How To Become A Dealer / Sales Trader

Follow up on my posting on how to become an equity analyst, this one refers to the very uncertain, multi definition role of who and what a dealer is. It depends on the securities firm, whether they are players in the institutional business.

Let's start by defining the various dealing roles:

a) remisiers - you basically work for yourself, pass the required papers, put down at least RM50,000 or RM100,000 and you can start getting clients onto your account, you probably get 40-60 sharing on commission though some may even get 30-70, the latter being your share, you must treat this as your own business, so the question is what do you bring to the table, buying a stock from any remisier in town is the same thing, its not like buying fresh fish which may differ in quality from one stall to the other ... if you cannot clarify what your value adds are, then you will be a mediocre remisier, are you prepared to face the challenges where more and more people are trading on their own via the internet (yes, they can still be your client but the rates drop substantially)

b) company dealers - they are usually fresh grads trained inhouse to key in the orders once they have passed the requisite papers, if their skills is just in keying in orders with no client list, then they end up working for a dealer who does the sales and marketing, there are good company dealers in that they are quick and efficient, a crucial role in execution, to get to work in elite teams especially for big institutional dealing teams ... the person must be dependable, responsible, meticulous, good at math, can do some excel to tabulate average execution prices, etc...

c) dealers/dealing teams - you can be part of a dealing team that has been built by one or two enterprising dealers, they basically also work for themselves, salaries are deducted from group commissions, structure of profit share depends on negotiation skills and the kind of revenue you can generate, you get to look after private, corporate and institutional clients, again what are your value adds, if you cannot clarify them you will end up in a mediocre team ... the difference here is that usually the team do not need to put up any collateral, dealing teams are better in that you do not exist alone and has the support and newsflow and buy/sell flows from a cross section of the market, the bigger your team is the better the terms, some even get to carry positions over a few days

d) sales trader - top of the food chain, used to be called institutional dealers, but I think sales traders get paid better, employed solely by company but focuses on bigger clients usually foreign based, may concentrate on hedge funds type, usually exist only in the top tier houses and bank backed houses, the very big funds or indexed funds may only be allowed to trade with big top tiered firms and bank backed, sales traders are also part of the placement arm for IPOs and matching orders, must be able to take positions on books to bid/offer for blocks,  do switching strategies (e.g. sell KLK buy FGV) or reweighting by indexed funds

How To Start

Your parents did not spend RM50,000-RM100,000 a year for 3 years for you to come back and sit by a phone or just keying in orders into a terminal, almost like a receptionist. Many see the roles as the easiest way to earn a living. If you think like that, then I can guarantee you will be way below average.

Its a sales job. No matter how good you are if you are working from a second or third tier securities firm, you will never get the big institutional clients. Hence you need to get to a top tier house and positions there are usually not advertised. Usually they are filled by frustrated analysts, frustrated corporate finance people, frustrated xxxxxx within the securities firm. You need to know somebody who knows somebody to get the prime positions. Once inside a big top tier house, you won't want to move too often, and should only move horizontally to another top tier house.

If you are a good sales person, with good skills such as technical analysis, fundamental analysis, good spotter of movers, good trading instinct, has a good network of reliable information flow ... it doesn't matter much which type of securities firm you operate out of, then you are better off building your own team.

Best way for a fresh graduate is to join an established dealing team. You won't amount to anything being a company dealer at a third tier or fourth tier firm. The dealing team may throw you a few small clients to start with but you have to go and get your own to build your rolodex. Once you figure you have outgrown your team, then go and set up your own team. If you just rely on your team leader's clientele, you will be no more than a receptionist.

Can you learn to be a good dealer? Can you learn to be a good trader? To a certain extent yes, but that will never qualify you for success. It has to be inherent in your blood. You need to feel excited by the markets. You must want to better the markets. You must care about making the right calls. You must want to make a lot of money, not just want but really really want.

If you are a sales trader, then EQ skills are very important as you will be dealing with too many clients with big egos and small dicks. In fact that is the number one skill for a great sales trader, the other skills are just tools of trade.

So How ...

Must know why you want to become one. Must be passionate about the markets. Must like reading about stocks and business news, business personalities and business magazines. Must be open to abuse. Will need to handle high stress. Must be able to drink a bit. Must have a bit of an ego. Should be an alpha male for a guy and for a girl must be able to work with dickheads and around dickheads.

This posting ties in well with my previous take on ....

TUESDAY, JULY 17, 2012

How To Behave Like a Badass Sales Trader/Dealer/Broker

Getting into a dealing room is difficult in the first place. After the initiation period, you will have to behave accordingly in order to be a "stockbroker". Most of the behavioural traits will be inculcated via osmosis, but you can always learn some handy tricks.


Yell Occasionally - Its no point being a soft spoken, polite person, in a dealing room. You will be accorded no respect. You have to yell occasionally to voice urgency. Easy targets will be when speaking on the phone to back room or settlements - use phrases like "the deal is done, don't bother me again"; "don't bother me again, just cross it it"; etc... The other easy targets are your execution dealers, some choice phrases include: "just hit the bloody thing to the stupid buyers"; "what do you mean we are still above the average buying price, ..C'MON"; etc...


Foul Language - This is a given, its the vibe, its a must. If you are not using occasional foul language, your bosses and colleagues will think you never do deals big enough or have clients that are big swinging dicks (or dickheads in most cases). No need to do it over the phone as you try not to swear to your clients. Just pick up any research report and exclaim, "these fucking analysts know dick shit", you get the drift ... a good trick is to put the phone down and then yell "Fucker" or "Useless fucker", hey, you might not even be on the line with anyone, but your colleagues and bosses will think you are doing "good work". "Good work" meaning "taking shit from clients".

Slam the phone - You are not a good broker if you have never broken a phone before. Sometimes the PABX system board may be very expensive, in that case, take the receiver and just whack on the table a few times till it can be heard across the room. Nobody will mess with you cause you will be perceived as a badass broker-dealer-trader. Works every time.

Use Useless Abbreviations & Insiders' Lingo - Sprinkle it in your conversation especially among friends not from the industry. Examples: dog with fleas, dead cat bounce, GN4, PN17, ostrich, pig, sheep, DK, Bollinger, arb, bp, CAC40, CFD, DAX30, front loading, front running, alpha, gamma, beta, GTC, RRR, warehousing, Sharpe ratio, theta, XD ...etc..


Badass behaviour in the dealing room is accepted because you are all fighting for the same clients. Some orders you got is some orders the competition did not get. To maintain good service, acute attention must be given to order instructions and execution precision - hence if you have to ensure the down line gets the message, you will yell and shout and curse, as its your head thats on the chopping block, not theirs. 
Getting yelled at by clients are normal, and as the punching bag, you will have to take those punches. Once the phone is down, that accumulated stress has to go somewhere or you will get an early ulcer or some cancerous growth.

Drink like a Fish - Badasses drink almost every other day. Either you have a really bad day in the office - so, need a drink. Or you had a really good day - so, have to drink to celebrate. If you are not a constant drinker when you are a trader/dealer/broker, you'd probably never amount to much. But basically you have to drink like a fish to numb your soul for being around so much money thats not yours, so many assholes, so much false pretences and bad behaviour,and so many devious sycophants. 


If you have read The Prince by Niccolo Machiavelli, you will know that a badass broker/dealer/trade is a true  Machiavellian. A person  who "views and manipulates others" for "personal gain, often against the other's self-interest". By reputation, stockbrokers have manipulative personalities. So do people who sell cars or houses. Its really hard to differentiate between the three.


How To Comfort Yourself - When your clients lose money, its a terrible thing and you will feel bad (for a little while). This always helped me when I was one, you will snap out of it when you repeat the mantra "Well, it could have been worse, it could have been my money, or it could have been me". Always work wonders.


How To Comfort Clients - When clients faced losses, they need to be handled. Tell them, you also suffered losses in your personal account on the same stock. Tell them another fund/client had even bigger losses than them. 

At the end of the day, a badass broker/dealer/trader is a person with high EQ (when necessary) and thinks that there is a vast gap between truth and untruths. Do you lie ??? ..., well, we don't call it lies when we are withholding some facts, ...we don't call it lying when we over exaggerate the attractiveness of a stock, ... we don't call it lying when we underplay the risk, ... we don't call it lying when we shove a placement down a client's throat because we just have to get the thing off our books.
--------------------------------------------

Question:

What does a hedge fund manager with no fund to manage say?

Answer:

Would you like fries with that sir?

A stockbroker is someone who invests your money till it's all gone!

--------------------------------------------


How to know you are not cut out to be badass:
- when you avoid calls from certain clients, if you can't face the music, you don't have the balls for the industry
- when you can't sleep well most nights worrying about positions
- when you look at yourself in the mirror coming home from work and you hate yourself
- when you feel like Spiderman in a bull market but feel like an idiot during a bear market (market cycles should have little effect on you emotionally, just the place you spend your holidays .. Mauritius or Redang)
- when you have no life apart from the markets

In the end, the financial markets, if you work in them, are just places where you help in the movement of funds from one to another. You live by the flickering lights on the screen. You stare at 4 screens the whole day and go home to stare at another screen, and if you are constantly on FB and Whatsapp, make that 6 screens - that is if you do not go to watch a movie, which would be 7 screens, what a life, screens the whole fucking day. In the end, you take your cut (or commission) with the movement of funds. You hope to value add in your service to clients via "good analysis" or "good execution" or "good information flow" ... mainly its all bull shit, and you know it too, and guess what, the client knows it too.

Stocks For Post Elections - The Flip Side

Starbiz daringly came up with 8 stocks for those who think that the government will stay in power. The reasoning being, you may see volatility or weakness in stocks as the polling date draws nearer. They are of the view that IF you think BN stays in power, the following stocks may be "collected on weakness"

http://biz.thestar.com.my/news/story.asp?file=/2013/1/29/business/12638990&sec=business

They include: Sapura Kencana, MMHE, Handal Resources, Cypark Resources, Prestariang, MYEG, CIMB and Gamuda.

My question is: Does that mean that if the opposition wins, the above 8 stocks will be hammered? Well, I think so. You cannot have your cake and eat it at the same time. The very ingredients that the writers relied upon in assessing the stocks as to why they are in favour, will also work against them if the flip side occurs.

Somehow, nobody seemed to be focused on what stocks to buy and sell should the opposition wins. Here are my selections:

COULD BE GOOD BUYS

1) TENAGA - Obviously, they have been "forced" to leak profits to IPPs. Can safely say that there will be a lot of mutual reviews and  renegotiations, and maybe cancellation when the due date comes up for some IPPs. All will be in favour of Tenaga.

2) Some Banks - If CIMB is a sell, then a more level playing field will favour the ones in 2nd-4th place in IB.


COULD BE SELLS - These are predicated on supposed changes in the competitive landscape for the major industries which will not favour the current crop of industry leaders. Industries most affected should be oil & gas, autos,  toll concessionaires

1) Sapura Kencana
2) DRB Hicom
3) MMC
4) Litrak
5) PLUS
6) Gamuda


Industry Developments

PLANTATIONS Companies - Not many are aware that there are still a number of layers involved for CPO companies when they want to export their products. I assume these layers will be dismantled. However, more rules could be implemented to ensure sustainable agriculture and to meet global best practices. Neutral.

AUTOS - Proton cars are usually around 50% cheaper overseas. Enough said.

MONOPOLIES & FIEFDOMS - Industry which currently are monopolies could be unshackled, such as flour and rice. The water concessionaires are not making our lives easier. Read between the lines.

BIG GOVERNMENT TO BE DOWNSIZED - Industries which are currently very much dominated by GLCs or government presence will be downsized as it is highly ineffective and unreasonable to have such high government presence at the expense of the private sectors. Sectors currently with very high government presence include Utilities (90%), Transportation & Warehousing (80%) and Agriculture, Banking, Communications (more than 60%).

Disclaimer: 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.

How To Become An Equity Analyst

I get this question all the time from younger folks wanting to get a foot into the financial markets. When we talk about investment banking, we are talking about equity analysts, sales traders and investment banking (corporate finance included) primarily. IB basically are the guys (gals) who meet with company owners listed/private and getting them to do deals which may include listings, corporate exercises such as rights, warrants, bonds, placements and/or M&A deals. Sales traders are the new fangled name for institutional dealers of the past. Sales traders deal with flows from clients, placements and basic buys and sells orders. It can get tricky with switching strategies, reweighting and ability to take on positions on books. I will talk about the IBs and sales traders in later postings.

Today its how to be an equity analyst. The easiest way, well not really easy, is to get a good degree from a good university. The named universities such as the Ivy league, plus the LSE, Oxcam or Sydney University or Melbourne University is a start. There are the second tiered ones such as Monash University, UNSW ... and you must score well. Most top houses will at least grant you an interview.

The most important subject to take is accounting. If you don't like accounting, forget it. You must be very good at Excel, if you hate spreadsheets, this is not for you. Get your niche early, know one or two industries very well.

If you are like me, screwing around during university and getting so-so results, there are plenty of ways to get your foot in as well.

a) Get a good internship - Use your contacts, your network, hope your parents know some BSDs at some investment banks. An internship at any top 10 brokers would do well on your resume. If you get your internship, don't just do what's been told to you. Ask around and get to know the BSDs in the right department. Hint that you want a starting position when you graduate, failing which, its OK to beg.

b) Do your CFA - This is the best route if you come from a university not in the top 100, and/or your results are so so only. Once you land a "business type" position, enroll and try to pass all the papers. It always look better if you can put in your resume, passed CFA Level 1, completing Level 2 etc... May not get you into the top 10 houses but getting into a local one even is a foot in. Get your foot in first.

c) Specialise - Do you want to be an equity analyst because you heard it pays well, or do you have a passion for analysing industries and companies? If its the former, you'd probably won't make much of yourself even if you get in. All analysts end up covering one, two sectors at most. Do your research, you can go the indirect route by specialising in plantations or banks, or semiconductors or technology, or mining etc... If you have spent 3 years at a plantations firm doing relevant work, you will be familiar with the parameters for that industry, what they look at, how to get the data and make predictions. 

To be an analyst in Malaysia is a small thing, if you can, work yourself into a regional position. Know the regional stocks as well. The big money is in becoming a regional something. You may have to move to HK or Singapore for those roles, except if you are in plantations, which you can basically look at companies in Malaysia, Indonesia and Singapore. The best paid person in IB, for sure is the top notch analyst ... look for the person who covers only ONE stock, e.g. Samsung or BHP ... they are paid over a million USD a year.

How to ace that interview:

a) Speak well - Besides researching and writing abilities, you need to speak well as all good analysts will have to speak to fund managers sometime. Your command of English must be good and your verbal skills as well.

b) Convincing - Be passionate, don't come to an interview even for a junior position without knowing anything. Must say you have deep interest in one or two industries, and you will be grilled further, and you must know your stuff. How? Read a few industry and companies research reports and things must roll off your tongue. If you can't even do that, then you better hope and pray you are a very pretty girl. (...its still a male dominated domain).

In the end, getting in is tough, once in you can move up by networking with better houses. Write good research reports that brings value to readers. I would say only 1 out of 5 analysts starting out become good ones, the rest just stick around and at best become Senior Analysts after 5 years but cannot progress.

To make it, you have to be early in calls, and be right most of the time. You have to be vocal. If you do not have the "stuff" to do that, then you will not make much headway. You have to get closer and closer to the company owners. You have to stick around at conferences and industry sessions. You have to write well, you have to be PERSUASIVE. You have to make a name for yourself. You are your own brand, the house is just a shell. Brand yourself first. 

Its not everybody's cup of tea, its a high stress job, you work 12 hours a day, everyday there's updates, results ... you keep spreadsheets that run pages and pages, you have little time for socialising. Your job is never secure, you can get laid off when times are bad (i.e. every 3 years), the higher you go the harder it is to find similar positions when there is a crisis or market contraction. So you better be very good at what you do. 

Analysts get crucified all the time. Sales traders think you are useless paper pushers who cannot hack it in the real time wheeling and dealing. IBs think you are their lackey boys to support whatever corporate exercises they are doing. Bosses think you are a huge mf cost center. Good luck!

Dilbert Compilation Part Dua

Wow! Didn't realise I did so many Dilbert cartoon mash ups. This is the second compilation of my gag Dilbert cartoons. I keep doing that I will have enough for a book soon, but then will have to talk to Dilbert's owner about royalties.

Maybe Only In Japan

CEOs who behave with integrity and share the burden of their employees, a collective kind of leader ... and he is not even an owner. Only in Japan.

When They Were Young & Not-Yet-Famous

Rihanna


Bruno Mars


Lady Gaga


Snoop Dog


Jennifer Lopez


Kanye West


Avril Lavinge


Adele


Prince


Beyonce


Bruce Springsteen

UMA On Bursa

This was a really funny quip, somebody suggested that an UMA should be issued to the Bursa for yesterday's market weakness. Well, truth be told, the market had its biggest single day drop since October 2011, plus it was unusual market activity, and thirdly nobody can really say for sure why.

Sure there is speculation about the reasons, but its pretty much like a deserving UMA to me. If you were to ask Bursa, they'd probably reply: "We are not aware of any unusual or material developments".

So, UMA it is to Bursa. You fall some more, we will issue a second UMA or designate all stocks ok.

Seriously, its about elections. Tell us something we don't know. It has to be held soon. How far will it go down to prior to election day. I think its more likely to be closer to 1500 than 1550. Thats just my view.

If opposition wins, we may see a knee jerk quick sell down to 1450 to be followed by a swift rebound provided the transition of power is smooth. If not, we could be in for more uncertainty and downside.

Its all necessary as in birthing pains, but it will all turn out well ...

Assuming the opposition wins, and power transition was smooth, I believe funds will flow back almost instantaneously within weeks. It is not as dire or nasty as some make it out to be. All I am worried about is the transition of power process be smooth.

A cleaner government, better management of resources, more transparency, less leakages ... how not to attract more funds? It will not be perfect, they will make mistakes, there will even be cases of corruption and mismanagement, but I think they will be a lot fewer and lesser in quantum. How not to have a vibrant post election market?

Value Traps & NTA Plays

Following Inch Kenneth meteoric surge, some readers have been so kind to send me emails about other great value stocks, e.g. Landmarks, Selangor Dredging, etc ... Dear all, stocks that trade at massive discounts are aplenty. You cannot just point to any one and say that's a good investment. It has a lot to do with proper usage of capital by investors. Why lock up your capital in a non performing great asset? The key is there must be a CATALYST to unlock value, something must be happening to unlock that value.




Those who have been in the markets long enough will understand the term "value trap". It is when you buy and hold something for the longest time because there is great inherent value. However the investor does not know when will the hidden values be unlock by management and/or owners. 

Hence investors who are wiser will always bear in mind the "value trap", being locked into something for the longest time, sometimes years. Let's look at: 

Kuchai Development 

Its basically a holding company. Its got a substantial stake of 26% in palm oil Sg Bagan and a highly attractive 3m shares of Great Eastern (traded now btw S$15-16). All in the total net asset value for Kuchai Development is around RM260m. It has 120.7m shares (50 sen), which makes for a NAV of RM2.47. Guess what's the share price??? Its just 1.20. How to go wrong?

Technically you have to outlive the owners or wait till they finally decide to do something with their shares. When looking at a value company, the first thing to check is the shareholdings level. For Kuchai: 

Kluang Rubber 41.9% 
Sg Bagan 9.38% 
Lee Foundation 4.18% 
Kota Trading 1.77% 



The top 3 are basically the same group of people and they made doubly sure they have more than 50% as that will stop anyone thinking of raiding the company. So if someone comes along and collect shares and then make a G.O. at RM1.60, he/she will not succeed as long as the controlling shareholders do not sell. They will probably sell if someone comes along and offer a substantive premium to NAV, say RM2.60-2.80 or thereabouts. The value is in the NAV and then the listing vehicle as a value add. 

Once the owner controls more than 50%, there's very little you can do. If you can locate a value company and there is ample free float, plus the controlling shareholder holds less than 35%, then I bet you that many vultures will be circling to take over the company, thus narrowing the gap between NAV and the share price.

It might be OK to hold on forever if the company pays a decent dividend, but in Kuchai's case it paid 0.8 sen in 2008 and 0.45 sen in 2009. If you take the share price of 80 sen  then, that works out to be a paltry dividend yield of 1% and 0.56%. Really no incentive to own this stock.


Stock               Share Price / NAV
Minho                 0.54 / 2.67
Mitrajaya            0.44 / 0.79
Pasdec                0.32 / 1.81
Advance Synergy  0.15 / 0.89
Majuperak           0.28 / 1.23
Eupe                   0.57 / 1.99
Focal Aims           0.37 / 1.17
Xian Leng            0.31 / 0.91
PW Cons             0.45 / 2.10
BCB                   0.40 / 1.69
Ekowood             0.18 / 0.73
Kia Lim               0.34 / 1.08
Prinsiptek            0.22 / 1.00
Rex Industry        0.62 / 1.92
KPSC                  0.39 / 1.26
Mycron Steel        0.34 / 1.43
Jerasia Capital     0.56 / 1.44
Cymao                0.31 / 1.47


I can go on and on ... for another 100 more at least ...



CAVEATS

These are not recommendations at all, just to highlight those with massive discounts to NTA. Besides the discount, one must look at a few things:
a) the quality of assets under its NTA, whether they are readily realisable or industry specific sunk cost (e.g. steel mills)
b) the real burn rate of an imploding company, many companies with discounts are because investors are dumping stocks of a deteriorating company which will be making significant amount of losses over the next few years just by hanging around, an imploding business model (let's not mention names la) .... then the discount is actually JUSTIFIED
c) there are material litigation which may cause future losses and liabilities



Dear SC & Bursa: I really think that there is a strong case for the SC and Bursa to come down hard on Kuchai because it does not resemble a normal company with on-going businesses. Its strictly a holding company. It does NOT allow shareholders to participate in the growth of the company, it just holds the stakes forever. It does NOTHING to extract value from their inherent value. 

To me, its like a company which has sold all businesses and sits on cash. In this case, the cash is the assets. Yes, we are treading on uncharted waters here when I advocate that SC & Bursa put in a proactive move to reinvigorate stocks like Kuchai ... but we can certainly draw up some stringent parameters, and if they are long drawn out inactive management presiding over deep value assets ... then issue a GOOD no-UMA, further inaction give them a delisting notice. We already have rules that forces companies to have a decent free float, we have rules that prohibits a company from sitting on cash forever, rules that warn companies if they are too inactive in volume traded ... all wanting a properly regularised market place to safeguard investors. Companies like Kuchai makes a mockery of being a listed company.

For companies like Kuchai, I would suggest that they need to sell down their company from above 50% effective stake to below 40% within 2 years, and then to below 35% within 4 years. One, it makes for better liquidity, two... it puts the company in play, three ... the owners will finally do something to extract value instead of doing nothing. Sounds like a great idea but will never get passed for being too radical. Still, worth thinking about it than doing nothing.

Some may say so is Berkshire Hathaway - in Buffett's case, he actively manages his positions, positions will be sold once they reach above fair value and vice versa. Kuchai's position makes a mockery of being a listed counter - anyone in their right mind would be 100x better off to invest directly into Great Eastern or Sg Bagan - there is absolutely no value to its existence.

Things We Should Know & Embrace

Saw this from one of my blog links, An Undomesticated Blogspot, searched a bit more and found that there were tons of fascinating mini videos made by the same group. When you condense a lot of information into a few minutes, you have to make it witty, relevant and revealing for the WOW Factor ... these video have them all ... and I agree with the deeper implications of the basic truths they represent. Enjoy and embrace more clarity in your life.

WE ARE ALL FEMALE (so close ... yet so far yet so near, we all almost the same, so what to get so worked up over with gender bias and lifestyle choices ... same-same gene pool)




CAN MONEY BUY HAPPINESS (yes, of course, its the way you spend it)



THE POWER OF MUSIC (to me house music is not music, its torture chamber for Europeans)



THE POWER OF NAPS (just don't go past 30 minutes each time)

Get To Know Your Candidates

Recently the MP for Titiwangsa Johari Bin Abdul Ghani  has made it clear that he does not need the Chinese and Indians to win the Titiwangsa seat. He did a mathematical calculation that all he need is the 32,000 Malay voters and that is all. He made it very clear that the Chinese and Indians are a minority and they are nothing but Customers. 

Ybhg Datuk Johari Bin Abdul Ghani is the Managing Director of CI Holdings Bhd. He came on the Board of this company on the 29th of November 2002.

Cukup (or Things You Would NEVER see In tomorrow's Papers)

I think its enough. Is the nation at tipping point? I am sorry, sudah tipped over dee ... No more questions as to whether Pakatan can form new government. We just have to make sure the ballots are as clean as humanly possible with our eyes. 

When I say you won't see it papers tomorrow, I forgot to exclude Chinese and Indian papers, apologies. Cukup for now .... show our decision during election time. HOW MANY 50 YEARS DO YOU HAVE TO SPARE?

Revived 2V1G Beautiful Cafe Tour

Only one playing date per city, already Penang and KL are pretty full. Exceptional guitar work by Malaysia's finest Roger Wang, complemented by dazzling vocals from Winnie Ho and a new surprising member of the trio.  2v = 2 vocals, 1G = 1 guitarist. They have two exceptional albums out already if you haven't heard. There will be a high quality vinyl double album pressing, done in Japan, and will be available to vinyl lovers in a few months. Miss this concert if you dare. 

KL :  16th January WEDNESDAY, NO BLACK TIE

IPOH : 18th January, FRIDAY, THE ARTISTE CAFE, DE GARDEN

PENANG : 19th January, SATURDAY, CHINA HOUSE

All shows start at 9pm with cover charge at RM50pp.

IPOs & Malaysia - A Sobering Analysis

There is the good news and the bad news. Malaysia made the headlines in 2012 by beating Hong Kong market for IPOs listing. Malaysia was 12th in 2011 and 5th in 2012. That is over taking UK and matching HK. Still, we are nowhere near what we can call a financial hub, be it regional or not.



The IPOs volatility in Malaysia was just 7.3%, a very low figure compared to other top ten IPO markets - what that means is that IPOs will generally perform adequately without zig-zagging too much or going below IPO price levels.


The queue for Malaysia listings this year includes Malakoff Corp.'s planned $1 billion IPO, which the company's chief executive said may happen in the second quarter, and the planned $1 billion IPO of Malaysia's busiest port, Westports Bhd., in which Hong Kong tycoon Li Ka-shing is an investor. Malaysian industrial conglomerate UMW Holdings Bhd  has invited banks to advise it on a $500 million IPO, and AirAsiaX Bhd., the long-haul unit of budget carrier AirAsia plans a $250 million offering in 2013.

Last year, Malaysia was home to the world's third-largest IPO, in which Felda Global Ventures Holdings Bhd. raised $3.2 billion. Meanwhile, IHH Healthcare Bhd.'s $2 billion IPO made it Asia's largest listed hospital operator by market value.



Iskandar Waterfront, which is developing real estate in the southern state of Johor as part of the government's push to promote Iskandar Malaysia as a special economic region, has invited bankers to manage the proposed IPO, three people familiar with the development told The Wall Street Journal on Wednesday.

Malaysian businessman Lim Kang Hoo owns 60% of Iskandar Waterfront, both directly and through some subsidiaries, and the Johor state government owns the remainder. 

Malaysian state-run funds, including government pension funds, and financial institutions that sit on massive cash piles play a big role in supporting the country's equities market. When foreign institutional investors go on a selling spree, government-backed buyers tend to step in, limiting the market's downside. and thus providing a measure of security to investors who worry about the volatility that affects markets without a similar buffer.

WHAT YOU HAVE READ IS THE GOOD NEWS ... here's why its not so good:

We have to try and sustain the pace and offerings in order for Malaysia to be truly considered a viable choice for good attractive listings. I should charge a million bucks for giving this advice but never mind la, this one also give free. How come, when its talking cock, it has to be free, even though there may be some good stuff in the cock talking??!!



a) funds - if you get the listings, the funds will be there to mop it up; so far we have been doing the "good ones", the easy to sell at "cheap-ish prices"; the more anchor funds you have the better the platform as investment bankers will know that their placements will go well already; herein lies the issue, will some of our bigger local funds be "asked or forced" to take up certain issues to be seen as "national service" to help some companies to list???, or even to help enshrine Malaysia as the new capital of IPOs for foreign listing in Malaysia??;  or worse, ask the big local funds to mop up the sellers in post IPO to ensure a decent showing.

Funds will always be there as long as the company is attractive, there will be hordes of investors wanting a piece of the action; it is only when the issues are dubious, e.g. the recent Astro listing, that we would welcome more international participants as cornerstones - ever wondered why Li Ka Shing was a cornerstone in IHH and not Astro?? (key issue, we MUST allow our local funds to remain vigilantly independent in the whole scheme of things, if not, we will be gambling and not running the whole thing in a professional manner).

b) seriously folks, pipeline - how many more Feldas do we have, any more Gas Malaysias; a fact many of us may not be aware is that Malaysia already is probably the NUMBER ONE country in the world that have the highest portion of its GDP that is listed (I think more than 80%) - i.e. everything that moves in the Malaysian economy is probably owned by some listed firm already. What that means is that we have a very active listing mechanism. Every time we spot a company making more than RM3m-5m a year in profits, the IBs will be trying to list the company. Which is why many of our listings are smallish (thats OK) as well. The only things in our economy that do not get listed are our laundry shops, the fish head curry shops and our mamak stalls (although I think plenty of our mamak chains make very good money and provide exceptional ROI and ROE). The question then remains: where else are we getting more companies to list locally? Sure, we have a few in the pipeline for 2013 and then...?

c) what do we do - our population is small, which is why most of our businesses will be small, not a good start. Thailand has a good sized population 60m odd I think, Indonesia even better. Population provides scale which we don't. Look at the listings last year, Felda is almost the last bastion in major plantations to be listed. Astro is a rehash and a rerun like MASH (pun intended). Of course if we have more Anandas, we could always take some listed companies private cheaply and then relist them for higher valuations two years down the road - you get ten Anandas, you are well on your way to recycling IPOs.



This is what we should be doing. IHH is a grand example. Take what we have, professionalize the management, acquire well and build and integrate, then list. We do not have the size organically, so we need to build inorganically. Too many of our company owners are happy being the biggest frog in a small pond. For every listed company which is successful locally, they already have a proven business platform on a small population. SCALE, LEVERAGE & BUILD ... who is doing it ... Khazanah tries but not even hard enough yet in my books. Best examples: AirAsia (you can hate Tony the man but you gotta love his brilliant entrepreneurship and vision) and CIMB. The blue print is there, unless there are things holding you back, why don't you go and build a regional business, then list the regional business on Bursa?? What is stopping IOI or KLK from putting all international ops in another vehicle and raise funds separately for it and build then list on Bursa. What is stopping Tomei or even PYT or even Carat from doing likewise?

OK, we may not be so aggressive or ready to bet the farm. Here is where good government leadership in finance comes in: use Khazanah more to tap businesses that can be built regionally, help them, fund them, be their partner ... there is your IHH. Do that for 3 companies a year, after 5 years, you will have 3 very decent IPOs coming back every year.

d) foreign listings - there is a window of opportunity with the Chinese IPOs and listing freeze in China and a blackout in the US. Yes, there are a lot of shenanigans there but opportunity is opportunity. Set strict rules. Set up independent task force for verification and checks and company visits over and over. Use only top accounting and audit firms. There is a genuine need for these Chinese companies to list as they are usually deemed too small for their markets or the wait is usually more than 3-5 years.  ... Till now, I have not YET seen ONE China listed company in Malaysia paying a decent consistent dividend, and they are all apparently making very good profits - get to the bottom of that, and we may see clear blue skies, or see a couple of M&A outfits taking some of these private at fair prices (e.g. 5-6x PER) instead of the 2-3x PER market prices, then you could seen a re-energised market. Doing nothing is PATHETIC.

e) selling selling - we can keep selling our assets, but how are we replenishing them. If we just keep selling soon most things in our country will be owned by foreign entities. Whenever there are great assets for sale, I do not see Malaysian interests bidding for them - F&N's APB for example; AIG's Asian operations; etc... We have to use our resources better, to shape our future, to invests in great regional and global business platforms, to help local companies do that. Otherwise, the IPO capital tag for Malaysia is another phrase for "Cheap Sale / Closing Down Sale / Everything Must Go".

Verdict: Its good to sparkle every now and then but if its not sustainable, its nothing in the end. Now that we showed that our structure and delivery are good to take big sized IPOs and do them successfully, build on them. But if we rely on our inherent private entities now, we will be sorely disappointed as we have listed almost every single one of them. (Side note, do you know that for most developed European countries that only 40%-50% of their GDP is listed, most of the wealth is still kept private.)

Whose Loss Is It ... Australia, Malaysia ... Who Will Feel It Most?

There is a brilliant doctor in NZ, a plastic surgeon to begin with, who is also a research scientist. Nothing too dramatic about that, except that in doing plastic surgery, he covered a lot of birthmarks on kids. He researched into it with hospital and research funding and when that ran out, he put his own money into it. He has managed to obliterate many birthmarks using novel and less invasive ways of treatment. What is remarkable is that his research is a big stepping stone to curing cancerous tumors.

Birthmarks will grow and multiply, they have stem cells and blood vessels (quite a major discovery by Prof Swee Tan), which means its close to tumors that grow. However, most birthmarks stopped growing after a while as if there is a stop switch. It is that stop switch that Prof Swee Tan is looking for which could very well be the key to curing or stopping cancerous growth.


So, why the headline? Well, he was born and raised in Malaysia. Did his university in Australia but OZ rules that all overseas students had to leave the country on completion. However, it was NZ which saw his potential contribution early and took him in.

Is it Malaysia's loss or Australia's loss??? .... Nah, top local political honchos will just shrug their shoulders saying "apa itu ..., di sini apa pun tarak... buat apa kita try to attract him to stay in Malaysia".

Side note, we have natural resources, we even have great tracts of land for development, Nusajaya is fine but we are at a loss to attract the right people and industry. Imagine over the years, we probably have let slipped at least 100 super achiever types like Prof Swee Tan. If we had nurtured them, provided the funding, resources and attention, we could have a viable plastic surgery sub industry, and we would have Koreans coming to our shores for surgery and not the other way around. And that is ONE TINY LITTLE EXAMPLE. Which is also why the Talent Corp won't be effective because its trying to bring down King Kong with shots of rubber bands from your fingers. It has to be a holistic top-down, from ground zero change of mindset, of education, of entitlement,of meritocracy, of citizenry ...

I believe the Australian medical community regard that as a very big loss - in terms of research leadership and flow on benefits.

But the one reading this feeling most angry , perplexed and disappointed should be the Singapore government "wtf... how can we let that slip through our talent netting, unforgivable, this is easy meat ... we must always take full advantage of 'meats' raised in Malaysia and then they simply allow us to take them in their productive years".

Time Travel

How many can you identify?

 Thats Jimi Hendrix with Mick Jagger

 Not many will get this one, Charlie Chaplin with Albert Einstein

 This one is very hard, James Dean with Elizabeth Taylor

 Oh, Mr. President, you make Clinton look like an angel