Tuesday, March 31, 2009

What's Up MNRB?

Published on Business Times.

  • MNRB mulls RM30m provision for equity investment losses
    By Rupinder SinghPublished: 2009/03/31

    REINSURANCE firm MNRB Holdings Bhd (6459) said it may have to set aside up to
    RM30 million in provisions in the current fiscal year, which ends March 31 2009, to cover losses in equity investments.

    President and group chief executive officer Anuar Mohd Hassan said MNRB was forced to make the additional provisions for diminution in the value of investments as it took a hit from the dismal performance of the equity market over the last one year.

    In the last 12 months, the Kuala Lumpur Composite Index (KLCI) has fallen by 29.6 per cent.

    He estimates that losses on its equity investments to be between RM20 million and RM30 million. The group holds less than 10 per cent in equities.

The following is MNRB's last reported earnings on Feb 2009. Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Here is the snap shot from the earnings notes.

The very smallish quoted securities purchased at cost was some 979k. Current market value is only 625k. Ouch!

From the balance sheet.




The article continues....

  • "We expect the figure to come down," Anuar told Business Times in an interview.

    Anuar said the company is in the process of making the provisions for the current fiscal year.

    "The exercise is still ongoing. We are now restructuring our existing investment portfolio," he said.

    Currently, almost half of the group's investment is in cash, some 24 per cent in Malaysian Government Securities (MGS) and the balance in private debt securities.... (do read rest of article
    here )

Half of the group's investment is in cash, some 24% in MGS and balance in private debt securities.

And MNRB is mulling a 30 Million loss provision!!!!!!!!!!!?????

Don't you think that MNRB should be more transparent and explain where and how these losses came about?

Green Packet Again

Green Packet has been on a run lately. Sadly, it is running the opposite direction.




Perhaps the following recent postings might help.

ps: Here is a nice old forum posting to follow Green Packet (see posting #72 )

Glimmer Of Hope From Japan's Survey of Production Forecast in Manufacturing???

We all knew how bad Japan's industrial production numbers announced on Monday, Japan's industrial production falls for fifth month.

Especially when the seasonally adjusted index was down some 38.4% from the previous year.

Pretty darn scary!

  • TOKYO (MarketWatch) -- Industrial production in Japan fell for a fifth month in a row, down 9.4% in February from the previous month, to stand at 68.7, according to data released Monday from Japan's Ministry of Economy, Trade and Industry. The seasonally adjusted index was down 38.4% from the previous year. Shipments were at 70.9, down 6.8% from a month ago. However, production is expected to increase 2.9% in March and to rise 3.1% in April, according to the Survey of Production Forecast in Manufacturing, the ministry said
However, the last line of that news clip, offered some hope. Survey of Production Forecast in Manufacturing said that production is expected to increase 2.9% in March and to rise 3.1% in April.

The Australian Business offers more insight with their article,
Japan industrial production expected to rise

  • JAPAN'S industrial production slumped 9.4 per cent in February, but for the first time since October manufacturers expect their outputs to rise.

    A Ministry of Economy Industry and Trade survey shows Japanese manufacturers expected industrial production to rise 2.9 per cent this month and by 3.1 per cent in April.

    Hopes that manufacturers are beginning to feel the bottom of the worst slump in 60 years were boosted by evidence of heavy inventory rundowns -- the inventory index fell 4.2 per cent, the sharpest month-on-month reduction on record.

    However, with monthly industrial output having fallen by 35 per cent since September, and the International Monetary Fund forecasting Japan's gross domestic product would shrink by 5.8 per cent through this year,
    the Tokyo Government is not ready to call a bottom.

    Releasing the February surveys, the ministry maintained an official view that Japanese manufacturing is still "rapidly declining".

    "The global economy is fraught with uncertainty," a ministry official told reporters.
    "We cannot say our country's production has bottomed out."

    And confirming the trend, new figures released yesterday showed output from the auto industry, a mainstay of export manufacturing, was still in precipitate decline.

    The Japan Automobile Manufacturers' Association reported that domestic vehicle production in February was down 56.2per cent, year-on-year.

    Exports, which account for more than half of Japanese auto production, were down almost 64 per cent in February -- and were 66 per cent lower to North America, Japan's biggest export market.

    The 212,107 Japanese vehicles shipped abroad in February was the lowest total in 34 years.

    At the same time, the METI survey showed inventories of small cars dropped 33.8 per cent in February and stocks of LCD television screens shrank by almost 26 per cent.

    Economists cautioned yesterday that inventory rundowns did not signal even the beginning of recovery, without evidence yet of any lift in US final demand for autos, electronic goods and components.

    Daiwa Institute of Research senior economist, Hiroshi Watanabe, yesterday questioned whether manufacturers' positive projections for March and April were too optimistic.

    However, the quickening improvement in inventories since January, when manufacturers began coming to grips with the huge stockpiles left by the collapse of export markets in the December quarter, is the closest thing they have seen to a green shoot in the past six months.

    "It seems some positive factors are emerging from Japanese industries after experiencing such severe export market shrinkage," said JP Morgan Japan senior economist Masamichi Adachi.

    "I don't think we can say industrial production has bottomed out yet, but now we are starting to see the bottom.

    "The inventory index has improved for machinery, and the same can be said for transport equipment and electricals. I would also add the steel industry,"
    he said.

    "So it is fair to say the Japanese economy is starting to come out of its worst situation, although this is not yet a strong trend."

Baltic Dry Index Reverses Yet Again

Yes, the Baltic Dry Index has fallen for twelfth straight days. I do hope that you are aware of the current sharp reversal again.




The following article published on InvestorsChronilce, almost two weeks ago, offers some insight on what's happening,
Baltic Dry awaits iron verdict

  • Created: 18 March 2009 Written by: Julian Hofmann

    The haggling over iron ore prices between the mining giants and China will dominate the outlook for key shipping indicator the Baltic Dry Index over the coming weeks, with an agreement the key to the index's long term recovery.

    The index, now at 1,974, has staged something of a recovery since January when the it fell as low as 925, technically below the cost of shipping, but remains a pale shadow of last year's 11,793 all time high. Nevertheless, at the current level ships are transporting goods at a profit. In the short term, the negotiations between Australian miners BHP Billiton and Rio Tinto and major Chinese steel producer Baosteel could have a profound effect. The market expects that Bao Steel will demand sharp price cuts of between 40 and 50 per cent to reflect the declining demand for steel products, with stockpiles rising in China. Bao's rates will be used as the benchmark for all other Chinese steel mills.

    An agreement is usually concluded around Easter but the threat of lengthy talks this year is weighing down the index. Ship owners have used the interim period to scrap ships to help maintain rates as scrap metal prices have stayed relatively stable at around $300 per tonne. The scrapping rate for the first three months of this year has already exceeded the entire total for 2008.


Monday, March 30, 2009

MARC downgrades Englotech

MARC downgrades Englotech RM50m debt notes

  • Written by Joe Chin
    Friday, 27 March 2009 20:33

    KUALA LUMPUR: Malaysian Rating Corporation Bhd has downgraded Englotechs Holding Bhd’s RM50.0 million Murabahah Medium Term Note Programme (MMTN) rating to DID­ from BBID.

    MARC said on March 27 the rating action was based on the cotton glove manufacturer’s failure to meet its profit payment of RM1.7 million due on March 26 this year as confirmed by OSK Trustees Bhd.

    In connection with the missed profit payments,
    Englotechs was seeking an extension of time to meet its profit payment until April 30.

    “Irrespective of whether the extension is obtained, MARC considers a default to have occurred where the failure to make the scheduled payment is due to the issuer being under financial stress,” it said.

Posted before: Englotechs Trade Receivables and Update on Englotechs

Saturday, March 28, 2009

Oh Comsa!

Was reading the following article: Tipping point – the fall after the rise

  • A sell-down often takes a spiral course. When the share price dives, many shareholders are compelled to sell, further depressing the price. And on it goes.

    It gets worse when investors borrow to buy shares. When the market value of the shares drops drastically, the banks or brokers will seek to limit their exposure by making margin calls. If the investors fail to pay up, the assets will be sold, typically at way below the purchase prices.

    “There’ll be a run on the stock when there’s a forced sale of pledged shares. It will all fall like a house of cards,” says Datuk Kour Nam Ngum.

    He went through exactly this when he was CEO of poultry company Comsa Farms Bhd back in 2006. When the stock was in the doldrums, a bank sold his pledged shares. That played a part in pushing Comsa to the brink. It failed to extricate itself from PN17 status and was delisted in April 2007.

Oh, I do remember why COMSA Farms the stocks was in the doldrums.

It's a bit harder to find the old articles but not impossible.

  • Comsa Reprimanded, Directors Fined For Publishing Inaccurate Results

    (KUALA LUMPUR) Bursa Malaysia Securities Bhd has reprimanded Comsa Farms Bhd for failing to take into account various accounting adjustments in the quarterly results for the period ended 31 March 2005 before releasing them for public announcement. Bursa Securities also required Comsa to engage its external auditors to carry out a limited review of the company's next four quarterly results prior to their announcement. In addition, Comsa's chief executive officer Datuk Kour Nam Ngum was fined RM100,000 and two other directors Tan Sri Ahmad Mustaffa Babjee and Ku Hien Liong were fined RM25,000 each for breaching the listing rules. Comsa's other directors Chia Yam Kung, Datin Heng Chui Koon and Datuk Sapari Amir were publicly reprimanded. ~ source:
    here

Bursa website: COMSA-Public reprimand

  • COMSA had breached paragraph 9.16(1), in particular paragraph 9.16(1)(a) of the Bursa Securities LR for failing to take into account the adjustments as explained in the Company’s announcement dated 5 April 2006 in the Company’s 4th quarterly report for the financial year ended (“FYE”) 31 March 2005 (“QR March 2005”) which was announced on 30 May 2005. The adjustments were only taken up in the Company’s annual audited accounts for the FYE 31 March 2005 (“AAA 2005”) which was announced on 5 April 2006 resulting in a deviation between the unaudited profit after taxation and minority interest of RM12.58 million and the audited loss after tax and minority interest of RM195.92 million for the FYE 31 March 2005.

Weekend Charts 28th March 2009

The Ringgit.


  • MALAYSIA'S ringgit rose for a third week, logging its best winning streak since April 2008, as speculation a global recession will ease spurred demand for emerging-market assets.... the ringgit gained 1 per cent for the week to 3.6100 per dollar as of 4.50 pm in Kuala Lumpur, the highest since February. 16, according to data compiled by Bloomberg. The currency pared this year’s decline to 4.4 per cent. (source: Business Times )

The six month chart of USDMYR (chart from yahoo.finance)



Gold.

Friday's opening gold price for Gold was at USD934. Gold closed at 925 last night. The selling/buying rates for the Kijang One Oz were at MYR 3572/3456.

The 3 month chart of Gold in MYR.


Daily chart of Gold in USD last 100 days.

Oil.

Daily chart for Crude Oil.


Baltic Dry Index

The Baltic Dry Index lost another 36 points to close at 1678! (Do read this: Eyes On The Baltic Dry Index Again )


Friday, March 27, 2009

Malaysian Loan Sharks Hire Women to Shame Defaulting Debtors

Malaysian Loan Sharks Hire Women to Shame Defaulting Debtors

  • March 27 (Bloomberg) -- Malaysian loan sharks have a new weapon in their growing struggle to get borrowers to repay debts: beautiful women.

    “They go to your office or house and sit there” to shame you into paying, said Michael Chong, 60, who has worked for two decades as a mediator between the illegal lenders and their debtors. “If it’s your house, they will wait outside and make lots of noise, and you cannot wallop the girl.”

    That’s in addition to the traditional incentives such as putting debtors in a cage, splashing their houses in red paint or breaking their limbs, said Chong, head of the Public Services and Complaints Department of the Malaysian Chinese Association, the second-biggest political party in the ruling coalition.

    The shortage of bank credit is pushing more people to loan sharks and causing a growing number to default, said Chong, who negotiated a record 56.6 million ringgit ($15 million) of debts last year and expects this year’s total to be higher. That’s forcing the lenders to look for new ways to recover the debts, he said.

    Job losses jumped 67 percent in the final quarter of last year to 24,033 as the global recession pushed bankruptcies to a three-year high. The government this month announced a 60 billion ringgit ($16 billion) stimulus plan, predicting that the economy may contract this year for the first time in a decade.

    Loan approvals by banks slid for a fifth month in January.

    “When there’s a shortage of supply, people will look at other avenues,” said Nazir Razak, chief executive officer of Bumiputra-Commerce Holdings Bhd., Malaysia’s second-biggest bank.

    ‘Big Earhole’

    Chong said gamblers traditionally made up about 80 percent of clients for loan sharks, known in Malaysia as Ah Long, from the Cantonese phrase “daai ji lung,” meaning “big earhole.” Now, the economic slump is driving more businesses, such as building subcontractors, to seek illegal loans, said Chong, whose arm was dislocated in 1990 by a loan shark that resented his interference.

    More than 10,000 civil servants are “trapped” by the loan sharks, state news agency Bernama reported last month, citing Ahmad Shah Mohd Zin, the secretary-general of the Congress of Unions of Employees in the Public and Civil Services, a national trade union.

    Chong has built a career dealing with public complaints over trafficking, missing persons, land scams and loan-sharking. In 1987, the party created a department for him with five assistants to ease a backlog. He has dealt with 30,000 cases since then, he said.

    In 2004, he had a 20-episode television series called “Michael Chong’s File” to warn the public of crimes.

    Repeat Offenders

    Police say efforts to curb unlicensed money lending are hampered because many borrowers are repeat offenders without access to other funds. Loan sharks typically advertise by sticking their cards or posters on phone booths, public toilets, lamp posts, and on the walls of shops and factories.

    “We are aware what the loan sharks are doing,” Inspector General of Police Musa Hassan said in an interview. “The problem is the people are still going to seek help from them.”

    Most borrowers turn to these lenders because they need the money fast, while bank loans can take months to approve, said Chong.

    “They can bank the money directly into your account,” he said. “You don’t have to see them and they can have the money within 10 minutes.”

    Some banks are trying to take some of the business by speeding up approvals. Bumiputra-Commerce’s CIMB Bank Bhd. formed CIMB Express, where personal loans of 3,000 to 50,000 ringgit can be approved within 24 hours, said Nazir. Rates start from 3 percent per month for a 5-year repayment schedule, the bank’s Web site says.

    10% Per Week

    The illegal lenders charge 10 percent interest per week for some loans, said Nadzim Johan, executive secretary of the Malaysian Muslim Consumer Organization, who had 100 cases referred to his consumer movement in 2008 and expects that to double this year.

    “It’s a huge social problem now,” Nadzim said. “It has created a lot of broken homes.”

    In one case, a South Korean businesswoman borrowed 100,000 ringgit and ended up paying 11 million ringgit over a few years because she couldn’t transfer funds in time, he said.

    “She started very small,” Nadzim said. “Most things start very small. Then it snowballs.”

    Borrowers include owners of small businesses, contractors, doctors, lawyers, gas-station owners, politicians, former senior civil servants and even the police, he said.

    Some loan sharks make 12 million ringgit a day, he said. “It’s become part of the infrastructure in society.”

    Harder to Collect

    A loan shark who gave his name as Loh, said it is getting harder to collect debts because of the slump. “They don’t follow” the payment schedules, he said.

    Chong said he has advised some debtors to run away and seek work in another country, and only return after a few years to pay their debts.

    “I’ve had cases where they chain them and put them under a cage,” Chong said. “They will throw paint, put up posters to shame you, take a microphone outside your house. Only the stupid ones will use violence.”

Prem Watsa: The 2 Billion Dollar Man!

On Toronto Life : The $2-Billion Man

Prem Watsa is the richest, savviest guy you’ve never heard of. He predicted the crash of ’87, the Japanese collapse of 1990 and last year’s meltdown, which he parlayed into a huge payoff. Now he’s gobbling up shares at rock-bottom prices. What he knows and why you should pay attention
By Alec Scott


  • Two years ago, in April 2007, the Dow Jones Industrial Average hit 13,000 for the first time ever. It was the culmination of six months of record highs— a whopping 38 in total. Traders were drunk on their own optimism, investors were still making unprecedented returns, and there seemed to be no end to what had been dubbed the “Energizer Bunny Economy.” When it comes to investing in the stock market, groupthink often prevails, and there were plenty of cheerleaders—from analysts to economics professors to business journalists—in the unrelenting pep rally.

    A few weeks after the Dow Jones record, a soft-spoken Toronto insurance and investment company executive named Prem Watsa stood before a crowd at the board of trade and delivered a buzz kill of a speech. The conference was one of the first major events hosted by the Ben Graham Centre for Value Investing at Western’s Ivey School of Business, for which Watsa, an Ivey graduate, had been a lead donor. But his mood was far from celebratory—he didn’t spend any time patting himself on the back. Instead, he issued a dire warning. “
    There’s a possibility of a one-in-50- or a one-in-100-year storm coming,” he said. “When the music stops, it stops very quickly.”

    Near the end of July came one of the first signs of the storm Watsa had predicted: the Dow had its first mini-meltdown, losing about 400 points in one day. Watsa had already protected himself. He’d moved the bulk of his company’s $16-billion (U.S.) portfolio out of the stock market and into relatively recession-proof treasury bonds and cash. Although he hadn’t participated in the market’s champagne swilling, he was determined to avoid the brutal hangover. In addition to moving his investments to higher ground, he used credit default swaps to wager that the U.S. credit market would go belly up. His bet: $341 mil­lion. His take-home when the house of cards came tumbling down: more than $2 billion.

    After such a win, many would have sat on the sidelines, cash in hand, smugly watching as the world’s financial systems collapsed. Yet Watsa’s company, Fairfax Financial Holdings—named for its “fair and friendly” acquisitions strategy—has recently waded back into the beleaguered market, spending $2.3 billion buying equity shares in troubled companies.

    Watsa is something of a puzzle—he was relentlessly bearish in the bull market, and now he’s bullishly throwing his weight around in what looks like one of the worst bears in history. The man who not only called the crisis but profited from it may be Bay Street’s savviest investor.

    Watsa’s rags-to-riches narrative stretches over two generations. His father, born in Mangalore, India, in 1910, was orphaned young and rose to become a respected principal of the posh Hyderabad Public School, India’s Upper Canada College. Watsa was born in Hyderabad in 1950 and eventually attended the elite school, where he was an outsider, one of the few boys who didn’t come from a rich or aristocratic family.

    After high school, Watsa gained admission to the prestigious chemical engineering program at the Indian Institute of Technology. (While studying there, he met his wife, Nalini, with whom he has three children—two daughters and a son.) He didn’t want the plodding life of a chemical engineer, so his father encouraged him to take his chances in Canada, where his brother was already working. Watsa decided to move to London, Ontario, where he enrolled in the MBA program at Western, selling air conditioners and furnaces to pay his way through. “I went to the Ivey not because it was good, though it turned out it was, but because it was near where my brother lived,” he says. Following business school, he worked for almost a decade in the investment wing at the now defunct Confederation Life, a department famous for its rigorous research. “There were four people selected for a second interview,” he once said. “The reason I got the job was that the three other guys didn’t show up.”

    It was at Confederation that Watsa had what he calls a “road to Damascus moment,” when his boss handed him a book by a Columbia business school prof and investment manager named Ben Graham. Graham was the original value investor. After losing almost everything in the 1929 crash and the Great Depression, he devised a risk-averse approach to playing the market, one that distinguished between investment and speculation. Generally, a value investor makes medium- and long-term investments in thoroughly investigated, demonstrably well-run companies. Analysis and discipline are key, and if there’s no margin of safety, you don’t invest. “You have to turn your back sometimes,” says Watsa.

    Perhaps it was his conservative upbringing, or simply a function of his personality, but Watsa was drawn to the relatively safe and steady (if unsexy) approach of value investing. He became a Ben Graham disciple.

    The richest and most famous value investor in the world is Warren Buffett—the Omaha, Nebraska, news­paper boy who grew his fortune from nothing to $62 billion. Watsa (who’s been called the Buffett of the North) tracks almost every move his American counterpart makes. Buffett, for instance, gave his elder son the middle name Graham, after Ben Graham. Watsa named his son Ben. Both Buffett and Watsa have based their fortunes on a bedrock of insurance: Buffett’s company, Berkshire Hathaway, has for years had a huge stake in GEICO, which spins tidy profits for him to invest elsewhere. Watsa began acquiring insurance companies in the mid-1980s. (Collectively, Fairfax subsidiaries constitute the largest property and casualty insurer in Canada, and they have a significant presence on the U.S. market.) More recently, after the Oracle of Omaha backed the ailing Goldman Sachs, the Oracle of Ontario came to the rescue of Toronto’s GMP Capital—no Goldman Sachs, to be sure, but a medium-sized presence on Bay Street. And Berkshire and Fairfax recently announced their first co-investment, buying significant shares in Chicago’s building materials company USG: $100 million from Watsa, $300 million from Buffett.

    Like Buffett, Watsa draws a salary that is modest for the field ($600,000) but owns a controlling stake in the companies he’s building. (Watsa’s net worth is difficult to establish, but estimates run as high as $4.16 bil­lion.) Both Berkshire and Fairfax have offices staffed by skeletal crews, and spacious libraries with extensive archives of corporate annual reports. The most significant difference between the two men is that Buffett is a garrulous cable news commentator, conference keynote and commencement speaker. For years, Watsa wouldn’t talk to the media, wouldn’t even speak to analysts to discuss quarterly results. “Buffett you can get on the phone. He’s available, he’s on MSNBC,” says Ira Gluskin, the head of the Toronto firm Gluskin Sheff. “Prem loved cultivating the image of not being available, that he was all about the work.” The image fits with descriptions of Watsa. According to one visitor, he wanders about his messy office like an absent-minded professor.

    Value investors buck the creed that has governed market regulation for the past two decades: that the market is efficient; that share prices will right themselves, accurately reflecting the health of companies even if individual shareholder behaviour is erratic. Buffett and Watsa believe the market is inherently inefficient and unruly, that it often overvalues or undervalues companies, that it panics beyond need or else talks itself into believing in a bubble. Watsa describes the stock market as manic depressive: “Sometimes it buys at a high price and sells at a low price. Don’t ever think that it knows more than you.”

    At the core, Watsa’s approach evinces a funda­mental distrust in the rationality of investors. Shareholders, after all, are overwhelmingly propelled by two emotions: fear and jubilance. Usually, both of them—in response to a headline, say, or an annual report—are simultaneously at play as stocks are bought and sold. It’s when one becomes dominant that everyone gets into trouble. But it’s not only emotion that scares value investors, it’s the corresponding bandwagon effect. At about the time that everyone comes to a consensus over something in the market, the consensus usually turns out to be wrong. And by then, a vulnerable company could be sunk.

    Professor Andrew Lo, the director of MIT’s Laboratory for Financial Engineering, studies the psychology of the market. While Lo believes the markets are capable of rational behaviour, he says they become irrational when investors’ animal instincts take over and their pleasure or fear receptors are activated. “That period of extended prosperity we had [before the crash] acted like a drug, stimulating the same pleasure centres in the brain that cocaine does. [The euphoria] removes inhibition; we forget that it’s possible to lose money,” he says. When the market showed signs of turning, another instinct took hold. “After the bubble burst,” he says, “the violent flight kicked in—another level of irrationality.”

    Lo believes that individuals who, like Watsa, got out of the market before the crash likely have a more highly developed instinct for fear. They can sniff out trouble well before the average unsuspecting investor. They might be naturally temperate (a kind of market ascetic), but they are also a more highly evolved animal. “Either he has experienced this before, so he has a memory of pain or loss,” Lo says, “or he has developed certain models or forecasts that trigger in his brain the potential for pain.”

    In Watsa’s case, it’s a bit of both. He’s not only a long-time student of crashes; he also has first-hand knowledge of what it means to almost lose it all.

    In the late ’90s, Fairfax acquired a troubled New York–based insurer, TIG, for $847 million (U.S.). The company turned out to be more of a dog than Watsa realized: it took years for Fairfax to integrate the few profitable parts of TIG into its other, healthier subsidiaries, and to shut down the many unprofitable sectors. After 9/11, Fairfax’s insurance group was hit with millions of dollars in claims: the company posted its first ever annual loss of $346 million. To raise funds, Fairfax listed its shares on the New York exchange in December of 2002, but within a week, two million shares were sold short—a harbinger of Fairfax’s tumultuous relationship with American hedge funds. In the summer of 2003, the company took public a large portion of its profitable subsidiary, North­bridge Financial, earning $200 million on the markets. (Watsa prefers not to be at the mercy of the market and recently bought back the shares, reprivatizing the company.)

    Certain hedge funds, not satisfied that Fairfax had done enough to deal with its losses, continued to short-sell its shares, betting that the company would nose-dive. Contributing to the short-selling was a report released in January 2003 by a Memphis-based broker, Morgan Keegan, claiming Fairfax had insufficient reserves to cover its outstanding insurance policies.

    A short-seller promises to supply shares to a buyer at a certain price, although the actual shares are not in hand. The seller later secures the shares, preferably once the price has dipped, profiting from the difference. (Of course, if the price goes up, a loss occurs.) In this high-risk and often predatory practice, the short-seller has a vested interest in seeing the company’s shares go down. There are plenty of scandalous stories of short-sellers allegedly planting false rumours to score fat profits, and among the most scandalous is one involving Fairfax.

    The precise facts will become known at a trial in New Jersey later this year, but the outline is not pretty. Fairfax alleges that a group of hedge funds conspired to drive down its stock price. Through mid-2003, negative stories about Fairfax’s supposed financial weakness were rampant in the financial press. Among the headlines on the popular on‑line business publication thestreet.com: “Fair­fax’s Buffett Pose Falls Short,” “Fair­fax Walks the High Wire on Rates,” “Fair­fax Fog Only Thickens.”

    From there, things got a little weird. According to court documents, the hedge fund companies allegedly retained an obscure operative named Spyro Contogouris to drive down Fairfax’s share price, a task he went about with alacrity. In 2005, he’s said to have approached the company’s former CFO, claiming (falsely) that he’d been deputized by the FBI to obtain evidence of financial improprieties. He is thought to be the author of a widely circulated 30-page letter that, among other things, compared Watsa to the convicted fraud­ster Martin Frankel. (It was even sent to the priest of Watsa’s church, St. Paul’s Anglican on Bloor.) In 2006, several false rumours began circulating: one claimed that the RCMP were pursuing Watsa; another said that they were about to raid Fairfax’s office; yet another claimed he’d placed his assets in his wife’s name and fled the country. By then, the company’s stock had tumbled from highs in the $400 range to less than $100 a share.

    At first, the intensely private Watsa wasn’t sure how to respond. But he ultimately countered with a PR offensive of his own, speaking to Forbes and other business publications in an effort to set the record straight. In the summer of 2006, he filed a $6-billion lawsuit against the hedge funds. (The SEC is investigating the charges; the hedge funds have denied any wrong­doing.) Many of Watsa’s largest investors stuck with Fairfax, which had made them a lot of money. With this support, and the com­pany’s continuing good results, Watsa gradually restored Fairfax’s reputation—and its tarnished stock price.

    Throughout the bull market that preceded the crash, Watsa was most concerned about the secondary credit market, in which groups of loans made by primary lenders were bundled and sold. Of course, in hindsight, the signs of trouble are obvious. But Watsa first grew wary way back in 2003, well before anyone else, and four years before his warning at the board of trade. The now infamous speech was posted on YouTube, where it has since gained a cult following among avid students of the market. In flat tones, with a slight Elmer Fudd lisp, Watsa outlined both the macro and micro of what would come to pass.

    And he continues to go against the grain. “Prem spends a lot of time trying to disagree with the conventional wisdom,” says Gluskin. “He’ll go out of his way to say, ‘If this is what everybody believes, it’s probably wrong, and the opposite is the way to make money.’ ” But there’s more to Watsa’s success than his contrarian streak. For one thing, he’s not entirely risk-averse—unlike Buffett, who doesn’t buy into companies where there’s been a whiff of controversy. “Buffett doesn’t like trouble,” says Wade Burton, a portfolio mana­ger at Mac­kenzie Cun­dill, a long-time Fair­fax watcher and investor. “Prem doesn’t mind mucking about in the mud, so long as the price is right.” In this, he more resembles yet another role model: John Templeton, the small-town Tennessee boy turned poker-playing buccaneer who made very good on the markets. Having met—and charmed—the eminent financier in the late ’70s, Watsa visited him at his palatial digs in the Bahamas once a year. He even keeps a bust of Temple­ton in his boardroom.

    Watsa’s recent buying spree is all Temple­ton. When the legendary investor died last summer, The Economist wrote, “At the point of maximum pessimism, he would enter and clean up”; or, to put it more bluntly, he bought when there was blood on the streets. When investors fled the New York market after the Second World War was declared, Templeton borrowed $10,000 to scoop up stocks priced at less than a dollar, often in companies that were near bankruptcy. In four years, he sold the stock, paid off the debt and pocketed $40,000—the seed money for Templeton Growth Fund, a market beater for many years.

    Similarly, Watsa has lately been buying stakes in unlikely companies in troubled industries: from newsprint purveyors and media companies (AbitibiBowater, Torstar and Canwest) to commercial real estate (H&R); from building materials (Chicago’s USG) to coal (International Coal Group) and computers (the out-of-favour Dell). Fairfax is betting that soon enough, with the help of the government cash being spread about, fundamentally solid companies will bounce back. The timing of the investments suggests Watsa thinks the bottom has been reached, or that it’s close enough. “Trees don’t grow to the sky,” Watsa likes to say, “and markets don’t fall to the floor.”

    Fairfax has just enjoyed its best year ever; it was Canada’s most profitable corporation in 2008. Just as Watsa avoided the irrational exuberance of the boom, he’s kept his head about him in the aftermath. It turns out the more evolved investor, with his heightened fear receptors, is also able to keep his fear in check. By most accounts, Watsa is an unemotional man. As one of his investors says, “There’s little amplitude to him. He’s never too high, never too low. If he ever had that tendency, he’s trained himself out of it.” There’s no flash to Prem Watsa, and this has served him well.

Prem was featured in this blog before:

Thursday, March 26, 2009

Ten Trillion And Counting!

On PBS Frontline: Ten Trillion And Counting! (you have to go there to see the whole video!)

  • The journey begins as FRONTLINE correspondent Forrest Sawyer takes viewers to a secret location: the Treasury's debt auction room, where the U.S. government sells securities backed by the "full faith and credit of the United States." On this day, the government is auctioning $67 billion of Treasury securities. The money borrowed will be used to fund services and programs that the government cannot pay for through tax revenues alone.

    Observers warn that the United States' reliance on borrowing to fund essential programs is
    a dangerous gamble. For the first time, investors are beginning to question the ability of federal government to meet its growing financial obligations, and fading confidence can have dire consequences. "You might have a situation where there is one day when the government says we need to sell several billion dollars of bonds, and nobody shows," Economist reporter Greg Ip tells FRONTLINE. "No money to pay the Social Security checks, no money to give to the states for their Medicaid programs. Cut, cut, cut, cut, cut."

    Yet more borrowing is exactly
    what the Obama administration plans to do: hundreds of billions to bail out the banks and other financial institutions; tens of billions more for the auto industry; $275 billion for homeowners and mortgage lenders; and a giant $787 billion stimulus package to jump-start an economy spiraling downward. Just like the Bush administration before it, Obama and his team are going to borrow big.

    "That's the paradox of the situation that we're in now," observes Matt Miller, author of The Tyranny of Dead Ideas. "Government has got to run big deficits to stimulate the economy, deficits that would have been unthinkable ... because government's the only entity with the wherewithal to prop up a demand in the economy when businesses and consumers are all pulling back."

Here is a mini clip on youtube!





V-Shape Economic Rebound For Malaysia

Erhm... published on Business Times: 'Economic rebound will be V-shaped'

  • 'Economic rebound will be V-shaped'

    Published: 2009/03/26

    ECONOMISTS are optimistic that Malaysia's economy will quickly rebound this year after it shrinks, or an event commonly known as a V-shaped recovery.

    Bank Negara Malaysia's newly-appointed assistant governor
    Dr Sukhdave Singh said at worst, Malaysia's economy will contract by 1 per cent when it feels the full brunt of a global recession.

    HSBC economist Robert Prior-Wandesforde expects Malaysia's economy to shrink 3.5 per cent this year.

    "It will be a difficult first half but we should see recovery as soon as in the second half of this year."

    They were speaking to reporters after participating in a seminar organised by the Malaysian Economic Association and Universiti Malaya's Economics Faculty in Kuala Lumpur last night.

    Prior-Wandesforde said Asian banks were better off than their peers in developed nations.

    "The US banks had cunningly sold toxic assets to many other banks in Europe. Asian banks, however, had wisely avoided buying these toxic assets in the form of sub-prime property loans," he said.

    Also, in the last decade, Malaysia has shifted more exports to China, India and Southeast Asia.

    "V-shaped recovery is normal in Asia," he added.

    The HSBC economist said Malaysia should start seeing growth in the first quarter of 2010 because interest rate cuts by central banks across the region will promote trade and growth.

V-shaped recovery is normal in Asia??

Sure?

How IS Japan doing all these years?

And how same is this time compared to last time?

Wednesday, March 25, 2009

Don't Blame Greed For The Financial Crisis!

It’s the Leverage Stupid!

  • March 23 (Bloomberg) -- Economist Horace Wood Brock spends his days advising money managers and his spare time rummaging around 18th- and 19th-century Europe.

    Brock, called Woody by friends, has loaned a portion of his collection of French and English furniture, decorative objects and Old Master drawings to Boston’s Museum of Fine Arts for an exhibition on view through May 17.

    The 63-year-old Brock, president of Strategic Economic Decisions, an advisory service that he started in 1985 for hedge and pension funds, endowments and other investment groups, blames the current economic crisis on the lack of regulation, not on excessive executive pay.

    “Where was the government?” Brock, dressed in khakis, loafers and gold-rimmed eyeglasses, asked in a recent interview at his Park Avenue apartment in Manhattan. “Where were the overseers?

    ‘‘We are blaming greed and incompetence,’’ he said. ‘‘Those things can’t be changed. They are human nature. It’s the leverage, stupid. That’s my mantra.”

    The exhibition includes 160 items, such as a rare Louis XIV 17th-century French tortoiseshell clock by Andre-Charles Boulle, an exuberant swirling Louis XV 18th-century gilt console table and a muscular anatomical study by Peter Paul Rubens.

    “People, whether or not they are great lovers of Old Master drawings or antique furniture, can come and be wowed by this astonishing assemblage,” said George T.M. Shackelford, the museum’s chair of European art. “If you’re turned off by gold, you might not want to come.”

    Stodgy Taste

    Brock said he doesn’t care if his taste is considered stodgy among contemporary-art collectors.

    “If you want to be hip, you buy a Warhol,” he said as he paced around his apartment. A blue Childe Hassam seascape hung above a wooden cabinet. “I am the least hip guy.”

    Brock’s consistency is paying off. Last week at the European Fine Art Fair -- the world’s biggest art and antiques show known as Tefaf -- in the Dutch city of Maastricht, collectors favored Old Masters over some modern works, dealers said. Prices for Old Masters have held steady, defying the bad economy.

    His collection is usually installed in the Manhattan apartment and a home in coastal Massachusetts. Some French furniture is on long-term loan to the J. Paul Getty Museum in Los Angeles.

    Brock says he wasn’t motivated to buy for status.

    “I march to my inner drummer,” he said.

    Math Theory

    In the 1980s he devised a mathematical theory to explain the fuzzy field of aesthetics. His theory shows the balance between order and disorder, which creates beauty in three dimensional objects.

    The Boston museum reproduces Brock’s theorem in the show’s catalog. The graph’s axes measure the theme of a piece and the transformation of this theme.

    “He’s not trying to trumpet the quality of his collection,” curator Shakleford said. “He’s trying to give people a framework for understanding, in his opinion, why we find things visually appealing.”

    Brock has donated 20 objects to the museum, six of which are included in the show. A gallery of English Regency furniture and decorative objects will be named after him as part of the museum’s continuing construction project.

    He considers his collection money well spent.

    “The dividends in terms of beauty is constant and increasing, if you own the best,” Brock said. “Unlike other assets.”

    “Splendor and Elegance: European Decorative Arts and Drawings from the Horace Wood Brock Collection” is at the Museum of Fine Arts, 465 Huntington Ave., Boston. Information: +1-617-267-9300;
    http://www.mfa.org.

What A Trading Day For TMI

Blogged this morning: Hello Bro, This Is TMI Calling

In loving memory, this is TMI's performance for today.






Some newsclip:

  • TMI skids in early trade, down 28 sen
    Written by Joe Chin
    Wednesday, 25 March 2009 09:30

    KUALA LUMPUR: TM International’s share price fell sharply in early trade on March 25 when it resumed trade after a one-day suspension to announce its rights share price.

    At 9.22am, the KL Composite Index fell 2.32 points to 875.6. Turnover was 40.24 million shares valued at RM63.79 million.

    TMI was down 28 sen to RM2.33. There were 7.96 million shares done.

    Other decliners were Tenaga and Public Bank, down 10 sen each to RM6.10 and RM7.40.

    On March 24, TMI had fixed the issue price of its rights offer at RM1.12, with an entitlement ratio of 5-for-4.

    OSK Investment Research said the EPS dilution was significantly higher at 49%-52% of FY09/10 EPS (vs the indicative 34% dilution earlier).

    However, they said this was not unexpected given the delay in fixing the price and the fact that TMI’s shares have fallen 29% since the proposal was announced on Feb 26.

    “We downgrade our recommendation to Take Profit from Trading Buy following the 20% rally over the past three trading days. We expect the market to react negatively to the larger-than-expected dilution.

    “On an ex-rights basis, its FY09/10 PERs are not particularly attractive at 10.2-12.7 times given the challenging outlook for its overseas businesses,” it said.

  • Path cleared for TMI to begin anew
    Written by Cindy Yeap
    Wednesday, 25 March 2009 10:11

    KUALA LUMPUR: TM International Bhd (TMI) shareholders approved all eight resolutions, including a RM5.25 billion rights issue and name change to Axiata Group, at a meeting that lasted over four hours yesterday, but it was not smooth sailing all the way.

    Approval for the renounceable five-for-four rights issue, fixed at RM1.12 apiece just ahead of the EGM yesterday, came by a show of hands after lengthy deliberations. But its proposed performance-based employees share option scheme (Esos) involving the issuance of up to 7% of its share capital met resistance from minorities.

    TMI chairman Tan Sri Azman Mokhtar was prompted to ask for vote via a poll, where one’s vote is based on respective shareholding, to see the three resolutions on the Esos through.

    The poll was called after he could not determine a conclusive outcome despite calling for a show of hands three times. This was again met with some protest by minorities, but the company’s legal adviser said the request for poll was allowed, citing Article 76 of TMI’s articles of association.

    To be fair, the Minority Shareholders Watchdog Group (MSWG) CEO Rita Benoy Bushon described the proposed Esos structure as “exemplary”, given that several performance thresholds for the company and the employees had to be met to determine eligibility. She called for greater transparency in its implementation.

    TMI Group CEO Datuk Seri Jamaludin Ibrahim told shareholders that it would be in a position to consider paying dividends to shareholders when the group’s cash flow “starts” turning positive “towards end-2010”.

    TMI Group chief financial officer Datuk Yusof Annuar Yaacob expects the whole TMI Group to be cash flow positive in 2011.

    But that was not enough to satisfy some minority shareholders, who wanted TMI to first show results and deliver shareholder returns, before considering the Esos.

    They voiced dissatisfaction about how TMI’s share price had tumbled from RM7.85 last April to the RM2 levels currently, wiping out RM20 billion in market capitalisation.

    Of those present, shareholders holding 7.7% of the company’s equity voted against the proposed Esos, while over 92% voted for it.

    Khazanah Nasional Bhd owns 44.51% of TMI. Employees Provident Fund board (EPF) has 15.76%, while Permodalan Nasional Bhd’s Amanah Raya Nominees Sdn Bhd holds 8.52%.

    Meanwhile, TMI said in a statement it had entered into underwriting agreements with CIMB Investment Bank, RHB Investment Bank and Maybank Investment Bank for the 55.49% or 2.6 billion of the rights shares, excluding Khazanah’s entitlement.

    Khazanah has undertaken to fully take up its portion and commit to subscribe to another 20% of the rights issue.

    EPF owns 57.55% of RHB Capital Bhd while PNB controls 52% of Maybank. Some RM85 million is estimated as the cost of the rights exercise, including the underwriting.

    TMI shareholders also approved that Khazanah be exempted from making a mandatory general offer (MGO) if one were to be triggered from the rights issue.

    The rights issue, expected to be completed around the first week of May, will see each TMI shareholder forking out an average of RM1.40 (RM1.12 per share multiplied by five rights shares then divided by 4 TMI shares) for every TMI share he owns.

    Any renounced rights entitlements are expected to be traded mid-April (T+13 days), Yusof said.

    The RM1.12 issue price represents a 50.9% discount to the five-day volume weighted average market price (VWAP up to March 23) of RM2.28 and 31.7% discount to the theoretical ex-rights price of RM1.64 (based on RM2.28 VWAP). TMI shares, suspended yesterday, closed at RM2.61 on Monday.

    Based on TMI’s last closing price of RM2.61, TMI’s theoretical ex-price is RM1.78.

    Kenanga Research maintained a buy call “on an ex-basis”. “Short-term weakness could be expected given the recent 20% uptick from the low as well as the larger-than-expected share issue”, Kenanga Research said in a note yesterday. TMI added 45 sen in three days prior to its suspension.

    “For traders, we would be looking at the rights-to-the-rights for opportunities. Based on the theoretical ex-rights price of RM1.78 versus the rights of RM1.12, the rights-to-the-rights shares should be priced around 66 sen maximum,” Kenanga said.

    TMI expects to see at least some RM240 million per annum in interest savings from the repayment of RM5.15 billion debts from the rights proceeds. Half or RM10.5 billion of TMI Group’s RM20 billion debts is at the holding level.

    RHB Research estimates TMI’s FY09-FY11 net debt/Ebitda (earnings before interest, taxation, depreciation and amortisation) will fall to between 2.2 times and 2.6 times from 3.1 times and 3.6 times pre-rights issue.

    Based on a theoretical ex-rights price of RM1.78, RHB estimated TMI’s FY09 and FY10 price-to-earnings ratio (PER) would rise to 11.2 times and 10.6 times, respectively, versus 8.4 times FY09 earnings per share (EPS) and 7.9 times FY10 EPS currently, as its share base balloons from 3.75 billion to 8.4 billion shares.

    RHB yesterday lowered its fair value for TMI to RM2.72 from RM3.45 after imputing a higher discount to reflect the dilution from the rights exercise, and retained its “market perform” call.

    Yusof also told shareholders that TMI intended to pay Telekom Malaysia Bhd (TM) “quickly over the next couple of weeks”, earlier than the April 25 deadline because there was an immediate interest savings, given that the RM4 billion due to TM carried a 6.5% interest rate per annum, higher than TMI’s average borrowing cost of 4.67% per annum.

    Yusof said it would invest between RM15 million and RM25 million in brand promotion for its new name Axiata. This is RM5 million to RM10 million more than the RM10 million to RM15 million it would have cost the company to continue spending to build the existing TMI brand.

    A new name that bore no resemblance to TM was chosen to eliminate any “confusion” in the branding between the demerged companies. Jamaludin said the new logo for TMI would be unveiled in “mid-April”.


    This article appeared in The Edge Financial Daily, March 25, 2009.

  • OSK Research: Take profit on TMI
    Written by Joe Chin
    Wednesday, 25 March 2009 10:51

    KUALA LUMPUR: OSK Investment has downgraded TM International to Take Profit from Trading Buy after the company fixed the issue price of its rights offer at RM1.12 with an entitlement ratio of five for five.

    It said in a research note on March 25 the earnings per share (EPS) dilution was significantly higher at 49%-52% of FY09/10 EPS (versus the indicative 34% dilution earlier), which is not unexpected given the delay in fixing the price.

    The research house also said TMI’s share price had fallen 29% since the proposal was announced on Feb 26.

    “We downgrade our recommendation to Take Profit from Trading Buy following the 20% rally over the past three trading days. We expect the market to react negatively to the larger-than-expected dilution.

    “On an ex-rights basis, its FY09/10 PERs are not particularly attractive at 10.2-12.7 times given the challenging outlook for its overseas businesses,” it added.

    OSK Investment said based on the proposed five-for-four rights issue, the level of dilution would be significantly higher at 49%-52% for FY09/10 EPS (interest savings net of tax) versus the circa 35% it would have recorded had the rights price been fixed much earlier.

    TMI’s share price fell by up to 30% from the level when the rights issue was proposed on Feb 26. With the 4.69 billion rights shares to be issued, the issued share capital will balloon some 125% to 8.44bn.

    OSK Research said the net gearing would ease to 0.6 times from 1.3 times currently, with the RM5.15bn proceeds used to pare debts. “Our target price is maintained at RM2.50 (RM1.73 ex-rights basis),” it said.

    The research house also said there could be a potential impairment from its acquisition of a 15% stake in IDEA in 3Q 2008.

    “We had previously excluded IDEA in our SOP valuation on TMI. We believe that should the impairment charges be accounted for, TMI may have to write off some RM3.8 billion for its 15% stake given that IDEA’s share price has fallen by some 70% since the acquisition was announced at end-2Q08,” it said.



Hello Bro, This Is TMI Calling

Posted the other day, Hello TMI, What's Up Bro?

Let me highlight that one section again.

So in the second set of news we have TMI saying..

  • Dominant fixed-line phone company Telekom Malaysia Bhd (TM),(4863) which posted a 73 per cent fall in 2008 net profit, said it will return RM3.51 billion cash to shareholders after sister company TM International Bhd (TMI) agreed to repay a debt it owes in the next quarter. .........
  • "There's no reason for us to keep the excess cash ... By returning cash in excess of its requirement to shareholders (98 sen a share), TM is providing immediate value enhancement,"

What do we have here? First it wants to do a US$1 billion rights issue (this is about rm3.6 billion or so) because bank borrowings too much. It also wants to pay back TM rm3.51 billion because it has excess cash.

How now brown cow?

On today's papers: TMI to sell shares at 57pc discount

  • TMI to sell shares at 57pc discount

    Published: 2009/03/24

    TM International Bhd, Malaysia’s state-controlled mobile-phone operator, offered to sell stock at a 57 per cent discount in a rights issue to raise RM5.25 billion (US$1.4 billion) and help pay off debt.


    Shareholders will be able to buy five new TM International shares for every four owned, the company said in a filing to the stock exchange in Kuala Lumpur today. TM International is offering RM4.69 billion new shares at RM1.12 each, less than half the stock’s closing price of RM2.61 yesterday on the Malaysian stock exchange.

    TMI, which has assets in Asian countries, including Indonesia and India, is seeking to raise funds to repay RM4 billion of debt to former parent Telekom Malaysia Bhd next month,
    and refinance about US$2 billion of loans used to invest in a mobile-phone operator in India.

    “Times are not good, business is quite tough, so to entice the shareholders, it has to be a big discount,” said Lye Thim Loong, who helps manage about US$500 million including TMI shares at Avenue Invest Bhd in Kuala Lumpur.

    Kuala Lumpur-based TMI said on March 11 it planned to offer the rights shares at as much as 40 per cent discount to their ex- rights price, or the price it estimates the stock will trade at after the offer.

    Bigger Discount

    The discount is “bigger than expected,” said Izz Al-Din Maslan, an analyst at AmSecurities Holdings Bhd in Kuala Lumpur who rates TMI stock “sell.” While the issue could lead to a 45 per cent dilution to the company’s earnings per share in 2009, investors should take up the offer to avoid bigger losses following the drop in the stock price, he said.

    TMI follows Malayan Banking Bhd in selling shares to raise funds as the global economic slowdown and the tightening of the credit market have made it increasingly difficult for companies to obtain loans.

    Malayan Banking, the country’s biggest lender, is raising RM6 billion selling new shares to existing investors at a 43 per cent discount to shore up its capital after making acquisitions last year.

    TMI had tumbled as much as 30 per cent since February 26, when the company announced the rights issue plan. The stock recouped some of the losses in the past three days after analysts said the declines were excessive.

    The shares were suspended from trading today for the sale announcement. The company is holding a meeting with shareholders to approve the rights offer. The stock added 11 per cent to RM2.61 yesterday.

    Malaysia’s state investment agency Khazanah Nasional Bhd, which owns 45 per cent of the company, has said it is prepared to subscribe to as much as 65 per cent of the rights offer. The country’s Employees Provident Fund, which controls about 20 per cent stake, has also said it will take up its portion in the rights offer, TMI has said. - Bloomberg

How?

TMI does the rights issue because this is what's owed to its parent TM.

How nice of TMI to settle this godzilla sized debt in the midst of a global financial crisis.

And after receiving this money, TM, as promised, would give a bumper dividend to its shareholders.

How bro?

Hard to fault this issue because this was promised earlier and a known fact but if you are a TMI shareholder and you are not aware of this arrangement, it does feel a little awkward because the money that you subscribe these rights issue will be the money used by TM to pay the dividends.

How bro?

Here is a report from KN.



And this is what RHB folks has to say.

Tuesday, March 24, 2009

Eyes On The Baltic Dry Index Again

The Baltic Dry Index has closed down yet again.



Here is the daily chart from stockcharts.com.


Last December the Index hit the low of 663 points and recovered to a high of 2298 in early March.

Since then the index has retreated to 1773 down some 22%.

Posted last Thursday,
China Shipping Warns Bleak Outlook For Baltic Dry Index, China Shipping Development warns about falling volume and over capacity.

Also do read some of the comments posted on
The Glimmer Of Hope As Baltic Dry Index Soars.

Published March 9th 2009.
Baltic Dry Index Reaches Highest Since October on Grain Cargoes. Some comments..

  • “Grain cargoes and large volumes out of especially South America” are supporting panamax rates, Lars Erich Nilsen, an Oslo-based analyst with specialist investment bank Fearnley Fonds ASA, said in a phone interview. “On the other hand, the iron-ore market, which is the underlying driver for capesizes, is not in a particularly” good shape, he said.

    Iron-ore stocks in China, the world’s biggest steelmaker, have jumped 1.2 percent this year while domestic prices for hot- rolled steel sheet, a benchmark steel product, fell 7.7 percent.

    The steel industry globally accounts for almost half of all dry-bulk cargo, according to shipper Golden Ocean Group Ltd.

    Steel Producers

    Producers including ArcelorMittal, the world’s biggest steelmaker, have cut output in response to slumping demand and a slowing world economy.
    Global growth is likely to shrink for the first time since World War II and trade decline the most in 80 years, the World Bank said today. That may further curb demand for steel and iron ore.

    “With steelmakers looking to cut production again, iron ore purchases have been reduced and there are reports of distress sales and offers by iron-ore traders,” Jim Lennon, a London- based analyst with Macquarie Group Ltd., wrote in a report. “We would expect exports from India to contract once again in coming months.”

Is it possible to see this 'correction' turn into yet another sharp downtrend?

Do you reckon it's possible?

Hope I am not wrong but I am afraid that I do think so.

Here is an editorial: Baltic Dry Index Down 20% in 5 Days: This Clearly Signals the End of Days

Monday, March 23, 2009

IOI Properties?

I peeped and I saw Dali talking about IOI Properties: Judging The VTO Of IOI Properties :p3

Errr....

Jan 10th 2008: IOI Prop unit buys Singapore land for condo project

  • IOI Properties (S) Pte Ltd (IOIP), a wholly owned unit of IOI Properties Bhd, together with its joint venture partner, Ho Bee Investment Ltd, have successfully tendered for a 5.3-acre land parcel in Singapore’s Sentosa Cove, for S$1.097bil cash.

  • Going by the existing market price of between S$2,000 and S$3,000 per sq ft for recent condominium projects in Singapore, the Pinnacle Collection project can expect to generate a gross development value of close to S$2bil while the Seaview project will gross around S$1.25bil.

  • “Our association with luxury landmark developments in Sentosa Cove will enhance the IOI Properties brand name and reputation as a luxury quality homes developer not only in Malaysia and Singapore, but also in the larger South-East Asia region,” it added.

Jan 15th 2008: No plans to take property unit private: IOI Corp

  • SHARES of IOI Properties Bhd rose as much as 8.3 per cent or RM1.10 yesterday, fuelled by a privatisation rumour which was promptly denied by the company. There was speculation that IOI Corp Bhd, which holds about 70 per cent of IOI Properties, could take its subsidiary private, offering RM15 a share. At that price, it would cost IOI Corp about RM1.5 billion to buy the remaining shares it does not own."It's not true. There's no such thing going on in the company," said a company spokesperson when contacted.

Feb 12th 2008: IOI Properties set to unveil project in IDR

  • He said the project, on a 101.171ha, would have 2,000 residential and commercial units. Of the land, 20.2ha will be allocated for light industrial buildings. “It is timely for us to have a project in the Johor Baru district after our success in the ongoing Bandar Putra Kulai project,’’ Heng told StarBiz in a telephone interview. He said the location of Taman Kempas Utama in the Kempas-Tebrau growth corridor within the Iskandar Development Region (IDR) augur well for the company. Heng said the project was easily accessible from the NSE after the Skudai toll plaza, Jalan Kempas Lama and Jalan Senai-Seelong.
    He said the Kempas-Tebrau corridor was currently the hottest spot for property development in south Johor with more than 10 ongoing projects. Heng said the outlook for the property sector in south Johor was promising and some of the biggest names in housing development were launching projects there.
    He said IOI Properties was still working on the gross development value of the project, adding that it would take between eight and 10 years to develop the scheme.

26th Feb 2008: IOI Properties announced a rights issue ( IOI PROPERTIES BERHAD ("IOI PROP" OR "COMPANY") (I) PROPOSED SHARE SPLIT; (II) PROPOSED AMENDMENTS TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY; AND (III) PROPOSED RIGHTS ISSUE (COLLECTIVELY REFERRED TO AS THE "PROPOSALS") )

27th Feb 2008: IOI Properties to raise RM932m

  • PROPERTY developer IOI Properties Bhd plans to raise up to RM932 million from a rights issue to part-fund its projects in Singapore.

    It will also use part of the money to refinance existing debt, it said in a statement to Bursa Malaysia yesterday.

    IOI Properties has total debt of RM225 million.

    In January, the company, a unit of IOI Corp Bhd, won a bid with its partner to buy land on the resort island of Sentosa, Singapore, for S$1.097 billion (RM2.5 billion).

    This followed its first successful bid in March last year.
    Then, it won a tender to buy land on the island for RM1.1 billion.

    "IOI Corp, being the controlling shareholder of IOI Properties, will give its irrevocable and unconditional written undertakings to subscribe in full for its entitlement," IOI Properties said.

    IOI Corp holds 71.15 per cent of IOI Properties as at February 15, 2008.

    Before the rights issue, IOI Properties will split its shares into two, to boost trading in the stock as it becomes more affordable.

    As at February 15 2008, IOI Properties has a paid-up capital of RM333.52 million comprising the same number of shares. After the split, the number of shares will double to 667 million.

    Then, it will offer investors one new rights share for every four existing shares held after the split. The rights are priced at RM5.50 apiece.

    Shares of IOI Properties closed at RM12.70 yesterday down 40 sen from Monday's close.

5th May 2008: IOI Properties in for steady flow of earnings

15th May 2008: Quarterly rpt on consolidated results for the financial period ended 31/3/2008

IOI Properties made 70.741 million for the quarter.

6th June 2008: Company was still active with their buybacks. Here is one such announcement Notice of Shares Buy Back - Immediate Announcement

18th June 2008: Rights Issue and Important Relevant Dates for Renounceable Rights were announced by IOI Properties

2nd July 2008: IOI Properties heading towards privatisation?

  • IOI Properties heading towards privatisation?

    By Francis Fernandez Published: 2008/07/02

    IOI Corp can choose to privatise IOI Properties at a minimum price of RM4.85, says a research analyst with Credit Suisse


    IOI Corp Bhd, Malaysia's second most valuable firm, may take its property arm private, make fresh purchases or give its convertible bondholders treasury shares, three foreign investment firms speculate.

    Credit Suisse said in a report that there was a high chance of IOI Corp privatising IOI Properties Bhd (IOI Prop) if the latter's rights issue was grossly undersubscribed.


    In February, IOI Prop said it planned to raise as much as RM932 million, with its parent underwriting the issue.

    "As IOI Corp is underwriting the deal, then IOI Corp may end up with more than 75 per cent of IOI Prop. Although there are other options, IOI Corp can choose to privatise IOI Prop at this juncture, at a minimum price of RM4.85," wrote Tan Ting Min, a research analyst.

    Doing so would cost its parent some RM1.1 billion and improve its earnings next year by as much as four per cent, the research house said.

    In the year to June 30 2007, IOI Corp made a net income of RM1.48 billion.

    In another report, Citigroup said that IOI Corp was on the lookout for new investment opportunities.

    Over the past eight years, IOI Corp has pumped in more than RM3 billion to take IOI Oleochemical Bhd private, buy the India-based Aditya Birla's edible oil and oleochemical units in Johor, and acquire 100 per cent of Loders Croklaan BV and its related businesses in the US, Canada and Egypt from the Unilever group.

    The purchases have made IOI Corp the world's largest oleochemical group.

    Merrill Lynch expects the group to use its treasury shares, stocks bought under buyback exercises, to enhance value. In the first half of this year, IOI Corp paid some RM1.2 billion to buy its own shares.

    "The highest form of value-enhancement would be to cancel the shares bought back, or it could issue shares to the CB (convertible bond) holders via the shares bought back, thus mitigating any dilution arising from the conversion," Merrill Lynch's Andrew Lee wrote in a report.

    IOI Corp currently has a US$360 million (RM1.2 billion) convertible bond due in 2011, with a conversion price of RM4.70 a share, and a US$600 million (RM2 billion) convertible bond due in 2013, with a conversion price of RM11 a share.

24th July 20o8: Announcement on Bursa

  • Aseambankers Malaysia Berhad (“Aseambankers”), on behalf of the Board of Directors of IOI Prop (“Board”), is pleased to announce that as at the close of acceptance of and payment for the Rights Shares under the Rights Issue at 5.00 p.m. on 21 July 2008, the total acceptances and excess applications received were for 170,866,635 Rights Shares over the 162,537,250 Rights Shares available for subscription under the Rights Issue, which represents an oversubscription of 8,329,385 Rights Shares or approximately 5.12%.

18th August 2008: Quarterly rpt on consolidated results for the financial period ended 30/6/2008

IOI Properties made 148.5 million for the quarter.

7th November 2008: Quarterly rpt on consolidated results for the financial period ended 30/9/2008

  • IOI Properties 1Q Net Profit Dn 31% On Weak Demand,High Costs

    KUALA LUMPUR (Dow Jones)--IOI Properties Bhd (1635.KU) said Friday first-quarter net profit fell 31% on year due to weaker demand and higher construction costs.

    Net profit in the three months ended Sept. 30 declined to MYR55.5 million from MYR80.1 million a year earlier, while revenue slipped to MYR158.8 million from MYR205.5 million.

    "The decline is attributable to the softer property market and the margin reduction due to higher construction costs during the quarter," IOI Properties said in the notes accompanying its results.

    Property development accounts for the bulk of the group's income, although it receives contributions from plantations, property investments and other operations.

    The company expects its full-year operating performance to be lower than the previous year as the property market is expected to remain soft until the second half of the fiscal year.

    Overall performance should remain "satisfactory" in the current market environment as lower building material prices will enable it to accelerate construction activities and achieve better margins when the property market recovers, the company said.

    It added that properties in the Puchong township are still seeing steady demand.

5th Feb 2009: IOI Corp to buy out property arm

  • By Chong Pooi Koon Published: 2009/02/05

    Planter IOI Corp Bhd (1961) plans to pay RM506 million, or RM2.60 a share in a cash-and-share deal to buy out IOI Properties Bhd before taking it private, the company said yesterday.....

---------------

Here is what has happened marked down in the chart.


The bigger picture.


Maybank Again

Huge articles on Business Times on Maybank.

I was hardly impressed.

The article is published AFTER Maybank announced formally its rights issue dates.
First let's roll back what has happened so far. The following are the postings written on Maybank;
Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!, More On Maybank PNB Is Saying Maybank rights a good buy

On today's business times:
Maybank sees key businesses growing


  • Maybank sees key businesses growing

    By Adeline Paul RajPublished: 2009/03/23

    Top lender Malayan Banking is counting on growth in consumer, Islamic and commercial banking to see it through the worsening economy

    Top lender Malayan Banking Bhd (Maybank) (1155) is confident it can grow its key businesses this year and the next despite a worsening economy, its chief said.

    President and chief executive officer Datuk Seri Abdul Wahid Omar said he was counting on growth in consumer, Islamic and commercial banking to see it through these troubled times.

    The group's insurance and investment banking businesses, however, are expected to falter given the weaker capital markets.

    "We're actually entering this recession, or crisis, with a strong balance sheet and strong asset quality. Even if our non-performing loans (NPLs) were to deteriorate further, we think we should still be profitable," he told Business Times in an interview.

    Wahid has warned, however, that the group's net profit in fiscal year ending June 30 2009 will be lower than last year's RM2.9 billion given the more challenging environment.

    He said the bulk of profit will continue to come from Maybank's traditional commercial banking franchise.

    The group, which is dominant in consumer banking, should also be able to continue to lead in this area.

    "No doubt, in some segments, we might see some increase in NPLs, but I think those increases will be manageable. If you look at our current net NPL ratio of 1.8 per cent, even if that doubles to 3.6 per cent it would still be manageable," he said.

    The industry's net NPL ratio is now about 2.2 per cent.

    Loan growth should be able to come in at about 6 per cent to 7 per cent this fiscal year, which is still "very good" considering the current environment, he said.

    Maybank's share price has fallen of late as investors worry that its move to raise RM6 billion via a rights issue will dilute earnings.
    It fell below RM4 last Monday, but has since been on the rise.

    Wahid said the move to strengthen Maybank's capital base was necessary

    and formed a key part of the group's ambition to become one of the top five banks in Southeast as well as South Asia come 2015.

    The group expanded last year, buying three banks in Asia for RM11.5 billion.

    "When we look at our requirements for the next three to five years, we felt that RM6 billion would be an appropriate amount. This is actually very much pre-empted and, with that, Maybank will be one of the best capitalised banks in this region.

    "Once we have enough capital, then there'll be no issue to be able to grow in the market, so that means that we'll be able to capture some loan growth, with much better margins," he said.

    Investors are also concerned that Maybank's dividends will now come in at a much lower level, but Wahid has given the assurance that the bank intends to stick to its long-term dividend policy of paying out between 40 per cent and 60 per cent of net profit.

    "For the current year we will have to review this indication, but for the long term we are committed to the 40-60 per cent range," he said.

    Banking analysts, like Fiona Leong of AmResearch, believe it may come in at as low as 25 per cent of net profit this year. Last year, it paid out 61 per cent.

    OSK Research's Keith Wee said Maybank was likely to conserve a large portion of its capital for potential impairment losses on its bank buys in Indonesia and Pakistan.

    These factors - lower dividends, potential impairment and the rights issue - continue to weigh on Maybank's stock. It has shed 15 per cent this year.

    Most analysts are recommending either a "sell" or "hold" on it, but at least two have called a "trading buy" as they believe it may have bottomed.

    While the group's three new bank purchases will provide it with a new source of income from this year, it will take a while yet to be earnings accretive given the higher interest incurred on the RM9.1 billion of capital that the group raised over the last six months, Wahid said.

    For now, Maybank, which is present in 14 countries, is taking a break from making further acquisitions and focusing on maximising organic-growth opportunities.

    It still wants to increase its stake in Vietnam's An Binh Bank by another 5 per cent to 20 per cent as per the subscription agreement, but is in no hurry to do so.

    As and when the Vietnamese government approves such a move, Maybank will be ready to act as the funds are already in place for it.

    Wahid also said that he was not overly concerned about Maybank's lower market capitalisation, adding that he would rather focus on fundamentals.

    "At this moment, given volatile markets, we're less concerned in terms of market capitalisation. We believe that if you focus on the fundamentals and deliver the results, your share price will take care of itself."

    Maybank, with a market capitalisation of some RM21.3 billion currently, saw its shares close at RM4.36 last Friday.

First let me repeat what's needed to be repeated.

Before the BII fiasco, Maybank's market capitalsation was some 43.6 Billion!

Now it is only some 21.3 billion.

Anyway, the group CEO said this:

  • "We're actually entering this recession, or crisis, with a strong balance sheet and strong asset quality. Even if our non-performing loans (NPLs) were to deteriorate further, we think we should still be profitable,"

I wonder. If Maybank's balance sheet is truly really strong, why the rights issue is needed? Maybank had overpaid for the banks and isn't this why the rights issue is needed?

And since the recession and crisis was known way back last year, why did Maybank overpay for their purchases? Doesn't make sense right? Since it was a crisis, why couldn't Maybank bargain?

Now a rights issue is needed.

A rights issue which would see Maybank's share base increase from 4881million shares to 7077 million shares. And if earnings do not increase, the earnings would be diluted.

And what did Wahid warn?

  • Wahid has warned, however, that the group's net profit in fiscal year ending June 30 2009 will be lower than last year's

Lower net profit is already expected.

And with lower net profit, how could investors logically expect more in dividends?

The CEO then said.

  • "For the current year we will have to review this indication, but for the long term we are committed to the 40-60 per cent range," he said.

And what about the impairment losses?

Yeah, Maybank closed at 4.38 last Friday. When I first blogged Maybank Has Lost 24.1 Billion In Market Capital Since BII Deal!!!, Maybank last traded at 4.00. LOL! :p2

And here is the other article on Maybank:

  • Longer wait to realise earnings-accretive BII

    By Adeline Paul RajPublished: 2009/03/23

    Malayan Banking Bhd's (1155) chief says it could take a longer-than-expected four years for its RM8.2 billion investment in Bank Internasional Indonesia to be earnings accretive.

    Maybank, which owns 97.5 per cent of BII, had told analysts when announcing the acquisition last year that it expected BII to start enhancing its earnings in the fiscal year ending June 30 2010.

    "With the RM8.2 billion that we paid, it will take a longer period for that investment to be earnings accretive. As to when, it very much depends on how fast we can grow the earnings, so it will not be within four years," Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar told Business Times in an interview.

    For the deal to be accretive, earnings contribution from BII has to be higher than the cost of funding.

    Maybank's stock took a tumble upon the company announcing plans to buy BII last March, and again later when it concluded the deal in November.

    Banking analysts viewed the deal as being too expensive and said the timing was not right. It had, after all, bought 15 per cent of Vietnam's An Binh Bank and 20 per cent of Pakistan's MCB Bank earlier in the year.

    Today, BII shares are trading at some 44 per cent below the tender offer price, while MCB's market price is around 70 per cent lower than the acquired price.

    Keith Wee, an analyst at OSK Research, said Maybank might have to make a further impairment of between RM1 billion and RM1.9 billion this fiscal year for its investments in BII and MCB.

    "It's a drag on the stock," he remarked.

    Maybank had already made an impairment to the tune of RM242 million on its MCB investment earlier in the first quarter.

    Wahid, however, said Maybank was confident of continued profitability and that any further impairment would not lead to a loss in the group's net earnings for the current fiscal year.

    He is aware that he has an uphill task in making good on Maybank's three bank purchases last year, especially given the bleak outlook analysts are painting amid the weaker global economy.

    Its RM11.5 billion acquisition trail has had its share of challenges and criticism.

    "At the end of the day, from Maybank's and my personal perspective, we would like to move forward. We're not about to look back and try to justify at what prices the deal was done."

    He pointed out that his main challenge this year would be to follow through on the new bank buys and realise value from them.

    "Obviously, the primary focus of the three will be on BII given that it cost us RM8.2 billion out of the total RM11.5 billion that we spent on acquisitions," Wahid remarked.

    His first priority at BII is to assemble a strong management team.

    The new appointments, comprising new and existing talent, were announced last Friday.

    Ridha Wirakusumah, a former American International Group Inc (AIG) executive, was made the new president director of BII, subject to approval from Indonesia's central bank. He was AIG's head of Asia-Pacific consumer finance.

    Maybank has identified four immediate focus areas for BII's new team to improve on: credit-risk underwriting processes, its trade finance capability, the remittance business and Internet banking.

    In addition, it wants to support Malaysian and Singaporean businesses that have invested or intend to invest in Indonesia.

    Wahid said Indonesia was an important market with much potential for growth as the banking penetration rate was still low at less than 30 per cent compared with Malaysia's 98 per cent and Singapore's 102 per cent.

    "We expect to grow BII's branch network from the current 250 branches to something more sizeable," he said.

    Media reports last weekend quoted him as saying that he expected to increase the number of branches to as many as 450 in the next three years.