A Brilliant Deal For Axiata, Celcom and PUC - Malaysia's Largest Listed Internet Commerce Entity

Next week on 26th April, PUC will be holding its EGM to approve the acquisition of a 33% stake in Pictureworks, which comes with guaranteed profits for two years. PUC sprang a surprise just prior to the important EGM by disclosing the deal with 11th Street. In one fell swoop, we basically have the largest listed internet commerce entity in Malaysia. 

Can anybody say that internet commerce will not grow even more significantly in Malaysia over the next 2, 5, 10 years? Well, how can anyone "participate" in that growth in a listed vehicle? Now you have it.

Ask yourself, can you buy a stake in Lazada or Shopee or even Zalora??? Yes, maybe when they actually list. Plus when they do, you can be sure the valuations will be astronomical (in the billions of USD).

Lazada, is backed by Ant Financial and Alibaba. Enough said.

Shopee is backed by Garena Group. Garena is backed by Tencent.


Celcom Planet Sdn Bhd is a joint venture between ADS and SKP, which owns and operates an e-commerce platform known as 11Street Malaysia, and is one of the largest e-commerce companies established in Malaysia. 11Street Malaysia was originally a leading e-commerce company in South Korea, operating under the management of SK Planet Co., Ltd. which expanded its operations to Malaysia to grow and expand the e-commerce industry in the country. From 2015 to 2017, 11Street Malaysia reported an achievement of more than 300% growth in gross merchandising value (“GMV”), 160% growth to over 13 million product listings, and 200% increase to 40,000 sellers registered on its platform. As of 31 December 2017, 11Street Malaysia recorded a GMV of approximately RM427million for financial ended 31 December 2017, and total monthly unique visitors (“UV”) of 13.5million for the month of December 2017. 

The Investment Amount translates to an implied valuation of 100% equity interest in CPSB ranging from MYR333.33 million to MYR375.00 million (the “Implied Valuation”).

How expensive was the deal? If you were to take the historical Gross Merchandising Value of RM450m, it means PUC is coming in at a staggeringly cheap P/GMV of 0.6x. How cheap is that? Well, similar deals in the same tech sector have been in the 1.5-2.0x.

Why would Axiata/Celcom do such a deal? One, that the management of PUC has the ability and vision to take 11th Street to the next level. If you look at the new ownership structure, the original shareholders will still hold much hight stakes than PUC in 11th Street, so nobody's cashing out.

I believe some of the RM90m will be used to pay down debt at 11th Street. The burn rate at 11th Street has passed the initial setup stage. They are recording good growth and good revenues, hence any synergies and cost savings will go swiftly to the bottom line. 


PUC shall be appointed as a preferred partner of 11Street Malaysia provided that it shall offer competitive terms to 11Street Malaysia for the following (“Synergistic Collaboration”):- a. 11Street Malaysia’s marketing needs, especially in digital marketing; b. 11Street Malaysia’s payment gateway requirements for all its eCommerce services with PUC’s flagship digital services platform (“Presto”) being nominated and implemented as the Company’s preferred payment platform on all of its eCommerce services; and c. 11Street Malaysia’s technology needs for its eCommerce infrastructure and platform.

This is key to the transaction, elevation of PUC as the management and preferred partner. Obvious immediate synergies in e-marketing and e-advertising, the usual rice bowls for PUC. The management of PUC will be directing and putting in place the future direction of 11th Street, which is critical in being part of a listed entity. 

PUC wishes to announce that the Company had on 12 April 2018 incorporated a wholly-owned subsidiary in Malaysia, namely PUC Ventures Sdn Bhd (“PVSB”), under the Malaysian Companies Act 2016 (“Incorporation”). PVSB is incorporated as an investment holding with an initial issued share capital of RM1.00 comprising one (1) ordinary share. It is intended that PVSB identifies opportunities to invest or acquire equity interests in and/or enter into strategic alliances / joint-ventures with companies which are principally involved in electronic commerce (“e-Commerce”) businesses, electronic payment services, financial services, technological services, and related businesses including but not limited to media services, airline and accommodation services related (“Target Segments”), which are synergistic and complementary to the existing businesses of PUC and its subsidiaries.

This announcement which came last week would actually be quite significant. The establishment of PUC Ventures would indicate that Pictureworks and 11th Street and e-Wallet and Presto etc... would not be just a mish mash of investments by PUC. It speaks of a bigger cohesive agenda by PUC going forward. I believe PUC is mapping itself as a smaller Meituan or Tencent.

CONCLUSION

a) Valuation wise - PUC looks particularly compelling - just taking into account the impending absorption of the proposed stake in Pictureworks, which is very undemanding. Added to the guaranteed profit for two years, Pictureworks has a very good chance to be listed in HKSE Gem, which will translate to a substantive "potential value unlocking" if/when Pictureworks lists. Just follow the steady roster of clientele of Pictureworks: Malaysia, HK, China, Singapore... but largely in China, which bodes well for a China/HK listing (comfort level based on source/location of revenues).

b) Valuation wise - As indicated above, the P/GMV for the 11th Street deal makes a lot of sense for PUC. Should they be able to bring up the revenues of 11th Street from 2017's RM427m to a billion ringgit within 2-4 years, that would certainly make it highly attractive to list or be sold to even bigger whales at a valuation closer to 2.0x P/GMV. As always, 11th Street is a highly sought after asset platform, hence the permutations for a sale or joint venture or seperate listing are always on the table. Another potential kicker in PUC's inherent value, which they bought at a very reasonable valuation.

c) A COUP - If you were to believe the media, JD.com and Alibaba were also trying hard to buy 11th Street. Of course both have bigger firepower and money, but then it would immediately lose its Malaysian roots. I think thats part of the broader strategy by Axiata/Celcom, to bring in a local champion and bring about much higher valuation, maybe a Malaysian "unicorn" in the making.
https://www.lowyat.net/2017/143327/report-alibaba-jd-com-competing-acquire-11street-malaysia/

d) Institutional Funds - Fund managers now can no longer ignore PUC. It is a "must have" being the biggest listed internet commerce entity. That should see an upsurge in institutional holders. 

e) Data Science & A.I. - The bigger picture going forward. I think PUC is one of the very very few tech based companies that understand the whole ecosystem of the new world and the new future. PUC Ventures would be the vehicle to jumpstart alliances and investments. Just gauging its corporate moves for the past years and a half would paint a company and leadership that understands the really "big picture".

Trade Wars - Sense & Sensibilities

My view: I like it that China has retaliated tit for tat, because there is no way a trade war will be good for either country. The fact that China did that will actually hasten the "end" to the trade wars quickly. Trump will now have to sit down and negotiate a kinda truce. 

The emerging markets selldown has been way overdone, a kneejerk reaction which has lowered average PE valuations of emerging markets to a 2 year low. I agree with strategists who called this a great opportunity for "all-in" into emerging markets, buying on this dip.


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Some of the talking heads on the same issue (as reported by Bloomberg):

Simon Smiles, chief investment officer at UBS Wealth Management for ultra-high net worth clients, said the potential market overreaction gives further reason for money managers to buy into weakness.

“We’re all-in, in terms of the growth impulse, in terms of the relative valuations and that’s against a backdrop of being constructive on risk assets more broadly," he said on Bloomberg TV, adding that UBS is overweight emerging-market equities and hard-currency debt.

Gene Frieda, global strategist at Pacific Investment Management Co.:

• "The market reaction is confused, reflecting the fact that it has no historical narrative on which to fall back. Today’s Chinese actions were not surprising, but the market response shows how confidence has been diminishing"
• "You cannot separate tweets against tech firms from tariff actions against China. This is a material change relative to the first quarter, when the market was bulletproof to bad news"
• Frieda said most probable scenario is a negotiated settlement before the first round of tariffs kick in on both sides. Yet second-most probable is that round one happens with the goods that have now been put on the table
• China has a strong desire to deescalate the situation
• Argentina and Brazil could be "unintended beneficiaries" from soybean tariffs

Anders Faergemann, senior fund manager at PineBridge Investments in London:

• Increased tensions may actually benefit emerging-market assets as markets could dial down their optimistic view of global synchronized growth and ultimately global yields will come down. That would add to the return outlook for spread products such as EM, he said
• "Valuations have already adjusted sufficiently to compensate for the increased equity volatility and EM spreads are better value now"
• "As long as China’s retaliation to the U.S. provocation remains within reason, which is our base case, fixed income should benefit and the appeal of EM remains strong and it stands to benefit from investors returning to a 2017 frame of mind"
• Faergemann favors the Mexican and Colombian pesos in this scenario as markets seem to be overestimating political risk associated with their upcoming elections

Anastasia Levashova, a fund manager at Blackfriars Asset Management in London:

• A trade war will have a mixed impact on EM countries as China buying less soy, avocados and wine from the U.S. means they’ll buy more from developing nations. On the other hand, no one knows where it will escalate, she said.
• More important indicator of direct competition between the U.S. and China was the launch of renminbi crude oil futures, a clear trend of strengthening their own currency and trade balance

Kathy Jones, chief fixed-income strategist at Charles Schwab:

• "It looks like a mixed bag for EM. On the one hand, it could benefit agricultural producers like Brazil and Argentina, but I doubt that is enough to offset the concerns about slowing global growth and protectionism"

Sebastien Barbe, head of emerging-market research and strategy at Credit Agricole CIB

• "It fuels the risk of a trade war, but we are not there yet. China has intensified its rhetoric, but I think we are still in a hard negotiation”
• If risks continue to intensify, Asian currencies would probably be most affected as some countries would be hit given supply chains and considering economies are more open to trade than other developing regions

Sean Newman, an Atlanta-based money manager at Invesco Advisers:

• Although trade war fears should be taken seriously, it isn’t a factor in his long-term outlook for emerging-market assets
• "We like buying here but are conscious that trade tweets may present some downside risk," noting Trump’s tweets on Monday, where he "hated Nafta in the morning and wanted a deal by the afternoon"

Greg Saichin, chief investment officer for emerging-market bonds at Allianz Global Investors

• "I still believe this is a negotiating stance for the U.S. -- somewhat justified, somewhat politically driven by the mid-term elections in November. The Chinese understand this"
• "Up to this point, Mexico was getting all the collateral damage given the negative NAFTA rhetoric. Now I’m not so sure. If this escalates into a full blown trade war then global growth will decrease with negative repercussions for oil and metals"
• Marginal producers for oil and metals, or competitive producers with high fiscal break-evens will be negatively impacted, he said. Frontier markets such as Ghana, Angola, Mozambique, Zambia and Ecuador, which rely on these commodities as a primary source of foreign-exchange generation, could be particularly hurt.

Alejandro Cuadrado, global head of FX at BBVA in New York:

• Cuadrado says he doesn’t share investor fears yet and hasn’t altered his long-term outlook for emerging-market currencies.
• He favors the Colombian and Argentine pesos for their carry

Uber/Grab and Uber/Didi - Further Examination Of The Deal

Grab is now well on its way to a lucrative IPO following the Uber deal. The deal makes so much sense for all. Uber divested its China ops to Didi and got a substantial stake, the same with Grab. By opting out of the fight, basically it elevated both Didi and Grab into highly listable vehicles.

Mega-potential tech IPOs are getting better at financial acumenship.  Its not always market share. The key is by opting out, Uber need to spend so much  less to burn in those regions. What you do not burn, it goes straight to the bottom line. Secondly, you get equity stakes that elevate your inherent "assets",  which will further lift your own valuation. Thirdly, the moves will allow Didi and Grab to attain much better IPO valuations. Fourthly, it will lock up "regions" for each of them, so as to not needing to fight them tooth and nail in every corner of the globe.

However, this strategy should only work if there are truly just the two of you in a market. If you wish to duck it out more when its a duopoly, it will be a long and expensive fight as both sides keep raising new funds to quash the other side.

I am surprised that there has been no government intervention in these deals because they are really duopolies which are taking advantage of the market conditions at the expense of consumers. I DOUBT VERY MUCH these type of deals will pass in an E.U. setting. Kudos to them to negotiate such deals in "monopoly/duopoly friendly" jurisdictions.

I'd do the same thing if I was any of them, I would also speed up to list before "new rules" comes in on duopolies to prevent any kind of "collusion" (seeming or apparent) or to give rise to "the erosion of a competitive market" or actions "that are not in the interest of the consumer". An immediate group which will not like the deal- the drivers.

SINGAPORE: Uber Technologies Inc. has reached an agreement to sell its South-East Asian ride-hailing business to rival Grab and could announce the deal as early as Monday morning in Singapore, people familiar with the matter said.

The agreement – which includes all of Uber's operations in South-East Asia as well as Uber Eats in the region – gives Uber a stake of between 25% and 30% in the new combined business, they said, asking not to be identified ahead of an official announcement.

The deal, which Bloomberg outlined earlier this month, marks Uber's operational exit from yet another major market and hands a victory to Grab.

SoftBank Group Corp, a major backer of Grab and Uber as well as China's Didi Chuxing, has pushed consolidation to improve the profitability of a global ride-hailing business that bleeds billions of dollars a year. New entrants and the strength of second-place regional players such as Lyft Inc in the U.S. has complicated those efforts.

The deal represents another major retreat from international markets for Uber.

Travis Kalanick, Uber's former chief executive officer, sold Uber's business in China in 2016 in return for a 17.5% stake in Chinese ride-hailing leader Didi Chuxing. Then Uber agreed to sell its Russian business to Yandex – just before after Dara Khosrowshahi took over as chief executive.

Khosrowshahi has been pushing to clean up the company's financials in preparations for an initial public offering next year. Pulling out of markets like South-East Asia would boost profits at a company that has burned through US$10.7bil (RM41.92bil) since its founding nine years ago.

Khosrowshahi signalled during a trip through Asia last month that he is committed to key markets such as Japan and India.

Grab, which has more than 86 million mobile app downloads, currently offers services in more than 190 cities across Singapore, Indonesia, the Philippines, Malaysia, Thailand, Vietnam, Myanmar and Cambodia. – Bloomberg

Read more at https://www.thestar.com.my/business/business-news/2018/03/25/sources-grab-seals-deal-to-take-over-ubers-southeast-asian-operations/#t51Wg2XxfseS85Te.99

Wineknot - Sublime, Subliminal, Substance

Wine bars are aplenty in KL. What makes a wine bar better than the rest? 


SUBSTANCE - Wine

If you want to speak of wine selection, thats a fair comment, but seriously, wine bars do not produce wine. Oh, you mean you have a skilled curator or sommelier ... (the latter is almost unnecessary unless you are talking about a 5 star or Michelin starred restaurant with an enormous selection to start with). 

What I am saying, getting a good variety of wines is not difficult, just peruse a few wine review magazines religiously, and try to stock up on those rated 85-88 or higher, further filtered by their prices (as most of wines consumed in wine bars has to be priced between RM150-400) ... just for show, include 10% of your selection of those between RM800-2,000... and you are on your way to becoming a more than decent wine bar. Another trick is to have very few of the first growth, aim for the second/third for value pricing.






























Recently, I was introduced to Wineknot @ Taman Desa. To me, it probably is one of the top 3 places for wine. Better than that, the accompanying food are either good or excellent.


SUBLIMINAL - Senses

I like a place that not only provides the structure for a wine bar, put some wine there and call it a wine bar. Walk inside and you are instantly attracted by the ambience - its not the over the top "speakeasy lush designs" but rather very warm tones accented by the liberal usage of wood and dark hues. A lot of thought obviously went into the lighting, which was inviting and soothing.

While on design, I must applaud the way they laid out the place, they created walls which basically makes for plenty of nooks and corners for added privacy and seclusion.



All of that make you wish to linger at the place longer, more comfortable to have lengthy conversations.








SUBLIME - The Food, Oh The Food

Actually this place need not even be a wine bar cause the food is usually excellent. The owner is the cook and she creates unbelievably yummy dishes. Iberico is a frequent item, as reflected in the full name of the place. I loved the fried meehoon, to me its a 1 Micheline star dish.

Crispy duck confit

Iberico aglio oilio

Mapo tofu pasta

Matsuzaka beef

Iberico ribs

Iberico rendang with petai





These are just a few of the many more tantalising dishes.




Wineknot Wine & Iberico Kitchen
Address: Danau Business Centre, 9-0-10, Jalan 3/109f, Taman Danau Desa, 58100 Kuala Lumpur, Federal Territory of Kuala Lumpur
Operating hours:  opens everyday, 3:30pm - 2am

People Who Bitch About Good Hawker Food Prices

PEOPLE WHO BITCH ABOUT HAWKER FOOD PRICES 

(I meant "good hawker food", if they were no good, you would walk away, no need to bitch):

so you are questioning how much margin he/she should make... on a bowl of labour/passion, that is your favourite... why we never question what the margin is for I Phone ... or concert tickets... 

but we would question the humble hawker, the vegetable seller who brings his products from the farm... the langsat seller from the back of his truck... 

we happily pay 400% margin to big ticket items but will squeeze the 20-30% or even 50% down for genuine strivers

or is it that we think hawker food should be affordable .... says WHO?? ... this is not socialism or communism ok... good hawker food are not essential items ... think its too expensive, don't buy... just like your I Phone ... eat bread, or better still fucking cook it yourself

We seemed to think that we have a NEED to CAP their fucking salary... would you like me to cap your salary!!??.. 


Is it that we have a mindset that hawkers should never, ever, fucking earn RM10,000 or RM30,000 or RM50,000 a month??!! Check your prejudices.

Meet Your Second Wife

Saturday Night Live... fun show with elements of adult humour, poking fun at politics and celebrities. Every now and then they hit the nail on the head with a superb sketch on "Meet Your Second Wife". The truths and facts that no one wants to examine or be examined. Its achingly funny but also instructive and enlightening at the same time. Enjoy ...

Black Panther - Best Movie For A Long Time

Movie Review BLACK PANTHER: Save you to read till the end, its a 10/10 movie for entertainment, and a whole lot of bonus points for many more meaningful things. BP is a standalone superhero by Marvel. The director and writer were excellent here. It makes sense, was believable and logical even though we were in the realm of superheroes. 

As a superhero movie, the storyline was brilliant, moving and not a single boring moment to speak of. Characters were given time to flesh out hence you empathised with most of them. The effects were devastating and not entirely over the top. The high tech environment was brilliantly crafted and fun to watch. 

This movie is a watershed movie, more important than the entertainment value it professes to offer. A largely black cast, and it will be a very successful film at the box office worldwide I am sure - its the movie that showed that a superhero need not be white, and that minorities can be more than just an add-on or two in a big movie. The ramifications will be that minorities can carry a picture, that kids everywhere will have a more varied platform to choose from as their role models, nobody should be constrained by race or colour. In many aspects, its empowering for many people, and will cause a lot of rethinking (in a positive way) for the social media and entertainment industry.

The movie also tackles the oppression of certain groups, when tolerated by the bystanders, is that right? A more resonating excerpt from the movie, for most Malaysians in particular, was the two line dialogue:
"If you are loyal to your country, then serve your country", followed by the vociferous reply "I love my country, I will save my country".

Chinese Food - OMAKASE ... Divine!!!

You put forward the word degustation, and immediately its fine dining and you are preparing to pay at least RM300-500pp, same for Omakase which is chef's choice in Japanese restaurants. This restaurant is the best discovery for the longest time, and you have to call to book first, and say you want Omakase as the chef would have to shop diligently for freshest ingredients.


paku pakis, blanched cold till crispy with sour chilli sauce, topped with prawn oil butter  8/10

easily my favourite dish, the soup was amazing, 8 hours with 3 different birds/bones as stock, and complements the melt in your mouth cabbage  10/10 

slow blanched pork belly, with cucumber and ginger (which gave it a lift)  9/10 

crispy chicken skin, the meat was actually fish ... Sek Yuen does this a bit better, but good nonetheless   7.5/10

I would call this a salad, well done eggplant plus squid and okra  8/10 

The place is known as Xiao Lao Wang hotpot restaurant, hence 90% of patrons go for hotpot not knowing Omakase was available but you can't order it as a walk in patron owing to preparation time needed. Its located at The School, Jaya One, ground floor. 

Another must have, soup cooked entirely with coconut water and chestnut, brilliant soup... the chicken is a special breed but I kinda forgot which breed ... you dip the chicken into boiling broth. Immensely enjoyable, the soup was at another level   10/10 

Their accompanying dipping sauces alternates according to different dishes, good attention to detail and some of the sauces were different, nuanced and refreshing.

A hit among lovers of rice with the stewed pork leg's sauce... not salty and just right.  8.5/10 

A delicate surprise, cheong fun with a chicken feet wrapped inside.  7/10 

Some friends have been there before and were gushing, hence I was invited to join them yesterday. Omakase refers to what the chef thought would be best served on that day depending on available freshest ingredients. However we did request for some of his signature top notch dishes - and you should too to avoid disappointment.




The steamed pumpkin with ginko and yam, old fashioned dish but warm nostalgic feel, pretty good.  8.5/10

My friends had this at a previous Omakase and swears on it. Sweet and sour soup, but exquisitely finished at the table with duck egg poured over.





The good news is the Omakase cost around RM200-250pp, great value for many kungfu dishes.

Market Correction or Bear

There is a huge difference between a market correction and a bear market. A proper correction reaches about 10% off the highs, while a bear market needs a 20% correction from the highs or more.

The correction was much needed, digesting the rate hike in the US and possibly another within the next 6 months. The rise and rise of ETFs as a sector of overall equities market seem to have exacerbated the correction as redemptions tend to have a "me-too" follow on effect. 

For me, I think its a much needed correction, not a bear market situation. There is still the massive injection of funds with the new repatriation laws affecting US companies bring back profits back from overseas. A lot will go into shares buybacks and some reinvestment in US. The flow on effects have not been fully discounted yet.

Plus, what are the alternatives for funds now? In spite of the rate hikes, interest rates are still benign. There are not many places to go.

I expect a swift rebound within the next two days.

ISAKI - Excellent Japanese Food & Wonderful Ambience

Isaki or Grunt Fish has a very light and delicate taste. Grunt fish can be eaten as sashimi, grilled with salt or marinated with chili leaves. Isaki is also a wonderful restaurant in Sri Hartamas. Located at the end of the row that houses Backyard pub, Bulldog, Aunty Nat and Saigon .

I love its outdoor garden setting. Coming into the open bench area that is its portico, one gets a nice feeling to the place, a friendly vibe that Isaki has a casual dining side to it. The pebble lined walk, the Japanese wooden lanterns and small pine wood slats that the waitresses scurry across in typical wooden sandals. Upstairs is a large area that lends itself perfectly to parties and events, with ample bar and seating. You get the overall impression of intimacy and minimal pretensions here. Here I have to say that they make the best sushi rice - an often overlooked factor. I mean, the seafood has to be fresh and the cuts appropriate, those are a given. However, not many places take the case to come up with proper sushi rice. I shy away from the Sushi Kings and Sakae Sushis because they have no idea how to do the sushi rice. Maybe its because they are "process-manufactured", the rice is packed as hard as a chinese dumpling, and the rice vinegar-sugar-water-salt mix is almost indistinguishable. In Isaki's case, the mix is excellent plus I suspect they do put in a dash of sake or kombu.

Isaki's sushi rice is so good, I can eat the rice on its own.

Somehow, a good sushi rice place has to equate to a good place for sake. At Isaki, you know they are serious when they have 4 different huge sake bottles being heated at any one time, and the sake menu is extensive.

I have never seen a Japanese restaurant that has so many pork items on their menu - its an eye opener. It could very well be that the restaurant is more influenced by Okinawan cooking (will ask them next time). Okinawan cooking tends toward stronger and spicier flavors than Japanese food, and is more heavily influenced by Chinese cooking styles. Hence pork is a very important ingredient to Okinawan cooking. Other items on the menu that are very good: the buta kakuni (steamed pork belly) and buta shishilo itame (pork slices with Japanese chillies). The garden setting makes for a wonderful place to have a barbecue as well, as almost one-third of their menu is catered to having the mini barbecue pit at your table. Fresh ingredients, lotsa meats and veggies, lotsa sake (hot and cold), wonderful outdoor setting, how not to like the place.

Lastly, I want to mention that its a very dog friendly place. If you go in the evening, you are likely to see the owners, a tanned Japanese man who won't be back in Japan anytime soon and a lovely Chemor girl called Maggie Liew, with their two beautiful dogs - one is the cutest bulldog that looks like a bodybuilder gone bad, while the other is a lovely dobbiemix with a nice shiny coat - both absolutely people friendly. The place is very dog friendly.

I know some people has a list of so called pet friendly eateries - to me, most of them are not pet friendly, but rather if they have a patio/verandah, they don't mind you bringing your pets. Those are pets tolerant places, not pet friendly, they just accomodate you because of your business. Genuine pet friendly places are an inclusive and embracing environment for responsible dog owners who bring their dogs out because they are part of their family rather than just pets. 

EPF Should Not Sell PLUS

Is there an alternative to North South Highway? How much of toll roads come under PLUS? There are 14.5m EPF members. We begrudgingly pay tolls, at least thinking some of it goes back to EPF returns.

If you look at our population bell curve, you can surmise that we are a growing population with a relatively wider base. In many aspects we are skewed towards a younger working population. This means that the annual contributions to EPF is likely to grow even more.

We can also surmise that there are limited investing opportunities locally, taking into account the kind of risk EPF is allowed to partake. PLUS is a significant player in an infrastructure that plays a critical role for the country. To replace PLUS with a similar investment with similar returns would be very difficult.


Fair Value - Not Enough Even

As a socialist-capitalist, I can be torn between getting more than a fair return on investment. That is, if an asset is being sold at higher than normal valuations, by all means, sell. I am certain that any potential buyer would have to offer a premium. The question then is how much of a premium would it make sense for EPF and Khazanah to dispose PLUS.

To me, the premium would have to be very high, so high that it would be silly not to sell, so high that it would be sillier to buy.

p/s: Yoona of Girls Generation


Critical Asset

Imagine a few years down the road, instead of the usual 5-10% annual increment, you see your normal RM1.10 toll

being raised to RM2.50. I am not saying it will happen. Yes there are rules to safeguard some of the increments, but seriously, it can only go up, and it won't be LESS than when EPF/Khazanah are the owners.

We are already having to increase our investing overseas owing to the deluge of contributions into EPF. We should not replace PLUS or assets with similar values.


Cornerstones Should Not Be Tampered With

We should be thankful that EPF has been able to give around 6% annual returns (tax free). Go and ask CPF whats their rate for the past few years. The high-ish rate is thanks to a solid platform girding the overall investing philosophy. Cagamas and other critical asset like PLUS are the cornerstones. You do not want to remove the cornerstones as the foundation would be shaky then.