Sunday, April 28, 2019

Drama Minggu Ini - Seacera


Points To Consider:

- Net current assets of Seacera was RM838m, largely backed by its 501 acres of land in Semenyih.
- Current management and CEO proposed to do a jv on that land with Duta Skyline (OCR)
- Datuk William Tan is the single largest shareholder with a 16.4% block and has pledged to inject RM30m into the company to resolve the company's cash flow. Tan basically was against the jv.
- Seacera just defaulted on an RM25,451 payment for its Ambank Islamic loan, putting it into PN17.
- Tan also mentioned that if he manages to take over the company he will declare a 10 sen special dividend after minor asset sales.


Commentary:

- Obviously Tan has other plans to develop the 501 acres, apparently with strong China involvement (Country Garden). So who is to say which jv is better? The CEO has the right to call the shots here.
- However, the CEO and present management totally ignore their largest shareholder's pledge to inject RM30m. How to justify the "silly" missed payment of just RM25,451? Cutting the leg to get rid of an itch!!!
- Should the SC step in? In this instance, there appears that there may be a case that the CEO may not have been acting in the company's best interest. On that note, the board of directors should have a lot to answer as well.
- This is an interesting situation where the shareholdings are splintered and no one really has effective control. What are the rights of the largest shareholder then?





Seacera now a PN17 company

KUALA LUMPUR: Seacera Group Bhd has become an affected listed issuer under Practice Note 17 (PN 17) under the Main Market Listing Requirements of Bursa Malaysia Securities.

It said on Friday that it had triggered the prescribed criteria after it defaulted in the payment of principal and profits to AmBank Islamic Bhd and it was also unable to provide a solvency declaration to Bursa Securities.

Trading in the securities of Seacera was halted at 11.48am on Friday. The tile maker's share price was flat at 31.5 sen before its request for voluntary suspension.

The tile maker has 12 months to regularise its financial condition. It also has to submit a regularisation plan to the Securities Commission if the plan will result in a significant change in the business direction or policy of the company.

However, Datuk William Tan Wei Lian (Chen Wei Nan), the single largest shareholder of Seacera with a 16.4% stake, pledged to inject RM30mil, or more into the company to resolve its cash flow and credit liability, if need be.

The company had attracted interest following Tan's move to call for an EGM to remove several directors.

In the latest development, Seacera announced that its application for injunction in respect of the notice of EGM issued by Tan and three others was heard on Thursday before the High Court judge.

Seacera had withdrawn the application on the undertaking provided by Tan and three others that "they will not jointly or severally issue any fresh notice of EGM until and unless they are members of at least 10% of the company".

Apart from that, Tan and three others had also withdrawn the notice of EGM dated April 15, which the company reserves its rights.

Read more at https://www.thestar.com.my/business/business-news/2019/04/26/seacera-suspends-trading-ahead-of-fresh-news/#lcjGHfAueZ0IkefT.99







Wednesday, April 24, 2019

Pogba Plays For Liverpool


What's up with the headline? My dua sen on the KT (UBS) mini-series.

Was it a difference in opinion? The answer is no. KT can't seem to understand the difference between current account deficit and fiscal deficit. OK granted, maybe KT failed first-year Econs, we don't know. Maybe he didn't even take Economics, I mean we have law graduates and even engineering graduates entering financial services and investment banking all the time.

For non-finance readers, the above views by KT is like a so-called football expert coming on TV commenting that Pogba played so bad for Liverpool. You as a football fan would CRINGE no end. That's probably how Tony Pua, Ong Kian Meng and most of the financial community felt.

I asked around my older friends in the industry, two who have worked with KT at Jardine (HK) before,  anecdotally their comments ended with "...an absolute xxx#### who never has anything good to say about Malaysia.." (or something to that effect). Not my words but those were the words I heard.

How the hell does UBS allow someone seemingly incompetent to rise so high? Well, it happens in MOST industries and to most people in high positions. Some people are just lucky, some were born to the right parents, some have relatives in high places, some have relatives who could hand them business on a silver platter, some just inherit the earth and all, some just so happened to attend the same school or were classmates to powerful people ....
... some because their gift of the gab is better than their IQ, most get to their positions based on the sales-ability (salesmanship)... whether you are CEO, Senior Manager, I don't care what industry they are in, a lot of selling is involved. You sell the products and services to clients, but more importantly, you have to sell yourself to the decision makers in your firm ...

 In the end, ask people at the most senior positions everywhere... be it Bursa, GLCs, the top 20 listed companies in KLSE ... their one hidden fear ... it is the same for all of us... "I HOPE NOBODY FINDS OUT HOW AVERAGE I AM"


https://www.theedgemarkets.com/article/ubs-remains-positive-malaysias-longterm-prospects?fbclid=IwAR0fNfd9gs7ew1IcrWfjgNuSBi-5q6Y5oN7UuhRkYgHb1xWctFC1WVd9yHE


KUALA LUMPUR (April 24): Swiss banking group UBS remains positive over Malaysia's long-term economic prospects, and has forecast economic growth of between 4.6% and 5% in 2020.
In a statement today, the Singapore branch of UBS said the Malaysian economy should start to see improvement in its exports alongside a stronger currency, since the Chinese economy is turning around.
“We have also recently upgraded our 3, 6 and 12-month forecast on the MYR (versus the USD) to 4.05, from 4.15 previously,” UBS said.
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In its statement, UBS also sought to clarify certain misunderstandings arising from a recent video interview featuring its regional chief investment officer Kelvin Tay, aired on Bloomberg TV on April 12.
“In the context of the interview question on the equity outlook for the region, Kelvin had inadvertently used some wrong terms given the short duration of the “live” interview and would like to clarify the following: He was referring to the Malaysian government’s projected “fiscal deficit” of 3.4%, and not “current account deficit”.
He was also referring to the government’s revenue and not GDP, when he mentioned that cancelling GST would result in a higher dependence on oil prices. He used the term “oil” to loosely refer to sectors that are closely correlated to oil price movements. In context of that discussion, he was referring to the fiscal deficit,” a UBS spokesperson said.

TONY PUA's article:
Current account surplus
Firstly, Tay argued that Malaysia had a current account deficit. This is quite scary as Malaysia has always prided itself as an economy with a current account surplus, with our value of exports well exceeding imports being one of the country’s key strengths. 
Any analyst worth his salt covering Malaysia should definitely know that.
For example, in 2018, Malaysia registered a current account surplus of 2.3 percent of the GDP. Given Malaysia’s very healthy trade surplus so far, the country’s current account balance will remain in surplus for 2019.
Malaysia does, however, have a moderate fiscal deficit which is typical of developing countries. For 2018, the deficit was 3.7 percent of GDP, while it is projected to fall to 3.4 percent this year. The finance minister has also projected the fiscal deficit to further decline to 3 percent for 2020 and less than 2.8 percent for 2021.
Malaysia is a diversified economy
Tay also claimed oil revenue made up 30 percent of Malaysia’s GDP.
This is completely incorrect. Malaysia is well-recognised by rating agencies and the investment community as having a fairly diversified economy with mining (including the oil and gas sector), manufacturing and services making up 7.9 percent, 23.0 percent and 55.5 percent of the 2018 GDP respectively.
Perhaps Tay was trying to highlight that oil and gas revenue is expected to contribute approximately 30.9 percent of 2019 government revenue. 
Even so, the UBS fund manager failed to highlight that the underlying contribution of oil and gas revenue as a percentage of government revenue is projected to be only 22.0 percent, after fully discounting the one-off special dividend from Petronas.
As announced by the finance minister in his budget speech, a one-off special dividend of RM30 billion is offered by Petronas with the specific intent of contributing to RM37 billion of GST and income tax refunds which were hidden and undisclosed by the previous regime.
In fact, oil and gas revenue as a percentage of the government’s total revenue has been declining over the years, with the peak being 44 percent in 2008.
Fiscal deficit target is intact, with pro-growth policy in place
As a direct result of Tay’s misguided understanding of Malaysia’s economy above, he went on to conclude that weak Brent crude oil prices – currently hovering at $71 per barrel – would negatively affect Malaysia’s growth since the Government was projecting Brent to average US$70 per barrel this year.
Tay failed to acknowledge the fact that every US$1 decline in crude prices will only affect approximately RM300 million of government revenue, and hence even with a US$10 decline, the overall revenue impact will only be RM3 billion.
Any such negative impact on government revenue as a result of weaker oil prices would be compensated by the new revenue measures which were announced by the finance minister in his budget speech, but has not been included in the government's official budget figures. The new measures are expected to raise an additional RM4 billion to RM5 billion of revenue for the government.
Government enjoys comfortable majority
Finally, Tay claimed a political paralysis in the country. This is untrue. On the contrary, most will certainly agree that Malaysia was paralysed by the 1MDB crisis before the change of government in May 2018.
However, with the change in power, Malaysia has now received a fresh renewal impetus, with the government pushing hard for greater transparency, improved governance, reduced corruption and increased competition. 
These reforms are difficult, will create short term headwinds and will take some time to demonstrate results. Nonetheless, the persistence of the new administration to carry out the reforms will certainly strengthen the country’s fundamentals to create continued economic growth when the global economy recovers its steam.
The new government commands a comfortable majority in the Parliament, controlling 63 percent of the seats in the Lower House. The fact the Malaysian government has successfully renegotiated the cost of multiple large high-profile infrastructure projects down proves there is no paralysis and indeed, the government is pressing on with various institutional reforms it promised to the Malaysian electorates.
Facts please
Bloomberg is a global media giant with humongous traction and audience. Tay’s ‘sensational’ interview with Bloomberg has been viralled widely on the social media to cast very negative aspersions of Malaysia. 
I would further like to state that we welcome fact-based criticisms and constructive commentaries. Malaysia, like any other country, isn’t perfect and is doing its best to recover from the damage caused by the previous kleptocratic administration.
Bloomberg, with the power it wields, certainly has a duty to fact-check information presented by their guests, especially when the mistakes were so elementary. If the information is outright false and damaging, they should be corrected.



Monday, April 22, 2019

IWCity and Ekovest

Its been a long, long, long while we haven't seen such a robust market like today. Ekovest and IWCity led the way. Both closed up limit up with substantive volume. The announcements by both companies after market close was NECESSARY based on full disclosure.

Naturally, this set tongues wagging that its all for naught. Really... is this our first rodeo??? Many big projects are awarded to private companies or joint ventures because it is easier to sort out details without revealing too much to the market. Subsequently, they usually will be injected into linked listed companies just based on the nature of project and capital requirements.

You cannot expect market investors to ignore such news because both companies are tightly controlled by LKH. A stock market is a forward discounting machinery. Judging from the longevity of the project and the massive capital requirements, and the fact that he has already listed companies in the correct sector - it would take an idiot to surmise that he won't inject into these two companies.

Surely Ekovest would be the lead player followed by IWCity. Remember when LKH got the same project before being unceremoniously taken away by you-know-who ... it was supposed to be injected into IWCity but the insufficient profits there made fundraising a problem. Hence this time around, it is likely that Ekovest would be the lead company.

IWH in the jv owns 60% of the project and would need to pay its share of the RM500m = RM300m. Ekovest has a warrant expiring June 2019 which should bring in RM150m. Thus making the fundraising relatively easy. To do something else (e.g. keep the jv private; use another listed vehicle, etc..) would be multiple times more onerous.

Nonetheless, it is likely that some selling pressure may occur tomorrow but I expect the whole thing to rebound swiftly. (p/s I hereby declare I have zero holdings in both companies or its warrants). Buyers will have to grit their teeth and brace for the volatility.

Reading comments from i3 would lead me to conclude that there are too many newbies in the markets, or less than sophisticated investors. There is no need to jump and be startled on the news. It shouldn't be your first rodeo.

p/s this is just my opinion and not a recommendation to sell or buy



KUALA LUMPUR: Iskandar Waterfront City Bhd

, two listed firms controlled by Tan Sri Lim Kang Hoo, have issued separate statements to Bursa Malaysia to clarify that they are not involved in the revived Bandar Malaysia project.

The statements came after shares in the two companies jumped to their maximum allowable daily limit on Monday.



Both companies, in similar statements, told the exchange today that they were not aware of the reason behind the recent surge in their share prices. They advise investors to exercise caution in the trading of their shares.

"Save for the press release issued by the Prime Minister's Office (PMO) on April 19 entitled "Government to Restate Bandar Malaysia Project", in which the name of our sister company, IWH-CREC Sdn Bhd was mentioned, the company wishes to clarify that IWCity is not involved in the reinstatement of the Bandar Malaysia project," IWCity said.

Investors on Monday chased up counters linked to Lim on high hopes that his companies would benefit from the revived Bandar Malaysia project.


Read more at https://www.thestar.com.my/business/business-news/2019/04/22/iwcity-ekovest-say-not-involved-in-reinstated-bandar-malaysia-projec/#5pVD8rbMsmd7Phka.99

Sunday, April 14, 2019

Impeccable



impeccable
/ɪmˈpɛkəb(ə)l/
adjective
  1. in accordance with the highest standards; faultless.

    "he had impeccable manners"

    synonyms:flawless, faultless, unblemished, spotless, stainless, untarnished, perfect, exemplary, ideal, model;
    e.g. impeccable design; impeccably designed
    • RARETHEOLOGY
      not liable to sin.




not impeccable
/not ɪmˈpɛkəb(ə)l/
adjective
  1. things you can use a sledgehammer to wreck
    "not impeccable designs"

    synonyms:not flawless, not faultless, not unblemished, not spotless, stainless, 
    not perfect, not exemplary, not ideal;
    • RARETHEOLOGY
      liable to sin.



Monday, April 01, 2019

A Simple New Rule That Guarantees China's Economic Power Trajectory For The Next 40-50 Years



Like it or not, we all have to contend with the USA owing to its sheer size and voracity as demand for exports, plus their lead in technology and education, and their reputation as a financial center (capital disbursement).


The above image classifies each of the states in the US by comparing their state GDP that is similar to another country's GDP. Hence whenever there is a downturn or rise in business confidence, it is akin to 50 countries moving at once in the same direction. That is why we have to follow what's happening in the US, and why Trump is so dangerous.

Look at the image carefully, one day very soon, China's map will resemble the above image. Sooner than you think.

China has surged up the charts for economic power by mobilising its rural class to middle or working class. It was the greatest economic miracle to do that on a capitalistic playbook on a socialised platform. A watered down kind of communism.

China has done very well in moving the rural class to working and/or middle class. That energised a substantive group of working consumers, fueling demand for all things. Education has always been big in China, and the last 15 years have seen many students venturing to study at solid colleges, and many have returned armed with stronger international networking and inroads into technology and international finance.

Naturally China has recorded huge amounts of surpluses and their not so secret strategy has been to recycle the surpluses into buying of "intelligent global assets" that have important patents or just to get a strong foothold into certain industries which are not familiar to Beijing. That's basically the unvoiced spat in the current trade war between the two countries.



What China could not develop fast enough, they would buy. So what's the problem?

Look at the demographics of China. Thanks to its one-child policy, by 2040 24% of the population in China will be 65 or older. You would then have to contend with a different set of problems (like Japan) where your labour base is not wide enough to support the retirees. Your stronghold as a consumption middle class will have new issues to tackle with a dwindling population curve.

China's population will be peaking at 1.45bn by 2030. An aging workforce can erode gains in productivity. The current birthrate of 1.7 needed to rise to 2.1 to maintain a steady population, thus ensuring its status as an economic power.

Already certain industries have shown that you need to have China as a market or you shouldn't exist at all - take the movie industry. Soon, in various guises, more and more industries will face the same equation. Be in China, market to China or die.

The think tanks in Beijing are obviously ahead of the curve on this problem. In 2016 Beijing abolished its one-child policy to "two is better". That had a knee jerk reaction as birthrates rose for two years after that but the overriding demands of the modern world saw marriages being further delayed and fewer couples wanting to have more kids as demands on their time and resources are high. 

Beijing is proactive here, it will probably remove the "two is better" policy altogether... go and have as many as you want, so as to pull the bell curve back up. There will still be a need for more incentives to ensure a birthrate of 2.1 but at least Beijing recognises this early and is willing to ditch the socialistic playbook for a LKY-styled pragmatic push forward.

Why The Population
- Create a sustainable workforce to support the retirees
- Replenish the middle class as the domestic economy is a priority to shield from economic crises overseas
- A consumer base that is enhanced (like the USA now) makes everybody kowtow to you for better trade ties, and indirect how your influence infiltrate the world of politics
- Better management of surpluses will allow for "control" and "dominance" over selected trade blocs, countries, shipping routes, access to certain prized assets/resources
- YOU NEED ECONOMIC POWER TO GO WITH MILITARY POWER FOR REAL GLOBAL LEADERSHIP

That is why China has basically ensured its status as an economic power stays on a strong uptrend trajectory by taking care of the population growth.

Countries Stock market's Capitalisation As A % Of GDP

 Why is the figure important ... if you can strip out foreign listings and non related listings (inclusive of SPACs) and maybe some REITs th...