Friday, September 08, 2023

Grumpy Old Man Syndrome

Sometimes we stereotypify something because we can see them in substantive numbers but we may not understand why they occur. Grumpy old men ... we all have more than our share of experiences with our fellow man. 

For women, we have had a lot of attention and research into the period when a woman goes into menopause. Hormone replacement therapy was a wonderful discovery for all humankind. We know that women lose a lot of the necessary hormones to be normal and hence many has to have some form of hormone replacement therapy.

Not a week goes by that I am not asked about testosterone levels. Especially one of the following questions:

—”How can I raise my testosterone?”

—”Can supplements actually boost testosterone?”

—”How do I know if I have low testosterone?”

The questions are endless. Testosterone is a hot marketing area for men, that strikes at the core of machismo and male health. Attach testosterone to any product with some hyperbole, and you can market it effectively.

But truth be told, testosterone levels are critical for male health. Low testosterone causes:

Low energy
Low sex drive
Low strength
Anxiety, depression, and general lethargy
There are no advantages to having low testosterone. Zero. Nada. In fact, hypogonadism (which is when your body is not producing enough testosterone) is linked to:

Alzheimer’s disease
Cardiovascular disease
Recent research even points to low testosterone being a precipitating factor for prostate cancer.

With all this in mind, it’s concerning that testosterone levels have been dropping in men worldwide for decades.

The reasons for this are legion:

Environmental endocrine disruptors, plastics, contaminants; lack of sunlight and solar radiation; lack of key micronutrients, skewed diets; lack of exercise, lack of sleep, increased stress; the list is long.

And this drop in testosterone is not only seen in humans, but animals as well. Across the world, environmental pollutants are affecting animal life and disrupting sex hormones.

The pragmatic reality is this:

Our environments and lifestyles do affect our bodies. And many men are slowly castrating themselves through their lifestyles.

Increasing your testosterone levels, and thus your general vitality, should be of paramount focus for all men.

High testosterone levels are a representation of overall good health.

You have everything to lose and nothing to gain by ignoring your hormone levels.

How come there is no therapy for men when we age?

Just looking at an average old man of 70-80 years. You know very well he will have some or most of the following problems due to normal aging (I haven't gone into specific diseases such as diabetes, heart issues, cancers, etc.):

- Slackening memory

- Osteoporosis

- Knee and ligaments issues

- Mood swings and irritability

- Loss of muscle mass

- Loss of strength 

- Virtually no production of sperm by testes

- Bladder control issues

- Loads of visceral fats

- Prostate issues

- Height loss

- Almost no more erections

- Very low libido and sex drive

- Possible depression
- Scalier and drier skin

- Decreased body hair

The sad truth is that the majority of men will go through their aging process from 40-50-60-70-80 with nary a word or care and just shoulder along. ALMOST ALL OF THE PROBLEMS CITED ABOVE HAS TO DO WITH THE LOSS OF TESTOSTERONE and NOT CARING.

What Can You Expect By Taking Andropause Succor

1-2 weeks:  

Better quality erections (hardness and ability to stay up longer)

More energetic and positive

Higher libido (sex drive)

Heightened metabolism

Less irritability and mood swings

Better quality sleep

More motivated and focused

Longer Term:   Stops hair loss

                      Less visceral fats

                      Retention of muscle mass

                      Better joints strength

                      Reduction in bone loss and danger of having osteoporosis

                      Elevated testosterone

                      Higher sperm count

                      Less lethargy and better temperament

Aging is inevitable but when there are sufficient research and science behind to remedy the situation, much like Hormone Replacement Therapy for women, we should take it.

By maintaining a sufficiently high testosterone level, we will age more gracefully and be active and have the strength to do more of the things we love.

ANDROPAUSE SUCCOR has formulated a largely herbal supplement to reverse the effects of low testosterone and more. Addressing anti-inflammation is a requisite platform to boosting overall health besides just raising testosterone for men.

You could be looking like someone like this on the left when you are 70-80. It's a choice.

Sunday, September 03, 2023

The Country Garden Factor In Forest City Revitalisation Plan

Forest City is a US100bn project. Country Garden supposedly holds a 60% stake with the rest by Esplanade Danga 88 (held by Johor state interest and the Sultan of Johor. CG missed two coupon payments totaling US22.5m last month.

- Resale prices have plummeted. Units were launched and sold in 2020 for around RM1,200psf. The resale market is being done at around RM500-550psf currently.

- The venture envisages accommodating 700000 residents in waterfront apartment towers on four man-made islands spanning 30 sq km (11.6 square miles) between Malaysia and Singapore. Only 9,000 people live in Forest City despite having 28000 residential units completed thus far.

- The concept and execution looked good on paper. CG with a top-rate brand, and many Chinese would like to somehow "transfer out" their wealth and exposure overseas - thus making Forest City an easy sale. That has been thrown out the window with the sharp downturn in China's own property market. Beijing, in order to stop public funds from going offshore (capital controls), has literally made it impossible for most Chinese to buy overseas' properties. CG is stalled and the buying from China has too.

- The pandemic only exacerbated the situation. Forest City was initially approved at the state level (where most land use decisions are made) even as the project skirted national environmental regulations. Eventually, the project developer was forced to address both national and even international concerns over the project. Local stakeholders, including coastal residents, fishermen, and environmentalists, played an important role in drawing media attention to the project. Singapore also voiced its objections, and knowing Singapore is a key player in the equation, a lot of work has been spent rectifying the concerns.

- If CG undergoes liquidation, no amount of incentives will be able to lift Forest City - it will have to undergo a long process of verification and tabulation. Residents would have to undergo an administrative process to submit proof to liquidators that they are indeed the rightful owners. CG would have to realize all its assets including shares it holds with its subsidiary companies in Malaysia, and that will include the developer of the Danga Bay project – Country Garden Danga Bay. If Country Garden Danga Bay is liquidated, residents who do not already own their strata titles might be forced to show proof that they are indeed the owner of the unit.

That's the gist of it, on the negative side.

Present Times

At present, CG has two main developments in south Johor – the US$100 billion (RM465 billion) Forest City flagship mega-development and the popular Country Garden Danga Bay on reclaimed land that has a gross development value of US$18 billion (RM83.7 billion). The developer also has a third project in Johor Baru called Central Park, which is still under development. The project is scheduled to be completed by next year and is valued at US$990 million (RM4.6 billion).

Bank Negara said that banks incorporated in the country had limited exposure to Country Garden, and added that the company’s Malaysia unit was servicing loans promptly. Bank Negara Malaysia told Reuters in an e-mail: “The current development with Country Garden Holdings Ltd in China is not expected to pose any material impact on the overall property market activity and prices in Malaysia.”

Interesting Points To Consider

a) Forest City is the largest international property venture for CG. They will try to shutter everything else before they touch Forest City. If Forest City is stopped by CG, that can only mean that the company is going under liquidation.

b) The ECRL (East Coast Rail Link) is considered part of China's Belt & Road initiative (thus making it a more important factor than usual). While the KL-Johor HSR is not exactly part of that initiative, it is also considered vitally important in terms of linking right down to Singapore.

c) Not to mention the numerous projects that China has a vested interest in in Malaysia, Malaysia is a crucial political ally in making sense of the sea rights in the South China Sea. Thus making Forest City not only a CG problem but one with greater ramifications to both countries.

d) The governments of Johor and Singapore are also discussing the possibility of launching further ferry services and will study the sustainability of a prospective new route between Puteri Harbour and Tuas. Unlike the already congested Johor Bahru city center or the area surrounding the causeway, the Second Link area has lots of land banks as well as well-developed infrastructure and facilities. Furthermore, it is close to a large seaport, the Port of Tanjung Pelepas, and the intended Kuala Lumpur-Singapore High-Speed Rail (HSR) station may be relocated to Gerbang Nusajaya (as it was previously planned).

In Closing
: CG is a very important factor in trying to revitalize and complete Forest City. Our government can do all the tax reductions and easy access plans, but if CG folds, it will add another 10 years of being in the wilderness for the project.

Hence, the newsflow on CG is of utmost importance. Their viability and the timing of the recovery in China's property market need to be closely followed. 

Following the recent issue of CG not paying the USD22.5m coupon on a couple of bonds, the world was watching to see if the creditors would grant an extension. This was critical in buying time to wait for the recent Beijing measures to pump up buying in the property market to come to fruition.

The X Factor: Country Garden had delayed a deadline for creditors to vote on whether to postpone payments for an onshore 3.9 billion yuan (USD537 million) private bond last Friday at 1400 GMT, as it strives to avoid default. On Saturday, Country Garden won approval from its creditors to extend the payments to 2026, a major relief for the developer and the entire sector.

While Country Garden's liabilities are only 59% of those at Evergrande, it has 3,103 projects across China, compared with around 800 for Evergrande - making the company matter to systemic stability while also fueling contagion fears as it shows signs of financial stress. The contagion effect means Beijing would pull out all stops to ensure CG not only survives but thrives. For now, the Chinese authorities are scrambling to introduce a string of measures, including mortgage rate cuts and an easing of home purchase restrictions, to revive the property market and prop up the sputtering economy.

How Bad

Country Garden's total liabilities were about USD194 billion. It faces 108.7 billion yuan (USD14.9 billion) worth of debts due within 12 months, while its cash levels are around 101.1 billion yuan.

I strongly expect Beijing to come in with a huge injection of capital to CG very soon. Go to liquidation? Silly... what happens when they start to auction off the landbanks of CG - the ramifications are too dire. Imagine the banking loans writedowns, the domino effect on other property players, the polarising disgruntlement among the property owners with loans facing negative equity, the land auctions which will bring down sentiment and land holding asset values even further ...

Hence, overall I see an 80% chance of Beijing coming in to save the company. Judging by the USD14bn loans due within 12 months, it is likely a Beijing-led rescue will come before the year is over for I cannot see them being able to convince another group of creditors to delay/extend the loans. This is a good thing for all the property counters presently rallying around the new measures for Forest City. The related parties just have to get out the details and execute ASAP (Federal, MOF, EPA, Johor state government, Singapore government, visas, MNCs actually moving, implementation details on tax rates, HSR, ferry, etc.)

Do you have any idea how big the rally will be (for Forest City linked counters)  IF/WHEN Country Garden gets the capital injection rescue???

Thursday, August 31, 2023

Property Rally - Something Bigger Or Just A Wet Fuse?

The local stocks have been in the doldrums for the longest time. We are talking of at least 4-5 years with the exception of a big run on glove stocks during the pandemic. The market is huge and it takes a lot of factors to collide for it to mushroom into a full-blooded bull market.

Malaysia has one of the highest GDP/market capitalization of stock exchange companies in the WORLD. Please wrap that around your finger. We are talking of 80 odd percent of local GDP. Every time a company starts to make RM4-6m a year, investment bankers will start shadowing those companies and groom them for a listing. The only companies not listed in Malaysia are your laundromats, kedai runcits, cendol seller, etc...

PM Anwar and his team have inherited a poor economy with loads of issues. At the same time, we are battered by the flight of money away from local shores owing to the presence of a new government. Plenty of "gray wealth" has left the shores thus exacerbating the ringgit's strength.

PM Anwar and Rafizi know too well how they need to supercharge the economy while taking time to curtail past misdeeds on our balance sheet. PM announced that Forest City has been designated as a special financial zone to spur the economy in Iskandar Malaysia. Amongst the incentives that have been announced include multiple entry visas, fast-track entry for those working in Singapore, and a flat income tax rate of 15% for knowledge workers. He said this should spur the growth of those involved in the healthcare, education, and tourism sectors.

Now, that announcement was in the middle of August... have a look at UEMS chart:

(UEMS 30 sen to 70 sen rally is about +130%; as the leader and th one with the biggest landbank the rally is still early)

Our superboy has been picking up steam since the middle of July from 30 sen, and it's around 70 sen in less than 1.5 months. OK forget about the fact that someone, somewhere... will also hear about the news first. Where do we go from here? Can this be big and sustainable enough to spark a broader bull run? Or will it just fizzle out?

My Views

a) The announcement by the government is not a haphazard thing; it is a thought-out plan with eventualities mapped out on logistics, people movement issues, visa issues, the proper monitoring and regulatory side on Forest City, etc.

b) This is certainly big enough to trigger a broader market rally; the concept... remember Putrajaya in 1995... that was a concept ... in 2001 it is real, viable, and operating; the same here, Forest City is not a concept, while it has not been fully built out yet, there are sufficient developed parcels to jump-start the whole new concept.

c) Political will: The Federal is for it, they need something big to revive the economy and hope to stand a better chance of winning the next general elections; We all know the Johor state government has been waiting for a long time to kickstart this mega project; and Singapore is exactly at the property cycle whereby, it needs to move the industrial sites to cheaper locales, to the Singapore side, this is the best alternative for them but they CANNOT be seen as the one proposing the scheme as that might be construed as a "takeover or buyout"; this way its more accommodating, you scratch my back I scratch yours.

The Johor Bahru-Singapore Rapid Transit System (RTS) is not a new project. It started in 2020 and will only be completed in 2026. While MyHSR Corporation recently initiated a request for information (RFI) to solicit concept proposals from local and international players for the behemoth Kuala Lumpur-Singapore high-speed rail project, the bankability of any public infrastructure project of this scale is always in question, however, with this new development, the "success factor" for this will be bettered substantially. 

d) As explained earlier, our local economy is intrinsically tied to our stock market; what it means is that it has a very high BETA, i.e. you pump RM100m into the stocks, it will have a velocity of money of around 7x-9x to the real economy; making it imperative to jumpstart the local economy; thus the Federal will move mountains to ensure that this gets delivered and executed promptly and smartly.

(IOI Prop's rally from 1.10 to 1.60 is about a 45% gain; that's a lagging performance and should have the legs to test RM2.00 soon)

The above table is a useful guide but I would also consider real float /controlling shareholders' real interest/ funding capacity/ stale bulls on the way up.

What's Next

Now, we need subsequent REAL CATALYSTS, and they need to come every few weeks. The newsflow will have to be positive and consistent.

Catalyst #1: This one has to happen soon. Since PM Anwar's announcement, I have been scouring the pages of The Straits Times to read any news or opinions from the government down south. The silence was deafening. Seriously, nothing of substance, just the announcement, nothing from the related ministries or PM down south. This just makes it more LIKE and PALPABLE that some major announcement will come soon. That's because obviously, it looks like a huge collective PR and rhetoric will come soon to applaud how the plan will enhance every facet of Singapore's economy and future prosperity.

Catalyst #2: There has to be REAL DEMAND, the real movement of companies. That should come from MNCs and some Singapore GLCs to start with, followed by local Singapore companies. Once timelines is heard and seen, these catalysts will further enhance the rally in stocks.

Catalyst #3: To restart many of the projects, they will need funds. Foreign companies coming to JV will be big catalysts as well. Fundraising will take center stage, thus providing more climaxes for the local bourse.

Catalyst #4: Asian stocks have been a blur over the past few years. The Forest City is a sufficiently big enough idea to draw back foreign investors. Keep an eye on the level of foreign buyers in local stocks over the coming months.

Catalyst #5: Any positive announcement on the Johor-Singapore rapid transit system, in particular on the funding side, JV partners, and timeline.

(stuff like this ... in today's The EDGE CEO)

Catalyst #6: Any positive developments from Country Garden; as they have been defaulting their bonds, the designation of Forest City is a glimmer of hope; at least CG may be keen to complete the whole project, failing which the rest of the project can now at least be sold to other parties to complete (owing to its attractiveness). Any positive news concerning the above will be well regarded.

Final View: Yes, I think this has a solid chance to propel a big rally in local stocks.

Let's look at the LINKED stocks:

(Sunway's run from 1.60 to 1.90 is only a gain of 18%, judging from the factors above 2.50 should not be difficult)

(Somebody forgot to inform them, that it ran up only 9% from 1.40 to 1.52; looks to have some legs yet)

(by virtue of them being a small taikor in Johor; access to mid-priced projects; delivering very solid profits; and having substantial landbank in and around Johor; this has lots of legs; just the run from 85 sen to 1.11, a 30% gain is insufficient to account for just the spectacular profits, and we are not even talking of their Johor exposure)

(up 53% from 60 sen to 92 sen; think there are better counters to ride the coattails)

Disclaimer: This is not a call to buy or sell, just an opinion from a market watcher, please consult your dealer or remisier before any action.

Monday, August 28, 2023

Most Deep Value Stock On Bursa?

 KSL just announced its last quarterly. It was spectacular, well not just last quarter, look at the last 5 quarters. While many property companies have been suffering, KSL has been thriving, buying land cheap, diligently adding value, ... recently opening the biggest mall in Klang, the Esplanade quietly. Apa lagi lu mau...??

Look at the NTA: RM3.33 ... current share price is around RM1.00. They have been conserving cash by not paying dividends since 2015, and wisely so as to push through the difficult years for property counters.

EPS: 25.11


NTA: 3.33

Net cash company with RM348,403,000 in bank account

Retained Earnings:RM2,695,442,000(RM2.695 billion) as of 31 March 2023

Call it deep value, the stock has used its cash well. Last year it bought 54 acres of land from Tropicana in Johor for RM103m. Judging from the recent announcement for the big Johor property nugget, it was timely.

The stock can trigger a huge revaluation since the NTA is so far away: one is the attraction in going private; two is giving a 10-20 sen dividend. They have not given any since 2015. The company should reward loyalty and themselves soon.

The directors' emoluments is a bit rich. The company has not paid dividends since 2015, so the directors and owners should "suffer" alongside with shareholders. This does not look good no matter how you cut it. Yes, you made more than RM100m in net profit last year and look set to make more than RM300m this year. As a percentage of net profit, is not justifiable.

At least the company is still highly profitable.

Looking at the table, the controlling shareholders should collectively have more than 75% locked up. No point in holding so many shares unless you are going to reward yourselves or take it private.

Disclaimer: This is not a call to buy or sell, just an opinion from a market watcher, please consult your dealer or remisier before any action.

Wednesday, August 16, 2023

Gold Reserves / GDP - Implications


One can easily tabulate countries with the largest gold reserves but it is meaningless unless it is expressed as a benchmark against a relevant factor. GDP, or rather nominal GDP is a useful benchmark. It is the value of all goods and services from a country, with no taking into account the differing cost of living in other countries.

The caveat here is that China's gold reserves are actually closer to 4,000 metric tons according to many experts' newsletters. There have been too many big "unknown" transactions over the past 2 years that can only be linked to China, even though officially it was not recorded as so.

If you divide the GDP (in million) by their gold reserves you will get a pretty picture. Naturally the lower the figure the more gold you have covering your GDP. I would put 2.0-4.0 as being in an astute position, a more than adequate coverage should anything resembling a currency crisis comes about. If ever a reversion to some sort of gold standard or linkage to a gold standard following a major currency paradigm shift, those with a good gold stash relative o their economy would be sitting pretty.

Italy 0.85  - the Italian economy is in the doldrums but thankfully their central bank has amassed a sufficient gold arsenal; in the event of a dislocation of the euro, the Italians would swiftly support any kind of SDR (special drawing rights) with links to the gold standard.

Turkey 1.02 - where the economy has been battered by high-interest rates and constant devaluation but fundamentals show that Erdogan has doubled up on gold reserves over the last few years; while economic winds have not been in their favor, they kind of have a last bastion in gold reserves, which may indicate that their currency has been way oversold. The economy has to stop using USD for most of their transactions, the problem being Turkey does not have many friends to do barter trades on major transactions.

Germany 1.28 - solid fundamentals; the central bank here has protected the integrity of their economy no matter how the economic winds blow.

France 1.2 - same here.

Russia 0.89 - a deliberate strategy to buy gold over the last 10 years and more of late, indicates why Russia is championing de-dollarisation. China is definitely an ally in that strategy.

Switzerland 0.835 - is it because the country is the biggest refinery for gold; anyways, the country is a firm believer, and hence their arrogance to keep having their own Swiss franc as a solid currency exposure.

Taiwan 1.86 - for all the gangsterism in politics, the central bank has shrewdly backed itself with more than sufficient gold reserves; a political pawn in the global chess game, it has tried to shield itself from things "they can control".


You may be able to get away with holding less in gold reserves if you are a commodity-rich country such as Australia, Malaysia, Indonesia the OPEC nations.

Australia 10.0; Malaysia 11.5; Indonesia 17.8; Brazil 16; Mexico 13.8; heck, Canada does not hold any gold reserves even cause its got tons of gold and other commodities in the ground.


In the comfort zone, 2.0-4.0:

USA 3.3 - for all the talk emanating from the USA in particular, on how gold is a useless thing and the gold standard should never be considered, they are holding a pretty decent amount; of course, their problem is not gold reserves but their unending printing of money and highly excessive debt levels; they do not want others to even consider de-dollarisation as a possibility but their reserves level tells us they are prepared somewhat for it.


Outside the comfort zone, i.e. more than 4.0 to 8.0:

China 4.8 - just outside the comfort zone but judging from the way China has been buying over the last 5 years, I think they will be headed for 3.0 within a couple of years; the country's disappointment over the US currency's reserves status, exporting of inflation, the exporting of US economic woes to developing countries via their excessive printing and liquidity injections - all points to ganging with Russia to change the status quo.

Japan 5.2 - just outside the comfort zone but I suspect their gold buying will be keener over the coming years once interest rates start to indicate more buoyant activity; the last two years have seen a deliberate strategy to weaken the yen.

India 4.3 - again India ha shored up its buying activity over the last few years and should see a similar strategy for the foreseeable future.


Danger zone, i.e. more than 8.0:

UK 10.0 - Brown sold UK's gold reserves poorly over the years; neither is it commodity rich; the Brexit as well - I see cloudy days for the British pound over the next few years.

Argentina 11.8 - the peso was devalued 18% a few days ago; more trouble in store (which is why I think Turkish lira is presently way oversold); lacking the gold backing will limit the options you can take to recharge your economy; any printing of money will result in a disastrous and vicious cycle of devaluation.

South Korea 16.0 - This open economy is kind of vulnerable; very export-oriented but has no legs to stand on in the event of a major financial currency crisis; limit your exposure.


Safe to say this is a crude benchmark but it also should tell us a lot of nuanced economic survival strategies among major nations. In the event of a major currency crisis, those with sufficient gold reserves and other important commodities will have a better seat at the table. I suspect a SDR linked to major currencies/gold and other important commodities will take effect. A de-dollarisation is in effect but not as painful as anticipated in the past for USD.

p/s.   1Q2023 Gold Buying Tally

Saturday, August 12, 2023

Best Kopi Tiam In Selangor

Well, that is a bold statement but I can safely say that with confidence. Kopi tiams are usually rented to different vendors with varying qualities of food. You'd be lucky to get 2 or 3 good stalls out of ten. That's why it was so easy to put up the Restoran Chicken Cuisine kopi tiam. One of the most weirdly named places for sure.

There's a better handle on QUALITY because it's all run and cooked by May and her team. May, from Ipoh, is a super cook. The kopi tiam is really two shop lots merged into one. Even the worst dish is a 6/10.

Most people come for the Curry Laksa (8/10), which may not look like much but packs a punch. The second most popular dish has to be kaiseehorfun (8/10). Followed by their CKT (8.5/10) and kaifarn/siulap (8.5/10). Hakka mee (7.5/10) also not bad. 

But my favourite is the dry curry mee (9.5/10). Can match the best from Ipoh. I usually add their wartkai (chicken) to the dish for extra oomph. Naturally their drinks also kaw-kaw style. I also strongly recommend their turnip and yam steamed cakes, great chilli and packed with real ingredients.

She also cooks lots of dishes for tapau: petai prawn curry, pork ribs curry, chicken curry, vinegar pork trotters, yellow tumeric rice, choykeok, wonderful kuihs from all over and to die for nasi lemak non-halal style etc... You will end up tapau-ing more than RM100 even though you as two pax for breakfast.

Bear in mind the kaiseehorfun and dry curry are only available on Saturdays and Sundays. You know you are in a happy place when the foreign workers give the best service, for them to do that means the boss treats them well - its a happy place.


4a, Jalan Pekedai U1/36,
Hicom-Glenmarie Industrial Park,
40150 Shah Alam, Selangor

Operating hours: 
6am - 4pm (Daily)

Friday, August 11, 2023

Reimagining Stephen Chow

 Yes, most people love Stephen Chow's movies ... I am a superfan but I also acknowledge that he is a comedy superstar but not one with a good character (how he treated people around him, his friends, etc.). But we are not here to debate how wonderful a person he is. As an artist, I think he is beyond iconic. Wish I knew who drew this magnificent image.  All and I mean all, of the important supporting characters in all his movies.

Surprisingly, I cannot locate two actors in the painting, whom I deem as important - Zhao Wei and Cecilia Cheung Pak Chi. Deliberate move?

Maybe I am thinking too much. Maybe the artist's intention is to let Stephen know how "dependent" his success was on people who collaborated with him. One of the biggest criticisms against him was how he "literally treated friends and collaborators" as rubbish to be thrown away after a while. Whether it was his master, people who mentored him, got him into pictures, got him the financing, a girlfriend who boosted his wealth no end, or close film directors and actors ... in the end, he has less than a handful of friends and chose it to be that way. Sigh... there are more important things in life: self-actualization; finding your purpose in life, your legacy with the ones you love, reshaping your heart and attitude so that you become a blessing to others, and that the world is a better place with you in it. 

Thursday, August 10, 2023

The Relevance of Research In Financial Markets

 In a nutshell, research in financial markets should be taken with a gargantuan truckload of salt. Recently, there's been a massive contradicting research recommendation on Mr. DIY. One house calling a SELL with a target price of RM1.29 (Affin Hwang) ... Maybank was bullish calling a BUY with a target price of RM2.40.

This is expected in research in financial markets, be it stocks or interest rate movements, or economic growth predictions. Differing predictions stem from different ASSUMPTIONS on key factors. Even when these assumptions on key factors are similar, there is a nuanced emphasis/bias on the weightage of each factor. Some will feel certain factors are more important than the rest.


How Do We Regard Research Then?

Research papers and opinions are only worth reading according to the author. Analysts and commentators are only as good as their body of work. They are just like actors or novelists, you like to see certain actors more than the rest or will buy the latest book by the author you like ) and trust.

How To Judge Good Opinions or Recommendations

Being correct is one thing but not the most important thing. Some people could be correct because they were lucky. Hence to me, the most important thing is that their justifications and arguments MUST BE PERSUASIVE. It has to be persuasive reading. Persuasion is not a psychosomatic quality that can be manipulated. Persuasiveness is based on laying out points and factors and layering arguments and insights to arrive at building conclusions. It also should not be a one-way street, in that the writer has to point out good and bad stuff so as to present a more cohesive and informed opinion.

Thus we read research reports and opinions, not so much to get an actual recommendation but to look at their justifications and insights. It is more important to come away with additional insights into a stock or industry.

If you have 10 reports on stock, say 8 buys and 2 sells... I would want to read the 2 sells. Always give minority views a chance because they dare not to go along with the crowd. They may be wrong but got to give them a chance as people with something to say, have balls (male/female).


The business is easy to dismiss. It is just an aggregation of household stuff. The company keep getting dismissed by investors but they kept charging on with sound financials. People may get lost looking at topline growth or PER. For me, the company's strength is it can weather any economic conditions, people buy useful and silly stuff all the time, whether they need it or not. They weathered the pandemic very well. They were aggressive to close non-performing shops quickly, and now with a deliberate strategy to be in malls as they realize foot traffic at malls is relevant to their business model - people who go to malls will eventually want to buy something, anything before going home empty handed ... Mr DIY is a convenient place to do that.

They now have more than the critical mass to do generic products in their own brand. This yields more value and margins, do not overlook this factor.

As simple as the business model looks, the key is managing inventory. The margins should be hefty as there are multiple choices for each product, and hard to do comparative pricing. Hence now it's just replication in other countries. The company has gone through highs and lows, plus a prolonged pandemic. I am more aligned with the bullish report.

Disclaimer: This is not a call to buy or sell, just an opinion from a market watcher, please consult your dealer or remisier before any action.

Monday, July 31, 2023

Malaysian REITs ... Beauty Contest

A friend asked me about Malaysian REITs... they all look so cheap. What gives. Looking at the above table there are only 5 REITS that trades at its NAV or higher: AME, Atrium, Axis, IGB, and Sunway.

If you look at Price to Book, i.e. discount to NAV, many trade between 40%-70% discount to NAV. How should we view such investments?

Discount Trap/Value Trap

Most REITs do trade at a discount, that's a given, but an acceptable discount should only be between 5%-15%, anything more implies there's something more that we have missed out.

Potential Factors Driving Discounts:

a) an environment of higher interest rates, which eats into net yield as rentals are not so agile at moving in tandem with real interest rates... not to mention the higher cost of refinancing;

b) economic activity outlook depressing: if we are looking at a depression over the horizon, there will be more breaking of leases and rentals, and subsequent downward pressure on yields;

c) owing to the age/design of properties under management, investors may be looking at lower rentals going forward, thus exacerbating the discount;

d) diversification or non-diversification can and will affect the discount, and so too is the "Grading" of the said property;

e) vacancy rates, the existence of newer competing projects in surrounding areas, the deterioration of infra-supporting business activity;

f) the aging aspect and requirements for repairs and upgrades;

g) the liquidity being traded, as usual, a bigger REIT would always win over a smaller capitalized REIT, the ability to get in and out, the ability to get a sizable position;

h) more importantly:  access to more capital sources, transparency, and a good management team;

Locally, investors are most gloomy with Hotels and Resorts type REITs. Will take a few more years before we need to look at them. Investors are most keen on Healthcare related REITs. The other sub-sector that is slightly optimistic is the Office REITs, while the Industrial REITs are not that exciting, although nowhere as gloomy as Hotels/Resorts REITs.

Using Discounts Smartly

When you based on just an absolute discount figure to NAV, you are likely to be caught in the value trap, even if the yield looks attractive. The best way to utilize a discount to NAV is to use the historical discount line over time. Each REIT has its nuances and timeline. If the yield is "good in your view", buy only when the discount is BELOW the average discount to NAV figure. Use a 5 percentage points basis before acting. That means when it is at least 5 percentage points below the average. You can use that also when selling, sell when it's 5 percentage points above the average line.

REITs Rosetta Stone

Local REITs taxation (or rather the non-taxation aspect) is the key. If the government even starts to consider any policy change to tax them, it will be more than disastrous. However, if we follow the regional policy to stay competitive, that is not likely to happen anytime soon.

What Do I Prefer

Well, good management first of all. I also like to look at family-owned REITs. There are family-owned ones that have good and solid professional management and some that don't. Do they do arm-length transactions?

The other aspect I look at is how "dependent" they are on the yearly dividends. To that end, I mean that the shares and other equity instruments are "not sold" or held in trust, and the rest of the family relies on the dividends more so than others.

I prefer UOA, IGB and KIP. But that's just me.

Thursday, July 27, 2023

Fed, Interest Rate Differentials, The De-Dollarisation - What Gives


The Federal Reserve finally bit the bullet and hiked rates to a target range of 5.25-5.5%, the highest in 22 years. What does that mean?

Firstly, we are all lucky that there's Jerome Powell, has the political will, intellect, and the balls to do that. If it was a Trump presidency, he would have sacked him and appointed a stooge who would have stopped raising the rate at 4.5% and wouldn't have been "allowed" to raise rates further.

The rate hike saw the bulls for stocks emerge from the ruins as they see this as the final hike necessary. Hope they are right.

The inflationary cycle has to be curtailed this time around because it all stemmed from the over-exuberance printing by the USA when they haven't even rectified the bastardization of US currency since 2008.

All currencies in Southeast Asia depreciated in 2022 and 2023 but to varying degrees. Many Malaysian are concerned over the weakness of the ringgit, in particular, over the last 6 months. 

Local companies have been shouldering higher import costs since H2 2022. Higher import costs will exacerbate existing cost pressures, driven by surging commodity and shipping costs. Firms are seeing a high-cost environment through the rest of 2022. They should find ways to cut costs where possible, for example, by reducing supply chain inefficiencies and reducing channel costs.

Why Asian Currencies Are Weak In 2022 and 2023

Surging commodity prices – Rising commodity prices are causing trade deficits across Southeast Asia to widen, as most of these countries are net commodity importers (except Indonesia). 

Global volatility – Global volatility has triggered a rush of foreign portfolio investment toward safe-haven currencies, leading to massive outflows from the emerging markets of Southeast Asia.

Monetary policy differences – The interest rate differentials as can be seen by the chart below, amplifies the interest rate differentials. Some countries may have a harder time hiking rates alongside the Federal Reserve owing to the already "depressive nature of their local economies".

Have you seen the Japanese yen??!! Even our ringgit is better than the yen. Japan really cannot raise rates as their own domestic economy is so unenergised.

Malaysia tends to feel the effects more because countries like Thailand, Vietnam, and Indonesia have a better than critical mass in their domestic economies. A "critical mass" implies a country's population of more than 50-60m in my view. This is why it is so much harder to launch a startup or a business in Malaysia as it's harder to get to critical mass.

It is more than likely that Malaysia's situation has been exacerbated by large outflows of money since the results of the last election. For reasons I need not elucidate here, it is only logical to expect dubiously gotten gains to leave the country in anticipation of a higher chance of crackdowns on illicit and illegal activities of the past. One should really go through the transactions since the last elections and pinpoint their source of wealth... but do we have the political will, even with a new, more transparent government?

The Demise Of USD Is Near

At every juncture, whenever the US economy goes into a crisis, the smaller countries all get whacked. Everybody's pretty pissed about this. The internet implosion in 2000, the 2008 financial crisis... even the Covid pandemic ... the American solution is to print and print. It goes back to the rest of us while the USD maintains its parity.

But let's solve the inflationary spiral first. Already if you look at the countries that are already doing a de-dollarization campaign. 

China and Russia are trading in their own currencies. Beijing and Brazil have also dropped the dollar in bilateral trade. The UAE is selling China its gas in yuan, through a French company. Southeast Asian nations in ASEAN are de-dollarizing their trade, and promoting local payment systems. Kenya is buying Persian Gulf oil with its own currency. Even the Financial Times newspaper has acknowledged that a “multipolar currency world” is emerging.

For all the central banks' talk that gold is useless... well most central banks have been buying gold in a big way for the past 15 years. China was the biggest since 2008 crisis. Now all the smaller countries have been accumulating as well.

While I do not think the USD will lose its wheels, its reserve currency status will be severely dented over the next few years. Less global transactions will involve USD, where possible.

The biggest Treasury bonds and USD holders will continue to reduce their position in favor of gold holdings. 

For all the talk by central bankers and economists about gold being a poor investment, and not viable as part of a standard global currency system ... these countries sure have been buying a lot of gold. You have to ask, what's that for?

Russia has been among the top buyers of gold in the last ten years pushing its gold reserves from 882.96 tons at the end of 2011 to 2,301.64 tons at the end of 2021. Turkey’s central bank has added around 278.55 tons of gold reserves since 2017. During 2017, 2018, and 2019, Turkey was the second largest purchaser of gold and continued with its buying as the fourth highest buyer in 2020. The country’s gold reserves at the end of 2021 stood at 394.2 tons, equivalent to 24.37% of its total reserves. 

India’s gold reserve levels are the ninth highest in the world. One of the biggest purchases of gold was in 2009 when the Reserve Bank of India purchased 200 metric tons of gold from the International Monetary Fund (IMF), under the IMF’s limited gold sales program. This took its reserves to 537 tons. In the last five years, India has continued to add gold to its reserves, which have swelled its gold holdings from 557.77 tons at the end of 2016 to 754.1 tons at the end of 2021 with 77.45 tons bought alone in 2021. During Q1 2022, India added 6.31 tons, taking its total gold reserve holdings to 760.4 tons. Gold currently constitutes around 6.86% of its total reserves.

China holds the world’s sixth-highest gold reserves at 1,948.31 tons, which constitutes 3.3% of its official reserves. However, many experts believe China's total is closer to 4,000 tons (making it the 4th highest in reality) with a lot of secretive buying - judging by surreptitious transactions over the past few years.

Look at the Gold Reserves, final column... if Gold is so useless why were 3 out of 4 central banks buying so aggressively for the last 5 years? For a no-yield instrument, that's a lot of gold.

The Finale ..

What will happen is the USD will see a gradual devaluation at first, followed by a big one, which they themselves will initiate. Calamity will ensue ... they will all gather around and discuss the global monetary system not working ... in the end the countries with gold will lead the talks as the USA does not have the means to pay down their debt, and even their gold holdings will not make a dent ... those with higher ratios of gold as per net GDP will have a louder voice ... IMF will restructure the SDRs (Special Drawing Rights) which will be a new mixture of gold, and other major currencies as per their ratios of gold to net GDP.