Insider Trading 101

David Li Kwok-po, head honcho of Bank of East Asia (which recently bought a substantial stke in Affin Bank), has strongly denied he passed on information that allowed a Hong Kong couple to reap an estimated US$8.2 million (HK$63.96 million) profit from alleged insider trading of Dow Jones shares. Li is Dow Jones' only Asian board member. The selection of Li to the board of Dow Jones was based on his very long and successful business career in HK/China. The case is fresh and hot, coming off just on events happening over the last 2 weeks.

An internal investigation has started into whether Li leaked confidential information to a friend, Michael Leung Kai-hung, about an imminent offer by Rupert Murdoch's News Corp to buy Dow Jones.

Leung is the father of Charlotte Wong Leung Ka-on who, with her husband Wong Kan-king, is under investigation by the US Securities and Exchange Commission for suspected insider trading.

Li admitted he had knowledge of Murdoch's interest in Dow Jones before News Corp made public its intentions. But he denied leaking information relating to the deal to anyone. "Not even my wife," Li told WSJ.

Murdoch indicated his interest in Dow Jones to company chief executive Richard Zannino in the week of April 9, followed by a telephone conference held by the board April 13. News Corp sent a formal takeover offer to the Dow Jones board April 17. The next day Leung transferred US$3.1m to his daughter. The key dates of the cash transactions and the following share purchase dates basically would seal the fate of the accused.

US federal regulators said the couple snapped up 415,000 Dow Jones shares just before News Corp announced its US$5 billion takeover bid. According to a lawsuit filed Tuesday by the SEC in a New York district court, the Wongs engaged in "widespread and unlawful trading activity" that positioned them to make an estimated US$8.2 million profit. If convicted, they are liable for a penalty of more than HK$100 million and possible imprisonment.

Leung had lent US$3.1 million to his daughter to facilitate the couple's purchase of the shares, according to the WSJ. The couple also reportedly used margin financing to leverage their purchases. They purchased 415,000 shares between April 13 and April 30 for US$15 million - representing about 20 percent of the daily trading turnover in Dow Jones shares. The US$15 million in the Wongs' account with the Hong Kong branch of Merrill Lynch is made up of US$4 million from their account in a Belgian bank, borrowings of US$3.1 million from Charlotte Wong's father and margin financing from banks.Sources say Merrill Lynch detected unusual movement in the Wongs' account and reported the matter to the US federal regulator.

On May 1, Dow Jones' stock price soared 58 percent after News Corp said it would make a US$60 per share offer to acquire the company. On May 4 the Wongs sold all their Dow Jones shares for about US$23 million. Cheryl Scarboro, associate director at the enforcement division of the SEC, said the purchase by the Wongs was a "highly profitable and timely purchase."

Charlotte Wong is a former executive director of China Mobile Peoples Telephone. Her father co-founded Peoples Telephone, which was acquired by China Mobile in a deal completed early last year . Leung is a board member of the Canadian subsidiary of Bank of East Asia, while both Leung and Li were shareholders of two firms whose shares were acquired by Avon Products. Leung is vice chairman at a Hong Kong social service organization which Li heads.

Obviously the accused did not attend Insider Trading 101. The mistakes they made were so glaring and unforgivable.

a) The Dates - In building an insider trading case, the sequential events plays a big part, it alludes to planning and motive. April 9 - Murdoch phones the CEO about his interest; April 13 - teleconference with board members of Dow Jones on the matter; April 17 - formal offer sent to board of Dow Jones; April 13-30 the accused bought 415,000 shares of Dow Jones; May 1 - Dow Jones stock rose 58% on the release of the news. This is what we call, die standing.

b) Unusual Patterns - Being novices to insider trading, the accused should have been wary of the patterns of trading they will be making. An examination of their trading records show they traded in infrequently. The timing of the father's loan of US$3.1m to leverage the account is very bad as its the father who had the close link to David Li.

How to do better next time (lol):

a) Spread trading pattern / Backup research - If I got the same tip from David Li, I would generate tons of research reports on all media companies in the US. In particular highlighting recent media deals over the last 6 months. Then I would buy 3 media stocks equally (including Dow Jones). This will not be a bad move because a buyout for Dow Jones would also lift valuations on similar media type companies instantaneously. The research would validate your interest in those stocks.

b) Beware of unusual moves - If you do not always go on margin, don't suddenly go on margin. Beware of the dates involved, e.g. in the above case, having narrowed to 3 media companies, I would not go and buy Dow Jones first, why not buy Reuters first followed by the other two.

c) The Links - If everybody knows that I know David Li, I would never use my account or even immediate family. It is at times like these you need to have a couple of friends you can trust with your life (lol). No one should be able to link the trades back to Li.

d) UMA - Beware of too aggressive buying because all exchanges have sophisticated trading systems to alert staff on unusual buying activity. The accussed buying amounted to 20% of total turnover during that period, waah you think you are Coper Aul? UMA is not only defined as a percentage of overall trades, but also a deviation from your account's usual trading value.

Its unfortunate for David Li to have his reputation tainted in this silly event, and he probably did not profit from it at all. He is worth billions in HKD but you cannot undo the mud splattered all over his resume. Of course, the news could have been leaked by other sources to Michael Leung or the accused: the advisors or bankers, senior News Corp staffers. So, David Li could still get to keep his stature and status. In fact, it is quite incomprehensible for a person such as David to even consider leaking or even be careless enough to leak such information, esp. when he does not stand to benefit materially. Any court of law is likely to give David Li a large dose of the benefit of doubt.

When rich people get caught doing these type of things, there is little sympathy. As Gekko would say "Greed is good"... but at least try and be smart about it. Not easy to be a successful culprit.

I guess, if the SEC watchdog is transplanted in KL, there would be a lot of very nervous and worried corporate senior mgmt, or are we still in denial that there is a problem with insider trading in this country that needs to be corrected?

Computer Systems Advisers

Wished I spotted this a week or two back, but nobody can always be at the top of the heap, just don't be the last.

a) CSA expects recurring income from information technology (IT) outsourcing as well as the customer services and support segments to boost its operating profit. Both segments contributed close to 80% of operating profit for the nine months ended Dec 31, 2006. The remainder came from IT systems and solutions.

b) Revenue for the third quarter grew 14.4% to RM112.36mil from RM98.19mil in the same quarter a year ago while net profit increased 26.8% to RM6.14mil. Earnings per share rose to 6.07 sen from 4.79 sen before.
c) Net profit for the first nine months came in at RM18.91mil, close to the RM20.4mil achieved for the whole of the previous financial year. CSA director Peter Yong said the IT outsourcing division now contributed close to 50% of the company’s earnings before tax, surpassing its own projections.

d) “The coming financial year will see us aggressively pursuing new outsourcing contracts in Malaysia and with global customers of Computer Sciences Corp (CSC),” he added. CSA is a member of the CSC group.

e) CSA recently spent RM14mil to expand its data centre to 23,000 sq ft from 10,000 sq ft to deliver more value-added data centre services. “We will continue to secure IT outsourcing deals globally by leveraging on the hub.

f) About 50% of revenue in the segment comes from countries in the Asia-Pacific region.

Paid Up: 101.2m shares

CSA Holdings Ltd 49.4%

Global Professionals Ltd 7.8%

Mohamed Rashdan bin Haji Baba 4.68%
Nik Mohd. Sidek 3.46%
EPF 1.33%

Free Float: 31%

BV Per Share RM2.35

EPS 2007 estd. 27 sen

Main reason for the recent pick up in activity: parent US company CSC looking to privatise the company. BS? Not really, considering CSC did privatised the Singapore arm last year. Its obviously on a consolidation strategy - best way to use excess cash. If CSC paid the same benchmark it paid for the Singapore company, which is 1.9x forward P/NTA, this points to the privatisation to be done at a minimum of RM4.00. Believability rating: high. Timing rating: sooner than you think.

Target Internet Marketing

In this internet age, the frequency of hits dictates everything. Frequency of hits also indicates popularity, and probability of success. Target marketing in the new age. I am pretty sick and tired of being greeted daily, when I switch on my computer, that I need my penis to be enlarged. Not just me, even my female friends are suspected to need penis enlargements - how do they know?! As if that doesn't get you down, they then offer you truckloads of viagra and cialis - man, if only I get so much action each week. Maybe can buy some for your grandfather so that he doesn't pee on his feet everytime.

Now I don't play 4D anymore, f*** I am now winning 3 to 4 lotteries a DAY!

First its the Nigerians, then Arabs, now Asians... all very sloppy with excess funds and people dying without a will ... enough already, I don't want so much money especially since they do not belong to me in the first place. Some more, I already can win a few lotteries each day, I don't need your tainted money.

The Warren & Charlie Show

Its the annual meeting for Berkshire Hathaway shareholders and board memebrs, and Warren and Charlie stayed 6.5 hours in the presentation followed by a lengthy Q&A. This is a 100% cut & paste job with zero input from me, but what these old geezers said are worth pondering. Here's some of what they said:

WB sounded a bearish note about the current environment of cash-flush private-equity funds, high corporate profits and bond prices that don’t adequately reflect financial risk.
... said he expected an external event would eventually upset the credit markets. Such an event — which he said could be as significant for credit markets as the Long-Term Capital Management meltdown in 1998 — would present opportunities for Berkshire, however, because the company could profit on mispriced securities. There was a “seize-up of the credit markets” during the LTCM episode, and “people will see that sort of thing again.” Quoting Mark Twain, he added, “History doesn’t repeat itself, but it rhymes. We will have something that rhymes with 1998.”

WB doesn’t expect a contraction of credit orchestrated by the government — through a sharp hike in interest rates, for example — but says one could be triggered by unexpected forces. In the past, he has mentioned the increased use of derivatives in the financial markets as an area of such possible dislocation. “Most authorities are reluctant to step on the brakes,” he said in answer to a question about global liquidity. “But you could very well see some exogenous event that feeds on itself in the markets.”

WB was also bearish on the sustainability of high corporate profits in the U.S. For one thing, if they were to continue at their recent rate of growth, he said, it wouldn’t be long until political forces would start agitating for higher taxes. “Corporate America is living in the best of all worlds, but… I would not expect corporate profits to continue to be 8.5% of GDP” far into the future."

CM said that consumer spending, financed through credit, is poised to wilt and potentially contribute to a slowdown in corporate-earnings growth. He cited the example of South Korea, where the economy and corporate profits suffered several yeas ago after banks extended too much credit to consumers through credit cards and consumer loans. “I don’t think this is the time to swing for the fences,” said CM.

Warren Buffett and Charlie Munger said company directors should more actively scrutinize big acquisitions, particuarly if they’re all-stock deals. WB said chief executives with “big egos” become easily enamored with big acquisitions, goaded on by investment banks who stand to benefit from big banking fees. Directors should engage chief executives and “get a real balanced discussion about the economics of what you’re doing,” adding that “it’s been pretty bad in the past few years” in terms of boards approving deals promoted by charismatic CEOs.

CM added “The self-serving delusional nature of even some very good minds in terms of IQ points is amazing.” Big deals, in general, “are contrary to shareholders’ interests,” WB said deals that use shares as currency deserve particular scrutiny. He cited the example of Berkshire’s own acquisition years ago Dexter Shoes, which involved some 2% of Berkshire stock. “When I gave away 2% of Berkshire Hathaway to acquire Dexter Shoe, it was dumb. You’d all be 2% richer if I hadn’t done that.”

About half a dozen Berkshire Hathaway shareholders, including the daughter of Holocaust survivors, appealed to Warren Buffett during the annual shareholder meeting to divest Berkshire’s holding in PetroChina Co. Ltd. The shareholders said the divestment would send a message to the Chinese government, which they said supports the Sudanese government and the genocide in Darfur. WB said shareholders were mistaken in thinking PetroChina has any impact on the Chinese government, or that a divestment of the Chinese oil company would influence Beijing. The Chinese government owns 100% of China National Petroleum Corp., which owns about 88% of PetroChina. A shareholder resolution to divest PetroChina sponsored by shareholder Judith Porter, a retired professor, was defeated by a margin of more than 98%. “PetroChina in no way tells the Chinese government what to do,” said WB. “We have no disagreement with what PetroChina is doing.” He added that he sees “no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct their business,” although he added that he is in full agreement over the significance of the problems in Darfur.

CM, Berkshire Hathaway’s 83-year-old vice chairman, isn’t a fan of ethanol despite growing up in the cornhusker state. “I think running automobiles on corn is one of the dumbest ideas,” in response to a question from a shareholder about the costs and benefits of ethanol. He said it doesn’t make sense to drive up the price of food to grow corn for ethanol use. “I love Nebraska to my core, but it’s not my home state’s finest moment.”

What Does Mourinho Say To His Players After Every Match?

Win, lose or draw, the Special One will always springs onto the pitch and give each Chelsea player a hug. I have always wondered what he says to them

everytime. Now I think I know the answer:

JM: "Just remember how much money we got in the bank ... every week almost 100,000 pounds ... f***em'all ... easy Russian money man ..."

John Terry: "I know, I know... I'm welling up just thinking about it, man, I love you"

Good Stories, But Not Right Now

When market is heady, there will always be stories, fundamentally based or otherwise. A good dealer or remisier should have with him/her handy a black book which tabulates all the rumours and stories going around. This will enable them to immediately comment or try to explain should anyone asks about a specific stock. We need to quickly do the math and our homework on any plausible stories - that's value add, we owe it to ourselves.

Even though stories may be enticing, but stories and rumours will always be there, especially during a bull run. Of course not all will be remotely true, if you can get 20% of them turning out to be true, that's a good hit rate already. Even if you have narrowed down to the 20%, the timing has to be right, the entry price has to be right. Trading during a bull market is not a buy-and-hold thingee.

Hot Whispers

DNP - Supposed to be worth RM2.80 as new property launches is thought to make it trade at a forward PER as low as 4x (Thematic play, hit and run. Already trades past its NTA of RM2.00, gotta be careful, although its RNAV is supposedly much higher)

N2N - Trading looks suspicious today, probably to announce 1Q2007 results very soon. Results expected to more than match the entire earnings for 2006 (A timing stock)

Time/Time.com - DIGI to buy the company (Maybe for the broadband but makes sense as it will dilute the Telenor stake automatically without requiring the foreign telco to sell down DIGI, high believability and sensibility)

LBS - Phhhttt Stock (The sound you make when you purse your lips and blow hot air out, from now on these will be identified as Phhhttt Stocks)

TWS Corp - Privatisation being hit by UMA, privatisation to win out in the end

PA - Phhhttt Stock

ECM - A lot of cash in the company, could be in for a very special dividend plus strategic senior mgmt, looks ok still

YTL group of companies - Owner bitching about overall low valuations of companies, some foreign IB looking at books and advising, may take some private to relist elsewhere (But dear-me, should remember our roots right, if you did not make your money early on from this country you would not be where you are now, now you can complain about low valuations, geez and my diamond shoes are biting into my heels as well, when drinking water must remember the source ... but the group stocks will be in for a major push upwards, albeit financially engineered like Maxis)

AsiaEP & EbWorx - Best from Mesdaq with involvement of foreign funds and IBs to leverage the companies further afield

Pelikan - Running on sale of Konsortium stake, not exciting enough

Markets overall look a bit edgy, KLCI would be down 20 points if not for Maxis. Volume and value traded diminished and that is not healthy for a market staying around its all time high.

Curlin: The Next Affirmed

Well, many of you know I love thoroughbred racing, this guy could very well be the best horse of the decade. Many will quibble over the best races or trophies. The triple crown series in the US is hard to rival. Though the pomposity of the Melbourne Cup is second to none, it lacks the history of super horses needed to prove themselves 3 times on 3 diff tracks (Kentucky Derby, Belmont Stakes and the Preakness). Trivia buffs, where is the Preakness run?

Of course, there are triple crowns in UK but in terms of stature, status and prizemoney, nothing beats the Triple Crown in the US. Though Dubai can pour millions more in prizemoney, its a bit like Roman Abramovich's money in football: that's not quite the way its done matey. There are other significant races in the world such as the Epsom Derby, L'Arc de Triomphe, Japan Cup, Golden Slipper and the Cox Plate... but the Triple Crown attracts attention for each year we wait to see if there is a super horse to win all three in a year. In its 133 year history, only 11 horses have won all 3 races. The last horse to do it was Affirmed in 1978. The 70s was marked by the 3 great horses, Affirmed was one, the other two also won the triple crown, namely, Seattle Slew in 1977 and Secretariat in 1973. So its been nearly 30 years since greatness has been proven. Naturally, there were hardluck stories, some just winning two of the three races, some encountered bad luck in a race which robbed them of the glory. Sometimes, to be immortalised, it takes more than ability, it also has an element of destiny in it. Real Quiet almost did it in 1998, but lost the Belmont by a nose.

This year I have a feeling about this unbeaten horse Curlin, unchallenged and now he's the favourite for the Kentucky Derby, the first of the 3 races. The colt a slight 7-2 favourite over 4-1 Street Sense. Still, Curlin has a few things to overcome. He didn't compete as a two-year-old and has run only three races in his career - though he won them by a combined 28 lengths. Thats an incredible 9 lengths a races. Most races are decided by the winning horse beating the second horse by less than a length (one length is about a small car's length). So Curlin won his races by nearly 10 car lengths each time. History isn't on his side, either. It's been 125 years since Apollo won after skipping his two-year-old season. Still, it takes a freak to win by nearly 10 lengths each time even though the earlier races were much easier. The main danger is the big shortener Street Sense which has plunged from 6-1 to 4-1 in just over 48 hours. As this year's live action was won by NBC over ESPN, maybe we will get to see some action over at channel 91, maybe.

Why!!??

Why are there very few (if any) applauding PM Badawi now that the index has touched 1,350 .. but there were tons of cynics and detractors making disparaging remarks every time the market falls ... considering he made made his call and the target was reached in less than 3 months??!!

Why are there so many glum faces at Maxis for the past few days ... I see, most sold their shares and options already around RM12, except for one or two fellas, no names please ... its probably the most glum looking press presentation by the board of Maxis ... except for one or two fellas!!??

Why are the bulk of dealers and remisiers not feeling as ecstatic as the KLCI ... now that its at an all time high ... only person in town feeling perfect synchronisation with KLCI movements is Yus-baby!!??

Why are we still holding onto Proton ... the price for it gets lower with each passing delay in doing a deal!!??

Stop The Press

Well, its getting to be less and less a secret, instead of RM1.20, do prepare another 30 sen (or maybe 20 sen) to buy your weekend paper. There had been whispers but overall the news has been well kept. The impact will be greater for NSTP than for Star. The good thing is that most analysts do not expect a rise in cover price this year, so the increase just for weekend papers will be a good boost. It also comes at a time when newsprint prices is on a downtrend. Hence better to increase now, as it would be more difficult to increase cover prices later when newsprint prices are lower. Following the crushed merger deal with Utusan, NSTP is apparently looking at a special dividend or the currently popular privatisation, very hush-hush at the present moment. Actually, NSTP would be an excellent vehicle to privatise, take it private, no more dirty laundry in the open, the losing of market share in English paper readership. Its NTA is RM4.11 or thereabouts, some 60% higher than market price, plus after that can relist the highly popular Harian Metro. Away from prying eyes and still a mouthpiece, sounds good?

"That's because in deciding for privatisation, the deal hugely favours the controlling party already - hence someone must look out for the long-suffering small tenacious investor"

May 3 (Bloomberg) -- T. Ananda Krishnan, Malaysia's second- richest man, offered to buy full control of Maxis Communications Bhd. for 15.8 billion ringgit ($4.6 billion) in Asia's biggest telecommunications acquisition in three years.
Binariang GSM Sdn., owned by Krishnan, offered to buy 40 percent of Maxis at 15.60 ringgit each, 20 percent higher than the closing price on April 27 before the stock was suspended for the announcement, CIMB Investment Bank Bhd. said in a statement today. The purchase values the company at 39.5 billion ringgit.

That's bloody close to the 41bn ringgit heard over the weekend. However, I am in agreement with Moola that the offer is too low, and probably will not succeed. Moola has posted his own valuation on Maxis, which places it at RM24.00. I think a fair price for the VGO is in the region of RM17.50-RM18.00. Since its Binariang making the incestuous offer to Maxis, let's see how professional the Board is at Maxis, and let's see how independent are the independent directors there, and let's see if Bursa and the SC try to protect the interests of the tenacious minority shareholders.

www.whereiszemoola.blogspot.com/2007/04/how-much-for-maxis.html

Open their last report quarterly earnings:

If you add back the depreciation of 1.014 billion, Maxis operations generated 3.352 billion ringgit!! ... consider that you have cash and you want an investment that can generate 3.352 Billion ringgit, how much do you reckon that you have to invest in a business that generates say 6%.

Is 6% a good return?

It's simple math. How much would you need to invest at 6% to generate a return of 3.352 billion? Answer? 3.352 divided by 6% = RM55.4 billion!! If someone offered you less, would you accept?

To grow in India, Indonesia and locally in broadband and 3G, the funding requirements are huge, but that is not really an issue, said Jamaludin. This year alone, the company needs RM2.77bil (of which RM1.57bil is for India and RM1.2bil for Malaysia) and in India alone..

And this is confirmed if you look at the cash flow. If you are a current shareholder of Maxis, your share of this 2.725 Billion has already being invested in India and Indonesia by Maxis. How should there be a value placed on these investments? So how much does Usaha Tegas wants to offer you?

AK47

There are loads of plausible reasons for taking Maxis private. There are the cynical ones and the positive ones. My reason for writing this posting was I came to the conclusion that the deal, even at 41bn ringgit (RM16.20 a share) has a 60%-70% chance of failing. Now if that is true, why would the man still want to do such as exercise? Some thoughts.

a) Maxis Undervalued (India) - Given, that is a given, esp their Indian and Indonesia stakes. Aircel's monthly new net additional subscribers surged an impressive 23% in 1Q2007 from 4Q2006 data - subscriber growth trend is healthy and spiking higher: in line to go past 8m subscribers by year end, if not earlier.
b) Maxis Undervalued (Indonesia) - Maxis also just bought out another 44% from their Indonesian partners Lippo Group for US$123.92m, a first step to bringing in a new "partner" into NTS. Tariffs in Indonesia is the highest in the region and almost 4x that of Malaysia. The downside is that NTS still has to contend with the 3 incumbents and its own limited coverage status. Looking at the positive angle, full Maxis mgmt control could signal the start of better prospects in Indonesia.
c) Maxis Undervalued (Sri Lanka) - Maxis is likely to acquire NTT's 35% stake in Sri Lanka Telecom (which controls Mobitel, holder of a 16% mkt share in mobile mkt in the country).
d) Much Lower Capital Expenses In Malaysia - Since Maxis is not going into new areas aggressively, and is printing money (free cash flow of RM1.2-1.3bn a year and rising), its own balance sheet is sufficient to fund the expansion into India, Indonesia and Sri Lanka. In particular, when mgmt feels that the market is not valuing its stakes in the 3 countries properly.
e) Privatise & List Again - Assuming the 41bn is correct, thats a 20% premium already. If you privatise and then list again, say in HK or Singapore, the additional valuation may yield better results but not sufficiently high enough to justify the exercise.
f) High Probability Of Failing - However, all that rests on the privatisation exercise succeeding. Big and small funds have been buying Maxis on their regional exposure and cash cow status in Malaysia. Maxis is a very decent regional play on telco penetration into Asia ex-China & Japan. Hence, there is a huge likelihood of some funds holding back approval. The Capital Group is a huge holder of Maxis shares. I doubt they'd think this is the best way to go.
g) Why Do An Uncertain Exercise? - If the deal does not have a good chance of success, why do it? The cynics would scoff and say that its to raise the share price valuation of Maxis and also Astro, Tanjong and Measat. Cos thats what will happen whether the privatisation succeeds or not. All companies in the man's stable will trade higher because of the visibility of the exercise and the intentions behind them. That is a mean statement, and Ananda is way above that to try and do something so under-handed just to prop up valuations. Plus, he is not selling, so it doesn't bother him whether his net worth is RM10bn or RM13bn.
h) Remember Bumi Armada - For the long history of excellence of the man, it was blotted considerably by the privatisation of Bumi Armada, and the nonchalant relisting of Bumi Armada. Minority shareholders were whacked before, during and after the whole exercise. So not his style, wonder who was behind it, but mention Bumi Armada, it leaves a very bitter taste esp if you had some of the shares. (Go to Where Is The Moola blog, he has an extensive and well researched point by point whacking on Bumi Armada's exercise). Due to the BA experience, fund managers will not be easily tempted to say "yours" at RM16.00 even.
i) PE Firms - Big private equity firms would do Maxis in the blink of an eye. No other sizable, good mgmt company with very decent regional exposure in telco side, coupled with excellent balance sheet. But if PE firms are involved, RM16 may not be the only buyout px. They could go as high as RM20 if they see value in the region of RM25 (as whispered by some optimistic fund managers) - which is why I believe RM16 is way way not likely to result in a proper successful deal.
j) Why Keep It Listed - The rule is if you have the money, where there is a willing buyer and seller, taking companies private is OK. However, some minority shareholders will want the counter to be listed: their argument being that they took big risks buying shares during the company's infancy period. Now that it is printing money, they want to take it off the table. The crux being that the main buyer is offering a premium to market. The long suffering shareholder may be willing to hold longer for dividends and longer term gains. Its a difficult balance to strike.

In the event of the deal being not successful, all shares in the group stable would have a higher base price anyway, is that the only thing the man wants? Seems too shallow for that. If anything, its more plausible to take Tanjong private. If I was a fund manager holding a sizable stake in Maxis, this is what I would demand from the man:
"Not at RM16, even though thats a nice premium. Better to gather all the foreign holdings into a SPV (call it Maxis International)and list them in Singapore. Keep Maxis listed but distribute the IPO shares in SPV to all Maxis shareholders as bonus. SPV will take care of future capital needs, and Maxis would then be able to distribute full RM1bn in dividends yearly instead of half that". This way, Maxis stay listed, better valuations for Maxis International, shareholders make tons on MI and doubling of dividends, everyone ends up richer. This way Maxis also allows minority shareholders to continue to participate in the growth and success of Maxis of the future. Don't just invite Malaysians to play when risks are high, and take good toys away from the kids.

p/s Whether the share px trades below or above the offer px is not a true indication of potential success of the deal. Generally, if it trades above, investors are betting on a higher offer later on. If its lower, generally investors are selling first (with discount) as that might be the best thing to happen for the stock. However, all we need is an aggregation of a few fund managers to block the deal at the approval meeting to crush the deal.

Posting on Bumi Armada
http://whereiszemoola.blogspot.com/2006/09/pirates-which-siezed-armada.html
Posting on Privatisation
http://whereiszemoola.blogspot.com/2006/09/more-on-privatisation-issue.html

Everybody Hates Me! I Wonder Why!

"We have top players and, sorry if I'm arrogant, we have a top manager." -Jose Mourinho, presenting himself as Chelsea's new manager.

"Please don't call me arrogant, but I'm European champion and I think I'm a special one."

"If I wanted to have an easy job...I would have stayed at Porto - beautiful blue chair, the Uefa Champions League trophy, God, and after God, me."

"I saw their players and manager go for a lap of honour after losing to us in their last home game. In Portugal if you do this, they throw bottles at you." - on M.U.

"Pressure? What pressure? Pressure is poor people in the world trying to feed their families. There is no pressure in football"

"I think he is one of these people who is a voyeur. He likes to watch other people. There are some guys who, when they are at home, have a big telescope to see what happens in other families. He speaks, speaks, speaks about Chelsea." - on Wenger.

My Take - As a M.U. fan since the early 70s, in the days of Macari and Gordon Hill to Whiteside and Steve Coppell, our rivalry was with Liverpool. However, that was a good rivalry, there was respect no matter how grudging. M.U. fans have now rooted for even Arsenal and Liverpool (or any teams for that matter) whenever they take on Chelsea, not so much that it would help M.U. win titles but just because ... When you are the top team, you get targeted and abused just like M.U. was in the 90s and a few years back. In Chelsea's case, you have not just a "top team" assembled overnight, but with a talented manager who thinks he sits next to God, and with dubious monopoly money. I guess, everybody who supports Chelsea should know that put Roman and Jose together, it does not have to be Chelsea, it could have been Watford or even Sunderland, but Roman wanted a London club (he hates to travel to the country-side /industrial towns). There i no history, no struggle, weak roots among the players (which explains the way they play... drawn purely by salary and ego-fulfilment ... club, what club?)

Tenaga: Nobody's Child

lionfish said...

Dali,

What do you think abt the recent price weakness on Tenaga? There are a lot of call warrants on this big blue chip... Earnings are growing but the stock is a big laggard vs the KLCI... I think at current levels, the mother is trading end-2006 while the KLCI has moved up 20% YTD already...

lionfish,

yes, tenaga is a weird animal... most brokers and foreign ones esp have tnb as a buy for the longest time, its not even matching the index gains ... so there is a disconnect here:
a) funds don't like tnb's story
b) glc revamp impact not so great at tnb, maybe they have fewer kinks to start with

The biggest disconnect has to be the way IPPs have given a viable alternative for investing vis-a-vis TNB. Hence TNB's policy, or rather the govt. policies are to be blamed for being "too nice" to IPPs to the detriment of TNB. That doesn't seem to be changing much, hence the under-performance can be expected to continue.