Monday, April 30, 2007

About Lion Diversified


  • Question : Do u think LIONDIV is worth investing? the growth is there... the profit is showing...

My Dearest SS,

Lion Diversified is tricky because every single year there are some big ticket disposals made by Lion Diversified.

Have a look.


So for me, yes this year looks great for Lion D but it's so difficult when I do not know exactly what is happening in the company and with so many outstanding corporate exercises (which are so complex and so very funky in nature), will the minority shareholder see these profits or even be adequately compensated for their investment?

rgds

How Much For Maxis?

My Dearest Moo Moo Cow,

So Usaha Tegas wants to make a VGO on Maxis.

Let's see how much money Maxis generated this whole year.

Open their last report quarterly earnings,
Quarterly rpt on consolidated results for the financial period ended 31/12/2006



If you add back the depreciation of 1.014 billion, Maxis operations generated 3.352 billion ringgit!!

My dearest Moo Moo Cow, 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% = 55.4 billion!!

If someone offered you less, would you accept?

Recently there was an article on Star Bix, New chapter at Maxis.

This line is most interesting.

  • 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?

rgds

Maxis Implication?

My Dearest Moo Moo Cow,

Posted on Bloomberg News,
Billionaire Krishnan Offers to Buy All of Maxis

  • Ang Kok Heng, who manages $114 million, including Maxis shares, at Phillip Capital Management in Kuala Lumpur. ``For long term investors, it's going to be an opportunity lost because you have one less good company to invest in here.''

Ultimately this means that the minority investors would never be given a chance to being adequately compensated for the permanent withdrawal of a good investment opportunity.

So what's the point of investing in the share market if a company can list and de-list their company anyway and anyhow as they like?

Is this a fish market?

  • ``The Board of Directors of the company is currently studying the implications of the potential takeover,'' Maxis's Chief Executive Officer Jamaludin Ibrahim said in a statement.

My dearest Moo Moo Cow, I do HOPE these folks study the SERIOUS IMPLICATION here, not just for the sake of your group of companies but for the whole of Bursa Malaysia! If companies are allowed to list and de-list as per their own fancy, is there any justification left to invest in any stocks on the Bursa Malaysia?

My Moo Moo Cow, do you reckon that a stock market can exist without the investors or minority shareholders?

And if Maxis was to seek listing in a foreign companies, don't you think that the implication would be deadly serious, my dearest Moo Moo Cow?

Them Sunrise Projectiles!

My Dearest Moo Moo Cow,

Let's look at Aseambankers projections again.



Now I am extremely lucky enough to have a saved copy of OSK report on Sunrise. See, I want to put this 154.9 million into some sort of perspective.

Back in Aug 2004, OSK projected earnings of 141.7 million for Sunrise in 2006. Sunrise had that huge funky provision back for its fiscal year 2006. Anyway, current nine month year to date fy 2007, Sunrise only managed 72.7 mil.



Ok, we can say that OSK is extremely powder-full with their earnings projections as expected.

Ok that was then. In Dec 2006, OSK report projected a net profit of only around 142 million for Sunrise fy 2008. LOL!! 2 years later, OSK is still using the same projected earnings for Sunrise? See table below.




And the following table is from RHB's research report dated 18th April 2007. RHB projected Sunrise to achieve a net profit of 134.4 million for its fy 2008.



Now if you thought Aseambankers was extremely optimistic, then how about HDBS research report on 18th April? HDBS projected an earnings of 190.7 million for Sunrise's fy 2008! WOW!!!





Yeah! I know what exactly you are thinking. Tell me more about it, my dearest!

Aseambankers on Sunrise

My Dearest Moo Moo Cow,

I just on the Edge website that
Aseambankers Research raises Sunrise's TP to RM4.50. I find so amusing the way the brokers raises the target price of a stock by raising the forecasted profits based on a very optimistic growth projection. Yes, the higher the expectations, the higher the target price.

Here's what written on the Edge based on that Aseambankers research report.


  • Aseambankers Research has raised the target price for Sunrise Bhd from RM3.92 to RM4.50 based on 11.5 times the calendar year 2008 earnings per share, supported by its revised net asset value (RNAV) of RM4.58.

    Maintaining a buy on Sunrise at RM3.78 and the earnings forecasts, it said the target price was well supported by the RNAV (previously RM4.50), which incorporates surplus from the recent proposed JV development on a 3.19 acre land in Mont Kiara.

    "Management guided that Sunrise has no plans to develop this new JV land in the immediate future, but merely intends to secure more land due to scarcity of supply around the Mont Kiara area," Aseambankers Research said.

    It said Sunrise's latest nine-month net profit at RM72.7 million, which was a 15.1% rise year-on-year, was within expectations, even though it only met 61.6% of consensus' and 65.9% of its full-year estimates.

    Aseambankers expected Sunrise's 4QFY07 results to be stronger, backed by a strong unbilled sales of RM1.3 billion as of April 23, 2007, and the near completion of Kiara Designer Suites and Solaris Mont Kiara (MK), which should lift margins. (read
    here for the rest of the Edge posting. )

And I was lucky enough to get a hold of Aseambankers research report.

Sunrise latest nine-month earning is around 72.7 million. So a full year earning of around 110 mil is about fair.

However, no one values stock based on current earnings. It's all about the future earnings.

And here is where it gets funky!

And in Sunrise case, the future earnings are based on an earnings expectations of 154.9 million. See the screenshot taken of Aseambankers research report.

And that works out to roughly a growth expectation of 40.8%



How?

Now my dearest Moo Moo Cow, I am not judging the issue of Sunrise as a stock but I am just totally amazed by the incredible projections made by our local research houses. Growth projections are simply worth 10 sen a dozen!

Quick update on Maxis

My Dearest Moo Moo Cow,

Incredible! Maxis was suspended in the morning.

And the following was posted on Bursa website.

  • The Company has received notification, after close of business on 27 April 2007 from Usaha Tegas Sdn Bhd ("UTSB"), a substantial shareholder of the Company, that UTSB and its affiliates intend to launch a voluntary general offer through a special purpose vehicle for all the ordinary shares of the Company. UTSB has indicated that, barring unforeseen circumstances, the notice of takeover offer will be served on the Company on or before 3 May 2007

Maxis to be Privatised?

My Dearest Moo Moo Cow,

Yet another story based on sources.
Plan to take Maxis private?

  • Plan to take Maxis private?
    By Adeline Paul Raj
    bt@nstp.com.my

    April 30 2007

    MAXIS Communications Bhd’s controlling shareholder Tan Sri T. Ananda Krishnan is working on a multi-billion-ringgit plan to take the telco private,
    sources say.
    The plan, which involves a general offer, may be unveiled as early as this week.

    Maxis share price, which closed at an all-time high of RM13.20 twice last week, last traded at RM13.

A very simple cow sense questions for you my dearest Moo Moo Cow.

1. If there is so much value being private, why bother listing a company?

2. In a hot stock market, doesn't it make more sense to ride on the bullish stock market? As a private entity in a hot stock market environment, can the company create such value?

So if there is no valid reason for a company to go private, why such a story?

Who are these sources creating such stories? Why?

Saturday, April 28, 2007

PCCS

My dearest Ezi,

The following table highlights PCCS earnings track record.



TTM stands for trailing twelve months or current 4 quarters.

Here's my interpretation of what PCCS has done.

If I view from what PCCS has done since its fy 2002, I would say that PCCS has done nothing really because if I consider that PCCS made 15.230 million for its fy 2002, then its current earnings or ttm earnings only indicates earnings of around 14.472 million. Which means for me, there simply has was no growth since fy 2002 and considering that the company's nett debt position has increased tremendously, I would normally just call this a investment a pass.

However, I do see some interesting issues.

Now fy 2004 was bad year for PCCS, however, the company has nicely recovered since then. So I guess it would be helpful if one takes a step back and understand what has happened back then.

27th May 2004, PCCS announced its fy 2004 Q4 earnings,
Quarterly rpt on consolidated results for the financial period ended 31/3/2004

  • Total turnover increased from RM53.1 million recorded in the preceding quarter to RM71.6 million achieved in the current quarter. This was mainly due to increase in orders from the Group’s Apparel and Labelling Division. But the loss incurred by Jusca Garments (Cambodia) Ltd was the main factor attributed to the decline in pre-tax profit from RM1.7 million to a loss of RM7.2 million.

Hm, the losses were due to PCCS's investment in Cambodia. (Here's an issue worth remembering, not all overseas ventures is profitable and in this instance, PCCS's Cambodia investment is perhaps an example!)

Back in Aug 2004, I receieved a copy of iCapital's write-up on PCCS. Do you like iCapital?

This is what the article said. I will add in some comments in blue italic.

  • Perusahaan Chan Choo Sing Group (PCCS) was listed on the KLSE on 16 Aug 1995 and its share price has been performing miserably since the 1997 Great Asian Crisis. The group’s core activities span 5 areas; namely, apparel manufacturing, embroidery, fabric knitting, labelling, and marketing and distribution.

    Perusahaan Chan Choo Sing S/B (PCCS S/B), PCCS Garments Ltd (PGL) and Jusca Garments (Cambodia) Ltd (Jusca), undertake apparel manufacturing with the latter 2 operating in Cambodia. Approximately 98% of its product are exported overseas to the US, Canada, EU, Japan, Singapore and the Middle East. Among the major clients of this division are Adidas, The Gap, Banana Republic, William Carter, Fila, Nike, Cross Creek, Old Navy and Visage. The operations in Cambodia started in 1999 with the acquisition of a 60% stake in PGL for US$2.1 million and a subsequent 40% for RM5.32 million in 2002. (this details the Cambodian investment by PCCS) This allows it to benefit from the abundant cheap labour available and the Generalised System of Preferences. Jusca was acquired in 2003 for US$0.7 million, representing a 70% interest. Unlike PGL, being new, Jusca has not been profitable and recorded a loss of RM4 mln in fiscal year 2004. (PCCS had invested in a loss making company. Is this advisable? Perhaps their strategy is to invest in a poor company at a cheap price and then attempt to turn it around.. hmm.. it does have some risks in such a strategy, yes? ) The current production capacity of the group’s apparel division is 40,000 dozens of apparels per month for PCCS S/B, 70,000 dozens per month for PGL and 30,000 dozens per month for Jusca. In total, PCCS’s apparel division contributes more than 80% to the group’s revenue.

    Although PCCS has an in-house fabric knitting and elastic webbings operation, the main buyers for its fabrics are other garment manufacturers and polymer coating factories that use fabrics as raw material for making carpets or car seats. (interesting! i wonder if PCCS is still active in this business considering the fact that the motor industry is in a slump) The current capacity is 75,000 kg of knitted fabrics and 4,500 kg gross of elastic bands per month. Another complementary activity undertaken by the group is embroidering emblems and logos for garments, towels, handkerchiefs, gifts and souvenirs including appliqué and normal embroidery. (highly diversified PCCS business) Its embroidery division has the capacity to produce 570,000 dozens of apparels per annum. The group also ventured into the labelling business, producing and supplying computer labels, textile labels, barcode labels, security labels and computer imprintable labels. With the current capacity, this division contributes RM1.2 – 1.5 million of sales per month.

    The group has a division specifically involved in the local marketing and distribution of its products under PCCS Capital S/B. It also has exclusive distributorship of US upmarket golf apparel, the “Cross Creek” brand under Cross Creek Distribution S/B. On 1st Apr 2002, Jusca Development S/B, formerly a marketing division, entered into a joint venture agreement with Swee Tian Brick Works S/B to develop 17.37 acres of vacant land in Tangkak, Johor.

    Both 2003 and 2004 marked significant developments in PCCS with the group actively acquiring new subsidiaries (ah, the acquisition trail. the engineering of new profits) to complement its existing business and diversify into new businesses. Realising it is short of a printing operation to be an integrated garment manufacturer, PCCS acquired Beauty Silk Screen S/B and Beauty Silk Screen Ltd in Mar 2003 and Apr 2003 for RM109,000 and RM190,000 respectively. With extensive testing of the print quality and getting buyers approval in 2003, this new division will start contributing to the group in fiscal year 2004. As an added sweetener to its existing apparel services, PCCS acquired Top Cheer S/B to market and distribute socks.

    In Jul 2003, the group also ventured into China with the acquisition of Blopak China P/L (Blopak) for RM4.1 million and China Roots Packaging Pte Ltd (China Roots) for US$1.201 million with an additional investment of US$1.0 million in Jul 2004. Blopak is involved in producing packaging materials and label stickers in China. China Roots is set to take over Blopak’s business in stages to be eligible for investment incentives in China.
    (Waa.. much more diversification of its business!)

    Another major development within PCCS is the disposal of Texline Associates Pte Ltd (TLA), its 60% owned subsidiary acquired in 1994 for RM5.7 million. TLA is engaged in the business of buying and trading textile and apparel, based in Singapore. In 2001, the group sold 15% of its TLA stake for RM10.4 million. The balance 45% was sold in Dec 2003 for RM16.34 million. Even though TLA was profitable, PCCS decided to cash out as the business was deteriorating. Nevertheless, by selling TLA, the group was able to [1]. Focus on its own marketing arm amidst a trend of direct purchasing from customers, [2]. Reduce its debt, and [3]. Eliminate the corporate guarantees of RM50 mln.

    Conclusion and Advice

    An important point worth noting about PCCS is that although the group recorded a sharp decline in profit for financial year 2004, a closer look will show that the group’s fundamentals were still intact. (but.. the company is really diversifying into so many businesses. Is this a concern to its business fundamentals? Would 'Jack of all trades' be of a concern here?) Taking out the loss of the newly acquired Jusca Garments (Cambodia) Ltd, the RM9.0 mln loss on the disposal of TLA, and TLA’s contribution in fiscal years 2003 (RM4.1 million) and 2004 (RM2.8 million), the pre-tax profit for PCCS would be approximately the same in 2003 and 2004. In addition, despite the plunge in profit, the group also continued to generate positive cash flow from its operations, signifying sound business operations.

    However, the most interesting development in PCCS is the group’s new venture in China via China Roots and Blopak. Although the usual advice is for companies not to venture into an unrelated business, the same may not hold true for Blopak. First, Blopak is the 5th largest plastic bottle supplier to Amway (China) Co Ltd. With Amway China a large tax contributor to the Chinese government, the long-term potential of Blopak and China Roots is huge. Secondly, it can be a window to expand the group’s current labelling and stickers operation, with both being able to complement each other. Nevertheless, with the existing net borrowings of around RM33 million, any major capital expenditure by PCCS would add substantially to the gearing of the group.

    At RM1.04, PCCS is capitalised at over RM62 mln. Assuming that Jusca reaches breakeven level in fiscal year 2005, assuming no positive or negative contribution from its China expansion and with no exceptional loss expected, PCCS is selling at a PE multiple of only 4 to 5 times. i Capital revises its Hold rating and now rates PCCS Group a Buy for the longer-term.

Ok, I am not keen on such Hold and buy for the longer-term strategy. I would rather wait for a clear confirmation that the business has turned around before investing. Yes, the investor could end up paying more for their investment but at least they are getting a more solid guarantee that their potential investment has turned around.

Consider this, back then in Aug 2004, PCCS was around 1.04. Now if one adopted the safer approach, almost a year later in May 2005, PCCS announced a net profit of around 11 mil for its fiscal year 2005. That was reported on 24th May 2005. If one had used this as a guide, their investment reasoning would have been more justifiable since PCCS had clearly turned around from their 2004 woes. And one could have invested in PCCS after this earnings announcement at a price of under 90 sen. That would have been a much better investment approach, yes?

Anyway, back in Sept 2004, there was this article in Star Biz called "PCCS has big plans for China unit".

  • “These companies are plagued by high wastage, inferior quality, late delivery and bad sales services,'' Gan told StarBiz in an interview.

    PCCS had in July 2003 acquired 100% in a loss making packaging company, Blopak China Private Ltd, for RM4.12mil and turned it around within a year, he said, adding that it broke even in June 2004 and would probably make a profit by the end of the year.

Interesting. Same strategy of buying a loss making company.

May 2006.

  • Monday May 22, 2006

    PCCS to boost China ops

    By Zazali Musa

    APPAREL maker PCCS Group Bhd wants to build up and strengthen its labelling and packaging division in China in the coming years.

    Group general manager Gan Hoe Lian said the company would focus on three market segments namely consumer goods, electrical items and garments.

    He said prospects for the labelling and packaging business in China was bright considering its position as the manufacturing hub of the world.

    “The three segments provide us with quantity. In addition, volume is not a problem in China,’’ Gan told StarBiz in an interview recently.

    He said with a large number of multinational corporations (MNCs) and international manufacturers having operations in China, the prospect was endless.

    The presence of the MNCs and international manufacturers in China offered good business opportunities for many local and foreign companies and businessmen.

    The company found that producers of consumer goods, electrical items and garments needed the services of support industries such as those in labelling and packaging.

    Gan said demand for labelling and packaging materials in China would grow even higher in future due to the booming manufacturing sector there.

    “Our labelling and packaging division in Malaysia is doing well, so we believe we can do the same in China.’’

    Although there were many packaging companies in China, a majority of them could not cope with the high standards set up by the MNCs, he said.

    Sensing a business opportunity, the company had in July 2003, acquired 100% equity in loss-making packaging company Blopak China Private Ltd for RM4.106mil.

    Blopak was already supplying bottles to an international multi level marketing (MLM) company in China.

    “Prior to our acquisition of Blopak, there was a lot of wastage where raw materials were not properly controlled during production,’’ Gan said.

    The company had successfully reduced the high wastage from 25% to 30% previously to the current 1% and 2%.

    Gan said with the improvement in quality, it was able to convince the MLM company to outsource bottle caps from Blopak as well.

    In addition to bottles and bottle caps, the company has started supplying toothbrushes and T-shirts to the MLM company.

    The supply of T-shirts came under its wholly owned subsidiary PCCS Garments (Shuzou) Ltd, set up in April last year.

    Gan said the prospects for apparel manufacturing in China was even brighter with Beijing hosting the Summer Olympics in 2008.

    “PCCS managed to turn Blopak around within a year. The company broke even in June 2004 and is now starting to contribute positively. It was a wise decision to acquire Blopak.”

    Gan added that several MLM companies and manufacturers in China had expressed interest to outsource packaging materials from the company.

    The company was currently providing product samples to five MNCs in China and Gan was confident of securing orders from them.

    He added that at present the company would focus on making plastic-based packaging materials before introducing other types of packaging products.

    “Demand for plastic-based packaging materials especially bottles in China is high particularly from beverages and consumer goods producers.”

PCCS reported its most recent earnings on Feb 2007. Quarterly rpt on consolidated results for the financial period ended 31/12/2006

I would check out this non-apparels business and see how PCCS is doing.

The following table below is taken from that quarterly earnings announcements.



Non-apparels earnings totals some 1.605 million for the first 3 quarters of current fiscal year. Which kind of pales against 3.611 million achieved the same period last fiscal year.

And there are no geographical segmentation reports. It would have been nice if PCCS included that report since the investor should know what exactly is happening with PCCS's Cambodia business and also its China business.

And its recent developments stated in that earnings report.

  • On 26 December 2006, Beauty Electronic Embroidering Centre Sdn. Bhd. (“BEEC”), a wholly-owned subsidiary of PCCS, had invested USD1,000,000/- in JIT Embroidery Limited (“JIT”), which was incorporated in Cambodia, representing 100% of the registered capital of JIT. On 20 January 2007, E.M.I. Embroidery Sdn. Bhd. (“EMI”), A 90% owned subsidiary of BEEC, a wholly-owned subsidiary of PCCS, had completed its voluntary winding-up proceedings.

So as it is, it would appear that PCCS has actively acquired businesses in Cambodia and China the past couple of years. And at this moment of time, PCCS earnings pales in comparison to what it had achieved for its fy 2002.

How would you rate such a business? Would you be concern of PCCS constant acquisitions of new businesses and with it, its nett debt increases? And moving ahead, do you see any catalyst for PCCS earnings to improve?

I hope the opinions posted on this blog posting helps as a second opinion!

Cheers

How Now My Dearest Moo Moo Cow?

My Dearest Moo Moo Cow,

Mr.Brian Pretti, the managing editor of ContraryInvestor.com has written a fantastic editorial on today's FSO market wrap, Deficit Attention Syndrome

Do give it a good read as Mr.Pretti has raised several very interesting issues.

For example.



  • The next chart is really the important one in terms of defining and characterizing the US trade deficit, as we know it today. What we are looking at is the percentage of the total US trade deficit being driven by both imports of crude oil and imports from China. I’ve delineated each separately as well as presented their ongoing combined value in the blue columns. The message is clear. In 2006, 66% of the US trade deficit is accounted for by crude imports and the trade deficit with China. It's no wonder China/US trade circumstances are such a perceptual political flash point. Unless something acts to change the trajectory of these trends, it will probably only be a year or two until crude and China account for three-quarters of the total US trade deficit. Outside of crude and China, it almost seems trade with the rest of the planet is an afterthought in terms of the overall US deficit specifically.


    Although this may sound both a bit philosophical and gloomy, here's the question. Just what is the US going to do to change this? Limiting trade with China means heightened domestic inflationary pressures. And crude oil is simply another story. As you know, the political answer to the crude import issue of the moment is to promote corn based ethanol, which is completely economically inefficient. Corn based ethanol is simply politics as usual (farm lobby) and guaranteed to raise the total price of energy to US consumers (that ought to do wonders for the economy). But that's for another discussion. For now, I see crude as intractable. China is open to debate.

    Simple question. How do we stop what you see below? Talk about a two-decade up trend of significance. This has to be the biggie for the US economy. For now, this is not about to change any time soon. Talk of eliminating the US trade deficit in its entirety is whistling in the wind.



    When Worlds Collide

    So there you have it, the big message in the trade deficit report of the moment is that a contracting rate of change in goods imports has been a very important pre-recessionary indicator of the past. A message worthy of monitoring. Before concluding this discussion, a few comments on other pre-recessionary dominoes that are stacking up one by one as of late. First, the leading economic indicators are clearly pointing toward recession, if indeed historical experience is still to be any guide at all. I’ve been through housing stats so many times that I won’t recant them here. Housing indicators of the moment are already in recessionary mode. Retail sales? Just have a look below. The following is the year over year rate of change in the quarterly moving average of retail sales. A method of smoothing out the trend a bit. The last time we saw this type of trajectory and level of change was right in front of the 2001 recessionette.


An Mr. Pretti closes with the following commentary.

  • We’re going to leave you with a quote that I first posted last year on our subscriber site and in our January open access monthly discussion. In the clarity of hindsight, it now takes on much more meaning and gravity. It’s a quote from a Fortune Magazine interview with Treasury Secy. Hank Paulson from last November. As suggested when it was first posted, LISTEN CAREFULLY to what Paulson is saying. The editorial inserts (ed.) are mine.

    Fortune: Aren't you concerned that GDP growth dropped to 1.6% in the latest quarter? That's kind of anemic, and we've seen a downturn in the housing market. Convince us we're not going to have a recession next year.

    Paulson: "I can't convince you. But as I looked at the third quarter, I felt good because I saw a major correction in the housing market, and I knew that was going to take more than one percentage point off GDP. And then I'm looking at the rest of the economy - strong corporate profits (ed. this is now slowing) and investment (ed.
    slowing also
    ),
    good growth outside the U.S. (ed. still true), strength in the construction sector away from housing (ed. this is now slowing), and then an equity market that has gone up and added $1 trillion in value.

    I know how much people care about housing. But I would be quite hopeful that through 401(k) plans, pension plans, and elsewhere that the average American is feeling an uplift from the appreciation of the equity market that would be very offsetting to any potential decline in housing."


    As I’ve suggested probably too many times, we’re an asset inflation dependent nation. From stock bubble to housing bubble, and now back to potential stock bubble? What else could Paulson be referring to in his quote? Although you don’t need me to tell you, directly from the horse's mouth, no? Do yourself a favor and savor the moment. After all, how often do you get a rare glimpse of truth on the Street? Ignore Paulson's comments at your own investment peril.

Exciting times ahead? Well, the Dow closed a third straight closing record while the US Dollar tumbles to record low versus euro!and Bill Bonner of the Daily Recknoning nicely puts as Dollar Fights Dow for Importance Supremacy.

And finally Bernard Ber of CIBC, Toronto, raises an interesting issue, is this too Much Like 1929?

And Mr Ber raises some interesting issue about China.

  • The Chinese stock market began to rise in value dramatically starting in November 2006. It has literally doubled in value since then (over a period of 6 months), with the Shanghai composite index rising from 1800 to a present level of 3600. The over-inflated state of the Chinese stock market recently resulted in a one-day decline of 9% on February 27, 2007, which in turn caused global stock markets to sell off sharply. As well, the economic growth rate in China has accelerated to an annualized rate of 11.1% in the first quarter of 2007. The run-up in the Chinese stock market and the acceleration in economic growth at the same time that China’s foreign exchange reserves rose sharply is also no coincidence.

    The point is rapidly approaching when China’s central bank will be forced to abandon their fixed exchange rate regime. On March 20, 2007, the governor of China’s central bank stated for the first time that they “will not stockpile foreign exchange reserves any more” (an extraordinarily important comment that few people took note of). Given the present state of affairs, how could that possibly be accomplished without the abandonment of the fixed exchange rate system? They will realize that the alternative to this (keeping the policy in place) can only result in the destruction of the Chinese economy. When the peg on China’s foreign exchange rate is dropped, the US economy (as well as the global economy) will implode.

    The global economy is critically dependent right now on what happens in the Chinese economy. To that extent, it is very important to focus on three elements going forward: the growth of China’s foreign exchange reserves, Chinese economic growth and the Chinese stock market. In turn, what happens in China will depend on the rate of deterioration in the US economy (which will determine the amount of private investment capital that returns back to China and causes their economy to overheat further). At this point, we are witnessing an extremely unusual relationship, whereby deterioration in US economic growth actually causes an acceleration in Chinese economic growth.

    Further deterioration in US economic growth from this point onward will cause the US Federal Reserve to consider cutting the US short term interest rate. While many participants in the US financial markets are conditioned to look at this outcome favourably, at this point such a decision would result in a repatriation of foreign capital (and rising longer term interest rates), because the interest rate differential versus other countries will become less favourable. An interest rate cut for a highly indebted country that is highly dependent on foreign capital will result in a completely opposite effect from that intended. The flight of private foreign capital back to China would result in the termination of China’s fixed exchange rate system, as the tremendous increase in their domestic money supply would necessitate it. Once that occurs, the foreign capital outflow would turn into a flood, given that there would be no foreign central bank intervention to offset it. Any benefit to debtors from a lower short term interest rate will be negated by the tremendous offsetting cost of sharply higher longer term interest rates (as US government debt is sold off in the US dollar liquidation). The US Federal Reserve is in a box. The Fed is now powerless to rescue the US economy, because of the threat of foreign capital flight. The emperor has no clothes.

    The tension in the world financial system will continue to build as the system is stretched from two opposite ends (the US and China). Further acceleration in Chinese economic growth or further deterioration in US economic growth will increase this tension to the point that the system literally breaks (remembering again that these two trends are linked together). Any further increases in the Chinese short term interest rate or decreases in the US short term interest rate will amplify these stresses and cause the cracks in the dam to widen (until the dam bursts).

And Mr.Ber poses this very important issue.

  • Now fast forward to today, and what you see is China as the emerging industrial power and the United States as the mature and stagnating industrial power. China is printing money in an effort to prop up the economy of the mature industrial power (the US). The inflation of the money supply is resulting in the overheating of the Chinese economy and stock market. Very interestingly, on February 27, 2007, it was the sharp 9% one-day drop in the Chinese stock market that led to the sharp drop in stock markets worldwide, including the US. People may be conditioned to think that economic events in developing countries pale in significance to economic events in the US, and may fail to see how what happens “way over there” in China would have any significant impact on their economic well-being. But how different the truth really is. I think most people even now after the February 27th turn of events, fail to grasp why the US stock market sold off so sharply after the Chinese stock market sell off occurred first. The idea that a foreign stock market could dictate what happens in the US stock market almost offends the American sense of national pride (so the event is casually dismissed as “market irrationality”). A word of advice: you better get used to it, as there is much more of that to come. The crash is coming.

Friday, April 27, 2007

The Profitable Call Warrants II

My Dearest Moo Moo Cow,

I would like to do a follow-up on the following blog posting, The Profitable Call Warrants

1. Astro-CA.


Born 23/5/2006.

COMMERCE INTERNATIONAL MERCHANT BANKERS BERHAD ("CIMB") PROPOSED ISSUE OF UP TO 28,000,000 NON-COLLATERALISED CASH-SETTLED CALL WARRANTS ("CW") OVER ORDINARY SHARES OF ASTRO ALL ASIA NETWORKS PLC ("ASTRO") ("ASTRO CW")

28,000,000 Call Warrants was issued by CIMB at 0.225.

Call Warrants expired 29th Jan 2007.


MONTHLY DISCLOSURE PURSUANT TO PARAGRAPH 5.11(2) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD

The following table is interesting.



Only 1,693,600 out of the 28,000,000 call warrants were exercised. What happened to the 26,306,400 call warrants? Did they died on expiry and went to the share heaven?


2. Scomi-CA

Born 23/5/06 .

COMMERCE INTERNATIONAL MERCHANT BANKERS BERHAD ("CIMB") PROPOSED ISSUE OF UP TO 35,000,000 NON-COLLATERALISED CASH-SETTLED CALL WARRANTS ("CW") OVER ORDINARY SHARES OF SCOMI GROUP BERHAD ("SCOMI") ("SCOMI CW")

35,000,000 Call Warrants was issued by CIMB at a price of 0.175.

Call Warrants expired 29th Jan 2007.

MONTHLY DISCLOSURE PURSUANT TO PARAGRAPH 5.11(2) OF THE LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD

The following table is even more interesting!



35,000,000 died on expiry and I wonder if they too went to the share heaven also?

And as mentioned in the first posting, The Profitable Call Warrants

  • Assuming CIMB managed to sell all their warrants on listing day, this is pretty profitable, eh?

    My dearest Moo Moo Cow, do not get me misunderstood. I am not saying that you cannot make money in such so-called instruments. (Actually, I call them 100% pure stock market gambling chips) Some traders have indeed profited from trading such instruments during the short life span of these warrants but if one buys this warrant in hope of profiting from the exercise price, then this example would show clearly how risky this venture is.

Just for the sake of you, my dearest Moo Moo Cow, I have uploaded both these two charts to see if the following point mentioned above is true.

  • Some traders have indeed profited from trading such instruments during the short life span of these warrants



And as can seen from the above charts, I do not dispute that there existed the window of opportunity for the smart trader to make money from these two call warrants but as seen from the exercising of warrants, if one buys these call warrants in hope of profiting from the exercise price, then this example would show clearly how risky these venture are.

Silver Bird says confident of turning around

Saw this business news posted, Silver Bird confident of returning to the black.


  • Group executive director Derec Ching said the group had been registering stronger sales in the last few months after a product crisis from September to January.

    “We are recovering, and certainly doing better now,” he said after the group AGM yesterday.

    Silver Bird registered a net loss of RM18.24mil for the first three months ended Jan 31 from RM1.21mil in the previous corresponding period. Ching said the losses largely reflected the crisis’ impact on the company’s bottom line in the first quarter of FY07.

    “Q107 was not a normal quarter for us and not reflective of our normal performance. Apart from the crisis, we were investing heavily to start up our Singapore operations,” he said.

    However, Ching said based on rising sales of bakery and consumer food products, and coupled with new launches in the current year, the group was “reasonably confident” it would be able to turn around within the remaining three quarters.

    Silver Bird recently secured an exclusive supply contract from a leading player in Singapore to supply bakery products to retailers in Singapore. This will help turn its Singapore operations around this year.

    Managing director Jackson Tan said the group would embark on a multi-million ringgit advertising and promotion (A&P) campaign earliest by July to drive up sales and regain the market share it used to enjoy.

    “It will be a major A&P campaign running for more than six months,” he said.

    He said as part of the group’s efforts to preserve High-5 products as the main driver for the group’s consumer division, Silver Bird would be appointing a famous personality as its product ambassador.

    Among other things, the group will introduce what Tan describes as innovative consumer products this year. “These will help us regain market share and bring back our glory days,” he said.

    On the group’s alliance with the AmBank group to offer micro lending services to small businesses, Ching said the parties had finalised the product, called AmMikro, and would be rolling it out soon.

    “We are only an agent that will facilitate AmBank in the distribution of this product via our distribution channel,” he said.

Me? I really do not understand why this company is diversifying into the micro lending business. It's own bread business is running into huge losses and this group wants to diversify its group business and mess around in a totally unrelated business! Why can't it fix its core business first?

For past Silver Bird postings: click here



Tanjong's Power Listing?

My dearest Moo Moo Cow,

Saw this news article on Star Bizweek, Tanjong power listing. My initial reaction upon seeing the news headline was, "Oh my, they can't be serious, can they? What about them shareholders of the stock Powertek, which Tanjong privatised a couple of years ago? Surely, they cannot be too happy seeing such news, can they?"

Then I read the article.

Guess what?

The article was filled with the usual according to sources, is expected, it is understood!!!!

Yet again, we are seeing tons of un-known sources being quoted yet again!! And the whole basis of the article is based on expectations!

  • Friday April 27, 2007

    Tanjong power listing

    By C. S. Tan

    PETALING JAYA: Tanjong plc is expected to spin off its power division for a listing overseas, which will enable the power and gaming group tap funds for acquisition of more power assets in other countries.

    As the company examines this option, sources say they expect such an exercise to unlock the value of its existing power assets, possibly before year's end.

    Tanjong started out as a numbers forecast operator (NFO) but later diversified successfully as an independent power producer (IPP).

    The power business has worked out so well that it produces larger profits than the NFO operations. The power division generated an operating profit of about RM430mil after interest costs, dwarfing the gaming division's operating profit of RM150mil in the financial year ended Jan 31, 2007.

    An initial public offering of the power assets could lead to a value of over RM3bil to emerge in a power company, the sources said.

    Visibility of earnings in the power division is clear again, now that negotiations between the Government and IPPs are believed to have been discontinued last month.

    The Government had hoped to re-negotiate supplementary agreements that would reduce the current burden of the bill that Tenaga Nasional Bhd has to pay to the IPPs.

    It was expected that a re-negotiated agreement would have been neutral to the value of the IPPs as measured by their discounted cash flows but the cash flows would be received over an extended concession period. That would have affected current dividend flows from Tanjong's three IPPs in the country.

    Since that may not be an issue anymore, Tanjong will be able to go to the capital markets and commit its Malaysian power assets to a certain level of dividend payout.

    The group owns three power plants in Malacca, two in Egypt and a 10% stake in a power generation and water desalination complex in Abu Dhabi, the United Arab Emirates.

    Tanjong has shown an ambition to expand its power business. It managed, for instance, to double its total net power generating capacity in the past year or so to 3,055 MW after its acquisition of power assets in Egypt and Abu Dhabi.

    The group has the balance sheet to expand further. It has a sizeable free cash flow of about RM500mil a year from its power and gaming businesses. That will enable it to obtain financing for any power assets that it acquires.

    Additionally, the group had RM1.29bil cash as at end-January, which should rapidly increase until it makes its next acquisition.

    The group is understood to be scouting around for acquisitions in the growth economies of Asia rather than the mature markets in the United States and Europe. Thus, it is searching for power assets in the Middle East, North Africa, Indian sub-continent and South-East Asia.

    Such acquisitions need to go through a tendering process and it has experienced a few failures in the past two to three years.

    Nonetheless, it took that as a step up the learning curve and the acquisitions of two sizeable power plants in Egypt last year vindicated its claims that it can succeed.

    Sources say Tanjong has the capacity and capability to acquire additional power plants every few years.

How?

Would Tanjong deny such a story?



Purpose In Life

My dearest Moo Moo Cow has forwarded me a very nice quote made by Dr. Van Tharp. I would like to share a snippet of it with everyone.

  • We live in a universe filled with energy that we can tap into if and when we are aware of it. Those who are creating problems tend to manipulate others (because they feel week and insecure) to gain power and money. They end up making others feel weak and ready to fight back to regain their energy.

    This competition for energy will end when we experience a connection to the power within all of us. Much of my coaching is about helping people channel into this sort of power.

    Knowing what you are all about, your purpose in life, will make it much easier to tap into the power of the universe. When you are on purpose, mysterious things seem to happen to keep you on track.
* click here for the rest of the posting *

Many thanks again my dearest Moo Moo Cow.

Wednesday, April 25, 2007

MaeMode

My Dearest Moo Moo Cow,

One of the stock earnings that caught my eye was Malaysian AE Models:
Quarterly rpt on consolidated results for the financial period ended 28/2/2007

It does look pretty impressive.



The above table shows what MaeMode has done.

Well here is my interpretation. MaeMode's earnings performance has been rather lackluster from its fy 2002 to fy 2005. But things are starting to look good since fy 2006 where its earnings jumped to 11.897 million. And as can seen the ttm numbers are indicating a net profit of around 18 mil, which means that fy 2007 should be a grand year for MaeMode.

So I investigated more. I always like to watch the cash/debt position. It's always the very first step I take before digging for more info. Here is what I found.



How?

I see the classical debt built-up again.

Sigh!

I guess I will call this a pass.

Tuesday, April 24, 2007

KHSB: Regarding Accountability Again

My Dearest Moo Moo Cow,

Remember the previous blog posting called It's All About Accountability?

Here is the announcement posted by KHSB, ARTICLE ENTITLED : SYABAS SHAKE-UP IN THE PIPELINE


  • We refer to Bursa Securities' letter dated 23 April 2007 with regards to the above article appearing in Star Bizweek, page BW3, on Saturday, 21 April 2007 and wish to clarify and confirm with Bursa Securities that Kumpulan Hartanah Selangor Berhad ("KHSB" or "the Company") is not aware of the acquisition of 70% interest in SYABAS by Kumpulan Perangsang Selangor Berhad and KHSB providing the consideration for the same.

    We further confirm that the Company is furnishing the above after due and diligent enquiry with directors, major shareholders and such relevant persons reasonably familiar with the above matter.

How my dearest Moo Moo Cow?

See the extreme danger in trading based on such news?

Monday, April 23, 2007

Capital Ideas

My Dearest Moo Moo Cow,

I like the following website http://www.capitalideasonline.com/.

One of the main reasons I like is because Chetan Parikh does a constant review of books. And currently two articles posted by Mr.Parikh is of interest.

  1. Limitations of financial reporting
  2. Accountants and analysts

Really good stuff

rgds

Regarding Toyochem again

My Dearest Moo Moo Cow,

On Saturday, I blogged on the following: Is Toyochem interesting?

Let's look at from a plus - minus point of view.

The plus points.

  1. Its balance sheet remains healthy. Net cash per share of RM1.25 is one of the highest on the second board. Net tangible asset stood at RM3.64 a share as at end-December 2006
  2. On Thursday, Toyochem announced a final net dividend for FY06 of 11 sen, translating into a decent yield of 4.0%. For FY05, it paid a gross final dividend of 11 sen per share. The net dividend payment for FY06 implied an improvement from FY05.

Minus points.

  1. No growth. And from the table posted on the last posting, Is Toyochem interesting? , there is no growth. And in fact, one could say that Toyochem earnings has been declining since fy 2004.
  2. And cash per share means nothing really if the company does not share adequetly with its shareholders. Is 4% sexy enough?

The growth issue is highly interesting. I, for one, always believe that growth and value goes hand in hand. You cannot have value without the growth.

And this reminds me of a discussion posted on Sahamas here.

  • there is one thing i would like to add... growth and value - it really goes hand in hand.

    Think of this way. Growth is an integral part of value. Always is.

    Easiest put.. a company which has a stagnant set of earnings, indicates that probably this could be the best the company could earn OR the company management simply has no ambition or drive to push the company to the next level. Taking out the issue of the stock price, would you think this as a great company? For me, my answer is no. Won't you want a good company that is growing?

    And incredibly it's never the other way around.

    Some companies simply engineer their growth by haphazard acquisitions or expansions. They borrow and borrow.. building the company as how one would stack up a deck of cards. Or the company could grow huge by sacrificing their profit margins to induce more sales revenue. How long could such unhealthy business last? Yes, there is growth but there is never value.

Saturday, April 21, 2007

Is Toyochem interesting?

My Dearest Moo Moo Cow,

Saw this business article posted on the Star,
Toyochem earnings look promising


  • Saturday April 21, 2007

    Toyochem earnings look promising

    By Yeow Pooi Ling

    PETALING JAYA: With main board counters having touched new highs, it is just a matter of time that second board-listed companies follow suit.

    However, as with the main board, not all second board stocks would see a re-rating in their prices. Only companies with strong fundamentals, attractive valuation and healthy cashflow would attract investors.

    Toyochem Corp Bhd seems to fit the above criteria. The company has continued to post high earnings with earnings per share at 27.5 sen for fiscal year (FY) ended Dec 31, 2006, despite facing rising raw material prices.

    Its balance sheet remains healthy. Net cash per share of RM1.25 is one of the highest on the second board. Net tangible asset stood at RM3.64 a share as at end-December 2006. Based on yesterday’s closing price of RM2.78, Toyochem was trading at a discount of 24%.

    Toyochem is involved in the manufacture and trading of printing ink, as well as services the graphic art industry. It is the largest ink player in the country with a market share of 40%.

    Toyochem is 51% owned by Toyo Ink Asia Ltd, Hong Kong, which is a wholly- owned unit of Toyo Ink Manufacturing Co Ltd of Japan (TIJ).

    Listed on the Japan Stock Exchange since 1965, TIJ is one of the most established printing ink manufacturers in the world with over 60 subsidiaries worldwide.

    This close association has enabled Toyochem to enjoy easy access to the most advanced technological developments.

    The costs of raw materials make up a significant bulk of Toyochem’s operating expenses. The raw materials include pigments, resin and additives, which are oil-derivative products.

    Nonetheless, while crude oil prices remained high, operating profit margins improved to 10.4% in the second half of FY06 from 8.2% in the first six months.

    Earnings per share recorded in the fourth quarter was the strongest at 9.1 sen; indicating that efficiencies had improved and Toyochem was able to pass on costs to its customers.

    The impact of crude oil prices on earnings is usually reflected three to four months later.

    Given that crude oil prices have weakened and hovering between US$60 and US$69 per barrel since the last quarter of 2006, the ink maker’s earnings, going forward, could be stronger.

    Furthermore, raw materials are purchased in US dollar denomination and Japanese yen so the strengthening of the ringgit would have translated into lower raw material costs for Toyochem and higher earnings.

    Based on FY06 results, about 58% of sales came from Malaysia, 22% from Singapore, 9.3% from the Middle East and 9.7% from East Asia.

    The company has indicated that export prospects to the Middle East are “improving” and the Indian market looks “promising.”

    Toyochem also plans to introduce vegetable oil-based ink to cater to customers that prefer environmental-friendly products.

    On Thursday, Toyochem announced a final net dividend for FY06 of 11 sen, translating into a decent yield of 4.0%. For FY05, it paid a gross final dividend of 11 sen per share. The net dividend payment for FY06 implied an improvement from FY05.

    It is learnt that the company intends to increase dividend payout to 50% of net profits in two years. With net cash of RM51mil and steadily growing earnings, there is a high chance that Toyochem can achieve the 50% payout. Reserves ballooned to RM106.5mil as at end-December 2006. If it decides to reward shareholders further, it could also declare a two-for-one bonus issue. This would also help it meet the requirement for a transfer to the main board.

    Given its solid fundamentals, Toyochem has attracted strong institutional investors like Skim Amanah Saham Bumiputra and Lembaga Tabung Haji, which held 11.35% and 4.16% respectively as at April 28, 2006.

Wah, my dearest Moo Moo Cow, this reporter is making Toyochem looks like one must-buy kind of stock investment.

Let's have a look at the company's track record.



How my dearest Moo Moo Cow? Despite having a solid balance sheet, Toyochem's earning is simply not that exciting at all, for there is simply no growth!

rgds

It's about Accountability

My Dearest Moo Moo Cow,

I am well aware of the your blog posting; Trading Idea: KHSB

  • Saturday April 21, 2007

    Syabas shake-up in the pipeline?

    By JOSE BARROCK

    THE possibility of a shake-up is looming over the water supply landscape of Selangor, Kuala Lumpur and Putrajaya, sources familiar with the matter tell BizWeek.

    It is understood that Kumpulan Perangsang Selangor Bhd (KPSB) is looking at acquiring Puncak Niaga Holdings Bhd's 70% equity interest in water supply services player Syarikat Bekalan Air Selangor Sdn Bhd (Syabas). Kumpulan Darul Ehsan Bhd (KDEB), the Selangor government's investment arm, owns the rest of the Syabas shares.

    KDEB is also KPSB's parent company, with a 55% shareholding. KPSB intends to buy the 70% stake at the present market value, according to a source, who declines to disclose any figures.

    Syabas has a 30-year concession, which commenced in early 2005, to supply water to Selangor, Kuala Lumpur and Putrajaya.

    KPSB is considering the share purchase so as to allow the State Government to firmly control the concession.

    There is also likely to be synergy between Syabas and KPSB's existing water businesses. Says a source, “It's about accountability”.

    “At present, the accountability for the water supply lies mainly in the hands of a listed company controlled by an individual. This will change when KPS takes over the helm,” the source adds.

    Executive chairman Tan Sri Rozali Ismail is the face of Puncak Niaga. He has a 41% stake in the company, both directly and via Central Plus (M) Sdn Bhd and Corporate Line (M) Sdn Bhd.

    KPSB is no greenhorn in the water sector. It has 55% equity interest in Titisan Modal Sdn Bhd, whose subsidiary, Konsortium ABASS Sdn Bhd, operates a water treatment plant in Selangor. KPSB also has an associate stake, to the tune of 30%, in Syarikat Pengeluar Air Selangor Holdings Bhd, another supplier of treated water.

    At press time, it is not clear how KPSB plans to finance the acquisition.

    After a loss-making 2005, the main board company rebounded last year to post an unaudited net profit of RM17.8mil on the back of RM351.3mil in sales.

    As at December, the company had RM271.3mil in deposits and cash balances, while its trade receivables stood at about RM561mil.

    KPSB has a 57% shareholding in Kumpulan Hartanah Selangor Bhd (KHSB), another main board company with several property development projects and a few hotels and golf clubs under its belt. Industry sources say KHSB may be involved in the Syabas deal by providing the consideration for the acquisition.

    KPSB shares have been actively traded lately, and closed last Thursday at RM1.34. The day before, the share price went up to RM1.54, the highest in about three years, before closing at RM1.42.

All about Accountability, said the source?

Goodness me, where is the accountability here?

How many times have we seen the companies involved deny articles written based on sources?

And where is the accountability in this news article?

  • After a loss-making 2005, the main board company rebounded last year to post an unaudited net profit of RM17.8mil on the back of RM351.3mil in sales. As at December, the company had RM271.3mil in deposits and cash balances, while its trade receivables stood at about RM561mil.

First, the above statements are facts however they are simply lacking in the exact detail. See KPS latest earnings report here, Quarterly rpt on consolidated results for the financial period ended 31/12/2006, and also see excel file of KPS latest earnings here.

  1. KPS reported a loss for the quarter. Why isn't it NOT mentioned? Why only highlight the nicer part where KPS made profit for the full fiscal year?
  2. Reporter starts to talk about deposits. Fine. That figure is indeed accurate but what the interest bearing loans which totals some 1.378 BILLION??? ( you can get the figure here ) And again the issue is simple, why highlight the cash and discount the borrowings??

Based on the 2 points above, is there intent to highlight only the good stuff and discount the bad?

Where is the accountability in such a financial article?

How my dearest Moo Moo Cow?

Genting Share Split Gets Highlighted!!

My Dearest Moo Moo Cow,

Previously, I had blogged on Genting's confusing share split issue.


  1. Genting's confusing Share Split.
  2. More confusion on Genting split issues
  3. Update on More confusion on Genting split issues

Those were the three postings made.

And I wrote the following comments.

  • So correct me if I am wrong here.

    Right now, in Genting's share split case, Bursa is NOW saying one could have sold their subdivided or split shares even before they are listed and quoted?

    Isn't it so confusing?

    And most people were taught that you could only sell shares only when the new shares are listed and quoted. That is you could only sell when you have these 'new' shares credited into your account.

    Well apparently in Genting's case, this was not the case.

    Now get this, Genting traded as high as 9.95 on the 11th. Yesterday, on the 13th it closed at 8.50. Wouldn't it be nice if everyone knew exactly that they could have sold their shares on the 11th itself when Genting was trading as high as 9.95 or even 9.50? It would be a good price to sell considering the massive run up in Genting's share price.

    So I reckon it's simply not fair level playing field because the confusion caused by this simple issue of when one could have sold their subdivided shares.

    Why can't the announcement be written in simpler English?

    Say for example in Genting's case, post the exact date when one could have sold the shares because as it is, it's so confusing.

    And my dearest Moo Moo Cow, it's rather ironic because I was highlighted by my dearest Scouser of one particular news article back in 2005.
    http://www.dailyexpress.com.my/news.cfm?NewsID=32801

In today's Star Bizweek, this issue was highlighted. Share split poser

  • In Genting's case, the 738.93 million shares of 50 sen each were subdivided into 3.69 billion shares of 10 sen each. According to a Bursa Malaysia announcement on April 13, the split shares would be “listed and quoted” on April 16.

    Says one investor: “When I read that announcement, did it mean that I can now (on April 13) sell my subdivided or split shares even before they are listed and quoted? From what I know, we are allowed to sell share only when the new shares are listed and quoted. That is, you can only sell when you have these 'new' shares credited into your account.”

    Had investors known exactly when to sell their shares, that would have been sweet, as Genting traded as high as RM9.95 on April 11, but closed the day at RM9.50, which was still its all-time high.

    “I wanted to sell my shares, but was afraid that I would be punished by Bursa for selling shares that had yet to be credited into my account,” says one contra trader.

    A Bursa Malaysia official says the confusion was mainly due to this being the first time a share split was carried out under the new SPEEDS (Sub-Division of Shares, Shares Consolidation and Bonus Issue Exercise in the Central Depository Scheme) initiative.

    Genting and Resorts were the first two issuers to implement exercises under SPEEDS. This is the stock exchange's latest initiative to enhance the efficiency of certain corporate exercises, namely share splits, share consolidation and bonus issues.

    It works by enabling issuers to have a shorter time-to-market for the securities arising from these exercises. With SPEEDS, these securities can be traded on the next market day after the books closing date (BCD) instead of the current timeframe of 6 to 10 market days after BCD.

    “Prior to this, stocks undergoing splits were suspended a total of 10 days. With SPEEDS, its seamless, and there is continuous trading,” says the official.

    For instance, prior to SPEEDS, a stock undergoing a split would be suspended four days before book closure, and requoted six days after BCD. Under the SPEEDS timeline, there is no trading suspension. The newly split shares can be traded the day after BCD.

    Thus, a trader who was trading Genting on a contra basis, would still be able to do it as if the stock had not undergone any split exercise.

    If this contra player bought the stock on April 10 (a day before the ex date), but sold it on April 13 (T+ 3), his settlement would still be done on a 50 sen basis, as he bought the stock before it went ex.

    Says the Bursa Malaysia official, “It's quite simple. Genting shares went ex on April 11, with BCD on April 13. Settlement of Genting shares on April 11, 12 and 13 will still be on a 50 sen basis, because the purchase of this stock would have been done on April 6, 9 and 10.

    “However, if a buyer bought Genting shares on April 11 or later, settlement would have been on a 10 sen basis. If as of 5pm on April 13 (the BCD), an investor were holding Genting shares, then his name would appear in the register, thus entitling him for the corporate action. His shares would be split.”

How my dearest Moo Moo Cow?

Let me repeat again.

  • Had investors known exactly when to sell their shares, that would have been sweet, as Genting traded as high as RM9.95 on April 11, but closed the day at RM9.50, which was still its all-time high.

To know that one could have sold when Genting traded as high as rm9.95 would have been extremely nice. Yes?

A Video Worth Watching

My Dearest Moo Moo Cow,

I saw this video link posted on Bloomberg.com where Mr. Ken Heebner of CGM Realty Fund, comments on the current US housing market.

I do believe it's worth watching.

http://www.bloomberg.com/avp/avp.asxx?clip=mms://media2.bloomberg.com/cache/vvefEajX3Khs.asf

rgds

Friday, April 20, 2007

How now my dearest Moo Moo Cow?

My Dearest Moo Moo Cow,

Some interesting stuff around, eh? Firstly, your
Shanghai 180 posting was rather interesting given what happened yesterday with the Chinese market falling some -4.5% and at one point the market was down as much as 7% and this dragged the Asian markets down with the concern focued mainly on China rate fears. But is the rates fear just the issue? Or is it the case of an extremely high Shanghai 180 market?

Some interesting commentary taken from the
following news article.

  • However, analysts warned that the price levels were unsustainable and the market could be approaching another correction.

    "This is definitely a bubble in the making - for most stocks, positive earnings growth has been priced in until 2009," said Steven Sun, HSBC equities analyst. "At the height of the last bubble [2000-01], we saw investors opening 2m accounts a month, which is half the current rate."

    "Any money getting into the market now is not smart money and is coming from the kind of people who can least afford to lose it," said Fraser Howie, author of a book on the Chinese stock markets. "That has to have the government worried about social stability."

    The rush to join the Chinese stock-buying frenzy comes after the market rose more than 130 per cent last year and a further 40 per cent so far this year.

    The benchmark Shanghai Composite Index rose 0.01 per cent on Wednesday to another record high.

    Retail investors began returning to the stock market in large numbers in May, following a five-year bear market. The figures for new accounts are considered a rough proxy for new retail investors entering the market, although there have been cases in the past where individual traders have opened thousands of accounts using fake identifications. There is also an element of double-counting in the figures as many investors open accounts in both Shanghai and Shenzhen.

    Even as retail investors continue to pile in to the market, foreign investors have grown cautious. One international fund manager said he now had more of his Chinese assets in cash than at any time since the government allowed foreigners access to domestic stocks.

    Before the February correction, the government had tried to cool market sentiment, publishing prominent editorials warning of the risks. However, since then, it has been quiet, leading many to assume there is tacit approval of the ongoing bull run.

    "We expect the government to come out with more measures to cool the market soon," said Jing Ulrich, JPMorgan chairman of China equities.

Some real concerns?

And then there is the commodity guru, Jim Rogers. He has another news article out. But first, I had posted a posting on his views back in March; And what about Jim Rogers Views?. Now I want to bring out this article again because he had an interesting comment.

  • But he added: "China is one of the few countries in the world where I'm willing to sit out a 30-40 percent decline."

That's mighty interesting cause if the 30-40% percent decline were to happen, what about the chain-effects caused? Would want consider it as a correction? Or would one consider it as a crash?

Anyway, on March 29th, Mr. Rogers has another news article, Commodity guru Rogers says not selling China shares.

Some interesting comments from that news clip:

  • HONG KONG, March 29 (Reuters) - Commodities and investment guru Jim Rogers said on Thursday he was holding on to his Chinese shares, even though the market is pricey and a bubble may be developing.

    "I own Chinese shares. I'm not selling Chinese shares. If the Chinese stock market doubles again this year I'll have to sell, because then it's a full-fledged bubble," he told a media briefing after a speech in Hong Kong.

    "If it goes down 50 percent this year I will buy a lot more Chinese shares. I'm not smart enough to know what it's going to do, but I'm not selling China at all."

    "There's no question that PEs (price to earnings ratios) in China in the A-share market are too high for some companies, but that doesn't mean it can't get much worse. When you have a bubble develop, crazy things happen," he said.

    "The Chinese stock market could double this year, even though it's expensive right now."

So how my dearest Moo Moo Cow? What do you think of his bullish veiws on the Chinese markets?

Moving on, just in case you do no notice but there's the extreme weakness in the US Dollar. ( click here for one of the many articles around).

Last but not least, Mr. Marty Chenard, who wrote that Shanghai 180, article has posted another update and you can read it here.

rgds