or RM8m if Quatis is rolled out on time.


This should bring about a fair valuation of between 45 sen to 65 sen depending on how optimistic you want to be.

Fiona Xie Lime Magazine April 2008 picture 5

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. The author may have bought shares in the company already. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Saturday, July 17, 2010

Bursa's New Transparency Move

Some will obviously say that the proposed amendments are reactionary to the more recent shenanigans in the markets. I am all for better transparency by listed firms, but we have to draw a line between credible information and over-regulation. Things can get petty and paper work can become too onerous and may even fail to achieve the objectives of better transparency.

http://i591.photobucket.com/albums/ss359/sgdaily6/erioto-43.jpg

Changes in directors, CEOs and CFOs - This is OK and acceptable.

Changes in external auditors and independent advisers - This is OK but may need to be extended to include an opinion from the external auditors and independent advisers as to why they were changed or asked to resign or were themselves voluntarily withdrawing from the positions.

Pledging of shares by controlling shareholders - Very good move, and it should include shares pledged to investment houses outside of the country.

Grounds for selection of independent directors / why a director is independent - This is total bullshit and asinine. Waste of time.

Improvements in clarity and analysis of quarterly reports - Good move but make it standardised so companies do not have to guess.

Annual reports to have 5 year financial highlights - Many listed firms already doing this. Good move nonetheless.

Deviation in utilisation of proceeds - Yes but should have a materiality clause as well.

Announcement or termination of corporate proposals and impact - Yes.

Immediacy in results of AGM/EGM - Yes for sure because business reporters can no longer cover the many AGMs or EGMs effectively, there are too many of them. This is important.

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Star Biz KUALA LUMPUR: Proposed amendments to Bursa Malaysia’s listing requirements and the introduction of the Corporate Disclosure Guide (CD Guide) are set to prod listed companies into revealing more details about key developments, including changes of directors, chief executive officers (CEOs), chief financial officers (CFOs), external auditors and independent advisers.

The revamp also covers disclosure rules for quarterly and annual reports, pledging of shares by controlling shareholders, termination of corporate proposals and voting results of shareholder meetings (see table). Some of these proposed improvements are seen as possible remedies to recent cases of poor corporate governance and stinginess with information.

In a media release yesterday, Bursa Malaysia said the CD Guide and the suggested changes to the listing requirements were aimed at promoting further transparency, quality and efficiency of the Malaysian capital market.

Said chief regulatory officer Selvarany Rasiah: “The proposed amendments are part of the exchange’s ongoing efforts to enhance the regulatory framework for listed issuers to ensure the competitiveness and attractiveness of Bursa Malaysia as a listing and investment destination.

“Maintenance of market integrity remains our key focus in formulating the proposed amendments, and in so doing, we strive to strike a careful balance between enhancing market regulation and promoting business efficacy.”

To come up with the proposals, the exchange took into account industry feedback, findings and observations from supervision and monitoring activities, stakeholder engagement, and international standards.

In a move to improve the quality of the stewardship of listed companies, the stock exchange plans to make it mandatory for a listed company to give its grounds for appointing a director or for nominating him for election.

“This includes the reasons why the listed issuer is of the view that the director has the character, experience, integrity, competence and time to effectively discharge his role as a director of the listed issuer.

In the case of an appointment of an independent director, we propose the listed issuer also sets out the reasons why the listed issuer considers the independent director as being ‘independent’,” says Bursa Malaysia in a consultation paper issued yesterday, which sets out the proposed amendments to the listing requirements.

A second consultation paper, also released yesterday, invites public feedback on the draft CG Guide. Bursa Malaysia said this consultation paper was meant to clarify the disclosure requirements set out in the listing requirement and to illustrate how the disclosure requirements should be applied. It also set out best practices for establishing policies and procedures to enable listed issuers to fulfil their disclosure obligations.

“The proposed CD Guide seeks to provide greater clarity and guidance to help listed issuers in better understanding and complying with their disclosure obligations under the listing requirements,” said Selvarany in the media release.

In addition, if the new disclosure rules are implemented, the companies will have to provide extra information in their quarterly and annual reports so as to enable investors to better understand the companies’ financial performance.

One proposal is to replace the performance reviews in the notes to quarterly reports with detailed analyses that set out material factors affecting the companies’ earnings and revenue. The idea is to eliminate cookie-cutter reviews that state the obvious. Bursa Malaysia has also proposed that the listing requirements prescribe certain items that ought to be incorporated in the income and cash flow statements in the quarterly reports.

Another interesting proposal is the requirement that the listed companies disclose the reasons for the resignation or change of directors, CEOs, CFOs, external auditors and independent advisers. This is partly to enable the detection of red flags, if any.

“Such disclosure would be particularly pertinent in instances where it arises from irregularities taking place in the listed issuer,” said Bursa Malaysia in the consultation paper on the proposed amendments to its listing requirements.

The deadline for submitting written comments on the two consultation papers, which can be downloaded from Bursa Malaysia’s website, is Aug 19.

“We expect diverse views on the consultation papers,” Selvarany told StarBiz. “We keep a very open mind. We want all constructive feedback. There may be some issues that we have not considered and we are prepared to take on board the relevant comments.”

CIMB's Callable Bull-Bear Certs - Nice One

CIMB yesterday launched the first callable bull-bear certificates (CBBCs) on Malaysia's national stock exchange. The initial four CBBCs start trading today and will allow investors to bet on four popular local stocks: AirAsia, Gamuda, Genting and Berjaya Corporation.

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"Malaysia is the first country in Southeast Asia to introduce CBBCs," said Charon Wardini Mokhzani, deputy chief executive of corporate and investment banking at CIMB, in a speech. "Our launch of CBBCs today is yet another example of innovation in exchange-traded products, designed to give investors more choice. It is not a substitute but a complement to all the other exchange-traded products we have."

Hong Kong pioneered the trading of CBBCs in Asia back in 2006. At the time, few participants expected the contracts to be popular in a market already dominated by warrants, but the timing turned out to be perfect to catch the rise in volatility during the height of the financial crisis - which made it expensive to buy warrants.

CBBCs, which are a kind of barrier option, are also simpler than warrants. Investors pay a small premium to buy a fixed-term contract that represents a bet on the direction of the underlying stock or index - either up or down. Depending on how far the strike is from the spot level, the contract can offer leverage of six times or more, but the investor is only on the hook for his initial investment. The contracts are callable, which is to say that they can terminate early if the underlying moves too far in the wrong direction.

http://popseoul.files.wordpress.com/2009/01/sondambi-marco-090126-20-288-29.jpg

Hong Kong's move into CBBCs has proven a profitable one. Most exchanges around the world are struggling to make money with lower trading volumes, lower margins and reduced profits as a result of the global financial crisis and the introduction of alternative trading systems - and at a time when new regulations and risk management issues are likely to impose additional challenges.

At Bursa Malaysia operating revenues have dropped by roughly a third since the peak of 2007, but in Hong Kong the drop-off from 2007 has been somewhat mitigated by the addition of new products such as CBBCs, which together with warrants now account for about a quarter of the trading on the exchange.

Bursa Malaysia will hope to replicate some of that success, though it remains to be seen if investors will embrace CBBCs in a market that is becoming less volatile and more friendly towards warrant investors.

Friday, July 16, 2010

Good Stocks On The Move

I have been terribly quiet on stocks specifics for the past couple of months. As mentioned the 2Q is always more down trending than otherwise, pays to stay out. The real reason being many will be itching to close their books early for the half year, especially if they had a great 1Q already to lock in gains and go away.

If you have read my strategy for 2H 2010, I am quite positive on equity. I can see funds starting to reload their guns, taking new positions. for the 2H.

Looking at the Malaysian market, good stocks are being bought up liberally over the past two weeks already. One can sense the pick up in volume and price breakout movements. Note the charts for the following good stocks:

London Biscuit



Oriental Food Industries




QL Resources




Evergreen




Freight Management



All the stocks above are good stocks which I have written on time and again. When activity picks up on stocks with dubious fundamentals, its highly speculative. When activity picks up on good stocks, its an indication of genuine long term funds inflow which should point towards a sustained run soon.

Another very cheap stock which I have been ignoring, yes its one of the China footwear maker, but its looking highly interesting:

Xinquan






NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

Thursday, July 15, 2010

Must Catch This - Junji Delfino Live!!!

Synopsis

It's been a long time coming but the imcomparable Junji Delfino - a celebrated singer, actress, writer and comedienne - will finally take the stage in her first on-woman show, rightly titled "Here I Am...Live". It's going to be a high voltage mix of music, hilarious commentary and fantastic autobiography that celebrates her 30th career anniversary and 50th birthday. Yes, she is turning 50 and she is going to raise the roof and tell the truth. Combining some of the greatest hits in jazz and theatre with her own brand-new material, she'll will be singing songs like "Papa Can You Hear Me", "Blame It On My Youth", "How Do You Keep The Music Playing", "Something Stupid" and the first single from her debut album "Here I Am". With a vocal brilliance best described as half laser beam, half lava flow, her show promises to swing with the vibrancy that has become synonymous with her name.

Reowned composers/pianists David Gomes and Michael Veerapan will partner as musical director for "Here I Am...Live". David and Michael's connection with Junji goes back to her first performances in KL at the famous All That Jazz club in the early 1990s. "Here I Am...Live" will also feature special guests appearances by the legendary Salamiah Hassan, and actors/comedians Jo Kukathas, Edwin Sumun and Patrick Teoh from Instant Cafe Theatre Company.

"Here I Am...Live" plays at the PJ Live Arts theatre in Jaya One (Jalan University, Petaling Jaya) from July 15-17. Call 03 7960 0439 (PJ Live Arts box-office) for tickets and bookings.

Messi Distracted During World Cup




Obviously the first one was doctored, but the Messi's photos had to be real ... sigh... talk about close marking.