Wednesday, December 29, 2010

2011 Prediction For Markets

As the year draws to a close, I get more and more queries as to what's in store for 2011. My view is that I think we will have a super bull market in most of Asia and other emerging markets.

What we had in 2010 is by and large still muted and did not have the requisite liquidity participation by private investors. 2010 was largely dominated by funds flow and institutional rebalancing.

In Malaysia, retail participation was still low. There is no doubt that there is ample liquidity on the sidelines, although much of it is actually in properties. Those in it would have had a fantastic run over the last 4-5 years, more incredibly brushing aside the global financial crisis merrily along the way.

Having a view is easy, justifying it is harder. Even if I can justify it brilliantly, if it does not come true, its pretty pathetic to me. Hence predicting and having it come to reality is more important than justifying or arguing it well.

So, what is the basis for my views, they are not that important anyway, I could b.s. my way very well. I think its more important that the weight you attribute to a person's view is their track record and the integrity of commentary. Its been nearly 6 years, not every post was a gem, but I hope the readers will be able say to themselves "enough said, say no more".

But I am only confident of the first 6 months, I cannot tell for the second half because I believe markets will overshoot in the first half, and that could bring the markets to highly vulnerable levels then, which would make prediction useless.

Monday, December 27, 2010

Have You Been To Lan Je?

I think this restaurant needs little introduction. They have one signature dish, the steamed tilapia (fei chou yue). They do not drown the fish with much soya sauce or cooked oil. Its loaded with ginger and hot chillies. Owing to the turnover, you can bet that the produce is very fresh. You don't get the mud-after-taste which is prevalent for this kind of fish. You can have normal or spicy, trust me, take the normal, the spicy one will be way too much chilli padi all over. The over generous amount of ginger is a trademark, will make you hot but ginger is good for you anyway.

The salty prawns is a decent dish as well. As it is probably farmed prawns, the taste of the prawns lacked something but its crunchy and pretty good overall.

Or you can go to their 4 other restaurants, two in Cheras and the HQ at Rawang. The other is in Kepong I think. The other dishes worth sampling are: fansueyip, and probably the kungpo chicken (as I saw many tables ordering that).

27-28, Block C, Jalan Rawang
Gerai MPS, Batu 16

No. 10G & 12G, Jalan Kasturi 3
Plaza Kasturi
Batu 11, Jalan Balakong

Kota Damansara:
F-50G & 51G, Jalan Teknologi 3/9
Bistari “DE” Kota
Kota Damansara
PJU 5, Petaling Jaya

Now We Are On To Something ... Malaysian Football

Finally, after years and years head shaking by Malaysians whenever we talk of the national or state football teams, we now have something to sink our teeth in. Its very easy to be critical of everything when asked why Malaysian actual footballing standard is nowhere near the average Malaysian's passion for the game. First let's get some common questions/doubts/assertions out of the way:

a) the best years are behind us - that's a bullshit sentiment, it all depends on what we put in, its never too late to change or modify our ways, if we keep a negative attitude... that kind of defeatist attitude will get everybody nowhere but a dead end

b) K. Rajagopal - for the past 15 years, there is no better coach than K. Rajagopal, authorities please bear that in mind

c) racial imbalance - is there a racial imbalance in the current squad, well yes... but nobody should really complain because many Chinese do not play football after their teenage years, its worse now with the proliferation of internet and PC games, guess who will be still at the fields playing ... take the Singapore experience, they even have a pro league and Singaporean Chinese make up less than 20% of the players ... its reality. Now, the only time you see Chinese playing football in Malaysia is on weekends when the old farts play futsal.

This under-23 squad stands a good chance to make a mark as a top 5 Asian team, maybe even qualify for the next Olympics, if the cards are played right. If Japan and South Korea can be where they are now, Malaysia can certainly get there because these two teams' football standard were still lagging behind Malaysia back in the 60s and 70s.

Brief History of Malaysian Football Grandest Period

Top coaches, when we say top, we mean they were really good, 1960s coach Abdul Ghani Minhat, Dave McLaren, followed by in the 70s Jalil Che Din, M. Kuppan, Chow Kwai Lam and Karl-Heinz Weigang.

In the early 1950s until the 1960s, Malaya's best accomplishment was winning the Asian Games bronze medal in 1962 in Jakarta by defeating South Vietnam 4-1. Top players then include: Abdul Ghani Minhat ("King Football"), Arthur Koh, G. Govindaraju, Robert Choe, Edwin Dutton and Stanley Gabriel.

Following the formation of Malaysia, there were other great players including: Abdullah Namat, Shaharuddin Abdullah, Wong Fook Chuan, N. Thanabalan, Norbit and Abdullah Zulkifli Nordin. Malaysia managed to qualify for the 1972 Olympics in Munich by beating the likes of Japan, South Korea, Taiwan and the Philippines. Two years later, Malaysia once again won the bronze medal in 1974 Asian Games in Tehran after beating North Korea 2-1. Malaysia continued to be a force in Asia by qualifying for subsequent Asian Cups in 1976 and 1980.

In the mid-70s, this is where the Malaysian team was most balanced and talented. Each player is like a superstar in their own right. They include: Mokhtar Dahari, Harun Jusoh, Santokh Singh, M. Chandran, Soh Chin Aun, R. Arumugam, Shaharuddin Abdullah, Wong Choon Wah, P. Umaparan, Wong Hee Kok, Shukor Salleh, Lim Fung Kee, Wong Kou Foo, Isa Bakar, Ali Bakar, Syed Ahmad, ... If you have seen them in action, you would liken them to a very good Premier League team, seriously.

Malaysia also qualified for the 1980 Olympics in Moscow, but the government boycotted the 1980 Olympics to protest the invasion of Afghanistan. Even in the early 80s the players were still pretty fantastic, we had Reduan Abdullah, Serbegeth Singh, Hassan Sani, Chow Chee Keong, Lim Teong Kim, Zainal Abidin, Bakri Ibni ...

Wong Choon Wah (17 Feb 1970)

Shaharuddin Abdullah (12 Aug 1970)

Super Mokh deserves special mention here, in 1975, he represented the Malaysia national football team against English giants Arsenal. Malaysia won the game 2–0, with Mokhtar scoring both goals. After the game, Mokhtar was rumoured to have been offered a chance to play for the Gunners. He also famously scored a goal in a 1–1 draw against England national football team's B team in 1978, dribbling past half of the opposing team coached by Bobby Robson (almost reminiscent of Ryan Giggs' very special goal against the Gunners in that famous FA Cup semi final tie). Paul Mariner was on the score sheet for England that day.

We can all sit back and blame corruption in the local league, or the advent of subscription TV which brought fans closer to European football, as causes for the demise of Malaysian footballing standard - to be fair, there is a strong element of truth in both. It was never going to be a great way to earn a living, as a footballer in Malaysia and as our lifestyle options increased, as our country developed, we basically had a lot more things to do than play football in the fields.

When we had nothing, playing football was great and cheap and widely available ... if we had top spinning competition, badminton, sepak takraw contests then ... we would be more than capable and competitive. We just don't do much of all that now - when was the last time your kids or nephews played those games?

Sunday, December 26, 2010

The Year In Review

As usual The Edge came out with its year in review wrap edition. I will try to follow the publication's focus page by page with my take.

Corporate Malaysia's New DNA - This I think is worthy page 3 material. The ETP and the corporate moves over the last 3 months in particular have seen a strong willingness by GLCs to work with non GLCs, either in a joint venture capacity or even a merger. Naturally this directive has to come from the top. This is an important step to leverage on each side's weaknesses and strength. Its a loud acknowledgment of what is lacking and what needs to be done that is synergistic. Its about reaching a goal faster. It means stop running around in circles with same bunch of issues and problems and results.

The accelerated approval for the LRT/MRT in appointing MMC-Gamuda was a pleasant shocker. I think investors are under appreciating the flow on benefits, and this actually underpins a brilliant run for at least 1Q2011.

2010 Best Deals - This one is hard to agree as they always put the biggest deals as the best deals, maybe they "had to do it". The Parkway Holdings deal to me was a poor deal. The bad moves were created when Khazanah allowed the other side to control the board. Then its a matter of playing hard to get by one side, and having to keep upping the offer for the other side. Its a good deal for Khazanah over the longer term but the deal should have been better strategised a long time ago.

The best deal is not Tanjong but the privatisation of Astro. Its thinking 3 steps ahead on why Astro is better off being privatised. It is infinitely better to relist when regional ops are better aligned and growth path is clearer for each unit.

The most audacious deal has to be STT's invetsment into U-Mobile. Till this day I am still trying to figure the logic. Too esoteric for me to comprehend this deal.

Best IPO - The Edge put MMHE as the winner but it should be the Luckiest IPO, not the best. It was damn lucky to find a foreign party willing to accumulate a strategic block of shares in the open market, thus pushing up the post IPO performance. Sometimes you have to be lucky to be a winner though.

Worst IPO - JCY, The Edge struck the right chord by highlighting the high pricing and why the controlling shareholder was selling so much shares as part of IPO. Now we all know why.

Wednesday, December 22, 2010

A Blessed Christ-mass To All Readers

My favourite song for Christmas time has always been Grown Up Christmas List ever since I heard Amy Grant sang it years ago. She was the original singer even though you could find many artistes covering it now (Michael Buble, Kelly Clarkson and Natalie Cole, to name a few). The song was composed by David Foster and Linda Thompson Jenner. At a time when we are busy buying and receiving presents, or maybe take it as an opportunity to drink too much, we get lost in all the merriment. Its the birthday of Jesus, does anybody know what he wants for his birthday?

Too often the church and fellow Christians fail to share the message of Christmas, we get all caught up in the theology. While we trumpet the need to be "saved", the underlying message is to bring mankind together and lookout for each other. We try to hate the sin but love the sinner ... but at times I wonder "where is the love"? When we judge others' lifestyles, sexual preferences, ... how we treat our fellow human beings though their occupation may be maids, labourers or beggers ... where is the love that you say you possess??? .... when we burn buildings, trigger off bombs in the name religion ... where is the love that you say you possess??? I think God when he appears, might say to all: "That's NOT what I meant!!!"

In the end, its human frailty that needs attention. I loved Amy Grant's version but the recent one by Charice (though I regard her singing as a bit precocious at times) was very good as well.

Do you remember me
I sat upon your knee
I wrote to you
With childhood fantasies

Well, I'm all grown up now
And still need help somehow
I'm not a child
But my heart still can dream

So here's my lifelong wish
My grown up christmas list
Not for myself
But for a world in need

No more lives torn apart
That wars would never start
and wars would never start
And time would heal all hearts
And everyone would have a friend
And right would always win
And love would never end
This is my grown up christmas list

As children we believed
The grandest sight to see
Was something lovely
Wrapped beneath our tree

Well heaven only knows
That packages and bows
Can never heal
A hurting human soul

What is this illusion called the innocence of youth
Maybe only in our blind belief can we ever find the truth

p/s some of you may say, its not just Christianity that wants all that ... so true, so true ... maybe its time for you to find out where's the difference.

Well, as they say, its easy to love the world, but its hard to deal with my cantankerous neighbour ... supporting big issues/causes is easy, loving someone or dealing with a difficult friend is hard. First of all, don't be "that difficult friend".

Anyway, I digress. No better time to get to write this, before my readers all fall off their chairs, ... my all time fav Christian album. Hymns used to drown me to sleep when I attended church as a kid every now and then with my aunt. Even in a progressive church setting, singing hymns was not a welcomed thing. When I got hold of this album some 20 years ago, it was so inspiring and fun to listen. Sandi's voice was exceptional, the arrangement was brilliant, the pacing was improved for many songs. In my mind hymns are exceptional pieces of music because they are theologically correct. The ones in her album are all gems. Get it if you can, its unbelievably good.

Hymns Just For You CD

Sandi Patty Hymns Just For You Album Track Listing

1.It Is Well With My Soul
2.Fairest Lord Jesus/I'd Rather Have Jesus: Fairest Lord Jesus / I'd Rather Have Jesus
3.How Great Thou Art
4.In the Garden/Just a Closer Walk With Thee/What a Friend We Have in J: In The Garden / Just A Closer Walk With Thee / What A Friend We Have In Jesus
5.Old Rugged Cross, The
6.Lord's Prayer, The
7.Amazing Grace
8.To God Be the Glory/Holy, Holy, Holy/Blessed Assurance/Great Is Thy: To God Be The Glory / Holy, Holy, Holy / Blessed Assurance / Great Is Thy Faithfulness
9.Might Fortress Is Our God/Rock of Ages/Victory in Jesus/Because He Li: A Mighty Fortress / Rock Of Ages / Victory In Jesus / Because He Lives
10.Sweet Hour of Prayer/I Need Thee Every Hour/Just as I Am/Turn Your Ey: Sweet Hour Of Prayer / I Need Thee Every Hour / Just As I Am / Turn Your Eyes Upon Jesus

Marketocracy Portfolio As At 22 December 2010

price history right curve
[download spreadsheet]
graph of fund vs. market indexes
SMF m100 S&P 500 DJIA Nasdaq
Graph Period: [7 Days] [30 Days] [90 Days] [6 Months] [1 Year] [2 Years] [3 Years]
[4 Years] [5 Years] [Since Inception]
left curve recent returns vs. major indexes right curve
Beating Today MTD QTD YTD
SMF 1.02% 8.26% 13.20% 17.02%
S&P 500 0.60% 5.73% 9.76% 14.03%
DOW 0.48% 4.29% 6.40% 10.07%
Nasdaq 0.68% 6.06% 11.86% 16.76%

recent returns right curve
Last Week 1.17%
Last Month 6.82%
Last 3 Months 14.72%
Last 6 Months 20.57%
Last 12 Months 18.88%
Last 2 Years 110.06%
Last 3 Years N/A
Last 5 Years N/A
Since Inception 47.82%
(Annualized) 17.62%
Last Week 0.54%
Last Month 4.11%
Last 3 Months 9.95%
Last 6 Months 15.34%
Last 12 Months 15.41%
Last 2 Years 46.90%
Last 3 Years N/A
Last 5 Years N/A
Since Inception 4.85%
(Annualized) 1.99%
Last Week 0.62%
Last Month 2.70%
Last 3 Months 4.77%
Last 6 Months 5.23%
Last 12 Months 3.47%
Last 2 Years 63.16%
Last 3 Years N/A
Last 5 Years N/A
Since Inception 42.97%
(Annualized) 15.64%
left curve alpha/beta vs. S&P500 right curve
Alpha 15.77%
Beta 1.15
R-Squared 0.78
left curve turnover right curve
Last Month 0.00%
Last 3 Months 9.49%
Last 6 Months 29.37%
Last 12 Months 111.43%

Symbol Price Shares Value Portion of Fund Inception Return
NYB $18.35 6,000 $110,100.00 7.37% 67.50%
FMC $80.25 1,500 $120,375.00 8.06% 43.39% Details
F $16.99 8,000 $135,920.00 9.10% 53.08% Details
QSII $71.30 1,500 $106,950.00 7.16% 32.09% Details
PLD $14.26 8,118 $115,762.68 7.75% 29.26% Details MIDDLE
C $4.74 25,000 $118,500.00 7.94% 27.19%
BP $43.54 3,000 $130,620.00 8.75% 27.41%
WFMI $51.35 2,500 $128,375.00 8.60% 25.50%
GE $17.90 4,000 $71,600.00 4.79% 20.87%
UCO $12.06 6,000 $72,360.00 4.85% 17.35% Details
AFL $56.60 1,500 $84,900.00 5.69% 1.70% Details
BAC $12.98 14,000 $181,720.00 12.17% 11.20% Details

Close Date Type Symbol Shares Net Avg. Price Net
Oct 29, 2010 Sell SUN 3,000 $37.4391 $112,317.29
Oct 28, 2010 Buy AFL 1,500 $55.6517 $83,477.58
Oct 21, 2010 Buy BAC 5,000 $11.75 $58,750.02
Aug 17, 2010 Sell POT 1,000 $140.3169 $140,316.93
Aug 12, 2010 Buy F 8,000 $12.4259 $99,407.51

Tuesday, December 21, 2010

Empire@Subang Jaya and Di Wei

The newish Empire shopping mall @ Subang is one snazzy place. Its not too big and parking is not too bad (for now). There are not that many chain stores which gives the place a bit of character. There's the hair salon on 3rd floor that gives you an iPad to play with while getting your hair done (yes, they have more than a few laying around). The Loaf is there at the foodie floor and you must check out the other end, a little cafe that serves great coffee and macaroons and stuff. There is a place called Vanilla on the top floor that serves the best lasagna, ready made for take home as well.

Then there is this funky Chinese restaurant Di Wei (Royal Taste/Cuisine). Its modern Chinese decor will unsettle your senses but the food is usually good to pretty good. They have an unbelievable Christmas set dinner - tell you the price at the end.

This has to be the tastiest lormaifan ever, its very light and mini, could have 3 of these.

There's your veggies and pork rib (the cod fish ran out). Decent.

Thin turkey chop in black pepper sauce, surprisingly very good. There's also the prawns dish which was forgettable.

Are we in a museum? The chairs a bit modern, the longest chopsticks you have ever used, and wait till you see the lighted catwalk in the middle.

Abalone, wukai, dried scallop and meat - very very soothing. This soup alone I'd be willing to pay RM35.
The whole shebang: RM98++ ... but will last till 23 Dec only. They even let me substitute the dessert for my fav ginger tea with sesame tongyuen and my companion switched to thunsuetyee, great tasting. Oh, and you also get a glass of red or white wine, I told you this was modern Chinese!!! Merry Christ-mass!!!

Sunday, December 19, 2010

US Trade Deficit and China

While many have been harping about the US trade deficit and the role China has in it, that has been the key argument to support a stronger yuan. However, the reality is quite different. I have said before that about 60%-70% of China's exports are actually produced and manufactured by foreign companies operating in China. The WSJ has a brilliant article on the iPhone trade imbalance and perception. Two academic researchers estimate that Apple Inc.'s iPhone—one of the best-selling U.S. technology products—actually added $1.9 billion to the U.S. trade deficit with China last year, officially.

How is this possible? The researchers say traditional ways of measuring global trade produce the number but fail to reflect the complexities of global commerce where the design, manufacturing and assembly of products often involve several countries. A distorted picture is the result, they say, one that exaggerates trade imbalances between nations.

Trade statistics in both countries consider the iPhone a Chinese export to the U.S., even though it is entirely designed and owned by a U.S. company, and is made largely of parts produced in several Asian and European countries. China's contribution is the last step—assembling and shipping the phones.

So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Co. accounts for just 3.6%, or $6.50, of the total, the researchers calculated in a report published this month.

"What we call 'Made in China' is indeed assembled in China, but what makes up the commercial value of the product comes from the numerous countries," Pascal Lamy, the director-general of the World Trade Organization, said in a speech in October. "The concept of country of origin for manufactured goods has gradually become obsolete." Mr. Lamy said if trade statistics were adjusted to reflect the actual value contributed to a product by different countries, the size of the U.S. trade deficit with China—$226.88 billion, according to U.S. figures—would be cut in half. To correct for that bias is difficult because it requires detailed knowledge of how products are put together.

Based on U.S. sales of 11.3 million iPhones in 2009, the researchers estimate Chinese iPhone exports at $2.02 billion. After deducting $121.5 million in Chinese imports for parts produced by U.S. firms such as chip maker Broadcom Corp., they arrive at the figure of the $1.9 billion Chinese trade surplus—and U.S. trade deficit—in iPhones. If China was credited with producing only its portion of the value of an iPhone, its exports to the U.S. for the same amount of iPhones would be a U.S. trade surplus of $48.1 million, after accounting for the parts U.S. firms contribute.

Other economists say some aspects of the researchers methodology may have led them to overstate their case. The study, for example, assumes that companies such as Toshiba Corp. and Samsung Electronics Co. that make components for the iPhone wholly assembled them in their home countries. But many of Apple's suppliers have manufacturing facilities in China, so it's likely that some portion of the components they build for the iPhone are made in China as well.

The latest results are broadly similar to analyses made by the Personal Computing Industry Center at the University of California, Irvine, of the trade and manufacture of another Apple product, the iPod. That research also found that Chinese labor accounted for only a few dollars of the iPod's value, even though trade statistics credited China with producing its full value.

Read more:

p/s of course the other fascinating thing is how much an iPhone actually cost to produce, ... even if you lock in another $100 for advertising and marketing, Apple is enjoying incredible margins before appointing the "die hard telcos" wanting to work with Apple.

Friday, December 17, 2010

Hap Seng Consolidated

This will probably be the highest priced stock that I have featured... lol. Most investors will only look at Hap Seng Plantations as it is more focused, same goes for research houses. Many will consider Hap Seng Consolidated to be having a finger in too many pies. But seriously, they are in all the right industries.

Year to Sep 2010, the company has made RM275.8m net profit or 39 sen net EPS. Taking in the final quarter, the company should register a net profit of RM348m or a net EPS of 55 sen. NTA is at RM4.41 per share, not revalued.

Hap Seng Plantation's stake alone is worth RM1.3bn at market prices. Current market cap for Hap Seng Consolidated is RM3.97bn.

Issues shares: 622m (RM1.00)
Gek Poh Holdings 56.02%
Lei Shing Hong Investment 10.83%

Market Cap (RM mn) / PER(current) / PER(forward)
Berjaya Corp 4,210.6 / 26.9 / 27.8
Boustead 5,349.5 / 9.8 / 11.9
Sime 52,041.9 / 75.3 / 16.8
Hap Seng Consolidated 3,970 / 13 / 10.2

You can read all about the various business arms of Hap Seng Consolidated below, all performing creditably. Why I chose to highlight the stock now is critical. Actually I was given the tip when the stock was at RM5.50 but as I have said before, great value is not enough for me to post. Timing and catalyst have to be right. If not, its the same as buying into Boustead - although Hap Seng do run their businesses a lot better than Boustead. After checking through my network, there is conformation that we have catalyst and timing.

1) The company is supposedly mulling a 1 for 4 share split, i.e. from RM1.00 share to 25 sen share. Seriously, the Malaysian market loses a lot of investors participation once the share price scale past RM4.00, like it or not. Hence its a worthwhile and very likely proposition.

2) Hap Seng Consolidated has been riding up alongside Hap Seng Plantations owing to the run in CPO. However, if you look closely at the actual volume traded, its more than the usual upswing. This was the same pattern prior to DRB scaling past RM1.50, and we are seeing a repeat of that. Rarely do the volume go past even 1m shares traded even when its going up. On Friday it was 2.5m traded.

3) There is news that the company is going to do a double whammy, i.e. a special dividend together with share split. A figure of 20-30 sen was heard.

4) Its a value proposition as well, even at present levels. If you like Boustead, you should like Hap Seng Consolidated even more given the likelihood of favourable corporate exercises. RM8.00-8.50 is quite reachable as news of their corporate exercises gather momentum.

As mentioned before, many research houses abandoned covering the stock, I could only find one report, and quite well written too, see if you can locate it as well.

Quarry and Building Materials
Benefit from projects. The 2011 Budget announcement had largely focused on construction and development. Construction boom. Even without government support, private initiatives have been burgeoning with many property developments being sold and continued developments. Plans for towers of buildings in the Klang Valley had continued to surface constantly. With the ongoing and even more upcoming developments, demand for building materials could potentially accelerate. Hap Seng Trading was appointed by Malaysian Mosaics Bhd on 30 June 2009 as its sole and exclusive distributor of MML tiles in Malaysia. Recently there was a privatization of MML which indicates value in the company. This hints positively to the segment.

Owns 52.53% of Hap Seng Plantations. Hap Seng Plantations is predominantly an oil palm planter in Sabah. It is an efficient planter with large economies of scale. Earnings rerating. CPO prices has increased rapidly over the half a year. With the large increase, earnings of planters are expected to increase substantially. Stock price increase in the industry has currently lagged the potential increase in net profits. Moreover, the USD has been strengthening against the ringgit, giving strength and competitiveness to the CPO against other oils especially soybean oil.Hap Seng is synergistically tied to its fertilizer division as well. High Efficiency. HSP is one of the most efficient planters in the industry with FFB yields of 21.5 metric tons per hectare and an OER of 21.6%. Moreover, HSP has a contiguous plantation which offers far more efficiency and scale than planters with plots of land in various locations. The group has a FFB yield of close to 700,000 metric tonnes per year. The group also operates 4 mills.

Plantation land
The total area of Hap Seng Plantations estates is 39,803 hectares. Hap Seng Plantations operates on one contiguous block of plantation land of approximately 36,354 hectares between Lahad Datu and Sandakan region, in addition to two smaller plantations of 1,276 hectares in Tawau and 2,173 hectares in Kota Marudu. 34,467 hectares of planted area comprises 32,576 hectares of matured oil palm and 1,891 hectares of immature plantings.

Malaysia and Indonesia. Hap Seng’s fertilizer business is primarily in Malaysia and
Indonesia. We do see some growth in the sector with higher CPO prices and as Indonesia’s plantation acreage increases and matures. Currently a very large amount of plantation land is maturing and coming onstream annually. The fertilizer business is complementary and synergistic to Hap Seng’s plantation segment. This is especially the case with rising CPO prices whereby demand of fertilizer normally increases.

Property development
Hap Seng’s property focus has been primarily on low-rise residential properties in major urban centres. Hap Seng’s key development area has been in Sabah. Hap Seng has developments in Tawau, Sandakan, Kota Kinabalu in Lahad Duta. Hap Seng has developments in all 3 key segments including residential, industrial and commercial. Branching out into Klang Valley. Hap Seng has ventured into the Klang Valley in recent years through D’Alpinia located in Puchong. It is located in the fringes of Puchong close to Seri Kembangan and Putrajaya. It is a relatively large development of 76 acres of land and is of a build and sell concept. The units are of modern contemporary design. Phase 1 was launched in late 2009.

Hap Seng is involved in automotive through Hap Seng Auto Sdn Bhd,Hap Seng Industrial Sdn Bhd and Hap Seng Star Sdn Bhd. Hap Seng Auto is involved in the distribution of Mercedes-Benz logging trucks, general-purpose trucks, buses, passenger vehicles and spare parts in Sabah and Sarawak. Hap Seng Auto Sdn Bhd is also the sole distributor for Mitsubishi Fuso commercial vehicles in East Malaysia. Hap Seng Industrial Sdn Bhd fabricates and assembles logging truck trailers, tankers and other industrial transport vehicles. Hap Seng Star Sdn Bhd is an authorized dealer of Mercedes-Benz and Smart vehicles in the Klang Valley. In April 2010, Hap Seng Star Sdn Bhd took over Hap Seng Auto Sdn Bhd’s role as the sole authorized dealer of Mercedes-Benz and Mitsubishi Fuso in East Malaysia.

Group synergy
Hap Seng’s property arm plays a synergistic role with the group. Hap Seng’s property arm benefits directly from its quarry & building materials arm and provides the latter with ongoing orders. Hap Seng’s property arm could benefit from lead time, consistency in demand and product quality. Hap Seng’s property arm could also benefit indirectly from their Credit Financing arm as it also serves construction and property related businesses.

Property Holdings
The group’s flagship Menara Hap Seng has seen a high occupancy rate of 94% for its tower block and 88% for its podium. The division continues to contribute substantially to the division, providing it strong cash flows and relatively stable earnings. Hap Seng has a 1.1 acre freehold land adjacent to the building and the 31,000 sq ft 1 ½ storey Hap Seng Star Mercedes-Benz showroom. The showroom has very premium frontage of Jalan P Ramlee and Jalan Sultan Ismail in the Central Business District of Kuala Lumpur. The area has the potential to be redeveloped into a very premium and high visibility commercial block.

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.

Wednesday, December 15, 2010

Great Fish Head Meehoon Soup

Some of you have commented that I only feature expensive eating places. Not really, if you scroll back, you will find Shin Kee beef noodle @ Petaling Street, Ah Sang bak kut teh @ Sungei Way, Hing Ket grill house @ Klang, etc.

This time, I am recommending this great place for premium Fish Head Meehoon soup. Its at Damansara Kim.

Location of GPS listed below.

The soup base is just right, the fish head is of a high quality hence the premium prices. Try their grilled salmon as well, its very juicy and delicious. Remember to order a plate of fried fish skin to put into the meehoon soup, its a must.

GPS Location:
N 03'08.089'
E 101'37.747'

Tuesday, December 14, 2010

This One Is Way Overdue For A Major Upside Rerating

I have always liked TSH Resources. This one is the beneficiary of an increasing number of research houses covering the stock over the last couple of months. What is more significant is that the company has reinvented and re-engineered its business model so much so that it is a steady cash generating machinery.

TSH has transformed from a largely downstream processor into a formidable upstream player via its aggressive expansion into Indonesia over the years and now has almost 100,000 hectares in oil palm landbank. Only 27% of it has been developed. Despite this significant development, valuations are at still at historical average, which implies that the transformation has yet to be fully appreciated by the market.

The group has a planted area of approximately 27,000 hectares, of
which over half is immature. If we include the young palms, the group has 70% of its planted area below prime. As the areas coming into maturity are quite substantial, the projected FFB production growth should be 20-25% per annum over the next few years.TSH remains one of the highest growing planters in Malaysia and Indonesia, given its aggressive investments in recent years (54% of its planted area is still immature).

The stock stirred some interest last month following their excellent results and has attempted to retests its high yesterday. Looks very likely to trying to find its proper valuation, which I see should be at RM3.60-3.80 at the bare minimum. This is a stock you can buy for 1 month, 3 month or 1 year as I see it topping RM4.00 within 6-12 months. TSH’s earnings at the cusp of a significant rebound, not only due to high CPO prices but also from phenomenal FFB production growth in the coming years.

On revised estimates, a couple of research houses have forecast earnings to grow at a 31% CAGR over the next two years, driven largely by the oil palm division.

Wood - This may explain some investors perception of TSH as a wood products player. However despite the difficult market conditions for wood products, this division will still be in the black. What many are overlooking is their foray into palm oil. After recording losses in 1HFY10, the wood products division finally broke even in 3QFY10. However, the division was still in the red in 9MFY10 with a small loss of RM2mil. Going forward, if the division continues to be in the black in 4QFY10, the division could break even for the full year. Earnings of the wood products operations are not exciting due to weak demand from the European countries like France, Spain, Germany and Portugal. Apart from Europe, the wood products division also sells its hardwood floor products to China and the US. TSH’s wood products operations are carried out by 65%-owned Ekowood International Bhd.

Wilmar - TSH has a good link up to Wilmar. In the cocoa processing, business were affected by unfavorable commodity price movements, but is about to turn the corner. The group expanded aggressively into Indonesia since 2006, and currently has almost 100,000 hectares in oil palm landbank. Only 27% of it has been developed. It has also expanded downstream via 50:50 JV with Wilmar and now operates a 750,000 tonnes per annum (tpa) palm oil refinery in Kunak, Sabah.

Suffice to say, it seems TSH is broadening its business to "look like a vehicle" that will be highly attractive to Wilmar down the road. Wilmar's willingness to be in a jv with TSH may be a strong indication of future developments down the track - to me, this is the main basis for the major rerating.

The "Killer App" - What could very well entice Wilmar to gobble up TSH eventually is the discovery of a new palm oil clone by its research lab. A new oil palm clone dubbed Wakuba oil palm ramet brand was launched with a promise of doubling the current oil yield. Named after
TSH Biotech Sdn Bhd's five-year-old tissue-culture laboratory in Wakuba Gading, Tawau, Sabah, the new clone promises an oil yield of up to 10 tonnes per ha compared with the average current yield of about 4.5 tonnes per ha in the country. TSH Resources' chairman Datuk Kelvin Tan said the company had invested RM25mil in the laboratory, which is expected to produce 1.5 million ramets by 2015 compared with 500,000 this year.

Plantation Industries and Commodities Minister Tan Sri Bernard Dompok launched the product in conjunction with the 2010 National Seminar on Palm Oil Milling, Refining, Environment and Quality here yesterday. Dompok also witnessed the signing of a memorandum of agreement (MOA) between the Malaysian Palm Oil Board (MPOB) and TSH Resources. The new MOA extends the technical collaboration on genetic marking to further improve efficiency and quality of ramets produced at the laboratory.

For 2010, the company is on track to record just over RM1bn in revenue and should reach RM70m in net profit. That equates to a net EPS of about 20 sen. The key driver to the rerating which some houses have missed is the kicker from palm oil in the years ahead, TSH should be able to make a net profit of RM170m in 2011 or a net EPS of 27 sen. The surge should continue into 2012 and 2013 judging from the planted area and the massive area still to be planted. In 2012, conservatively net profit should scale to RM200m or a net EPS of 31 sen.

The shares issued is 413.7m and you will find very few sellers on the way up as the owners know very well that the break up value of TSH is between RM4.20-4.60.

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.