Comments On AirAsia Exceptional Losses

Posted the following yesterday, "AirAsia Reported Massive Losses Again!!"

Received a set of interesting comments which I felt I should reply in detail. I do hope and ask that you spare your precious time with me in this rather long reply!

Ah said...

• Actually... I think revenue is relevant to stock analysis.. it shows the growth potential of a company. I personally wouldn't want to invest in a company with shrinking revenue, which could be telling that the company is losing market share? If you look at airasia's operating data or presentation, they did record some encouraging passenger growth. Of course, higher revenue should translate to higher net profit, i do agree that net profit is more important.

Ah, just for your information, when I blogged the posting What Lah! Didn't AirAsia Said No More Oil Bets?, I focused on one Business Times article titled Strong bookings to fuel AirAsia's revenue (link is removed - probably due to Business Time's own managment of its web space)

I felt the title was misleading.

Yes market share of course it's extremely important but this is where it would be subjective. In my own opinion, I would never run my business just for the sake of market share.

Market share is like a popularity contest where rewards is never fully guaranteed.

I would choose the net earnings over being popular.

And that's my flawed opinion.

And this is why I do NOT like companies goating on their record revenue.

Look at AirAsia.

It got it's dream record revenue. What about profitability? Where?

• But in AirAsia's case, the huge loss was very much due to the "exceptional item" of >rm400million. If you exclude this and the deferred tax, core net profit is still quite decent. However, on whether to treat the lumpy RM426 million as "exceptional" or "one-off" is disputable. Who knows whether there will be another RM400million exceptional items next year?

One thing first. The deferred tax 'ADDS' to AirAsia profit.

See how some 44.530 million was added back to AirAsia profits?

I am sure you understand that these deferred taxes are taxes in which AirAsia was supposed to pay the local government as taxes from their aircraft purchases.

Last blogged in December 2008, Again On AirAsia's Deferred Tax Issue and the earnings reported last night showed that AirAsia deferred tax is at 672.501 million!!

( see also AirAsia's deferred taxes issue and More on AirAsia's Deferred Tax Issue. And I would note from the first posting "We believe that AirAsia has a strong case for its non-provision of deferred taxes. With capital allowances and investment allowances likely to come to RM18bn in total, the company will not have to pay cash taxes for decades." )

Now let's look at AirAsia exceptional item mentioned in its books.

• The exceptional amount of RM426 million in the quarter relates to the cost of the unwinding our fuel derivative contracts and interest rate swaps. For the full year accounted, the Company has incurred a total of RM1,069 million which includes our collateral held by the now defunct Lehman Brothers. The allocation of the cost borne by the respective business unit is as follows; AirAsia Berhad is RM641 million, Thai AirAsia is RM222 million and Indonesia AirAsia is RM207 million.

The cause of the exceptional amount of rm426 million as stated by AirAsia was due to unwinding of fuel derivative contracts and interest rate swaps.

And how would you define such losses?

For me, in my flawed opinion as usual, these are PLAIN SIMPLE MANAGEMENT MISTAKES.

No one asked AirAsia to hedge on oil and no one asked them to fiddle with complex stuff as interest rate swaps.

Now they lost big money!!!!

rm426 million!

And I would simply declare and state this as HORRENDOUS management.

And I do believe you have hit it spot on when you said "Who knows whether there will be another RM400million exceptional items next year?"

I for one would NOT DISCOUNT THIS from happening!

And let me state why!

November 2008, I wrote the following What Lah! Didn't AirAsia Said No More Oil Bets?

I started that posting by highlighting that on 11 January 2008 AirAsia publicly stated the following on our Business Times.

• AirAsia: No more bets on oil price
  
  AIRASIA Bhd, Asia's biggest discount carrier by fleet size, will stop making bets on the price of oil, after incorrect forecasts contributed to a 16 per cent slide in shares over the last month.
  
  "It's a nightmare because the volatility is crazy," chief executive officer Datuk Tony Fernandes said in a Bloomberg Television interview on Thursday. "We took a bet that oil won't go above US$90 a barrel and it has and it's staying there."

November 2008. Business Time published Strong bookings to fuel AirAsia's revenue (link not working)

The boss pre-warns on fuel hedging losses and at the same time gloats on record revenues!

• Fernandes, however, expects the airline to remain profitable this year, despite provisions and costs which will be incurred.
  
  AirAsia will make provision for losses from the collapse of Lehman Brothers investment bank.
  
  "We had a trade (on fuel) with them (Lehman Brothers) and some money outstanding, I don't think we are going to get it back, but we would have paid for it anyway," he said.
  
  That, together with hedging losses, which even Fernandes admits will be heavy, will be quite a sum. However, he declined to reveal any figures.

Few days later, I blogged AirAsia Posted Massive Losses!

• AirAsia had a charge of RM215 million in the third quarter after the company unwound hedging contracts and the likely non-recovery of a collateral for trades held by the now bankrupt Lehman Brothers. (quoted from Business Times AirAsia posts RM465.5m net loss )

How??

January 2008 AirAsia siad no more bets on oil prices. November it took a rm218 million charges in losses. And yesterday it took another rm426 million hit!

How?

The losses are rather incredible, yes?

How can the investor trust that this will not happen again?

Would you trust?

• All in, my view is that AirAsia is doing some sort of bloodbath this year.. and charging all the shit to FY08 since it's already a bad year (stock mkt collapse, record high jetfuel cost). So in FY09, they are basically unhedged and could take advantage of the lower fuel cost, as well as the lower finance cost (part of the RM426 million was due to unwinding of interest rate swap) I do believe that they can deliver some nice profit in FY09! BUT BUT BUT... i also agreed with you on the issue of high gearing.. hehe :)

Lower financial cost?

I seriously wonder how low the cost of financing their debts can get when its total debts so far is more than rm6 billion (discounting the newer 2.5 billion loan from Barclays)

This is what the company is saying in its earning notes.

• (i) Forward Foreign Exchange Contracts
  The Group has hedged 65% of its dollar liabilities pertaining to its aircraft, engine and simulator loans into Ringgit by using long dated foreign exchange.
  
  (ii) Interest Rate Swaps
  The Group entered into interest rate swaps (some of which are capped) to hedge against fluctuations in the US-LIBOR on its existing and future aircraft financing for deliveries between Year 2005 and 2009. The effect of this transaction enables the Group to pay fixed interest rate of between 3.25% to 5.20% over a period of 12 to 14 years.
  
  (iii) Fuel Hedging
  As at 31 December 2008, following the unprecedented, near collapse of the US financial system and the collapse of WTI prices from $147 to $31 per barrel during the year, had subsequently liquidated its positions to take opportunity of the lower spot prices.

Changed 65% of its dollar liabilities to Ringgit. Interest rate swap? I do hope it knows what it is doing here.

Fuel hedging.

I can't help being evil here. Yes crude oil is down for now but what if it rises to say $45 or $50 of $60? Dare we say not possible? And what would AirAsia do again? Start hedging again?

AirAsia Reported Massive Losses Again!!

That is a snap shot of AirAsia's earnings!!!

Massive losses again!

Guess what AirAsia did DELIVER its strong REVENUE as promised but as you can see, strong revenue does not equate to strong net profit. ( see What Lah! Didn't AirAsia Said No More Oil Bets? - in it I posted an article from Business Times stating "Strong bookings to fuel AirAsia's revenue"

• I had a chuckle. Record revenue?
  
  Since when did revenue ever counted for anything in the investing world?
  
  Strong revenue WILL NOT seduce any investors to invest in a stock!
  
  Strong net profits, yes!

Anyway I was most interested in what's inside AirAsia balance sheet and compare to what I was looking at in the previous quarter in November 2008 as blogged in AirAsia Posted Massive Losses!

Cash balances now only totals 593.871 million!!!!!

3 months ago AirAsia had 774 million.

And as stated in AirAsia Posted Massive Losses! , AirAsia had some 1.084 billion in its previous quarterly earnings reported in August 2008! ( see Quarterly rpt on consolidated results for the financial period ended 30/6/2008 )

Would you call this as burning up cash at an alarming rate?

Would you?

And the debts?


Total debts at 6.690 Billion!

Blogged on Tuesday Would You Define AirAsia Debt As A Bubble? AirAsia just got new debts of 2.5 billion! (total future debts should be at least 9.19 Billion!)

So what do we have here?

Massive capital commitment + shrinking cash balances + ballooning debts!!!!!

And not forgetting massive losses too!

Simple mind boggling thing is that with total fiscal year losses at 471 million, how and when AirAsia is ever going to pay back its 9.19 billion in borrowings????????

And what's even more mind boggling is the recent events like AirAsia Ponders Manchester United Shirt Deal or More Capital Borrowing For AirAsia to fund Labu LCCT project???? or how about the AirAsia Buyout talks?

Truly unbelievable!

Burning Money One More Time

Couple of years ago, I made the following posting Burning Money!

Given what has happened now, I felt that this wonderful article gives tells the simple lesson on borrowing again.

Give it a read. :D

Look around.

What do you see in AirAsia?

Do you think they too are burning money?

Sir Fred Goodwin: Give The Money Up Fred!!

Posted yesterday: More Pension Money For RBS's Sir Fred Goodwin

On the UK Sun ( Yeah, absolutely love this tabloid for its juicer footie stories. :p2 ), they are reporting that Sir Fred Goodwin is fighting for his pension: Axed RBS boss 'guards pension'

My personal feeling Sir Fred Goodwin should take a good look in the mirror and ask himself that isn't the pension money outrageously insane given the size and the magnitude of how badly RBS has screwed up under his leadership? Look at what has happened to RBS. Does he think he should be rewarded for leading RBS to where it is now?

Give the money up Fred!

Look at what the UK Government is doing just to clean up your mess. Whose money is it?

And here you are insisting that you will not voluntarily give your money up.

Don't you have any dignity left in yourself?

Come on, do the only thing that is correct.

Give the money up!!!!!

Axed RBS boss 'guards pension'

• FORMER Royal Bank of Scotland boss Sir Fred Goodwin has written to the Treasury indicating he will not voluntarily give up his pension, it was revealed tonight.
  
  Sir Fred is coming under increasing pressure to give up at least part of the pension, worth an estimated £693,000 a year.
  
  He is already receiving it at the age of 50 under an early retirement deal agreed with the RBS board when he was forced out last October.
  
  Royal Bank of Scotland's record losses in 2008 are the BIGGEST in British corporate history.
  
  Prime Minister Gordon Brown today said the Government was looking at legal action to claw back the money, insisting that there should be “no reward for failure”.
  
  But Treasury sources this evening revealed that Sir Fred has written to City minister Lord Myners to say that he is not ready to waive his entitlement.
  
  Alistair Darling said ministers only became aware of the massive payout last week.
  
  UK Financial Investments – the body which manages taxpayers’ shareholdings in the part-nationalised banks – has been asked to look into clawing back some of the pension deal.
  
  But Sir Fred could end the controversy by giving it up.
  
  "The ball is in his court," Mr Darling said.
  
  Humiliating
  
  The news comes as RBS also announced it would be putting £325billion into the Government insurance scheme against toxic assets.
  
  Derek Simpson, joint leader of Unite, said: “These historic and humiliating losses bring into sharp focus just how reckless RBS’s former management team have behaved."
  
  Mr Darling said: “You cannot justify these excesses, especially when you have got such a failure of this magnitude.”
  
  Around £20billion of RBS’s losses is linked to write-downs on the acquisition of Dutch bank ABN AMRO — led by Sir Fred two years ago.
  
  He lost his job last year when the bank was bailed out. Treasury Committee chairman John McFall said: “There should be a claw back.”
  
  The Treasury is to pump an EXTRA£13BILLION into RBS, taking its stake in the company to about 84 per cent – up from 70 per cent.
  
  RBS must make £16billion available for lending, and £9billion must be used for mortgages.
  
  Tomorrow, Mr Darling will spell out plans to insure £250BILLION of toxic debts at Lloyds.
  Underwriting the debts means ministers will have put £1.3TRILLION of our money on the line to bail-out the banks in just six months.
  
  Mr Darling said: “We want to ensure that by cleaning up the balance sheet, that by making sure RBS has enough capital, we can get through this period.”
  
  He said RBS had also announced a restructuring of the bank, identifying parts that were “core” to its future.
  
  Mr Darling went on to acknowledge that there was a cost to the taxpayer, but added that the “cost of not doing it is absolutely colossal”.
  
  “You’ll remember that when Lehmans, that was a big investment bank in America, went down, that’s what precipitated the crisis in the world’s banking system," he said.
  
  “That’s what led to every government in the world having to recapitalise those banks because they were within hours of collapse.”
  
  Treasury officials were locked in frantic talks with bosses at the banks late last night thrashing out details of the bailout.
  
  Ministers hope the move will end the uncertainty swirling round our banks.
  
  Mr Darling said yesterday he wanted the banks to “clean up their balance sheets and rebuild for the future”.
  
  Meanwhile, house prices fell by a further 1.8 per cent during February, pushing the average cost of a home back below the £150,000 threshold.
  
  Nationwide Building Society said the average property in the UK was now worth £147,746 – £31,612 less than in the same month of 2008.
  
  The annual rate at which house prices are falling also continued to accelerate to hit a new record of 17.6 per cent.

Comments On Lion Diversified Earnings

Posted last November 2008. Lion Diversified Has Now Got Much More Earnings but.....

Tonight Lion Diversified announced its earnings. The earnings summary below shows just how horrendous it was.

However given the known shutdown in the steel sector, the losses weren't too much of a shocker to me.

Instead I was more interested in its balance sheet. Will we see the shrinking cash and exploding debts and the increasing receivables?

Mentioned in that blog posting. Lion Diversified Has Now Got Much More Earnings but.....

• 1. Cash balances is now 176.745 (compare to 215.439 million a quarter ago).
  
  2. Total debts is now 986.542 million (compare to 864.774 million a quarter ago!!)
  
  3. Trade receivables is now 511.587 million (compare to 392.027 million a quarter ago!!!)

Quarterly rpt on consolidated results for the financial period ended 31/12/2008

1. Cash balances increased to 302.428 million from 176.745 million three months ago. And if you look at the cash flow, the cash balance increased thanks to the fact that some 327 million was raised from the issuance of ICULS. Could you imagine the cash balances if this 327 million wasn't there?

2. Trade receivables exploded to 683.976 million! Three months ago it was only 511.587 million.(what on earth is happening??????)

3. Total loans is now 1.001 Billion versus 986.542 million reported in its previous quarterly earnings!

How?

I do see many around who brands Lion Diversified as a so-called fundamental stock.

I just do not understand such branding.

Lion Diversified did great as a stock a couple of years ago because of the Parkson success story.

However, do understand this Lion Diversified is now a totally different story. There is no retail business left in this stock!

Look at the basic numbers. What does one have? For me, in my flawed opinion, I see a company with massive losses and a terribly deteriorating balance sheet.

And look at the stock price. It last traded at 29 sen.

Can you see why it is trading so low?

Latest Comments From Jim Rogers

ps: where is the bow tie? :p2

More Pension Money For RBS's Sir Fred Goodwin

Published on UK Telegraph.

Anger over £8m pension top up for Sir Fred Goodwin

• Royal Bank of Scotland’s disgraced former chief executive has picked up an £8m pension top-up after being sacked by the lender for leading it to a £28bn loss last year, the largest in UK corporate history.
  
  The payment was made despite RBS and Sir Fred’s insistence that he received no compensation for loss of office after the taxpayer stepped in to rescue the bank. It means he is already drawing a pension for life of £650,000 a year at the age of 50.
  
  The revelation, by BBC business editor Robert Peston, comes on the day that RBS’s new management unveils the full horrors of its performance last year. New chief executive Stephen Hester has already said the bank, now 70pc owned by the state, made up to £28bn in losses in 2008. He will today detail plans to dump £300bn of bad and “non-core” assets into a ringfenced unit.
  
  Sir Fred is understood to be in discussions with the Treasury, UK Financial Investments – which manages the taxpayer’s bank stakes – and RBS about amending the pension top-up. The Treasury said in a statement: “This is another example of the culture of rewards for failure that we are determined to sweep away for the future.
  
  “We are committed to cleaning up the banking system – both the financial balance sheets and the behaviour of those that lead them.”
  
  Sir Fred’s payment, which almost doubles to £16m the £8.4m his pension had earned by 2007 after 10 years on the board, was agreed by the previous management. An RBS spokesman said: “The company is taking further legal advice in respect of certain aspects of Sir Fred Goodwin’s contractual arrangements and continues to discuss the position with UKFI.”
  
  Before the Treasury Select Committee this month he said: “My pension is the same as everyone else in the bank who is in a defined benefit pension scheme.” However, it is believed he and other board members were given special terms that boosted their pension from the age of 50.
  
  The Treasury added that it has been “vigorously pursuing with the new chairman [Sir Philip Hampton] whether there is any scope for clawing back some or all of this pension entitlement” and has “a view to testing any potential for legal redress”.
  
  The bank’s new management will today reveal plans to use taxpayer insurance for £300bn of toxic debts under the Government’s “Asset Protection Scheme”, full details of which are expected alongside the results. In return, RBS may have to meet draconian targets such as monthly lending levels. The Government will apply the same pressure to Lloyds Banking Group and any other bank which uses its insurance for toxic assets. The issue of forced lending has been the subject of intense debate with some banks claiming there actually is considerable credit available – the problem is now demand.
  
  Banks may put up to £600bn of toxic assets into the scheme. Given the enormous sums involved, politicians are determined to extract meaningful promises from banks to increase lending, in the hope it will help reverse the economic downturn.
  
  RBS will also announce that Nathan Bostock, a senior executive at high street bank Abbey, will run a new subsidiary. Mr Bostock is a former colleague of Mr Hester.

The horror stories simply continues!

Would You Buy Uchi For Its Dividends?

Last night I highlighted the declining earnings in Uchi. Yet Another Update On Uchi

I clicked open my stock quotes and Uchi is UP a nice 6 sen or 8%!!!




Bad earnings? But the markets are loving the stock! Why? Are my comments WRONG?

Well do understand this. I am merely stating the facts and for Uchi, its earnings is CLEARLY DECLINING and do note that I do not here to predict the stock movement.

So what is happening with Uchi?

If I have to guess the answer is very simple.
PROPOSED FINAL DIVIDEND FOR THE YEAR ENDED DECEMBER 31, 2008

• Please be informed that the Board of Directors of Uchi Technologies Berhad has, on February 25, 2009, proposed a Final Tax Exempt Dividend of 6 sen per share of RM0.20 each for the year ended December 31, 2008 for the approval of shareholders at the forthcoming Annual General Meeting of the Company.However, the entitlement date and date of payment of the Dividend have yet to be finalised at the moment

Based on yesterday's closing price, this proposed Tax Exempt Dividend is certainly interesting.

I took a look at its balance sheet.

Its cash balances total 135.844 million and it had no loans. However, if you look at the previous year cash balances, you can see clearly that Uchi's cash balance is shrinking.

Flashback 2007. I wrote Review Of Uchi Again

In it I compiled the following table.

Back in 2006, it had cash balances of 168.170 million and when I looked at in Sept 2007, it had cash balances of 172.039 million. Cash balances now is 135.844 million. Clearly shrinking yes?

Yesterday's 4Q unaudited earnings, Uchi reported net profit of only 58.748 million.

Compare to to the above table.

The last time Uchi reported net earnings below 60 million was fy 2003.

So we have the very interesting case where one is looking at three main issues.

1. Uchi pays great dividends.

2. Earnings is clearly declining.

3. Cash balances is also clearly declining and one of the main reason is that Uchi's pays great dividends.

Now common sense would suggest that if the earnings keep on declining, one day Uchi's dividends payout would surely decline too.

Counter argument is that in the long run, Uchi's earnings should recover and given the fact that Uchi's current cash balances is still quite sizeable, why worry? Buy and enjoy the dividends for the long term.

How?

Would you buy Uchi for its dividends?

CCM Was Reported To Have Posted Record Revenue But ...

This morning news item that caught my attention was CCM posts record revenue of RM2.2b

• Chemical Company of Malaysia Bhd (CCM) (2879) has registered a pre-tax profit of RM120.268 million for its financial year ended December 31, 2008, up from RM105.551 million the previous year.
  
  The country's largest generic pharmaceutical manufacturer set a new record of RM2.165 billion in revenue, an increase of 55 per cent from RM1.397 billion in 2007.
  
  The fertilisers division was the group’s top revenue earner last year, CCM said in a statement yesterday.
  
  The division’s revenue nearly doubled to record a 94.2 per cent increase in revenue to RM1.4 billion from RM723.8 million in the same period in 2007, it said.
  
  Pre-tax profit rose significantly by 138.4 per cent to RM83.5 million from RM35.0 million previously for the division, it added.
  
  The division’s higher performance over the previous year was achieved on the back of rising prices and improved margins in the first three quarters of 2008, which started to soften in the last quarter.
  
  The group’s chemicals division reported an 18.7 per cent growth in revenue to RM606.5 million from RM511.1 million in 2007.
  
  However, the division’s pre-tax profit at RM14.7 million was 3.1 per cent lower than the previous year due to year-end stock impairment charges incurred, reflecting market falls in product prices and underperformance of its water systems business.
  
  The pharmaceuticals division’s revenue improved seven per cent to RM232.7 million from RM217.4 million in the corresponding period the previous year.
  
  However, its pre-tax profit was 33 per cent lower at RM37.2 million from RM56.3 million previously.
  
  CCM attributed the decrease to reduced margins arising from higher raw material prices coupled with lower selling prices of products to the government sector.
  
  The CCM board has recommended a final dividend of 1.8 sen per ordinary shareless tax at 25 per cent and 4.9 sen tax exemption for the financial year ended December 31, 2008. - Bernama

Record revenue?

I am always so sceptical when I read such a headlines. More revenue does not necessary equates to more profit. This is business 101.

Here is the link to CCM's quarterly earnings Quarterly rpt on consolidated results for the financial period ended 31/12/2008

And here is the screen shot of its earnings.

Holy cow!

I am rather so disappointed on the quality of reporting from Bernama.

Despite the record revenue and what's said, the bottom line is CCM lost money for the quarter.

Why isn't this RATHER IMPORTANT FACT not stated? Who fed Bernama this set of news?

And if one takes a look inside CCM's earnings note, the company notes mentioned the following.

• Consolidated Group revenue for the fourth quarter ended 31 December 2008 increased by 34.8% over the same quarter last year driven by the fertilisers division (revenue increase of 68%) and the chemicals division (revenue increase of 20%). Consolidated Group profit before tax for the fourth quarter ended 31 December 2008 was a loss of RM 1.7 million compared to a profit of RM 33.5 million for the same quarter last year. This reversal in performance was primarily due to the impairment of year-end stocks incurred by the fertilisers and chemicals divisions arising from the sharp declines in market prices caused by the global economic crisis. The stock impairment losses were charged to cost of sales causing the gross profit margin for the quarter to drop from 14.5% last year to 7.9% in the current year.
  
  For the year ended 31 December 2008, Consolidated Group revenue crossed the two billion Ringgit mark, registering a 94.2% increase over the same period last year. The principal revenue driver was the fertilisers division, with increases in revenue also being contributed by the chemicals and pharmaceuticals divisions albeit by smaller percentage amounts. Consolidated Group profit before taxation for the year ended 31 December 2008 saw an increase of 13.9% from RM105.6 million in 2007 to RM120.3 million in 2008, despite the year-end stock impairment charges and a once-off extraordinary charge of RM15.4 million recorded in second quarter of the year representing a write-off of the residual value of the nitric acid plant which will no longer be in operation once the Shah Alam fertiliser plant is converted to a solid urea-based steam granulation process technology. Excluding the nitric acid plant write-off, the increase in the profit before taxation would have been 28.8% against the same period last year.

How?

Don't you think that the Bernama news article posted on Business Times should have at least stated the fact that CCM lost money for the quarter?

Sigh!

Massive Losses Posted by Sino Hua-An

Sino Hua-An has been an interesting stock topic. ( Started back in May 2008. I made the following comments at Sahamas. http://sahamas.net/forum5/5799-1.html (see posting #2 ). )

I had fond memories. When I first blogged Regarding Sino Hua-An I wrote what I could see.

• And do note that 08 Q2 earnings, sales revenue shot up to 434.426 million. However, earnings only increased so slightly from 35.567 million to 36.916 million. Now one can take the calculator and compute the earnings margins but one should be able to spot that there is tremendous pressure on its earnings margins. Would this be a worry?
  How?
  
  Just from the earnings alone, how would you evaluate this stock?
  
  The earnings are decent no? But there is NO Growth and now earnings margins is under massive pressure.
  
  And would this be one reason why potential 'investors' or buyers would be worried about?
  
  And what about the company's product? IMHO this is also a huge concern because the past couple of months, metallurgical coke and its by-products have had one MASSIVE bull run. Prices had been extremely favourable and logical reasoning would suggest that this favourable coke prices would have boosted Huann's bottom line. But as we can see above earnings table, this coke bull run did not translate to better earnings for Huann. Would this be a concern since we have here a company whose key product is having one hell of a bull run but yet the company produces flat earnings. What does this say about the Quality of the company and the Business? Not very good yes? Do you reckon such reasoning is flawed?

Those were my points. I just could not see the quality in Hua-An itself.

Tonight Sino Hua-An announced its earnings. It was an absolute horror show. ( However this should have been as expected given the warnings given on the steel sector)

A net loss of 83.650 million surely would have been shocking for most. I am sorry but I am not.

The drastic decline in earnings was first mentioned in Who wants Sino Hua-An? and repeated in the posting Sino Hua An Q3 Earnings.

This is what the company had to say.

• Review of Performance
  
  For the fourth quarter ended 31 December 2008, the Group recorded consolidated revenue of approximately RM232.9 million. However the Group incurred a significantly higher cost of sales of approximately RM334.4 million, thus registering a gross loss and loss before tax of approximately RM101.5 million and RM98.4 million, respectively.
  
  These unprecedented losses were attributable to the abrupt and sudden downturn in the steel and metallurgical coke industry experienced in the fourth quarter under review stemming from the worldwide financial and economic meltdown. Steel production was cut considerably in the fourth quarter thus significantly reducing industry wide demand for metallurgical coke. These circumstances had adversely changed the pricing dynamics of the steel and coke industry whereby the aggregate cost of production of steel and metallurgical coke were rendered higher than their respective selling prices. During the fourth quarter under review, the average price of metallurgical coke was about RMB1,546/tonne, representing an increase of 6% from RMB1,462/tonne in the preceding year corresponding quarter. The average price of coking coal on the other hand had escalated significantly by 47% to RMB1,201/tonne over the same period from RMB819/tonne in the preceding year corresponding quarter. As for the prices of the by-products (which have a revenue contribution of approximately 15%), except for coal slime which saw an increase of 92% in the current quarter compared to the same quarter last year, the prices of ammonium sulphate, crude benzene, tar oil, coal gas and middlings have shown a decline in average prices by 20%, 45%, 6%, 16% and 25% respectively over the same period.
  
  Notwithstanding the adverse environment besetting the industry in the fourth quarter, the industry landscape has gradually improved in December with the pricing structure readjusted favourably for the Group as well as the industry players.
  
  By virtue of the losses recorded in the fourth quarter under review, the Group wrote-back tax provision of approximately RM14.8 million as a result of earlier tax paid made on profits recorded during the preceding three quarters (9 months) of the year. Consequently, the Group recorded a net loss for the fourth quarter period of RM83.7 million.
  
  In respect of the cumulative results, the Group managed to record a revenue of approximately RM1.46 billion. In relation to the challenges faced by the industry in the fourth quarter, the Group posted a cumulative cost of sales of approximately RM1.43 billion. Assisted by the favourable results registered by the Group in the preceding three quarters of the year, the Group managed to record a cumulative consolidated gross profit and net profit for the year of approximately RM1.0 million and RM545,000 respectively.

And here is a snap shot of its balance sheet. Look at the arrow comparisons.

See the much higher trade receivables?

See the much lesser bank balances?

See the much higher trade payables? (why is Sino Hua-An not paying its trade creditors?)

And as opinioned in Who wants Sino Hua-An?

• Now that would be rather poor yes? The declining margin places a huge question mark over Huann's ability to generate better profits and if you ask me, in an environment where its main product was enjoying a bull run, Huann's performance was terribly poor. Hey, that's my blunt and flawed view on it.
  
  Now regarding PE.
  
  As it is, right now, based on current earnings, most stocks are looking cheap.
  
  That's a fact.
  
  However, for the market, most of the time, the market is only interested in what the stock can earn in the future.
  
  Which means, one has to address the sustainability of Huann's earnings.
  
  Firstly, as listed company here, Huann's earnings track record is simply too little.
  
  And the biggest issue in my opinion is Huann's products itself. It's clearly cyclical and given the fact that most commodities prices have turned south in a dramatic fashion, it's most likely that Huann's products would command a much lower pricing. Is this not possible?
  
  And last but not least, I have to repeat yet again, when Huann's products was in a bull run, Huann's earnings was flat. And if that is the case, if Huann's products turn 'soft', surely Huann's earnings would decline, yes? Is this not possible? And if that would happen, surely Huann's earnings per share would decline. So what appears cheap now in relative to PE, might not appear cheap later if the earnings decline.

And the following chart shows how poorly Hua-An has been doing.

Here are my past blog postings:

1. Regarding Sino Hua-An
2. More On Sino Hua-Ann
3. Who wants Sino Hua-An?
4. Still Who Wants Huann?
5. Sino Hua An Q3 Earnings.

Yet Another Update On Uchi

Uchi is a stock that I have followed a lot. Last I wrote was Update On Uchi.

Tonight Uchi reported its earnings.

And as you can see CLEARLY above that Uchi's growth is CLEARLY not there anymore.

As mentioned in Update On Uchi:

Some issues worth pondering. Has it's spectacular growth finally ended? Signs of margin pressure exist. Would the issue snowball?

And last of not least, one should consider the durability of Uchi products now given the current economic environment.Two previous blog posting that should be read, Review Of Uchi Again. and Uchi and its ESOS ( the ESOS issue is still a huge concern)

---

How? Isn't this what we are seeing? We are no longer talking about slowing growth but now we are talking about DECLINING earnings!

Many did not liked it when I chatted on Uchi and some did not like it one bit when I questioned the wisdom of buying and holding forever this stock. Well here we are. Uchi last traded at 75 sen.

Here is Uchi's chart.

Do you like what you see?

And the recent plunge to current levels, doesn't this represent another leg down for this so-called fundamental stock?

How?

Malaysian Bulk Carrier Earnings And Dry Bulk Shipping Prospects

I had been blogging a lot on Baltic Dry Index. You can view past blog postings via the following search link: http://whereiszemoola.blogspot.com/search?q=baltic+dry+index

Today Malaysian Bulk Carrier or Maybulk reported its earnings.

It was not nice and it clearly reflected the earlier massive plunge seen in the dry bulk index.

The previous quarter Maybulk reported net earnings of 143 million!!

So a net of earnings of only 3.238 million is pretty darn drastic!

I was more interested in what the company has to say about future prospect in the shipping industry. This is what the management wrote.

• The outlook for the world economy is grim and expectations are for the global economic slowdown to be protracted and severe. This is corroborated by the latest International Monetary Fund’s (“IMF”) forecast wherein global growth is now slashed to 0.5% for 2009. In its report the IMF expects the world economy to gradually recover only in 2010 and the growth rate to be around 3%. "A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit makers are unclogged," the IMF said.
  
  The BDI plummeted 94% from 11,793 in May 20th to 663 on December 5 last year as global trade slowed sharply. However, recent restocking orders from China have caused the Cape-size rates to firm as China resumed iron ore shipments from Australia and Brazil. Consequently the BDI has recovered substantially from its December lows. But the fundamentals in the other industries such as steel, automobiles and shipyards are still bleak and recent freight market’s strength does not appear sustainable especially since substantial new-building deliveries and laid up tonnage continue to be an overhang in the market. The tanker market, though not as bad as the dry bulk is also weak and is expected to continue to be weak.
  
  The ongoing financial crisis is restricting credit for companies and consumers, and is aggravating the current world economic condition. With the financial sector gripped by their de-leveraging and recapitalizing concerns, credit overall remains tight. Amid all the grim background, it is encouraging to note that the governments of the major countries are taking steps to inject substantial financial stimulus into their respective economies so as to stem the economic slide. Despite the bleak economic outlook for 2009, MBC is well placed to weather the difficulties. The collapse of the dry-bulk market will provide opportunities for the Group to consider acquisitions and MBC along with its strategic partners have been active in exploring same. The shareholders have supported the Group’s diversification into offshore oil and gas services which continue to outperform other shipping sectors.
  
  The freight market faces uncertainty in FY2009. The recent recovery in the freight market does not appear sustainable and as such offer little prospect for over-aged tonnage to benefit from the next up cycle. In this respect, the Group completed the disposal of its 25 year old Alam Sempurna in January 2009 for a very modest gain of RM8.1m. Whilst the four quarters in FY2009 may present uneven results, the Board is generally satisfied that FY2009 will be profitable, albeit substantially lower compared to FY2008.

footnote.

I am indeed aware of Maybulk's investment in quoted securities. As had argued before I do not like it one bit and I am utterly disappointed at the lack of information. As it is, if you read Maybulk's earnings it is sitting on a sizable paper loss! Yeah, company might argue that paper loss is not real since they have not sold. But as you can also see, there is lacking of information and without the information how could one be convinced?

Comments: AirAsia Ponders Manchester United Shirt Deal

On the sporting front, I see many articles stating that AirAsia ponder Man United deal.

Here's one.

• Leading airline company AirAsia are the latest organisation to have talks with Manchester United over becoming their next shirt sponsors.
  
  The Red Devils need a replacement for embattled US banking giant AIG, who have confirmed they will not be renewing their current contract, which expires next year.
  
  Despite the current global economic downturn, United are still quietly confident of agreeing an increase on the present £19million-a-year they make in total from their deal with AIG.
  
  It was confirmed last month that negotiations had taken place with giant Indian corporation Sahara, while Saudi Telecom are also believed to be in the running.
  
  Now AirAsia chief executive Tony Fernandes has confirmed he will meet United counterpart David Gill about the possibility of becoming only the club's fourth shirt sponsor, following on from Sharp, Vodafone and AIG.
  
  "There is no doubt that this would be great for AirAsia," said Fernandes on his personal blog.
  
  "I don't know what the entire package would amount to but I was just thrilled that we have reached a stage where Manchester United would actually
  
  1) Think that we are a big enough brand to afford them; and 2) That they would want our brand on them."
  
  An Asia-based deal would make sense for United given the scale of their support in the region.
  
  The Red Devils have already announced their plans for a pre-season tour in the summer that will see them visit China, South Korea, Indonesia and Malaysia.
  
  It will be their third tour to the continent in five years, while last weekend they confirmed a tie-up with the city of Seoul to promote both organisations.

Last I recall was that AIG's four year deal cost AIG a cool US$100 million.

Bottom line is can AirAsia afford such a deal?

Last I recall it was just yesterday that I asked "Would You Define AirAsia Debt As A Bubble?" after reading that AirAsia had taken another mega loan worth some USD700 million or some RM2.5 billion.

Last I recall that in AirAsia last reported earnings AirAsia stated it had cash balances of 774 million, total debts of 6.352 billion and a capital commitment of 24.1 billion. Adding that RM2.5 Billion new loans should mean that AirAsia loans would total a mind-boggling 8.872 million.

Well what's wrong with such a godzilla-sized loan? One needs to make money, yes?

And this is the link to AirAsia last reported earnings source of data: Quarterly rpt on consolidated results for the financial period ended 30/9/2008

What's the total quarterly losses? RM465.527 million! Total year-to-date losses totals RM294.834 million.

Truly amazing.

So do you reckon AirAsia should sponsor a Manchester United shirt deal?

Do you think US100million or RM365 million at present time is simply excessive for a company who is clearly not in the best of financial health as AirAsia?

Why can't AirAsia repair its poor balance sheet before pondering on such a massive project? Why can't AirAsia makes its billions of ringgit first and settle at least half of its loans first before thinking of such a massive project?

Do you think I am wrong to be asking such questions?

By the way, on the side note, let me be really frank also. Most knows that I am a Manchester United supporter too and let me say I would dearly, dearly love to have my name printed on Manchester United's shirt.

Yes, I would.

However let me be really frank also. I know I cannot play footie well enough to play for Manchester United and I know I certainly cannot afford such a deal.

Possible To See Palm Oil At A Premium Over Soyoil?

Posted on Dow Jones.

• KUALA LUMPUR (Dow Jones)--The price of soyoil continues to fall, raising the specter of a rare market reversal in which palm olein could sell at a premium to rival soy.
  
  Soyoil's premium over palm olien - more than $200/ton only a few months ago - has slumped to around $35/ton. Analysts now forecast that for the first time in many years soyoil's price could tumble below palm.
  
  "It is possible to see palm oil at a premium over soyoil, but my guess is that this will be brief," said James Fry, Chairman, LMC International, a London-based commodities consultancy.
  
  This is because countries other than India will switch from buying palm oil to soy oil in order to take advantage of its falling price, Fry said.
  
  "It is a phenomenon (reversal of premium) which happens once every few years and is a reflection of the cash market. It is the right time to buy soybean oil and sell palm oil," said a London-based trading executive who didn't want to be named.
  
  The palm-soy price reversal, he said, could occur in the next month or so.
  
  Signs of growing demand for soybean oil include the fact that China has purchased at least 90,000 metric tons of soyoil since Friday; prices were between $685 and $690 a ton, on a cost and freight basis. China's looking for even more cargoes, a senior Jakarta-based trading executive said.
  
  The global economic recession is making buyers, including those in China, especially price-conscious, says Alvin Tai, commodities analyst with OSK Research, a Kuala Lumpur-based brokerage.
  
  Ironically, the weak world economy may also slow overall demand for all varieties of vegetable oils, he notes.
  
  India, the world's No. 2 vegetable oil consumer after China, is proving instrumental in the shifting soy-palm oil dynamic.
  
  Until about two years ago, India imposed a lower import duty on soyoil, 45%, compared with crude palm oil at 80%; this served to boost imports of soyoil. However, in early 2008, India removed import duties on all crude edible oils in order to fight inflation; later in the year, it levied a 20% import duty on soyoil to help domestic farmers during the local soybean harvest. There's still no tariff on crude palm oil.
  
  "We are now seeing the tug-of-war between India and the rest of the world in their vegetable oil imports being played out again, with palm oil being favored by Indian tariffs, rather than soyoil," said Fry.
  
  Slowdown In Palm Oil Production
  
  The narrowing of the soy-palm oil premium mainly reflects the fact that palm oil production growth has been slowing, said Siegfried Falk, co-editor, Oil World, a Hamburg-based journal on oils and fats.
  
  Falk said global production of palm oil increased by a record 4.8 million tons in the marketing year to September 2008 - but during 2008-09 it may increase by only 2.3 million tons. This is because cyclical biological stress in oil palm trees is expected to reduce yields, and in Indonesia the economic slowdown will likely discourage farmers from increasing their acreages.
  
  Malaysia's palm oil stocks fell to a nine-month low of 1.83 million tons in January; a further drawdown is expected this month because heavy rains slowed the harvesting of oil palm fruits.
  
  Analysts point out that palm oil's broad fundamentals have become tighter as South America's soybean harvest approaches. Recent rains have helped revive the fortunes of the Argentina's soybean crop, with last weekend's downpours providing a boost for growers, said Mike Tannura, a Chicago-based agricultural meteorologist.
  
  Tannura forecasts dry weather this week but doesn't expect heat stress and says maturation should begin during the next one to two weeks.
  
  Analysts said another factor which has contributed to soyoil's shrinking premium is its reduced use in making biodiesel.
  
  Until last year, Argentina was exporting large volumes of soyoil-based biodiesel, but changes in U.S. and European tax structures made this less attractive.
  
  Oil World's Falk cautions that soyoil could shortly regain its premium over palm olein. "Soya oil supplies will also be relatively tight this season," he said, adding that Oil World is likely to issue revised estimates for the demand and supply scenario on Friday.
  
  The latest rains in Argentina were helpful but won't fully offset the impact of recent drought conditions. Additionally, the shift in demand from palm oil to soyoil is expected to tighten supplies later this year.
  
  So far, palm oil prices have been generally quite strong, unlike other commodities such as soybeans and corn, because this is a lean-production season for CPO, noted OSK Research's Tai.
  
  He said palm oil prices can't hold on indefinitely on their own. Last week, CPO prices rose to a 40-day high, above MYR2,000/ton and are now hovering around MYR1,900.
  
  "The real test for prices will be in March, when palm oil production starts to rise," Tai said.
  

Hello TMI, What's Up Bro?

The following set of news caught my attention.

'TMI aiming for US$1b rights issue'

• SINGAPORE/KUALA LUMPUR: Malaysian mobile phone company TM International (TMI) (6888) is looking to raise more than US$1 billion (US$1 = RM3.67) in a rights offering in the first half of this year to cut debt, sources with direct knowledge of the deal said yesterday.
  
  Analysts said TMI is facing significant pressure to lower its RM10.45 billion debt, while its overseas businesses are also being hit by the economic slowdown.
  
  "TMI will do a rights and the issue size is over US$1 billion," one of the sources said, declining to be identified because the deal is not public.
  
  JPMorgan and Goldman Sachs, which are advising TMI on the fundraising, declined to comment.
  A TMI spokeswoman said nothing has been finalised yet, but the firm is on track to announce details of its capital raising plan in the first quarter.
  
  In a report yesterday, Citigroup said TMI may need to raise capital because of an expected US$300 million cash shortfall next year and about US$600 million to US$700 million capital spending.
  
  "A rights issue or a debt issue - both of which will prove challenging in our view," said Karen Ang, a Citi analyst.
  
  Malaysia's state investment arm Khazanah Nasional Bhd, which owns 44.51 per cent of TMI, said last month the mobile company will issue right shares or some other equity-linked instrument this quarter to raise funds to repay some of its debt. - Reuters

LOL!

I like how they said "sources with direct knowledge of the deal" and "one of the sources said, declining to be identified because the deal is not public."

Now this is called narrowing down the sources! Inside info eh? Ho ho ho!

Anyway let's not talk about sources this morning.

So TMI wants to do a rights issue worth maybe over US$1billion to lessen the size of its debts.

Now this sounds like the right thing to do but in US dollars now?

And then I saw the other news TM to return RM3.51b to shareholders, pay dividends

• 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.
  
  TM, which will receive the full amount of RM4.03 billion by April 24, said the capital repayment exercise, pending shareholders' approval, would be completed by end of second 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," said group chief executive officer Datuk Zamzamzairani Mohd Isa in Kuala Lumpur yesterday.
  
  Besides the capital repayment of RM3.5 billion, the company also agreed to pay a final dividend of RM382 million.
  
  The company said its capital repayment exercise will not change its dividend policy of returning at least RM700 million to shareholders.
  
  The move, which is expected to be positively received by investors, has also raised some concerns.
  
  An analyst who declined to be named said the company should set aside more cash (from TMI's repayment) for working capital and repay bank loans.
  "It's like giving all your salary to your parents when you have bills still to pay," said the analyst.
  
  TM, which has started rolling out the RM11.4 billion national high-speed broadband (HSBB) project, said it has no funding worries currently and enough cash internally to fund the project.
  
  The company is expected to spend RM1.7 billion on the HSBB project this year, of which half (RM850 million) will be subsidised by the government. Besides the RM1.7 billion commitment, the company will spend RM1.5 billion or less on non-HSBB related capital expenditure.
  
  Nevertheless, group chief financial officer Datuk Bazlan Osman said TM has ample room to gear up without hurting its credit ratings.
  
  "There is a potential of debt head room moving forward. If you look at our balance sheet, we do have quite a fair, if not good, debt-to-capital or debt-to-EBITDA ratio.
  
  "We believe we should be able to maintain our current rating, which is 'A-' by the foreign rating house, and 'AAA' by the local rating house," said Bazlan.
  
  Analysts expect TM shares to rise today, mainly driven by the capital repayment announcement.
  
  "It will generate interest in the stock market ... 98 sen a share capital repayment for a stock trading at around RM3.30, that's a handsome return of nearly 30 per cent already," said an analyst.
  
  The company's fourth quarter net profit grew 5.7 per cent to RM166 million, while revenue grew by 18.7 per cent to RM2.5 billion, helped by growth in the broadband and data businesses.
  
  However, for the full year ended December 31 2008, net profit fell by 73.2 per cent to RM229.3 million, mainly due to exceptional items like foreign exchange losses.
  
  Broadband revenue jumped by more than 25 per cent to RM1.48 billion, while broadband customer base expanded by 26.7 per cent to 1.6 million users in 2008.
  
  Fixed-line voice revenue declined 9.6 per cent to RM4.4 billion, due to fixed to mobile migration.

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?

I am so baffled.

And I so fully agree with the analyst that declined to be named!

• An analyst who declined to be named said the company should set aside more cash (from TMI's repayment) for working capital and repay bank loans. "It's like giving all your salary to your parents when you have bills still to pay," said the analyst.

Update On Swee Joo's Earnings

Blogged previously Shipper Swee Joo Announces Losses

Swee Joo announced its quarterly earnings on Monday and its horror showing continued.

Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Losses increased from 2.406 million the previous quarter to 3.761 million.

Total cash balances is at 21.9 million while total borrowings remained incredibly high at 431 million.

This is what the company had to say in its notes.

• For the current quarter ended 31st December 2008, the Group recorded an increase of 5.9 % on turnover compared to same quarter of previous year (from RM 86.4 million in 1st Quarter 2008 to RM 91.5 million in 1st Quarter 2009). However the result for this quarter was a loss before taxation of RM 3.55 million compared to a profit before taxation of RM 9.45 million in the same quarter of previous year . The decrease on profit before taxation during the current quarter under review compared to same quarter last year was mainly due to the combination of the following factors:
  
  (i) Substantial decrease in load factor as a result of the global economic crisis which impacted the demand for goods and thus reduces the cargo available for shipment;
  (ii) Higher finance expenses due to borrowings to finance the expansion of property, plant and equipment; and
  (iii) Reduction on average freight rate.

Three deadly factors.

Decrease in load factor equals decrease in sales or less demand.

Higher finance expenses equals higher cost.

Reduction on average freight rate equals lower average selling price.

How?

The following chart shows how Swee Joo is doing the past two years.

Current Bear Market Chart

Last night Stocks Soar as Bernanke Calms Jitters

• The Dow Jones Industrial Average gained 236.16, or 3.3 percent, to close at 7,350.94. The S&P 500 rose 4 percent and Nasdaq advanced 3.9 percent.
  
  This came after stocks dropped more than 3 percent on Monday, ending at levels not seen since May 1997.

The following two charts are from dshort.com

This is where we are at the current bear market.

And how does this compare to previous bear markets?

The following chart shows where the current bear market stands.

Would You Define AirAsia Debt As A Bubble?

Published on Business Times, AirAsia secures Barclays funding

I like Star Business version better AirAsia needs RM13bil funding because at least I do get see some numbers.

See at least I get to know that the deal is worth some US700 million (rm2.5 billion). I am puzzled here. With the USD so strong against the ringgit or the ringgit so weak against the USD, why do the deal in USD?

• PETALING JAYA: AirAsia Bhd yesterday sealed a deal in London mandating Barclays Capital to fund the purchase of 15 new A320-200 aircraft worth nearly US$700mil (RM2.5bil) for delivery largely in 2009 despite global banks clamping down on lending.
  
  After yesterday’s deal, AirAsia needs another RM13bil to fund 104 aircraft orders it has placed from 2010 to 2014.
  
  It is learnt that AirAsia is also in talks with BNP Paribas to secure more funding for 14 new A320 aircraft whose deliveries are in 2010.
  
  But beyond that, can it secure all the funding it needs to take delivery of all the orders it has placed?
  
  “We are thrilled to have secured the funding. It is not easy to raise money in (current times). The fact that we are able to do it shows the confidence of the financial community in our business model as it is the worst period for the credit market.
  
  “This financing takes care of our 2009 and part of 2010 deliveries. Getting more guarantees for 2010 will not be an issue as our model is strong and it enables us to raise the money,’’ group chief executive officer Datuk Seri Tony Fernandes said in London yesterday evening.
  
  He added that “this financing (via Barclays Capital) and the one (being negotiatied with BNP Paribas) will take us till end of 2010.”
  
  “If people cannot get credit after that, i.e. in 2011, it would mean that the aviation sector will really be in difficult times.
  
  “If by then we are not able to get credit, then we will have to cancel our aircraft orders but we hope we will not have to get to that stage. I think two years is a long time and we will cross the bridge when we get there.
  
  “In the immediate horizon we have two years worth of financing (to see us through). We dare say we have achieved what not many airlines could have achieved in current times,’’ he said.
  
  The signing ceremony was held in London to formalise the facility and it was attended by Fernandes, Barclays Capital, Airbus (the aircraft manufacturer) and BayernLB.
  
  The funding via Barclays Capital – the investment banking division of Barclays PLC – comes three months after AirAsia secured a facility for US$336mil (RM1.21bil) to fund eight new A320 aircraft purchases.
  
  The lead arrrangers for that earlier deal was BNP Paribas and Natixis Transport Finance.
  
  The signing yesterday also confirmed a StarBiz report on Nov 13 that AirAsia was then close to securing a deal to purchase aircraft worth about US$1bil.
  
  AirAsia has ordered 175 aircraft with an option of 50 more. Thus far, it has taken delivery of 56 aircraft and will take delivery of 14 and 24 aircraft this year and in 2010 respectively.
  
  The budget airline is on an expansion trail even though many carriers globally including full service carriers are grounding aircraft on many of their routes in the current economic slowdown.
  
  “We will continue to grow and launch new routes. Dhaka will be our next new launch route. We are also seeing growth from the corporate sector, a sector which is new to us,” Fernandes said.
  
  Asked why AirAsia had a sale and leaseback arrangement with Doric for its last two aircraft deliveries and whether it would do similar arrangements for the current order of the 15 new Airbus A320-200 aircraft, Fernandes said: “Doric was a unique arrangement where there were clear tax advantages. Our aim is to own aircraft.’’

I am amazed. Bewildered.

Last month I wrote More Capital Borrowing For AirAsia????

Let me repeat the points.

• Take a look at this posting: AirAsia Posted Massive Losses!
  I will just take out some important facts.
  
  1. Cash balances is now only 774 million compared to 1.084 billion in its previous quarterly earnings!
  
  2. In its previous quarter, I thought AirAsia borrowings were extremely high at 5.397 billion. AirAsia total debts is now 6.352 billion!!!!!
  
  Now if you reckon that is bad, what about AirAsia's capital commitments? Have a look at the following screen shot. (source of data: Quarterly rpt on consolidated results for the financial period ended 30/9/2008 )
  
  
  
  AA still has capital commitment totalling a whopping 24.1 billion!
  
  So let's summarise. AA on its last quarterly earnings said that it has Cash balances of 774 million, total debts of 6.352 billion and a capital commitment of 24.1 billion.

So Barclays is giving AirAsia another 2.5 billion in loans!!!

Which means AirAsia loans could total a whopping 8.872 BILLION!

Holy cow!

Would you define this as debt bubble?

How?

Should One Invest In Gold And Jewellery Business?

Posted yesterday on Star Business, Tomei MD: Gold and jewellery business is not all glitter

Some interesting comments from that very frank interview.

• He said the group would weather the current economic crisis and hoped to maintain its turnover and achieve a slight growth in net profit this year.
  
  For the year ended Dec 31, 2007, Tomei made a net profit of RM12.6mil on revenue of RM223.8mil. For the nine months ended Sept 30, it recorded a net profit of RM14.7mil against RM8.7mil in the previous corresponding period.
  
  “We are not so badly affected by the economic crisis possibility due to the festive season. Typically, sales booms during the second half of the year,” Ng said, adding that gold remained a good investment option.
  
  Ng said Malaysia was still cushioned from the global crisis but getting Malaysians to spend was difficult.
  
  “We are also competing for the consumer ringgit with other stores,” he added.
  
  “We had already planned our cash-flow last year when the crisis started in the US so that the group can ride through the crisis,” he said.
  
  Going forward, Tomei will open more retail outlets and improve its information technology system. The group has budgeted RM10mil for capital expenditure this year.
  
  To a question, Ng said: “As a retailer, I cannot be sitting around doing nothing. When there is a crisis, there is an opportunity and the fittest survives.
  
  “It is good to be conservative but if we do not do anything, people might forget us. Either we grow or we stop operation.”
  
  “A lot of people are talking about cutting cost and retrenchment of late. Personally, I think retrenchment is quite demoralising for the staff,” Ng said.
  
  He pointed out that Tomei had embarked on group-wide cost-saving initiatives before the crisis started.
  
  Also top on Ng’s agenda this year is paring down the group’s gearing which is close to one time.
  
  “To some our gearing is relatively low, but to us it’s very high. In fact, it is the highest in our history. We have to do something about it,” he said.

Let's look at some of Tomei's listed competitors.

Poh Kong earnings was pretty impressive back in December, Quarterly rpt on consolidated results for the financial period ended 31/10/2008

Comments made by Poh Kong.

• The Group's revenue for the first quarter under review was higher at RM161.982 million as compared to the revenue in the corresponding quarter last year of RM135.102 million; an increase of RM26.880 million. The increase in revenue was attributed to revenue from the new outlets and existing stores. The Group's profit before tax in the current quarter at RM13.998 million was higher as compared to the profit before tax of RM12.810 million in the corresponding quarter last year; an increase of RM1.188 million. The increase in profit before tax was mainly attributable to an increase in demand of jewellery during the festive season.
  
  For the current financial year, the Group will continue its drive to build market share by enhancing and differentiating its product offerings to its targeted market segments. Towards this purpose, the Group is actively evaluating various initiatives and opportunities to attract new customers through the introduction of new product designs, enhanced customer service and retail branch network expansion.
  
  The Board of Directors expects the performance of the Group for the financial year ending 31 July 2009 to be satisfactory.

Its other competitor Degem announced its earnings last night. Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Degem's earnings were rather shockingly poor.

Net earnings slumped to a mere 255 thousand! Same period last fiscal year Degem posted earnings of 5.696 million!!!

And Degem painted a grim picture in its earnings notes.

• For the financial year ended 31 December 2008, the Group registered a revenue of RM212.9 million compared to RM157.9 million in the preceding year, an increase of 35.0%. Net profit was RM14.2 million as compared to RM17.9 million in the preceding year. The lower profit is due to increase in operating costs and reduction of margin in a weak market.
  
  In the fourth quarter of year 2008, the Group registered a revenue of RM48.4 million and net profit of RM0.14 million versus a revenue of RM53.4 million and net profit of RM5.0 million recorded in the immediate preceding quarter. The decrease in profit is due to the lower gross margin affected by the global economic crisis.
  
  Performance is expected to slow down due to the current global economic downturn. In view of this, the Group has taken measures to mitigate any negative impact with prudent costs control, optimum inventory holding level and is cautiously optimistic that the Group’s results for the coming year is expected to be satisfactory.

Malaysia Economy Prospects

Published on Business Times: Malaysia exports may fall 4pc as electronic demand dips

• MALAYSIA's exports may fall as much as 4 per cent this year as demand for the Southeast Asian nation's electronics slumps amid the global recession, the government said.
  
  Overseas sales of made-in-Malaysia products - mostly electrical components, palm oil and crude oil - may increase 0.5 per cent at best in 2009, Minister of International Trade and Industry Tan Sri Muhyiddin Yassin said. Exports rose 9.6 per cent in 2008.
  
  "The economic situation on the global front is very bad," Muhyiddin said yesterday in Kuala Lumpur. Malaysia's trade performance is "very difficult" to predict this year, he said.
  
  Demand for electrical and electronics goods, which account for about 38 per cent of Malaysia's exports, is drying up as consumers worldwide spend less. The government is due to propose a second stimulus plan to Parliament on March 10 in a bid to avoid entering a recession.
  
  The government has said the second plan will be larger than a package unveiled in November worth RM7 billion, joining countries from China to Thailand in expanding budgets to counter the global economic slowdown.
  
  Muhyiddin said he has asked the Finance Ministry to include in the package grants for small businesses, cuts in sales and corporate taxes, and a reduction in contributions by employers to the country's biggest pension fund.
  
  The government may announce a stimulus of between RM10 billion and RM15 billion that gives tax breaks to small-and medium-sized businesses, RHB Research Institute Sdn Bhd said yesterday. - Bloomberg

Last week Challenging year ahead for Malaysia

• Trade figures showing sharp downtrend
  
  THE country’s latest trade figures announced last week have brought closer to home the reality that the current economic downturn could be more severe than anticipated.
  
  December exports fell 14.9% year-on-year, the biggest slide since September 2001, while imports fell 23.1%, the biggest since August 2001.
  
  This has raised concerns that the decline in global demand in the coming months may be more severe and will weigh on the country’s gross domestic product (GDP) growth.

Let's note some 'expectations', views and opinions made in that article.

• Kenanga Research, in a recent note, has revised its GDP forecast to 0.6% for 2009 from 3.3% while the average GDP growth for 2008 may edge closer to 5%.
• AmResearch estimates GDP growth of 4.9% in 2008 and a contraction of around 0.5% in 2009.
• RAM Holdings Bhd group chief economist Dr Yeah Kim Leng sees a very challenging first half as industries and companies seek to weather the export slump and knock-on effects of cutback in consumer spending and business investment. “It will also be smaller than that of our last recession in 1998 as most large firms are generally healthy going into this economic slowdown,” he told StarBiz. His initial growth forecast of 3.6% this year will be more than halved due to the deepening global downturn. ( forecast of 3.6% halved? LOL! Why can't Star Biz states just the number? :P )
• Malaysian-American Electronics Industry chairman Datuk Wong Siew “If the downturn is stronger than expected, I foresee more retrenchment in the second half of the year as companies have already cut costs and will have to adjust their human resource capacity to meet demand,”
• Retail Group Malaysia managing director Tan Hai Hsin sees bad times for retailers, at least until the second quarter of the year with the end of the annual festivities and lower consumer spending due to more retrenchments and reduced take-home pay.
• This year’s forecast car sales have been revised downward by the Malaysian Automotive Association (MAA) to 480,000 units, a 12.4% drop versus last year.

Now in today's papers , Malaysia economic growth target realistic: PM

• THE Malaysian economy can still grow this year and the government's expectation is realistic, says Prime Minister Datuk Seri Abdullah Ahmad Badawi.
  
  He did not say what would be the revised economic expansion target that would be announced on March 10.
  
  "We are still realistic (about positive economic growth) depending on how we apply ourselves to this task," Abdullah told industry captains at a dialogue session organised by the KL Business Club in Kuala Lumpur yesterday.
  
  The government had targeted to grow the economy by 3.5 per cent this year. However, Deputy Prime Minister Datuk Seri Najib Razak is set to announce a revised figure on March 10, the same day he will announce the second stimulus package.
  
  Abdullah was also asked about the trend of protectionism where countries impose measures to protect local businesses, often at the expense of other nations.
  
  "This is a symptom of failure of World Trade Organisation (WTO) talks. That is why countries want to go on their own," he said.
  
  As countries cannot rely on the WTO, smaller groups of nations like Asean, for example, will be more important. Groupings like Asean will then engage with similar groupings like the European Union to boost trade.

How?

Southeast Asia Could Be Sinking To A Potentially Deep Recession!

Something not to discount.

From Dow Jones.

• A sharp contraction in Thailand's quarterly economic growth confirmed fears that much of Southeast Asia - until recently a relative bright spot in the world economy - is sinking into a potentially deep recession.
  
  Growth was already nose-diving in Singapore, the region's financial capital, and Malaysia is expected to see a sharp deceleration in economic activity when it reports its most recent quarterly data this coming Friday. Layoffs are piling up at textile factories and semiconductor plants, and economists warn the region's previously-announced stimulus packages won't be enough to offset spiraling declines in exports to the U.S. and elsewhere.
  
  Thailand's data underscored the worst fears. The country's economy - Southeast Asia's second-biggest - contracted 4.3% in the fourth quarter compared to the same period a year earlier, considerably worse than analysts expected. The government slashed its forecast for 2009 growth to between 0% and -1.0%, from earlier projections of 3.0% to 4.0%, meaning Thailand will almost certainly endure a recession this year. The Thai economy "will be likely to get worse" before it gets better as exports stay weak, says Sriyan Pietersz, an analyst at JPMorgan Chase & Co. (JPM) in Bangkok.
  
  Southeast Asia had until recently looked somewhat stronger than the rest of Asia and many other emerging markets. Its governments built up huge reserves in the wake of the 1997-98 Asian financial crisis. Many local companies and consumers, burned by sharp currency devaluations in the late 1990s, avoided the excessive foreign borrowing and other risks that are now plaguing Eastern Europe and other regions.
  
  Two of the region's economies - Indonesia and the Philippines - are still performing better than most emerging nations, largely because they have large consumer markets that are offsetting declines in export revenues. Both countries posted growth in excess of 4% in the fourth quarter.
  
  But Indonesia faces further fallout from swooning prices for copper, palm oil and other key commodity exports, and the Philippines is counting on remittances from foreign-based workers to keep domestic spending high, even though a weaker global economy could trim those funds.
  
  The area's other big players are looking more and more like Taiwan and Korea, whose economies have already been sent into tailspins by their excessive reliance on exports.
  
  In Malaysia, a major hub of electronics manufacturing, growth was at 6.7% as recently as the second quarter of 2008. Now, analysts are forecasting only slight growth for the fourth quarter of 2008 and an outright contraction of -0.5% or worse for 2009.
  
  Auto sales fell 17.5% in January from a year earlier. In Singapore, the government said last week that non-oil exports fell 35% on-year to $6.6 billion, its worst performance since records began thirty years ago.
  
  The city-state is now bracing for an economic contraction of between 2% and 5% in 2009, according to the government. The economy has only done this badly once before, in 2001, when the U.S. tech slump led to a 2.4% fall in Singapore's gross domestic product. "There is no escape. We're going to go through a major downturn," says Manu Bhaskaran, an adjunct fellow at Singapore's Institute of Policy Studies.
  
  At Singapore's huge port, one of the world's largest, hundreds of ships can be seen from downtown Singapore, idling just offshore with no cargo to transport. Guy Lamb, managing director of Singapore-based Island Shipbrokers, which charters oil tankers, says the company has maintained its volumes but rates have fallen 75% since a peak at the beginning of 2008.
  
  Property prices, fueled in recent years by foreign demand, are also in free-fall, A report by Credit Suisse Group (CS) in January found that 200,000 foreigners could leave Singapore over the next two years as they lose their jobs in services and manufacturing. Property prices, already down 8% from their peak in 2008, could fall by as much as 40% this year, Credit Suisse warned.
  
  Singapore-based Chartered Semiconductor Manufacturing (C27.SG), one of the world's largest chip makers, said last month that it was firing 600 workers amid forecasts of its biggest ever loss in the first quarter. As job losses increase, the government announced a $13.6 billion stimulus package in January, which cut corporate taxes, subsidized wages and guaranteed bank loans.
  
  Other Southeast Asian nations have announced their own stimulus plans. Still, without a turnaround in global demand to restore export growth, such measures are likely to have only limited impact, economists say.
  
  Malaysia is now planning a second stimulus program that may be more than four times as large as its initial effort, according to media reports, and economists believe other Southeast Asian nations will follow suit.
  
  In Thailand, some analysts noted that the recent contraction reflected one-time losses from November and December, when anti-government protesters shut down the country's main airport and blocked tourist arrivals. But Pietersz at JPMorgan argued the key culprit was a nearly 10% drop in exports in the quarter. That problem accelerated in January, when exports tumbled 26.5% from a year earlier. Thai officials have said manufacturers could cut as many as 1,000,000 jobs this year as exports fade.
  
  "There's no sign of deceleration" in the export decline in Thailand, or anywhere else in Southeast Asia, Pietersz said.
  

Crisis Rant Of The Year II - Rick's Revolution

Part II to Crisis Rant Of The Year - Rick Santelli

Massive Warning On East Europe Yet Again

Blogged earlier this month, The Potential Global Meltdown (Other postings : Russia Crisis Worsens As Ruble Tumbles , Russia Crisis Worsens , Another Russian Crisis? and Europe Is In Its Deepest Recession!

On this week's John Mauldin's newsletter, While Rome Burns, John highlights the risk again in Europe.

• The Risk in Europe
  
  I mentioned last week that European banks are at significant risk. I want to follow up on that point, as it is very important. Eastern Europe has borrowed an estimated $1.7 trillion, primarily from Western European banks. And much of Eastern Europe is already in a deep recession bordering on depression. A great deal of that $1.7 trillion is at risk, especially the portion that is in Swiss francs. It is a story that could easily be as big as the US subprime problem.
  
  In Poland, as an example, 60% of mortgages are in Swiss francs. When times are good and currencies are stable, it is nice to have a low-interest Swiss mortgage. And as a requirement for joining the euro currency union, Poland has been required to keep its currency stable against the euro. This gave borrowers comfort that they could borrow at low interest in francs or euros, rather than at much higher local rates.
  
  But in an echo of teaser-rate subprimes here in the US, there is a problem. Along came the synchronized global recession and large Polish current-account trade deficits, which were three times those of the US in terms of GDP, just to give us some perspective. Of course, if you are not a reserve currency this is going to bring some pressure to bear. And it did. The Polish zloty has basically dropped in half compared to the Swiss franc. That means if you are a mortgage holder, your house payment just doubled. That same story is repeated all over the Baltics and Eastern Europe.
  
  Austrian banks have lent $289 billion (230 billion euros) to Eastern Europe. That is 70% of Austrian GDP. Much of it is in Swiss francs they borrowed from Swiss banks. Even a 10% impairment (highly optimistic) would bankrupt the Austrian financial system, says the Austrian finance minister, Joseph Proll. In the US we speak of banks that are too big to be allowed to fail. But the reality is that we could nationalize them if we needed to do so. (And for the record, I favor nationalization and swift privatization. We cannot afford a repeat of Japan's zombie banks.)
  
  The problem is that in Europe there are many banks that are simply too big to save. The size of the banks in terms of the GDP of the country in which they are domiciled is all out of proportion. For my American readers, it would be as if the bank bailout package were in excess of $14 trillion (give or take a few trillion). In essence, there are small countries which have very large banks (relatively speaking) that have gone outside their own borders to make loans and have done so at levels of leverage which are far in excess of the most leveraged US banks. The ability of the "host" countries to nationalize their banks is simply not there. They are going to have to have help from larger countries. But as we will see below, that help is problematical.
  
  Western European banks have been very aggressive in lending to emerging market countries worldwide. Almost 75% of an estimated $4.9 trillion of loans outstanding are to countries that are in deep recessions. Plus, according to the IMF, they are 50% more leveraged than US banks.
  
  Today the euro rallied back to $1.26 based upon statements from German authorities that were interpreted as a potential willingness to help out non-German (in particular, Austrian) banks.
  
  However, this more sobering note from Strategic Energy was sent to me by a reader. It nicely sums up my concerns:
  
  "It is East Europe that is blowing up right now. Erik Berglof, EBRD's chief economist, told me the region may need €400bn in help to cover loans and prop up the credit system. Europe's governments are making matters worse. Some are pressuring their banks to pull back, undercutting subsidiaries in East Europe. Athens has ordered Greek banks to pull out of the Balkans.
  
  "The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan -- and Turkey next -- and is fast exhausting its own $200bn (€155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights. Its $16bn rescue of Ukraine has unravelled. The country -- facing a 12% contraction in GDP after the collapse of steel prices -- is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5% in the fourth quarter. Protesters have smashed the treasury and stormed parliament.
  
  "'This is much worse than the East Asia crisis in the 1990s,' said Lars Christensen, at Danske Bank. 'There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU.' Europe is already in deeper trouble than the ECB or EU leaders ever expected. Germany contracted at an annual rate of 8.4% in the fourth quarter. If Deutsche Bank is correct, the economy will have shrunk by nearly 9% before the end of this year. This is the sort of level that stokes popular revolt.
  
  "The implications are obvious. Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU "union bonds" should the debt markets take fright at the rocketing trajectory of Italy's public debt (hitting 112pc of GDP next year, just revised up from 101pc -- big change), or rescue Austria from its Habsburg adventurism. So we watch and wait as the lethal brush fires move closer. If one spark jumps across the eurozone line, we will have global systemic crisis within days. Are the firemen ready?"

Do subscribe to read rest of John's newsletter here: While Rome Burns

Halim Mazmin: Fair Or Sweet Deal?

Blogged the other day, Halim Mazmin To Be Taken Private

Jasonred79 said...

• Well... overall, I think that this is a win-win situation for both sides. Current shareholders get a 50% upside, and the major shareholder gets some profits as he disposes of those ships and closes down the company.
  
  Of course, the MOST fair thing to do would be to just wind down the company immediately, which could see shareholders getting more than that.
  
  Possibly.
  
  I need to look at the TOTAL assets and liabilities, as well as their makeup, to make my decision here.
  
  Cash - liabilities = 150 million.
  At 60 sen per share, the are valuing the company at... RM170-190 million?
  
  So, overall, probably a fair deal, IMHO.
  I wouldn't say it is extremely generous to minority shareholders, but nor is it supremely unfair either.

My reply:

• Jason,
  
  I wasn't talking about fair or not fair.
  
  I was talking about a sweet deal for the boss.
  
  To buy the rest of the shares the boss doesn't own, it would cost him just 70 million.
  
  And what does he get for that 70 million?
  
  Well he gets to own the whole of a company called Halim Mazmin who has some "RM263.43 million in cash and liabilities of RM111.47 million" in its balance sheet.
  
  Sweet?

Jasonred79 said...

• Hmmm... let's see. He pays RM70 million... and in return gets the remaining 37%-40% of Halim...
  So he gets around 40% of 263m cash and 111m liabilities.
  
  Doesn't sound that sweet to me, actually.
  Sounds like he is paying Rm70 million to get something worth Rm60 million.
  
  Of course, their are probably a lot of non-cash assets there which will make the deal look more attractive for him...

On today's Star Business Valued less than cash, CS Tan gave the following opinion.

• AS stock markets continue to plummet, share prices have reached levels that investors had not expected.
  
  The unexpected low prices have ensured the trend of taking companies private continues.
  
  The latest of these involved Halim Mazmin Bhd last week when it was announced major shareholders Tan Sri Halim Mohammad and Puan Sri Mazmin Noordin propose to privatise the company.
  
  As shipping group Halim Mazmin sailed into unchartered waters of deep value, taking it private brings exceptional value for Halim, who is executive chairman, and his wife Mazmin, an executive director.
  
  They propose an offer of 60 sen cash each to be paid to minority shareholders by Halim Mazmin following which, all the shares of minority shareholders would be cancelled.
  
  That would involve payment of about RM74mil cash to minority shareholders as they collectively own 122.9 million shares.
  
  That’s well within the means of Halim Mazmin. The company had cash of RM263mil and borrowings of RM107mil, which translated into net cash of RM156mil at the end of last year.
  
  Hence, after paying off minority shareholders, the company would still have RM82mil cash.
  
  Besides that cash, Halim Mazmin had about RM106mil in fixed assets, principally a few cargo ships. That’s a rich company to wholly own.
  
  There’s this huge embedded value because Halim Mazmin traded at just around 40 sen before the offer, and that gave it a total market value of just RM125mil.
  
  On that market value, the stake of Halim and Mazmin in the company was worth RM76mil. That is less than the cash in the company (RM82mil) after minority shareholders are paid off.
  
  In owning the company privately, they would have all the fixed assets, namely the vessels, that had a book value of RM106mil.
  
  As for minority shareholders, the offer enables them to exit at 60 sen a share. If they reject the offer, the price would probably drop back to 40 sen.
  
  Of course, they would prefer a liquidation of the company in which case, they may get the net tangible asset value of 83 sen, but that’s not on the table. Further, it’s not possible to sell vessels at this time at book value in view of the depressed market.
  
  It’s up to minority shareholders. For the exercise to proceed, it requires the approval of at least 75% of the shareholders, present and voting, at an EGM. Halim and Mazmin would abstain from voting at the EGM, the company said. It is believed they can’t vote, being the offerors.

Fair or sweet?

In my flawed opinion, I reckon that there's a lesson here.

The cash per share yardstick.

I have seen far too many intelligent people making a massively wrong assumption with the yardstick, which they assume that they can FULL fair value based on the cash per yard stick.

Why?

The board owners are in full control of whatever cash in the listed entity. And if the board owners want to privatise the company, there is ALWAYS a possibility that the owners would make a deal that's in their favour. Which means one would most likely NOT see an offer that matches closes to what the cash per share yardstick indicates.

Think about it.

A privatisation or even a buyout happens when there is money to be made by the offer-er. If there is no money to be made, why bother? And if they are in the business of wanting to make money, what about the other shareholders? Do you reckon they would get a fair or a sweet deal?

Final words.

Cash per share?

For me, it's a good indicator to know that a company has more cash than borrowings. It's just a simple healthy indicator. That's all. To assume that I can get full value for the cash is simply wishful thinking. Yup, it's sad but it's true.

Comments Made By Lee Kuan Yew Last Year On Singapore Sovereign Fund

The following clip was posted last April 2008. It features Lee Kuan Yew who talks about Singapore sovereign wealth fund.

Should they have been more conservative?

LKY: "The franchise of the banks, the expertise that they have, under proper leadership, they will be able to recover and rise again ... Will there be another Swiss bank like UBS for wealth management? I doubt it, we doubt it, that is why we invested in it." Citigroup, he added, had an enormous spread worldwide as a retail bank".

LOL!

Another Swiss bank like UBS?

Will there be a UBS? And what about Citigroup?

Everyone wanted to be a 'Warren Buffett'.

*whistle*

Hitler Slams Temasek and Ho Ching

Hitler has landed in Singapore. ( You probably have seen many, many versions of this clip before. )

Mouse over the bottom right and click on the CC (close caption) to get the English subtitles.

Credit Crunch Rant Of The Year - Al Murray

Published on UK Sun: Why bankers leave a bitter taste

By Al Murray

• FIRST thing’s first, I am not one to shy away from the big stories.
  It’s time for some Credit Crunch Blah Blah, and what a surprise, the banks have screwed something up! Who’d have thought it, eh?
  
  The people who make sure your cashpoint card doesn’t work when you’re abroad, who write you a £20 letter about your £10 overdraft, have cocked it all up.
  
  No one knows how or why or when — least of all them — but somehow they’ve lost more money than anyone has lost before.
  
  Thing is, when you take a step back and think about it, you realise just whose money it is.
  
  Yes. IT’S OUR MONEY! They lost our money. Whose money? OUR MONEY!
  
  So what do they do about it? Long before they apologise, long before they put their own money on a horse and hope it comes in (which is what anyone normal would do, let’s face it) they go to Gordon Brown, cap in hand and ask him to help them out.
  
  They say: “We’ve lost a load of money, we don’t know where the money is, help us, please!” (Whose money? OUR MONEY!) And then Gordon Brown says: “Aye, laddies, I’ll help ya oot, here’s a cheque for 70 ballion poonds, that should cover it.” That’s nice and dandy of him, but whose money is he giving them? That’s right, OUR MONEY! So he’s given them OUR MONEY to replace OUR MONEY that they’ve lost.
  
  But the trouble is he’s not got enough money because it’s been spent on Health and Safety and second houses for MPs, and so he’s had to borrow some more money.
  
  So he goes to another bank and borrows a load more money, and whose money is it that he borrows? — OUR MONEY!
  
  So he’s borrowing OUR MONEY to replace OUR MONEY, that he’s already spent, to replace OUR MONEY that the banks lost.
  
  And how’s he going to pay off that loan? By raising taxes — which come out of OUR MONEY!
  
  So he’s going to insist we cough up more of OUR MONEY to repay the loan of OUR MONEY needed to replace OUR MONEY the banks need to replace OUR MONEY that they lost. In other words, we pay four times over. Thanks for that.
  
  But here’s the part that really gets my goat. I don’t have a goat, but feel like I should buy one just so it can get got. The banks’ one job is to look after our money — that’s it, it’s not like they’ve got anything else to do, is it? That’s what they do, look after money.
  
  Stick it in a safe, sit a bloke next to the safe, fill up the cashpoint machine as and when. It can’t be hard, can it?
  
  If I can figure it out, why does a bloke who gets a million Pound bonus at Christmas not realise any of this?
  
  Banks look after money, full stop. A bank that doesn’t have any money in it is just a building, the same way a pint without any beer in it is just a glass.
  
  What’s worse is we don’t hear the bloody end of it, it’s all over the telly and papers. Ironically it’s the financial experts who are raking it in.
  
  It’s lucky the media doesn’t charge us a tenner every time they tell us the country’s gone overdrawn like the banks do, otherwise we’d have even less money.
  
  I might start it. You’ve got no money mate, there you go, I’ve just provided you with a service.

Pricelss mate!

Collapse Of The Financial System

George Soros:

• 'We witnessed the collapse of the financial system. It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom.'

Paul Volker:

• "I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world,"

Source: http://www.businesstimes.com.sg/sub/latest/story/0,4574,320212,00.html?

See also? http://uk.reuters.com/article/businessNews/idUKTRE51K0AV20090221

Crisis Rant Of The Year - Rick Santelli

If you had missed Rick Santelli's rant on CNBC the other day, here he is again.

IOI Earnings Results And Flashback On What Has IOI Done The Past One Year

Posted last night Comments And Views On Ringgit Fall To Two Year Low

How would a low ringgit impact Malaysian companies? Who would be impacted?

IOI Corporation came up instantly.

There were issues about its forex losses before and I knew that IOI has massive borrowings denominated in USD.

So I thought it would be a good simple exercise to have a brief look at some older earnings report for IOI.

I start with looking at what was on IOI's books back exactly a year ago, Feb 2008, Quarterly rpt on consolidated results for the financial period ended 31/12/2007

Under the long term borrowings, USD denominated loans totals 656.488 million and IOI values these borrowings at 2.170 billion. This should works out to an exchange rate of around 3.31.

3 months later, in May 2008, IOI announced the following Quarterly rpt on consolidated results for the financial period ended 31/3/2008


USD denominated loans now totals 1.112 BILLION and IOI values these borrowings at 3.547 BILLION. My calculator shows that this works to an exchange rate of 3.19.

Now I know this is a LOT but I do agree that it's hard to criticise IOI Corporation for what it did here.

Crude palm oil was booming and IOI Corporation were making totally insane profits. And with IOI able to obtain borrowing rates at 3.19, surely there were some justifications to borrow more in USD, yes?

Think about it.

The money in USD were getting cheaper and cheaper and with the US housing crisis the smartie pants reasoning was that the USD were going to plummet into the deep blue sea.

And what's better way to ride the USD weakness by borrowing more in that currency?

Was that not a justifiable reasoning?

Maybe.

This is what the company said back in May 2008 in its earnings notes.

• Group revenue for YTD Q3 FY2008 is 58% higher than last year’s corresponding period. All major business segments reported increase in revenue as a result of higher palm oil prices, increased volume for resource-based manufacturing, as well as higher sales of properties.
  
  The Group's pre-tax profit for YTD Q3 FY2008 is RM2.24 billion , an increase of 61% as compared to the RM1.39 billion reported for YTD Q3 FY2007, contributed by better performances from all major business segments.
  
  Plantation earnings of RM1,302.4 million for YTD Q3 FY2008 is about twice the earnings generated for YTD Q3 FY2007, boosted by significantly higher CPO prices. Average CPO prices realised for YTD Q3 FY2008 is RM2,705 per MT as compared to RM1,649 per MT for the same period last year. The resource-based manufacturing segment continued to perform well for YTD Q3 FY2008 with an increase in operating profit by 47% at RM457.4 million with the inclusion of profit from Pan Century Group as well as volume and margin growth from all three sub-segments.
  
  The property segment’s operating profit is about previous year’s level at RM310.6 million. Overall, the Group achieved net earnings of RM1.63 billion for YTD Q3 FY2008, a 59% increase over the RM1.03 billion recorded for YTD Q3 FY2007. The percentage increase of the Group’s net earnings level is slightly lower than the percentage increase of the Group’s pre-tax level due mainly to higher tax expense as a result of the expiry of certain tax incentives granted by the tax authority at the end of FY2007.
  
  In the opinion of the Directors, the results for the financial period under review have not been affected by any transaction or event of a material or unusual nature which may have arisen between 31 March 2008 and the date of this announcement.

Now I know very well that the above statement left out one important note. Quarterly earnings were boosted by gains in forex gains of 226 million (hey IOI borrowings in USD in Feb 2008 were valued at 3.31 and 3 months later the rates fell to 3.19.). Do look under segmental reporting and you can see it. ( link: Quarterly rpt on consolidated results for the financial period ended 31/3/2008 )

Three months later, Quarterly rpt on consolidated results for the financial period ended 30/6/2008.

Despite the now falling crude palm oil prices, the following was a sample news clip trumpeting IOI fiscal year success, IOI shines with RM2.23bil profit. Do note that the non-existent mention of the forex gains, one have to read the finer details in the earnings report to see it.

Huge success for IOI.

Everything it had was gold.

Rm2.23 billion in net profit. Record earnings. They borrowed more and due to the weakening USD dollar, what they borrowed is now less.

Success.

Time to venture more.

Then came August 2008. Article entitled: IOI Corp wins bid for Menara Citibank?

• We wish to inform that IOI Corporation Berhad has succeeded in its bid for the purchase of Menara Citibank and has reached an agreement with Inverfin Sdn Bhd and its shareholders to enter into a definitive agreement in due course.

A RM586 million deal of buy an office building!

I was shocked.

But like many others, who are we to question when IOI Corp had the winning hand? Everything they touched were turning into gold literally.

Then came October. It was a hell of a month. The US housing crisis had turned into a global crisis. And worse still the street got wind of IOI plunging on forex losses! IOI share price then plunges on these forex losses newss

And the most incredible article then was Citigroup makes buy call on IOI Corp

• Citigroup has fairly valued IOI Corp’s share price at RM7.46 on the basis that it would trade at 22.7 times of its price to earnings ratio from its current financial year forecast profits of RM2.1 billion.

That was a bold valuation in my flawed opinion. It was based on a forecast of a net profit of rm2.1 billion. I found it absurd. Crude palm oil prices were falling off the cliff. Was it right to project such a high profit forecast?

So how much was the forex losses? Forex announcement.pdf

The sum of all fears

• IOI Corp had closed at RM3.02 on Oct 23. Over the next two trading days, it was in a downhill roll that pushed the share price to a 52-week intraday low of RM2.08. That’s a 31% plunge in a period when the KL Composite Index was never more than 10% down.
  
  The counter has clawed its way back to RM2.74 last Thursday and it looks like the painful streak has ended, thanks partly to the company’s explanation on its forward foreign currency contracts. Nevertheless, the episode has raised some questions. (do read the article in full)

Then came November. Everything was falling apart fast.

Quarterly rpt on consolidated results for the financial period ended 30/9/2008

Snippet from a Dow Jones news clip.

• IOI Corp 1Q Net Profit Down 36%; Expects Weaker Fiscal 2009
  
  KUALA LUMPUR (Dow Jones)--IOI Corp. (1961.KU) said Friday first-quarter net profit fell 35.7% due to foreign exchange losses and poorer results from its property unit, and expects weaker results for the 2009 fiscal year.
  
  Malaysia's second-largest plantation group by acreage said in a filing to the stock exchange that net profit for the quarter to Sept. 30 fell to MYR290.5 million from MYR451.5 million a year earlier.
  
  The company said it had a foreign exchange loss of MYR100.6 million from its resource-based manufacturing business segment and from the partial conversion of proceeds from U.S. dollar-denominated borrowings.

I was thinking out loud fast. During the good times, it was just in May's quarterly earnings, it had forex gains of over 226 million in its book. But it kept quiet on how this forex gains did boost its earnings. Now they have a forex losses, they start using it as an excuse for their poor earnings.

And later that month, came another shocker.

IOI CORPORATION BERHAD ("the Company") - Proposed Acquisition of the entire equity interest in Inverfin Sdn Bhd ("Proposed Acquisition")

IOI Corp’s RM73m deposit for Menara Citibank forfeited

Shocking! Everyone was simply shocked!

In the following article on bizweek,IOI Corp should better explain why it’s losing its RM73mil deposit, the following issues were raised!

• So, why is that changed in three months? Was there an exodus of tenants from Menara Citibank? Did the rental income drop? Was there a collapse in office space prices? Why is the acquisition not strategic anymore?
  
  Why could not IOI Corp have foreseen these problems earlier? After all, the subprime crisis was already upon us. Why did it pay the deposit which it now has most likely lost if it had felt there could be problems?
  
  IOI Corp’s explanation is poor at best and we really don’t know what it is at worst. Investors certainly expect a lot more from this company, once the darling of the stock market. And so should regulators. Minority shareholders certainly have a right to be seriously upset.
  
  Coming so soon after its recent debacle where it reported foreign exchange losses of over RM312mil for the quarter to end-September, the latest episode will put another dent in its reputation, largely unsullied until the forex episode.

It was shambolic in my flawed opinion. As mentioned the global crisis was a known issue then. Why did IOI still insist on a deal worth 586 million to buy Menara Citibank? Did the success of the insane profits got to their heads? Did it?

And sad to say this is so embarrassing for IOI. Losing 73 million makes them such a 'water fish'!

A day after IOI lost its 73 million, Flitch announces that it is lowering IOI credit rating and cites higher risk. Few days later Moody's cuts IOI Corp's credit rating

• IOI Corp , Malaysia's second-largest palm oil producer, had its credit rating cut by Moody's Investors Services, which said the company's share buyback and "hefty" capital distributions have increased its debt.

Ouch!

Yesterday IOI Corp announced its earnings.

Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Net earnings is now only 168 million. Last quarter it had 290.50 million. A year ago same period, it had 581 million in profits! (Citigroup's profit forecast of rm2.1 billion for IOI is now really looking absurd now!)

Ouch!

With the recent strength of the USD, coupled with the weakness in the Malaysian Ringgit ( Comments And Views On Ringgit Fall To Two Year Low ) , I was naturally not shocked to see that IOI is saying that its Q2 net hit by forex losses, IOI Q2 net profit falls

• IOI Corp Bhd’s second-quarter ended Dec 31 net profit plunged 71% to RM168.6mil from RM581.2mil in the previous corresponding period on falling palm oil prices, huge foreign exchange losses and a weak property market.
  
  The drop in profit also calls for a lower dividend for shareholders. For the period under review, IOI Corp proposes to pay out 3 sen per share compared with 7 sen per share paid a year earlier.

The news of the lower dividend is not going to be well received! (edit: On Star's Bizweek Is dividend under threat? - time to re-evaluate one's opinion on the safety of investing for a stock's dividends. Reason is simple. If earnings falls drastically, companies COULD cut their dividends as seen in IOI's example here!!! )

How?

Here I sit wondering again the same issue as I had written earlier.

• I was thinking out loud fast. During the good times, it was just in May's quarterly earnings, it had forex gains of over 226 million in its book. But it kept quiet on how this forex gains did boost its earnings. Now they have a forex losses, they start using it as an excuse for their poor earnings.

Same issue yes? Last time they mention nothing when they book some 226 million profits from forex gains. Now they have this forex losses, they make such a big fuss over them.

Am I wrong to point this issue out?

The following is a screen shot of their total borrowings from their earnings report last night.

Under the long term borrowings, USD denominated loans totals 1.100 Billion and IOI values these borrowings at 3.816 billion. This should works out to an exchange rate of around 3.43.

Yesterday at 5pm, the ringgit was traded at 3.6770/6790 against the dollar.

Let's reflect back on the earlier point made on IOI taking more USD denominated loans!

The assumed collapse in USD has not happened!

And IOI borrowed more!

And now what they had borrowed equates to them owing more money!!!!

And the longer the ringgit remains weaker against the USD, the greater the pain for IOI Corp!

Here's the USD vs MYR one year chart again. (see Charts Of USD Vs Other Currencies On a One Year Time Frame )


Does the ringgit looks like it's going to strengthen against USD anytime soon?

Ouch!

And double Ouch!

How?

In my flawed opinion, it looked like IOI Corp made several bad moves during their record breaking year last year.

They assumed the USD was going to tank, so they borrowed more in USD. ( Yes, one day the USD could tank but hey don't ask me, I do not know when!)

They got itchy and went into an agreement to buy an office tower. They lost 73 million!

They lost huge money with their forex hedging (sorry to complicated for me to comment on what exactly they did!)

Ouch! Ouch! Ouch!

I do not know but on hindsight now, do you think that they should have been more prudent during their great times last year?

Here is the one year chart for IOI Corp. Ouch!

Comments And Views On Ringgit Fall To Two Year Low

Posted on Dow Jones News wire.

• Malaysian Ringgit Targets Lows, Ctrl Bk Won't Stir
  
  KUALA LUMPUR (Dow Jones)--The Malaysian ringgit, one of Asia's worst-performing currencies so far this year, slid Friday to a two-year low. It may soon drop to levels unseen since the regional crisis a decade ago, but the central bank is unlikely to try to reverse the decline.
  
  The dollar was trading at MYR3.6725 at 0600 GMT after hitting MYR.3.6785, up from Thursday's close of MYR3.6580 to the highest since November 2006.
  
  "People are nervous and may continue to sell the ringgit because of flight-to-safety flows," said David Cohen at Action Economics in Singapore.
  
  The ringgit is down 5% year-to-date as Malaysia's trade-reliant economy weakens further on the global slump. It has fallen 15% from its record high of April 2008, when the dollar traded down to MYR3.1310.
  
  Many forecasters expect the U.S. currency to be trading in a higher MYR3.7000-MYR3.8000 range by midyear. Some traders say the dollar might break above MYR3.8000 - the level to which Malaysia pegged the ringgit for almost seven years from September 1998 - and even test MYR4.000.
  
  Bank Negara Malaysia isn't likely to intervene heavily to defend the ringgit, analysts say, because inflation has been slowing since August, the currency's decline is in line with those of its Asian peers and Malaysia's exporters could use the boost of a weaker currency.
  
  As long as other Asian currencies are falling, Bank Negara will likely maintain a "hands-off approach" to the ringgit, Cohen said. The ringgit's fall is significantly less than the 16% year-to-date drop by the South Korean won, but Cohen noted it's not "out of sync" with other competitors, such as the Indonesian rupiah, the Singapore dollar and the Thai baht.
  
  "Like other central banks, Bank Negara is worried about economic growth," he said. "It has front-loaded its rate cuts and has allowed the exchange rate to weaken to recent lows because inflation has become less of a concern."
  
  Malaysia's exports, which amounted to a hefty 124% of the country's gross domestic product last year, fell 14.9% in December from a year earlier, the steepest drop in seven years. Exports are expected to keep falling at least through the first half of the year.
  
  Some economists, however, like Wan Suhaimie at Kenanga Investment Bank, expect a more active central bank to make a "reasonable effort to intervene and limit the ringgit downside within a reasonable range." He tips the ringgit trading mostly steady, with the dollar falling back by year end to MYR3.5200 if Malaysia economic growth starts to pick up in the fourth quarter.
  
  Despite its slide against the dollar, the ringgit isn't doing badly on a global scale. On a nominal trade-weighted basis, it's down just 1.4% this year, said Citigroup economist Kit Wei Zheng, who tips the dollar rising to a MYR3.700-MYR3.8000 range in the second quarter.
  
  One factor that could pummel the ringgit would be a downgrade of Malaysia's sovereign debt, Kit said.
  
  Fitch Ratings cut the outlook on Malaysia's A-plus local-currency rating to negative this month and warned that the government was over-dependent on oil revenues, which account for 40% of budget revenue.
  
  Charts also don't augur well for the ringgit. Dow Jones technical analysis suggests the dollar will keep rising against the ringgit in coming weeks.
  
  Tuesday's break by the dollar above critical resistance at the Dec. 4 high of MYR3.6415 has opened the way for a test of the June-to-October 2006 highs at MYR3.6950. A break there would target MYR3.7800, the November 2005-January 2006 highs, and then the key MYR3.8000 line. A rise above that level would expose the dollar's upside to MYR4.0000 and then its the July 1998 peak of MYR4.3260.
  
  A key factor for the ringgit will be the performance of the Singapore dollar.
  
  If the U.S. currency, trading Friday S$1.5376, rises to S$1.7000, it could also spurt against the ringgit, hitting MYR4.0000, said a trader at a foreign bank in Kuala Lumpur. "That possibility is very real given the deteriorating domestic and external conditions."
  
  By contrast, Citigroup's Kit expects the U.S. dollar to rise only to S$1.6000 at most, which would translate to a move to around MYR3.8000. Kit said the Monetary Authority of Singapore, which targets the city-state's dollar on a trade-weighted basis, won't let it weaken significantly more than that unless the euro "collapses."
  
  A positive for the ringgit is Malaysia's recent MYR40 billion foreign-exchange swap with China, which provides some assurance in terms of liquidity as Malaysia's foreign reserves have fallen, said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank in Kuala Lumpur. Reserves including forwards have fallen to $91 billion as of the end of January from $145 billion in April.
  
  Ramanathan forecasts a tight range for the ringgit, saying most of the bad ringgit news has been priced in by the recent drop. He forecasts the dollar rising to MYR3.7000 in the third quarter before pulling back to end the year at MYR3.6800 as the economy starts to recover.
  

Singapore GIC Investment Mistake In Citigroup And UBS

I was searching the net for comments written on Singapore's GIC losses in Citigroup and UBS.

I came upon the following article posted, “Substantial Long-term Returns” From Bank Investments? Fat Hope, GIC

Give it a read, it's rather interesting. :D

Anyway I am thinking out loud here. My thinking could be obviously flawed but I cannot stop wondering about Singapore GIC. What are they thinking? Obviously Citigroup and UBS were terrible mistakes and they paid some terribly high prices for their mistakes. So why couldn't they just admit they made a terrible mistake and realise their losses? Why can't they cut loss? Why insist on taking this long term approach? Don't they realise that holding them long term solves nothing? Long term investors? They look like long term mistake holders!

Just my flawed opinion. :p2

Spamming Blogger Caught Red Handed

Blogger Seng has posted a great posting Can you tell the difference?

Samgoss aka okating, I do have some comments for you.

Do you know it's rather pointless in what you are doing?

Do you?

Do you need to use two names to win your argument? ( And you know very well that we know you are using more than two names. )

Do you?

Do try to understand this picture.

The english in it is not too difficult to understand.

Do GROW UP and STOP SPAMMING my blog too!

Charts Of USD Vs Other Currencies On a One Year Time Frame

Here are a bunch of currency pair charts taken on a one year time frame. Charts are done on Yahoo! Finance ( I do like their interactive charts!)

USD vs Malaysian Ringgit

USD vs Indian Rupees



USD vs Euro



USD vs Great Britain Pound



USD vs Sing Dollars



USD vs Australian Dollars



USD vs South African Rand (ZAR)



USD vs Russian Ruble



Put them ALL together and this is what you get.



How?

I did not include the Japanese Yen.

Here is the USD versus the JPY on a one year time frame. A total different picture, yes?



However the recent one month chart does indicate something!

Holy cow?

Gold Soars To Record Highs

Published on Bloomberg, Gold Gains for Third Day to Seven-Month High in Asia on Demand

• By Glenys Sim
  
  Feb. 18 (Bloomberg) -- Gold advanced for a third day in Asia, climbing to the highest price since July as the deepening global recession drove investors to purchase bullion as a store of value.
  
  Low interest rate environments and spending by governments also prompted investors to buy the metal as an alternative to declining currencies. Gold priced in euros and pounds rose to all-time highs today, while bullion in Australian and New Zealand dollars and in South African rand reached records yesterday.
  
  “Safe haven or flight-to-quality demand remains the driving force behind rising gold prices, as global economic and financial market uncertainties continue,” Toby Hassall, research analyst at Commodity Warrants Australia, said in a weekly note today.
  
  Gold for immediate delivery rose as much as 0.4 percent to $974.32 an ounce, before trading at $973.17 at 2:06 p.m. in Singapore. Gold for April delivery was up 0.7 percent at $974.40 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.
  
  “Investment demand for gold is also benefiting from increased inflationary concerns resulting from expansionary monetary and fiscal policies,” said Hassall.
  
  Gold holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, gained to a record 1,008.8 metric tons as of yesterday, placing it just behind the 1,040 tons held by Switzerland, the world’s sixth-largest stockpile.
  
  December-delivery gold in Tokyo was up 1.5 percent at 2,898 yen a gram ($976 an ounce), while Shanghai gold for June delivery gained 2.1 percent to 213.59 yuan a gram ($972 an ounce).
  
  Gold Record
  
  Gold futures in Dubai and India also climbed to their highest today, tracking gains in the international markets.
  
  Bullion for April delivery on the Dubai Gold and Commodities Exchange surged to $974.70 per ounce, the highest since the exchange began trading gold futures in 2006. April-delivery gold on the Multi Commodity Exchange of India Ltd. gained to 15,608 rupees ($313) for 10 grams, the highest since trading started in 2003.
  
  “As government treasuries increase money supply and central banks lower the price of money via interest rate reductions, the relatively finite supply of gold means the yellow metal is less prone to devaluation in high inflation environments,” said Hassall. “Silver prices should also benefit from strong investment demand which is likely to more than offset weak industrial demand prospects.”
  
  Among other precious metals for immediate delivery, silver gained 1.2 percent to $14.305 an ounce, platinum was 1.3 percent higher at $1,105 an ounce, and palladium declined 0.3 percent to $218.75 an ounce as of 2:11 p.m. in Singapore.

Published on India's Economic Times, Gold at all-time high of Rs 15,800 per 10 gm in Delhi

• NEW DELHI: Surging gold prices set yet another record of Rs 15,800 per 10 gram in the national capital on Thursday in line with the surging global Richie Rich in UPA's time bullion markets on speculation that the global recession will deepen further.
  
  The precious metal recorded fresh gains of Rs 50 to Rs 15,800, a level never seen before, after poor economic data of Russia and Japan raised concerns of a growing malaise of global recession.
  
  Jewellers and market analysts said the demand of the yellow metal picked up after the global equity and forex markets dropped in the recent past.
  
  They said shaky investors find no other option but to park their funds in the precious metals, while physical buying for the current marriage season declined substantially.
  
  "We do not see any customers these days as surging gold prices cooled down the demand for jewellery in this marriage season," said a Delhi-based Jeweller Gaurav Anand.
  
  A similar firming trend in other regional bullion markets in the country also dampened trading sentiment to a great extent. In Kolkata, the gold opened at a record high of Rs 15,925 per 10 gram.
  
  Meanwhile, gold in futures trading touched a new high by rising 0.88 per cent to Rs 15,712 per 10 gram at the MCX counter.

Gold, Is the Future Still Bright or Fading?

Great editorial from Chris Puplava on Financial Sense Online, Gold, Is the Future Still Bright or Fading?

It has to be great because it does mention the issue I posted the other day. Performance Of Gold During Recession. :D

Chris wrote

• While the inverse correlation of gold to the stock markets was cited above as a bullish support for gold, it can also work against gold. If the stock market bottoms this year there is a good chance that it will be associated with a top in gold, not necessarily “THE” top in gold for this cycle but “A” top. This relationship can be seen by comparing gold with the S&P 500 in the 1973 and 1981 recessions during the prior secular bull market in gold. The figure below normalizes gold to 100 at the onset of the recession and the x-axis is the duration in months before and after the recessions began. What is interesting to note is that gold is following a similar path to what was seen in the recessions highlighted below. If gold follows the 1973 path then it should be peaking in the next month or so at a new high before undergoing a sizable correction, which is certainly possible given gold’s close proximity to its former high. If gold follows the 1981 recessionary path, then we could see strength in gold for another six months before a correction is seen. At either rate, both recessions witnessed a peak in gold anywhere from 13-19 months after the recession began, pointing to a top of intermediate nature in gold’s future in the next six months.
  
  

Do read the editorial in full because it is good with Chris presenting the bullish and bearish case for gold. Gold, Is the Future Still Bright or Fading?

Dr. Marc Faber On Financial Sense Newshour

If you like Dr. Marc Faber views, then do give the following podcast a listen. Dr. Marc Faber appears on a guest on Jim Puplava's Financial Sense Newshour

RealPlayer WinAmp Windows Media Mp3

( Here is a link to the transcript of last year's interview "What's Ahead in 2008" )

Halim Mazmin To Be Taken Private

Halim Mazmin has announced that it will be taken private by its owner TAN Sri Halim Mohammad.

The following is from a Dow Jones newswire

• Halim Mazmin Major Hldrs Offer 60 Sen/Shr To Take Co Private
  
  KUALA LUMPUR (Dow Jones)--Halim Mazmin Bhd. (7102.KU) Wednesday said its major shareholders have proposed to take the company private by offering 60 sen in cash for each remaining share that they don't already own.
  
  In a statement to the stock exchange, Halim Mazmin said its major shareholders Halim Mohammad and Mazmin Noordin collectively hold a 60.79% stake in the company as of Feb 13.
  
  The proposal is subject to regulatory approvals being obtained, it said, adding that the proposal, if undertaken, is expected to be completed by the third quarter of 2009.

The following is published on Business Times.

• Halim Mazmin to be taken private
  
  By Francis Fernandez Published: 2009/02/19
  
  TAN Sri Halim Mohammad is taking shipping firm Halim Mazmin Bhd (7102) private in a deal valued at around RM70 million, the first time in five years a Malaysian shipowner is exchanging its listing status in favour of private ownership.
  
  Half a decade ago, tycoon T. Ananda Krishnan took Bumi Armada Bhd, one of Malaysia's largest owners and operators of offshore support vessels, private. (comment: I beg to differ on Bumi Armada's privatisation. It was totally different because Bumi Armada was a listed subsidiary and it was taken in a rather crude manner in a deal that utterly short-changed the minority shareholders. See The Pirates which siezed the Armada )
  
  In an interview with Business Times, Halim said his primary reason for doing so was because the outlook for the shipping sector here has turned bleak, and he wanted to give minority shareholders a "fair shake".
  
  "We only have two ships left ... both are on charter up to next year, and if the outlook for global container shipping lines continues to weaken, Halim Mazmin could end up as a company with no business to sustain its capital spread," said Halim.
  
  He noted that banks are reluctant to provide fresh capital to shipowners to buy vessels under the current global economic outlook.
  
  "By deciding to make a capital repayment to stakeholders, I am taking a personal risk, as upon completion of the exercise, all the liabilities are mine," said Halim, in justifying the decision to keep the company private.
  
  The company is being advised by AmInvestment Bank, while OSK Investment Bank Bhd is the independent advisor to minority shareholders.
  
  Under the deal, Halim will not make a general offer. Instead, the company will use its cash to pay shareholders 60 sen a share, and then proceed to cancel the shares. Halim and his family members hold 63.57 per cent of the listed entity.
  
  At group level, Halim Mazmin has RM263.43 million in cash and liabilities of RM111.47 million.
  
  The offer is also a 50 per cent premium over the company's last traded price of 40 sen a share.
  
  Meanwhile, the group also announced its 2008 results yesterday. For the 12 months ended December 31 2008, Halim Mazmin at the group level registered revenue of RM32.60 million alongside a pre-tax profit of RM4.98 million.

Halim Mazmin announced its earnings last nite too: Quarterly rpt on consolidated results for the financial period ended 31/12/2008

The offer to buy up the remaining shares would cost 70 million.

• At group level, Halim Mazmin has RM263.43 million in cash and liabilities of RM111.47 million.

How?

Oh Emma!

Ok the following posting has nothing to do with stocks or the economy. :P

It has to do with facebook.

LOL!

So do you have facebook?

Anyway the following tale posted tells of a nasty and cruel prank done on a Man United fan by some cruel Scousers!

Arghhhh... yes Scousers!

LOL!

Married man travels 400 miles for Facebook affair, only to discover it is a hoax

• A married Manchester United fan drove 400 miles to begin an affair with a girl he had met on Facebook, only to discover it had been a hoax set up by two rival Liverpool supporters.
  
  Stuart Slann, 39, made the nine-hour trip from his home in Sheffield to a remote farm in Scotland last month on the promise of meeting the woman he had been swapping suggestive messages with for several weeks.
  
  However, after arriving at the deserted house and waiting for a further three hours in his car for "Emma" to finish work and show up, the two pranksters called him to confess.
  
  To add to his humiliation, they recorded the conversation and put it onto Facebook, the social networking website, and video-sharing website YouTube, along with an embarrassing photograph.
  
  It was then that Mr Slann's wife Louise, 32, discovered the "affair". Their marriage is now over.
  
  Mr Slann said: "It was a cruel thing to do. I've been taken for a ride. They wound me up good and proper."
  
  The Manchester United fan met the unnamed men, believed to be cage-fighters, during a holiday in Cancun, Mexico, last November.
  
  The three soon started to argue about their rival teams, and a series of heated exchanges ensued over the three-week holiday.
  
  On one occasion the Liverpool Football Club fans threw Mr Slann into the pool, and he accidentally broke his ankle.
  
  Not content with that, when the Liverpudlian pair returned home they hatched a plan to humiliate him and set up a false Facebook account, pretending to be a woman called Emma from Scotland.
  
  After more than a month of sending messages and flirting online almost every night, "Emma" arranged to meet Mr Slann in Aberdeen.
  
  He drove for nine hours to what he believed was her home, and then received a series of text messages telling him she would be hours late from work.
  
  Finally, one of the two men rang Mr Slann in his broad Liverpudlian accent and admitted that it was all a con.
  
  The recorded conversation has now been posted on YouTube.
  
  During the phone-call the Liverpool fans asked him: "Do you recognise our voices Stuart?
  
  "It's them Scouse lads who threw you in the pool! Do you recognise our Scouse accents do you?"
  
  Mr Slann replied: "Yes."
  
  The Liverpool supporter then said: "You've been framed," before bursting into laughter.
  
  Next they asked him: "How do you feel?". After a long pause Stuart replied: "----".
  
  The Liverpudlian then said: "You fell in love with me over the computer."
  
  Now Mr Slann has had his humiliation compounded after the phone conversation was posted on the internet on February 13, attracting hundreds of hits.
  
  Mr Slann said: "There's no doubt that I've been done good and proper by the lads from Liverpool. It was cruel but I'll hold my hands up and say they really wound me up.
  
  "I'd been chatting to this girl on Facebook for about a month or so. I really thought she was genuine, and I had no reason to doubt it.
  
  "On the night she asked me to Scotland I was on the road for about nine hours. And then when I got to this remote farm she sent me a text to say she was still in work.
  
  "That's what made it worse, not only had I driven for nine hours, but I had to wait for about another three and a half hours for her to finish work.
  
  "Then when I got the call to say it was all a hoax I just felt awful.
  
  "If they had asked to drive to Manchester, Leeds or even Liverpool it wouldn't have been so bad and maybe I'd have seen the funny side.
  
  "But to drag me all the way to Aberdeen was just cruel.
  
  "When I met the lads on holiday I thought they were alright and we had a bit of banter over football and they threw me in the pool."

Facebook affair?

LOL!

How Could He Be Drunk?

Drunk?

Articles On Boustead Heavy (BHIC) Earnings

BHIC or Boustead Heavy Industries Corp announced its earnings last night.





As you can see from the above table from Dow Jones, the earnings wasn't nice at all.

Business Times carried the following article. Boustead Heavy Q4 profit down by almost two-thirds

• BOUSTEAD Heavy Industries Corp (BHIC) Bhd's (8133) fourth quarter net profit fell by almost two-thirds due to lower margin and reduced share profit from associates, compared to a year ago.
  
  This was despite revenue almost quadrupling to RM169.3 million for the period ended December 31 2008, from RM45.7 million for the same period a year ago.
  
  The group said while the global economic environment is expected to continue to impact its future performance, it will continue with efforts to improve its capacity and competency.
  
  "In line with efforts to widen the market base, the group will continue to penetrate new markets within the Asian and African regions," BHIC told Bursa Malaysia Bhd yesterday.
  
  BHIC registered a net profit of RM15 million for the period ended December 31 2008, compared to RM48.3 million net profit for the same period in 2007.
  
  The group has proposed a final dividend of 5.5 per cent per share, despite declining profits. Some RM13.7 million will be distributed in the payout which is yet to be approved shareholders approval.
  
  Net profit for the full year ended December 31 2008 was also down by two thirds to RM115 million, from RM485 million in 2007.
  
  This was also despite recording much higher revenue of RM496 million in 2008, from RM117 million in 2007.

The Star Business on the other hand carried the following headlines. BHIC posts RM14.96mil Q4 net profit

• PETALING JAYA: Boustead Heavy Industries Corp Bhd (BHIC), the naval contractor and oil and gas player, posted a net profit of RM14.96mil, or six sen per share, in the final quarter ended Dec 31.
  
  This was on a turnover of RM169mil.
  
  For the full financial year (FY08), net profit amounted to RM115mil, or 46.33 sen per share, on revenue of RM496mil.
  
  The group’s net profit was lower than RM485mil achieved in FY07, but this was due to lower writebacks received from revived projects in an associate company.
  
  Group deputy executive chairman vice-admiral (rtd) Datuk Seri Ahmad Ramli Mohd Nor said BHIC’s order book stood at RM720mil.
  
  “We anticipate our order book to grow, with more projects currently in negotiation stage with local and foreign parties,’’ he said in a statement yesterday.
  
  The group’s quarter-on-quarter performance showed an increase in revenue from RM114mil in the third quarter to RM169mil in the last three months.
  
  However, BHIC’s last-quarter performance was “affected by a lower margin and reduced share of profit from our associate,’’ Ramli said.
  
  BHIC said the global economic environment would impact the group’s future performance.

How?

See the spin?

Feb 18: Charts Of Gold Prices In Ringgit

Since I blogged Gold Soars Against The Weak Euro this morning, I decided to update my kijang gold prices.

Before I load the charts, here are some numbers.

The following is the screen shot from Maybank's Kijang Emas coins prices yesterday, Feb 17th.

As you can see based on Feb 16th closing prices, the Kijang Emas are priced as follows.

Do note the gap of in the buy and sell prices. Selling price of gold in one ounce (OZ) was 3616 and the buying price was 3501.

And the following chart reflects the weekly gold prices based on Malaysian Ringgit.

Last night gold soared $23.50 to close at $967.50 an ounce.

Updated selling price of gold in one ounce (OZ) is now 3745 and the buying price is now 3625.


previous posting: Chart of Gold Prices In MYR

ps. how nice that USD is now 3.64 versus the ringgit. Better pray hard that the USD does not tank against the ringgit! :p2

Gold Soars Against The Weak Euro

Published on UK Telegraph Gold hits record against euro on fear of Zimbabwean-style response to bank crisis

• Gold has surged to an all-time high against the euro, sterling, and a string of Asian currencies on mounting concerns that global authorities are embarking on a "Zimbabwe-style" debasement of the international monetary system.
  
  By Ambrose Evans-Pritchard
  Last Updated: 8:49PM GMT 17 Feb 2009
  
  "This gold rally is driven by safe-haven fears and has a very different feel from the bull market we've had for the last eight years," said John Reade, chief metals strategist at UBS. "Investors are seeing articles in the press saying governments should deliberately stoke inflation, and they are reacting to it."
  
  Gold jumped to multiple records on Tuesday, triggered by fears that East Europe's banking crisis could set off debt defaults and lead to contagion within the eurozone. It touched €762 an ounce against the euro, £675 against sterling, and 47,783 against India's rupee.
  
  Jewellery demand – usually the mainstay of the industry – has almost entirely dried up and the price is now being driven by investors. They range from the billionaires stashing boxes of krugerrands under the floors of their Swiss chalets (as an emergency fund for total disorder) to the small savers buying the exchange traded funds (ETFs). SPDR Gold Trust has added 200 metric tonnes in the last six weeks. ETF Securities added 62,000 ounces last week alone.
  
  In dollar terms, gold is at a seven-month high of $964. This is below last spring's peak of $1,030 but the circumstances today are radically different. The dollar itself has become a safe haven as the crisis goes from bad to worse – if only because it is the currency of a unified and powerful nation with institutions that have been tested over time. It is not yet clear how well the eurozone's 16-strong bloc of disparate states will respond to extreme stress. The euro dived two cents to $1.26 against the dollar, threatening to break below a 24-year upward trend line.
  
  Crucially, gold has decoupled from oil and base metals, finding once again its ancient role as a store of wealth in dangerous times.
  
  "People can see that the only solution to the credit crisis is to devalue all fiat currencies," said Peter Hambro, chairman of the Anglo-Russian mining group Peter Hambro Gold. "The job of central bankers is to allow this to happen in an orderly fashion through inflation. I'm afraid it is the only way to avoid disaster, but naturally investors are turning to gold as a form of wealth insurance."
  
  One analyst said the spectacle of central banks slashing rates to zero across the world and buying government debt as if there was no tomorrow feels like the "beginning of the 'Zimbabwe-isation' of the global economy".
  
  Gold bugs have been emboldened by news that Russia has accumulated 90 tonnes over the last 15 months.
  
  "We are buying gold," said Alexei Ulyukayev, deputy head of Russia's central bank. The bank is under orders from the Kremlin to raise the gold share of foreign reserves to 10pc.
  
  The trend by central banks and global wealth funds to shift reserves into euro bonds may have peaked as it becomes clear that the European region is tipping into a slump that is as deep – if not deeper – than the US downturn. Germany contracted at an 8.4pc annual rate in the fourth quarter. The severity of the crash in Britain, Ireland, Spain, the Baltics, Hungary, Ukraine and Russia has shifted the epicentre of this crisis across the Atlantic. The latest shock news is the 20pc fall in Russia's industrial production in January. The country is losing half a million jobs a month.
  
  Markets have been rattled this week by warnings from rating agency Moody's that Austrian, Swedish and Italian banks may face downgrades over their heavy exposure to the ex-Soviet bloc. The region has borrowed $1.7 trillion (£1.2 trillion) – mostly from European banks – and must roll over $400bn this year.
  
  Austria's central bank governor, Ewald Nowotny, said the regional crisis had become "dangerous" and called for a pan-EU rescue strategy to prevent contagion.
  
  Bartosz Pawlowski, from TD Securities, said the recent plunge in currencies across Eastern Europe had come as a brutal shock. "The rout could potentially lead to substantial problems, if not an outright collapse of the financial system," he said, citing the rising real burden of debt taken out in euros and Swiss francs.
  
  Even Poland – a pillar of stability in the region – may ultimately need a bail-out by the International Monetary Fund. Latvia, Hungary, Ukraine and Belarus have already been rescued. Romania's premier, Emil Boc said his country would decide over the next two weeks whether to seek an IMF loan. Turkey is next.

You Call This Financial News?

Published on Business Times, Merger on the cards?

• By Roziana Hamsawi Published: 2009/02/18
  
  A Merger between Bank Islam Malaysia Bhd (5258) , Malaysia's oldest Islamic lender, and rival Maybank Islamic Bank could be back on the drawing board again, sources said.

Please do define 'sources said' for me. I am simply lost.

Who are the sources?

The tea lady who works at the bank is a source of information, yes?

And what about the parking lot attendant? Couldn't he be the source?

Or what about the mamak from the mamak stall who heard the conversations? A possible source of info?

How?

Soucres can be anyone and anyone and no one can also be sources, yes?

• Sources said this is now being studied again but it is unclear if such a merger would eventually happen.

LOL! This statement simply cracks me up!

You have the typical unknown sources who tells the 'speculation' that is being studied but then the very same unknown sources is UNCLEAR if such a merger could happen.

LOL! So what's the point?

How about reporting financial news based on REAL sources and based on FACTS?

Is it that hard to do?

Else the whole financial news is rendered useless because it's based on zero concrete facts.

• "The mechanics of it are still being worked out," said one source familiar with the development.

LOL! The news article started off by saying SOURCES said.

Now if my English is not as screwed up as I think it has been lately, sources indicates many source. First the article started off with many 'sources'. Now it's only one specific source? Got any name for reference?

• Such a deal could spark consolidation in the crowded sector as Islamic lenders seek to compete against their bigger conventional rivals.

'Could' spark consolidation? LOL! Speculation?

• Industry players had expected Islamic banks to merge so as to better compete and also as a result of the global financial crisis.

LOL! Industry players? What's the meaning of industry players? What industry? And what are they playing? LOL!

• News of the possible merger between Bank Islam and Maybank Islamic have also sparked rumours that the Dubai Group, Bank Islam's foreign and major shareholder, is pulling out from the bank.

LOL! News of possible merger? And this so called news started from them 'sources'. LOL! And these so called 'news' have also 'sparked rumours'.

• Dubai Group had injected some RM828 million in Malaysia's first Islamic bank just over two years ago, in return for a 40 per cent stake.
  
  However, Dubai Group said it is a "long term strategic investor" in Bank Islam.
  
  "We are proud to be associated with the bank's impressive turnaround over the past two years and are confident of its potential to grow further," Dubai Group said in a statement to Business Times.
  
  Maybank also said that it "is not currently in talks with Dubai Group as speculated."
  
  There were speculation that Maybank could buy Dubai Group's stake to facilitate a merger with Bank Islam.

LOL! Speculation!

Wasn't that a fun comical editorial?

I wonder how it made it as a financial news! oO

Chapter 11 For Trump Entertainment

Trump Entertainment Files for Chapter 11

• Trump Entertainment Resorts, Donald Trump's casino group, filed for Chapter 11 bankruptcy protection on Tuesday, court documents show.
  
  The casino operator had assets of about $2.1 billion and total debts of about $1.74 billion on Dec. 31, 2008, it said in its filing with the U.S. Bankruptcy Court for the District of New Jersey.
  
  Nine affiliates of the casino operator including Trump Plaza Associates, Trump Plaza Associates, Trump Marina Associates and Trump Taj Mahal Associates simultaneously sought protection, according to the filing.

The troubles in Trump Entertainment Resorts had been highlighted before in past blog posting here: Betting On The Casino Industry? and see also Trump Without Trump!!

Just Do It!

ps. love this clip!

What Is Green Packet Saying Here??

Here is a follow-up to this morning posting About Green Packet

Just read today's article on TheEdge.

• 17-02-2009: Green Packet: Losses due to investments in WiMAX
  by Racheal Lee Mei Nyee
  
  PETALING JAYA: Green Packet Bhd saw a net loss of RM55 million for the year ended Dec 31, 2008 (FY08), from a net profit of RM30.2 million a year earlier due to its investments in its WiMAX business, its managing director and chief executive Puan Chan Cheong said.

Net loss of rm55 million!

• “We have the cash ready for it and we also see cash flow coming in. We estimate the peak funding to be around RM750 million, and hence we still require about RM250 million. We planned to fund either through raising capital or by bank loan where we have steady cash flow where we can demonstrate,” he said, adding that the project would include sites building in the two capital cities of Sabah and Sarawak by the second half of this year.
  
  As at Dec 31, 2008, the company had cash of RM280.8 million and bank facilities available of RM38.1 million.

Am I reading it wrongly?

Is the company trying to tell the market it has plenty of cash?????

Yes it now has some 280.8 million but why is Green Packet discounting its current total borrowings? Total borrowings does not matter? Well for the record, Green Packet's current total borrowings is now a whopping 196.632 million!

Here's the screen shot from Green Packet's quarterly earnings.

How?

A year ago, 28th February 2008 Green Packet announced its earnings. Quarterly rpt on consolidated results for the financial period ended 31/12/2007

• It had cash balances then of 242.467 million and total debts of only 3.662 million.

On February 2007. Green Packet had the following.

• A year ago, it had cash balances of 303.832 million and debts of only 1.090 million!

How?

And as usual the boss is naturally optimistic as always. LOL!

• Puan is optimistic towards the industry despite the current financial meltdown, due to the global demand for 3G and WiMAX. “China has just awarded 3G licence and they are building the biggest WiMAX network now consisting of 30,000 sites. With our long history and good relationship with China, we expect China business to start to recover in the second half of this year,” he said

About Green Packet

Dedicated to Jasonred79 said in A Look At Green Packet Quarterly Earnings

• The title of your post is deceptive... the point of interest is not in the earnings for Green Packet.

My dearest Jason,

I am guilty as charged.

The post was utterly deceptive. I had mentioned nothing about Green Packet's earnings.

So this morning I am going to write a bit.

Perhaps not exactly on Green Packet's earnings but I am just going to do a simple look back at historical news article on Green Packet.

25 June 2007.

• 25 Jun 2007: Corporate: Green Packet: We have nothing to hide
  By Cindy Yeap
  
  Green Packet Bhd's share price ended at RM4 last Friday, its lowest for the year. In the last two weeks, the largest capitalised stock on the Mesdaq Market saw over RM444 million of its market capitalisation wiped out, and its share price plunge nearly one-fifth during the period. (comment: what's the price of Green Packet now?)
  
  Some of the losses may have been due to questions raised on the company's high level of receivables of late, causing investors to take profit on their holdings, analysts say.
  
  "While there may be nothing really wrong with the company, one can't blame investors for choosing to take profit, in the light of the recent fraud at Transmile Group Bhd," says one analyst.
  
  After all, most investors would already be sitting on healthy gains, considering that in a span of two years, Green Packet's share price has risen over 10 times from the 55 sen at which it was sold in May 2005.
  
  But at its RM4 close last Friday, Green Packet shares had fallen 30% from its all time high of RM5.75 on Feb 23. The stock last closed above RM5 on June 7.
  Should one be concerned? Will the stock continue to slide?
  
  Green Packet's CEO Puan Chan Cheong says some investors had contacted the company to check on its level of receivables, and that the company had done its best to allay their concerns.
  
  "Our stock was performing when the market was not performing. Now that the stock market is moving, some investors may have chosen to take profit and put their money elsewhere.
  
  "We understand that investors are shaken by recent news of accounting irregularities and may have some apprehension. We will continue to do our best to answer any questions investors may have. We've explained that it is not unusual to give six months' credit to Chinese companies. We've got nothing to hide. Our FY2006 accounts have already been audited and passed by shareholders at our recent annual general meeting," Puan tells The Edge.

Jan 24th 2008, GPacket expanding solutions business aggressively. Here are some highlights from the article.

• Green Packet reported a 69.8% year-on-year decline in net profit to RM6.61mil in the third quarter ended Sept 30, 2007. (comment: 69.8% decline in net profit! oO)
• On this, Puan said: “Shareholders should look at the long-term prospects and fundamentals of the company. We are very optimistic of our newest business pillar – converged telecommunication services – and foresee solid growth from 2009 onwards even as the technology matures and more WiMAX products are made available. (comment: long-term prospect and fundamentals? what does serious decline in net profit margins indicate? )

4 Feb 2008: Corporate: Taking a chance on Green Packet. (by By Cindy Yeap) Some noteable comments.

• It is worth noting that the stock has, in the past 11 months, lost over 70% of its value when measured against its all-time high of RM7.80 on Feb 26 last year. This was in spite of the fact that all four stockbrokers polled on Bloomberg are still calling a "buy" on the stock, valuing the company at least RM4 a share.
  
  Now that Green Packet's share price has fallen almost to RM2, some investors with a long-term view are looking at the stock again. Is the time ripe to pick up Green Packet shares? Has its share price "bottomed"?
• The brokerage — whose sister company OSK Technology Ventures Sdn Bhd is a substantial shareholder of Green Packet with 16% stake — expects Green Packet to book RM49 million net profit for the year ended Dec 31, 2007. This implies an expectation that the company will make RM20 million net profit in 4Q2007. For the nine months ended Sept 30, 2007, Green Packet made RM28.8 million net profit, down 28% from the RM40.2 million made in the previous corresponding period.
  
  "We advise investors to take a long-term view of the stock, considering the interim challenges," OSK Research says.
  
  None of Green Packet's top three shareholders — Green Packet Holdings Ltd (33.78%), OSK Technology Ventures (16%) and PacificQuest (8.26%), which is controlled by its Saudi strategic partner — sold shares post its transfer to the Main Board from the Mesdaq Market on July 18 last year, according to stock exchange filings. But they have not been acquiring either. At last Thursday's RM2.50 close, it would cost the three RM350 million to buy the remaining 42% of the company not in their hands. Every 10 sen difference in share price is RM14 million. ( comments: LOL! Vested interest from OSK Research? )

Oh Cindy!

25 Feb 2008: Corporate: 'Transformation year' for Green Packet (by Cindy Yeap)

• For the full year, the company's top line will still see "triple-digit" growth year on year, but the same could not be said for its earnings. "Profits this year, we believe, will be quite stagnant due to high start-up cost, the investments into R&D, the building of human capital. We are working hard to achieve double-digit growth… we will definitely still be profitable," says Puan
• Green Packet is expected to release its full-year 2007 results by this Thursday.
  
  For the nine months ended Sept 30, 2007, Green Packet's net profit fell 28.4% to RM28.79 million from a year ago. Revenue was up 78.1% to RM99.38 million. Its discounted call service Next Global Technology Sdn Bhd (NexTel) contributed RM42.4 million to revenue but only RM14,000 to net profit so far. There is a profit guarantee that NexTel's audited profit after tax would be at least RM8 million for FY2007.
  
  However, Green Packet may have to book some associate losses from its 20%-owned investment in Singapore-based Inova Venture Pte Ltd and 29.9%-owned GMO Ltd. Based on mTouche Technology Bhd's full-year results, mTouche's 40% share of losses at GMO was RM1.2 million, implying that Green Packet's share of losses is about RM900,000. Inova made a RM8.5 million provision for doubtful debts.
• "I believe we will see a new breed of investors with different horizon when results begin to show," he says.
  
  At its RM2.43 close last Friday , Green Packet shares have slipped 69% from its all-time high of RM7.80 on Feb 26 last year. As at Feb 15, it has 3.07 million shares in treasury that it bought at an average cost of just under RM2.50 each. (comments: what is Green Packet current price?)

28th February Green Packet announced its earnings. Quarterly rpt on consolidated results for the financial period ended 31/12/2007

(comments: It had cash balances then of 242.467 million and total debts of only 3.662 million. A year ago, it had cash balances of 303.832 million and debts of only 1.090 million! How was yesterday's balance sheet? A Look At Green Packet Quarterly Earnings )

Blogged the following last year More On Green Packet

In that posting, on Business Times Green Packet aims to regain sales momentum

• "We expect sales in China to be slow during the first half, and eventually to pick up in the second half once the 3G is awarded. The delay is only a temporary setback. We expect the 3G spectrum to be awarded before the Olympics.
  
  "Should there be any further delays, we still can achieve triple-digit revenue growth; if not, very close," Puan said. (comments: ahem. aiming for triple-digit REVENUE growth! Kinda makes you wonder about net profit growth! LOL!)

On Star Business the very same day, Green Packet sees 100% growth in revenue this year

• Green Packet Bhd, which reported 24% higher revenue of RM122.84mil for the year ended Dec 31 (FY07), expects a 100% growth in revenue this year as its diversification plans start to bear fruit.
  
  Group managing director and chief executive officer Puan Chan Cheong was confident of the “achievable” target, as the company had diversified its markets to cushion the impact of a slowdown in any one region. (comments: On the back of a net profit of only 277 thousand, the CEO keeps harping on higher revenue growth!!!! oO)

May 19th 2006. WiMAX major earner for Green Packet

• “Green Packet set its five-year target last year and it wants Packet One to be a billion ringgit revenue company by 2012 and the solutions business to enjoy a lot of regional success by then,'' he said in an interview. (comments: Billion dollar revenue company!!! LOL! can make money or not? oO )
• He was optimistic of turning profitable fast because the investment cost for its WiMAX business was lower than what a company would have spent on 3G.
• The WiMAX business and an end of the delay in the deployment of 3G in China is forecast to make a huge impact on Green Packet's financial fortune.
  
  “We believe our business in China will bounce back stronger in the second half of the year. At the same time, all our other regions will start to contribute more,'' he said.
  
  Green Packet's investment schedule on its WiMAX and geographical diversification will range from the second half of 2007 to the first half of 2009.
  
  “This will push Green Packet into the next phase. And we believe profit will grow at a faster rate then,'' said Puan, who added that the company was confident of a strong double digit or even triple digit growth rate in revenue this financial year.

July 1, 2008 Green Packet expects better results in second half

• KUALA LUMPUR: Green Packet Bhd is optimistic of a better second half despite weak first-quarter performance, says group managing director and chief executive officer Puan Chan Cheong.

Here is Green Packet's most recent quarterly earnings then. Quarterly rpt on consolidated results for the financial period ended 31/3/2008. It had net losses of 2.733 million. Why isn't this fact mentioned? Instead the word 'weak' was used! LOL!

August came. Quarterly rpt on consolidated results for the financial period ended 30/6/2008

Net losses grew to 4.889 million.

The following was posted on Star Business. (Sorry lost the link)

• Friday August 22, 2008
  
  GPacket optimist
  
  KUALA LUMPUR: Green Packet Bhd, which had a weak second quarter performance, is optimistic of seeing a better second half.
  
  Group managing director and chief executive officer Puan Chan Cheong said the drop in group revenue was mainly due to the substantially higher operating cost incurred for the group’s converged telecommunication business unit. There were high marketing expenses.
  
  Green Packet posted a net loss of RM6.6mil for the second quarter ended June 30 while its revenue fell 37% to RM22.45mil.

Revenue fell 37%. LOL! Where is the revenue growth mentioned by Green Packet?

November 11, 2008. Foreigners keen to take up stake in Green Packet

• More than five foreign investors have expressed interest in taking up strategic stakes in Green Packet Bhd, which recently launched its WiMAX service.
• Group managing director Puan Chan Cheong said the parties involved were international telcos and operators from the US, Middle East, East Asia and Europe.
• “The parties had shown interest in our company, especially our WiMAX service, and we are evaluating the proposals now,” he told reporters after its EGM yesterday.

Few days later, Quarterly rpt on consolidated results for the financial period ended 30/9/2008

Green Packet reported a net loss of 10.829 million.

On New Year Eye, Green Packet plans aggressive campaign

• Puan said the wireless broadband business was expected to contribute to profits within three to five years.
• "We should see a positive bottom line maybe in five years or less," he said.

Feb 7, 2009 Green Packet set for a comeback

• Incidentally, Puan is of the Monkey Zodiac, which is deemed very lucky in the 2009 earth Ox year. In the words of a famous feng shui master: “The Monkey can do no wrong this year. Even if he does wrong, somebody else will take the blame.”

ROFLMAO!!!!

The article then continues...

• Certainly, Green Packet’s financial results in 2008 weren’t too inspiring. Its solutions pillar in China, which had always been its major revenue earner, also took a huge dip as its China clients, which are China’s mobile operators, delayed their spending as they waited for the government to issue third-generation (3G) licences.
• For the nine months to September 2008, Green Packet recorded a loss of RM17.91mil from a previous profit of RM29.88mil. Revenue also dropped 34.67% to RM62.91mil. For the third quarter itself, it recorded a net loss of RM10.29mil.
• Puan is confident that improvement will be seen in both pillars this year. With the 3G licences now issued, he expects China to start contributing positively again by the second half.

Remember positive bottom line in maybe 5 years or less.

And so Green Packet announced its earnings last night.

So how did it do?

How much is Green Packet trading nowadays?

Utterly Shambolical As Trading Halts On Bursa Malaysia Keeps Happening!

Trading halt on Bursa Malaysia is becoming a habit.

A nasty of habit and it's really kind of embarrassing.

Let's look back at the chain of happenings since last year.

On 10th March 2008 trading was halted due to limit down ruling.

• Bursa Malaysia halts trading after KLCI falls 10% limit
  
  KUALA LUMPUR: Bursa Malaysia halted trading at 2.58pm after the Kuala Lumpur Composite Index (KLCI) fell 10%, which is the maximum limit.
  
  Trading will resume at 3.58pm.
  
  The KLCI fell 130.01 points to 1,166.32, the biggest one-day percentage loss in recent years.
  
  Turnover was 913 million shares valued at RM2.47bil. Losers hammered gainers 887 to 19.
  
  Sime Darby fell RM1.90 to RM9.10, KPS lost RM1.74 to RM1.68, DiGi RM1.70 to RM21.30 while BCHB fell RM1.65 to RM8.55.
  
  Other losers were IJM, down RM1.45 to RM5.50, Puncak RM1.36 to RM3.16, Tenaga RM1.25 to RM7.40 and Bursa RM1.05 to RMN8.90

A rather understandable situation given the market sentiments then.

However on 3rd July 2008, the unexpected and the unforgiven happened.

Trading on Bursa Malaysia was halted due to technical glitch. The following news article described what happened then and hardware failure was given as the primary reason why trading was halted.

• Bursa trading suspended due to hardware snag
  
  July 04, 2008
  
  Kuala Lumpur: Prime Minister Datuk Seri Abdullah Ahmad Badawi wants immediate action taken to address the technical glitches that led to the suspension of trading in the bourse for the whole day, Thursday.
  
  "This incident will reflect negatively on us. It is very important for Bursa Malaysia to make sure the technical glitches will not recur," he told reporters in Parliament.
  
  Abdullah said he was informed of the incident but no explanation was given.
  
  Asked if there were other reasons for the incident, Abdullah, who is also Finance Minister, said: "I don't see why the technical glitch should happen.
  
  There's no reason for it to happen.
  
  "If we want to take into account in terms of the country's security, we are still safe."
  
  Abdullah said the incident cannot be considered as something that could lead to political instability.
  
  "I don't want any assumptions to be made as it can lead to negative interpretations to market sentiments. What I want to explain here is that the country's peace and security are under control," he added.
  
  Bursa Malaysia Chief Executive Officer Datuk Yusli Mohamed Yusoff had said he was confident that trading on the market would resume as usual Friday.
  
  He said the exchange had managed to resolve all technical glitches in the trading systems.
  He attributed the problem to the equities trading system experiencing a hardware failure.
  
  "However, the derivatives and bond markets, clearing, settlement and depository system were unaffected," Yusli said.
  
  Yusli also dismissed talks that the suspension was linked to any political development.
  
  Bursa Malaysia had earlier in the day announced that trading would be suspended for the morning and resume at 2.30pm. However, it later retracted the statement and issued another to say that it would not be the case.
  
  At 3.40 pm, the exchange announced that trading would stay suspended until 5pm - the usual time the market closes.
  
  "We tried resuming trade in the afternoon from a primary site but encountered connectivity problems. Only 30 of the 152 sites representing 13 brokers proved operational. We then decided to suspend trading for the rest of the day," Yusli explained.
  
  Yusli said Bursa Malaysia would review all its systems. "We expect to launch a new system in a couple of months. We are in the final stages of launching the system called Bursa Trade Security.
  
  "There is however no exchange in the world that can guarantee its systems would not fail. Still, we will ensure that this does not happen in the future," Yusli added.
  
  The last time Bursa Malaysia experienced a systems failure was in June 2000 when trading was halted for half a day due to a technical problem.
  
  Yusli estimated Thursday's loss based on brokerage fees as at RM450,000 due to the thin trading volume over the past few days.
  
  According to Yusli, 153,000 shares of 15 counters from eight brokers' sites were matched. But as the market was suspended for the whole day, all orders matched were cancelled. As for the indices, Yusli said values for July 2 would apply for the next trading session.
  
  On the issue of compensation Yusli said: "We see this as a trading problem."
  
  Responding to another question as to whether investors would lose confidence in Bursa Malaysia due to the suspension, Yusli said they should focus on the fundamentals. - Bernama.

This should not happen and there is no reason for it to happen!

That was the ORDER given!

Come December 2008, Bursa gave everyone an early Christmas present with yet another trading halt again!!!

No joke.

• Glitch in Bursa afternoon trading speedily rectified
  
  Tuesday December 23, 2008
  Glitch in Bursa afternoon trading speedily rectified
  By EDY SARIF
  
  PETALING JAYA: Bursa Malaysia Securities Bhd managed to rectify a technical problem which delayed briefly the afternoon session trading on the local bourse yesterday “in a timely manner with minimal trading disruption.”
  
  Chief executive officer Datuk Yusli Mohamed Yusoff said they were able to identify the cause and resolved the problem “expeditiously and commenced with the pre-opening phase at 2.50pm.”
  
  “Our priority remains in monitoring the system vigilantly and in ensuring there is minimal disruption to trading,” he said in a statement.
  
  Bursa Malaysia, in the same statement, said “in order to preserve a fair and orderly market, it decided to halt the securities market at the beginning of the afternoon trading session.”
  
  The stock exchange operator said it “identified an issue with an application module” which resulted in the system rejecting orders keyed in by brokers during the pre-opening phase of the afternoon trading session.
  
  However, the derivatives market was unaffected and continued to trade as normal.
  
  A remisier said the technical glitch resulted in orders from clients being halted for a while.
  
  “Orders couldn’t go through for about half an hour to 45 minutes when the market opened in the afternoon. However, we are lucky as the problem was not encountered for too long,” he said.
  
  HLG Securities Sdn Bhd remisier Muhammadi Omar said the technical problem resulted in clients losing the chance to sell their stocks when prices were good.
  
  “Before lunch time, the market was doing good as prices were really attractive. However, due to the disruption, clients who wanted to sell their stocks when the market opened in the afternoon couldn’t do so,” he said.
  
  The Kuala Lumpur Stock Exchange closed at 873.43 points yesterday, down 2.97 points.

Speedily rectified?

• Thursday December 25, 2008
  Technical glitch holds up trading again
  By EDY SARIF
  
  PETALING JAYA: Trading at the new Bursa Trade Securities was suspended again yesterday afternoon for about 45 minutes due to a technical issue.
  
  The new platform that was launched early this month encountered the same technical glitch that it faced on Monday.
  
  A statement from Bursa Malaysia said the system rejected orders keyed in by the brokers during the pre-opening phase of the afternoon trading session.
  
  However, the derivatives market was unaffected.
  
  “This is due to the application module for the pre-opening phase. A software patch is currently being developed by the trading system vendor, NYSE Euronext Advanced Trading Solution (NYXT), and is targeted for implementation by the end of this week,” it said.
  
  Chief executive officer Datuk Yusli Mohamed Yusoff said its priority remained in ensuring there was minimal disruption to trading.
  
  “We are still waiting for NYXT to come back to us with the software patch. As a stop-gap measure, our internal team put in place a work-around process which enabled us to get trading up and running within the hour on Monday and today (yesterday),” he said.
  
  He added that there was a possibility the problem would recur until the software patch had been deployed.
  
  If this happened, he said, it expected its work-around process to again get the system up and running.
  
  A remisier said the problem had resulted in orders not keyed in for his clients.
  
  Another remisier said nothing much could be done except to wait for the system to be available again.
  
  “This is the second time I’m facing this kind of problem this week. It gives a bad impression not just to us, but to investors and people who are involved in trading,” he said, adding that it was fortunate that the market was quite quiet with thin trading volume.

Chains of habit are sure difficult to break and true enough it happened yet again yesterday!!!!!!!

ARGGGGGGGGGGGGGHHHHHH!!!!!!!!!!!!!!!!!!!!

• FTSE glitch disrupts Bursa trading for half an hour
  
  STOCK exchange operator Bursa Malaysia Bhd (1818) said "a disruption to real-time index feed from FTSE" yesterday has forced it to halt trading on the stock and derivatives markets for about half an hour.
  
  The problem has affected the dissemination of data by the exchange, Bursa Malaysia said in a statement yesterday.
  
  "I don't think it's a major problem. Luckily it happened on a day when trading liquidity was quite low," Maybank Investment Bank Bhd's head of research Vincent Khoo said.
  
  The technical glitch was the fourth that Bursa Malaysia had faced since it put in a new trading system in December.
  
  Trading on the bourse was disrupted twice in a week on December 22 and 24 last year, and again on January 2 when the pre-opening session was delayed by about 18 minutes.
  Even before the new trading platform was adopted, an embarrassing system failure last July had led to a full-day trading suspension, spurring unnecessary rumours of sabotage since the market was expected to fall sharply on that particular day.
  
  Yesterday, trading was suspended after Bursa Malaysia was unable to process an information message arising from a disruption to real-time index feed from FTSE.
  
  The exchange had decided to halt all trades from 12.19pm, shortly before the lunch break, to maintain a fair and orderly market although trades and orders were not affected. The glitch also delayed the pre-opening session by 20 minutes before trading resumed for the afternoon session.
  
  "Our priority is to ensure that the market operates in a fair and orderly manner and there is minimal disruption to trading," Bursa Malaysia's chief executive officer Datuk Yusli Mohamed Yusoff said.
  
  Trading will start as normal today.
  
  However, all FBM indices will not be available via Bursa Malaysia until it has confirmed that the information message processing is in order.

Utterly shambolic!

There is simply no reason for this to be happening so frequently.

It's totally embarrassing to say the least as these trading halts gives an extremely bad impression on OUR stock exchange.

It does not appear to me that the folks in charge of Bursa Malaysia knows how to run a stock exchange at all.

Sigh!

A Look At Green Packet Quarterly Earnings

Almost a year ago, Green Packet announced the following quarterly earnings report.

Quarterly rpt on consolidated results for the financial period ended 31/12/2007

Today's Green Packet. Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Nice?

Jeremy Grantham's 4Q 2008 letter

Jeremy Grantham's GMO 4Q 2008 letter

Page 2

• But let us look for a minute at the extent of the loss in perceived wealth that is the main shock to our economic system. If in real terms we assume write-downs of 50% in U.S. equities, 35% in U.S. housing, and 35% to 40% in commercial real estate, we will have had a total loss of about $20 trillion of perceived wealth from a peak total of about $50 trillion. This relates to a GDP of about $13 trillion, the annual value of all U.S. produced goods and services. These write-downs not only mean that we perceive ourselves as shockingly poorer, they also dramatically increase our real debt ratios. Prudent debt issuance is based on two factors: income and collateral.
  
  Like a good old-fashioned mortgage issuer, we want the debt we issue to be no more than 80% of the conservative asset value, and lower would be better. We also want the income of the borrower to be sufficient to pay the interest with a safety margin and, ideally, to be enough to amortize the principal slowly. On this basis, the National Private Asset Base (to coin a phrase) of $50 trillion supported about $25 trillion of private debt, corporate and individual. Given that almost half of us have small or no mortgages, this 50% ratio seems dangerously high.
  
  But now the asset values have fallen back to $30 trillion, whereas the debt remains at $25 trillion, give or take the miserly $1 trillion we have written down so far. If we would like the same asset coverage of 50% that we had a year ago, we could support only $15 trillion or so of total debt. The remaining $10 trillion of debt would have been stranded as the tide went out! What is worse is that credit standards have of course tightened, so newly conservative lenders now assume the obvious: that 50% was too high, and that 40% loan to collateral value or even less would be more appropriate. As always, now that it’s raining, bankers want back the umbrellas they lent us. At 40% of $30 trillion, ideal debt levels would be $12 trillion or so, almost exactly half of where they actually are today!
  
  It is obvious that the scale of write-downs that we have been reading about in recent months of $1 trillion to $2 trillion will not move our system anywhere near back to a healthy balance.

His comments on Warren Buffett page 5-6

• First, Warren Buffett. At about 950 on the S&P on October 16, he announced that he was a personal buyer of U.S. stocks because they were cheap and their prices reflected widespread fear. This is not typical for him, but he certainly did it in 1974. When he said it back then, every stock in our portfolio at Batterymarch yielded almost 10%! The portfolio P/E was below 7.5x. Even with hindsight, if you value the market in 1974 using our current methodology, it was very much cheaper than it is today at 950, which is what we calculate as almost precisely fair value.
  
  His recent announcement made the market seem so much more exciting than boring old fair value. So what are the possibilities? Was he performing a civic duty? Certainly, animal spirits are a critical component of any recovery, so encouragement to take risk from an authoritative source makes perfect sense. Does he believe that 1974- type cheapness can never return, or is very unlikely in this particular case? If that were the argument, we would disagree; we suspect that cheaper prices are not just possible but probable, although admittedly far from certain. Has he perhaps a tactical market timing model that produces his obvious excitement, despite these ordinary values? Most unlikely, given his style. Or are our numbers wrong? Perish the thought! In any case, it is all an interesting conundrum.

On the Black Swan logic. Page 6

• Second, Nassim Taleb and the Black Swan logic, which I have previously admired in public. Taleb is completely dismissive – in a way only he can be – of any near certainties. He implies that we have just suffered from an outlier event crashing up against standard risk modeling that only assumes that events will occur in an approximately normal way. He argues that modeling the 95% or 99% normal range in Value at Risk (VaR) misses the whole point: that the real game is played out in the final 1%. It's hard to disagree with this criticism of VaR, but is it relevant in this case? Was the recent breaking of our credit and asset bubbles a totally unpredictable outlier?
  
  We believe that we live in a world where bubbles routinely form and where there are – in complete contrast to Nassim Taleb’s belief – some near certainties. One is that bubbles will break. Bernanke should not have said, “U.S. house prices have never declined,” thus implying that they never would. He should have said, “Never before has a three sigma, 1 in 100, U.S. housing bubble occurred, and be advised that all such analogous bubbles in other asset classes and in housing in other countries have always burst.” (Robert Shiller for the Fed! He would have said almost exactly that.) The bursting of the U.S. and U.K. housing bubbles, the profit margins, and the risk premium in global asset prices were all “near certainties.” This was a White Swan, a particularly White Swan. Taleb’s work will no doubt be correct when we have a genuine Black Swan, but this was most definitely not it. (Okay, Nassim. I can hear you thinking: this guy Grantham is a complete loser who has obviously missed my entire point.)

His recommendations..

• Re-introducing the Very First of Our 7-year Forecasts: Bullish Again!
  For many years, we used a 10-year forecast for asset class returns. In January 2002, we made our first 7-year forecast, dated December 31, 2001. We moved from 10 to 7 years because research proved that it was closer to the average time for financial series to mean revert. The data is shown in Table 1.
  
  As you can see, despite being called “perma bears,” we overestimated the returns for global equities, except for emerging, where we were more or less spot on. Government debt – not surprisingly, given our crisis – also moderately outperformed our estimate.
  
  Current Recommendations
  Slowly and carefully invest your cash reserves into global equities, preferring high quality U.S. blue chips and emerging market equities. Imputed 7-year returns are moderately above normal and much above the average of the last 15 years. But be prepared for a decline to new lows this year or next, for that would be the most likely historical pattern, as markets love to overcorrect on the downside after major bubbles. 600 or below on the S&P 500 would be a more typical low than the 750 we reached for one day.
  
  .... Emerging countries are, of course, a different story. They will probably recover more quickly, and will continue to grow at double (or better) the growth rate of developed countries.

Jeremy's commentary on the issue of Value Trap is excellent again. This is a must read section on page 8 and I will reproduce his first paragraph.

• The Year of the Value Trap
  Since time immemorial, the most successful value investors have been the bravest. The greatest advantage of value investing has always been that when your cheap stock goes down in price, it gets even cheaper and more attractive. This is the complete opposite of momentum stocks, which lose their momentum rating as they decline and hence become unattractive. But averaging down in value stocks can take lots of nerve and considerable ability in convincing anxious clients of the soundness of the strategy. For at least 60 years, those value investors who managed these problems and bought more of the stocks that had tumbled the most emerged with both the strongest performance and the most business success. (Of course, analytical skills also help, but let’s assume that these skills were distributed evenly between brave and nervous investors.) Major market declines in the past set up the best opportunities for brave value managers: the 50% declines of 1972-74 and 2000-02. Value investors in 1972 and 2000 were also able to buy value stocks at their biggest discounts to the general market at least since 1945. In addition, averaging down in those value stocks that fell the most eventually added substantially to an already strong return. Those value managers with the best analytical skills within this group became the few handfuls of super-successful investors.

I repeat what was posted in past posting Jeremy Grantham Joins The Bullish Camp!

• The Curse of the Value Manager
  
  We at GMO have a strong value bias, and our curse, therefore, like all value managers, is being too early. In 1998 we saw horribly overpriced stocks that at 21 times earnings equaled the two previous great bubbles of 1929 and 1965. Seeing this new “peak,” we were sellers far, far too early, only to watch it go to 35 times earnings! And as it went up, so many of our clients went with it, reminding us that career risk is really the only other thing that matters. The other side of the coin is that only sleepy value managers buy brilliantly cheap stocks: industrious, wide-awake value managers buy them when they are merely very nicely cheap, and suffer badly when they become – as they sometimes do – spectacularly cheap. I said as far back as 1999, while suffering from selling too soon, that my next big mistake would be buying too soon. This probably sounded ridiculous for someone who was regarded as a perma bear, but I meant it. With 14 years of an overpriced S&P, one feels like a perma bear just as I felt like a perma bull at the end of 13 years of underpriced markets from 1973-86. But that was long ago. Well, surprisingly, here we are again. Finally! On October 10 th we can say that, with the S&P at 900, stocks are cheap in the U.S. and cheaper still overseas. We will therefore be steady buyers at these prices. Not necessarily rapid buyers, in fact probably not, but steady buyers. But we have no illusions. Timing is difficult and is apparently not usually our skill set, although we got desperately and atypically lucky moving rapidly to underweight in emerging equities three months ago. That aside, we play the numbers. And we recognize the real possibilities of severe and typical overruns. We also recognize that the current crisis comes with possibly unique dangers of a global meltdown. We recognize, in short, that we are very probably buying too soon. Caveat emptor.

See past posting: Grantham Calls It "Cheapest In 20 Years"

Interview With GMO's Jeremy Grantham

On China's Plunging Imports

More comments from Prof. Michael Pettis on China's latest trade numbers.

• According to an article in today’s Xinhua:
  A sharp fall in imports and exports in January, which included a weeklong Spring Festival holiday, has both puzzled and alarmed economists. General Administration of Customs figures released yesterday showed exports plummeted 17.5 percent year-on-year, much sharper than the 2.8 percent fall in December.
  
  Imports fell even more dramatically, to 43.1 percent year-on-year. The combined foreign trade in January fell 29 percent year-on-year. Such a major decline in monthly foreign trade is rare in the 30 years of reform and opening up.
  
  …Last month, however, was an exception because it had one full week of holiday from January 26. The Chinese Lunar New Year is the most important festival for Chinese but usually it falls in February. So this year, January had five fewer working days than those in many of the previous years. If that is considered, the Customs said, exports actually rose 6.8 percent year-on-year in January. And compared with December, they increased 4.6 percent.

The following two passages were most interesting for me from his article, More terrible trade numbers from China

• The reality is that both exports and imports continue to contract at a rapid pace, and indicate that both foreign consumption and local consumption are in sharp decline. What worries me even more is a number that the Xinhua report, for some reason, did not bother to publish in their article on the trade data. China’s trade surplus for January was a mind-blowing $39.1 billion, just a smidgen under November’s all-time high of $40.1 billion (or about 25% higher, if we want to play the day-count game), and edging out December’s $39.0 billion for second place. That puts the trade surplus over the past four months $153.4 billion, well over half of all of last year’s record-smashing $297.5 billion trade surplus.
  
  I know I have written about this many times, but I want to say again what that means for the global imbalance. The world’s consumers are experiencing a sharp contraction in demand. That contraction has to be “shared out” among all of the world’s producers. The decline in Chinese exports means that Chinese producers are absorbing part of that contraction, but the bigger decline in its imports means that Chinese consumers are contributing an even greater amount to the contraction in demand. The result, with net Chinese consumption contracting by more than net Chinese production, is that non-Chinese producers must absorb more than 100% of the contraction in demand from non-Chinese consumers. It will be hard to convince them that this is fair.
  
  

William Hill Joins The Mad Rush For Cash Call!

The mad rush for rights issue!

Will there be enough money?

• William Hill joins rights issue rush
  Some of Britain's biggest companies, including Liberty International, the owner of the Lakeside shopping centre, and bookmaker William Hill, will announce rights issues to raise billions of pounds within the next few weeks.
  
  By Garry White
  Last Updated: 11:25PM GMT 14 Feb 2009
  
  The accelerating rush to tap investors for capital, which will also be joined by Premier Foods, the country's biggest food producer, will underline the growing need of major corporate names to repair their balance sheets as they brace themselves for a protracted downturn.
  
  The continuing flood of rights issues will also intensify the debate about the traditional pre-emption rights of existing investors to participate in new fundraisings.
  
  Premier Foods, which owns Hovis bread and the Mr Kipling cakes range, is drawing up plans to announce a £400m rights issue alongside its results. The company is also in talks to attract a cornerstone investor that would subscribe an additional sum of new equity on preferential terms. The prospective investor is understood to be a large US private equity fund.
  
  Premier is discussing the plan with institutional shareholders, some of which have said that they do not want to see a new investor subscribe to new equity on potentially better terms than they would receive.
  
  The debate about pre-emption rights has been inflamed since Barclays decided to raise billions of pounds from a group of Middle Eastern government-backed funds last year. Under the terms of that capital-raising, the new shareholders were issued tax-deductible securities which paid a coupon of 14pc. Legal & General Investment Management (LGIM), the City's largest institutional investor, is now understood to be calling for the resignation of Marcus Agius, the chairman of Barclays, following the controversial fundraising.
  
  Rio Tinto, the debt-laden mining group, added further fuel to the ire of City institutions last week when it agreed a deal with Chinalco, the state-controlled Chinese aluminium producer. The Association of British Insurers wrote to Rio Tinto chairman Paul Skinner before the announcement was made, but to no avail.
  
  Chinalco agreed to inject $19.5bn (£13.5bn) into Rio, $7.2bn via a convertible bond issue and the rest to purchase minority stakes in nine mines. Now major shareholders are calling for the deal to be scrapped and are trying to get the company to undertake a $10bn rights issue.
  
  William Hill is understood to be plotting a rights issue to raise about £200m, to be announced later this month. The rights issue is to be fully underwritten by Citigroup, and would form part of a £1.2bn refinancing designed to steer the group through the deepening recession.
  
  Among the other companies examining raising capital is CRH, the Irish industrials group, which is understood to be examining a rights issue to raise about €1bn (£894m).
  
  The first FTSE 100 group to unveil a rights issue in 2009 was mining group Xstrata. However, this deal had its fair share of controversy too. The company did not ignore pre-emption rights, but a deal with its largest shareholder raised concerns about related-party transactions.
  
  The company announced a two-for-one rights issue raising £4.1bn. Part of the deal involved Xstrata buying a coal mine from Glencore, the Swiss commodities trader and Xstrata's largest shareholder with a 35pc stake, for $2bn.
  
  One investor called the transaction a "cheap loan to Glencore" adding that "if these were normal times, we'd vote it down and ask them to come back with a proper rights issue. But we don't have much choice."
  
  One sector where rights issues seemed inevitable was property. This has been caused by the tumbling value of commercial property and the high degree of leverage built up when the property market was soaring.
  
  First off the block was Workspace group, which provides serviced offices throughout London. The amount raised was a relatively small £87m via a five-for-one rights issue to restore its balance sheet and cut debt. Workspace was the first UK real estate investment trust (REIT) to concede such a cash call, but it was closely followed by retail property group Hammerson, which needed to shore up its balance sheet to stop it breaking banking covenants.
  
  The company, whose portfolio is dominated by shopping centres and retail parks, offered shareholders seven new shares for every five held, at a 62pc discount.
  
  Last Thursday, British Land became the latest large property company to tap investors. The company raised £740m to reduce debt but also to exploit buying opportunities as commercial property values plunge amid the economic downturn.
  
  Both Liberty International and Land Securities, the UK's largest commercial property group, are predicted to follow with fundraisings of their own.
  
  Other groups that have raised cash through rights issues in 2009 include insurers Beazley and Catlin, as well as Cookson.
  
  As the global economic turmoil continues companies are trying to be more creative in the way they raise cash. As Barclays and Rio Tinto's example shows, the route to new funds can be paved with difficulty and controversy. One thing you can be sure of, however, is that the next few weeks will see a flood of rights issues as broken balance sheets receive some major surgery.
  

The Potential Global Meltdown

More comments on the woes of Russia and its potential worldwide threat.

Published on UK Telegraph.

Failure to save East Europe will lead to worldwide meltdown

• By Ambrose Evans-Pritchard
  Last Updated: 2:05AM GMT 15 Feb 2009
  
  If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung.
  
  Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP.
  
  "A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.
  
  The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a "monetary Stalingrad" in the East.
  
  Mr Pröll tried to drum up support for his rescue package from EU finance ministers in Brussels last week. The idea was scotched by Germany's Peer Steinbrück. Not our problem, he said. We'll see about that.
  
  Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut.
  
  Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the rouble.
  
  "This is the largest run on a currency in history," said Mr Jen.
  
  In Poland, 60pc of mortgages are in Swiss francs. The zloty has just halved against the franc. Hungary, the Balkans, the Baltics, and Ukraine are all suffering variants of this story. As an act of collective folly – by lenders and borrowers – it matches America's sub-prime debacle. There is a crucial difference, however. European banks are on the hook for both. US banks are not.
  
  Almost all East bloc debts are owed to West Europe, especially Austrian, Swedish, Greek, Italian, and Belgian banks. En plus, Europeans account for an astonishing 74pc of the entire $4.9 trillion portfolio of loans to emerging markets.
  
  They are five times more exposed to this latest bust than American or Japanese banks, and they are 50pc more leveraged (IMF data).
  
  Spain is up to its neck in Latin America, which has belatedly joined the slump (Mexico's car output fell 51pc in January, and Brazil lost 650,000 jobs in one month). Britain and Switzerland are up to their necks in Asia.
  
  Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.
  
  Under a "Taylor Rule" analysis, the European Central Bank already needs to cut rates to zero and then purchase bonds and Pfandbriefe on a huge scale. It is constrained by geopolitics – a German-Dutch veto – and the Maastricht Treaty.
  
  But I digress. It is East Europe that is blowing up right now. Erik Berglof, EBRD's chief economist, told me the region may need €400bn in help to cover loans and prop up the credit system.
  
  Europe's governments are making matters worse. Some are pressuring their banks to pull back, undercutting subsidiaries in East Europe. Athens has ordered Greek banks to pull out of the Balkans.
  
  The sums needed are beyond the limits of the IMF, which has already bailed out Hungary, Ukraine, Latvia, Belarus, Iceland, and Pakistan – and Turkey next – and is fast exhausting its own $200bn (€155bn) reserve. We are nearing the point where the IMF may have to print money for the world, using arcane powers to issue Special Drawing Rights.
  
  Its $16bn rescue of Ukraine has unravelled. The country – facing a 12pc contraction in GDP after the collapse of steel prices – is hurtling towards default, leaving Unicredit, Raffeisen and ING in the lurch. Pakistan wants another $7.6bn. Latvia's central bank governor has declared his economy "clinically dead" after it shrank 10.5pc in the fourth quarter. Protesters have smashed the treasury and stormed parliament.
  
  "This is much worse than the East Asia crisis in the 1990s," said Lars Christensen, at Danske Bank.
  
  "There are accidents waiting to happen across the region, but the EU institutions don't have any framework for dealing with this. The day they decide not to save one of these one countries will be the trigger for a massive crisis with contagion spreading into the EU."
  
  Europe is already in deeper trouble than the ECB or EU leaders ever expected. Germany contracted at an annual rate of 8.4pc in the fourth quarter.
  
  If Deutsche Bank is correct, the economy will have shrunk by nearly 9pc before the end of this year. This is the sort of level that stokes popular revolt.
  
  The implications are obvious. Berlin is not going to rescue Ireland, Spain, Greece and Portugal as the collapse of their credit bubbles leads to rising defaults, or rescue Italy by accepting plans for EU "union bonds" should the debt markets take fright at the rocketing trajectory of Italy's public debt (hitting 112pc of GDP next year, just revised up from 101pc – big change), or rescue Austria from its Habsburg adventurism.
  
  So we watch and wait as the lethal brush fires move closer.
  
  If one spark jumps across the eurozone line, we will have global systemic crisis within days. Are the firemen ready?

Other postings : Russia Crisis Worsens As Ruble Tumbles , Russia Crisis Worsens and Another Russian Crisis?

Other postings: Europe Is In Its Deepest Recesssion!

Trump Without Trump!!

Donald Trump has walked out of Trump Entertainment!

And according to Bloomberg news bankruptcy is possible: Trump Quits Trump Entertainment, Bankruptcy Possible

On Businessweek, Chris Palmeri highlights Donald Trump's official statement. Trump Steps Down from Casino Empire.

Yes, Donald considers his investment in Trump Entertainment Resorts as worthless!

• “Based on the fact that I am not involved in the management of Trump Entertainment Resorts and that I strongly disagree with the bondholders’ decisions and actions, past and present, with respect to the company, and despite the fact that it currently has the right to use the name Trump for limited purposes, I have decided to resign from the Board of Directors. Moreover, the company has represented for quite some time substantially less than 1% of my net worth, and my investment in it is worthless to me now. I want to leave what I believe will become a highly volatile situation and focus on the many other opportunities that are available to me in these very troubled but exciting times.”
  
  “During the past number of years, in exercising their oversight authority, the bondholder’s representatives have made a series of bad decisions and encouraged wasteful spending, which has led to severe problems within the company. The company is no longer operated to a standard consistent with other of my holdings, in particular, my real estate portfolio, and after dealing with bondholders of the company for an extended period of time, I sense no indication that this will change. I no longer wish to remain a member of the Board of Directors of a company that is controlled by representatives of the bondholders. My daughter, Ivanka, has chosen to resign as well. I will have certain ongoing contractual relationships with the company for a time, which I intend to abide by, and will monitor the situation and protect my rights as required.
  
  “While The Trump Organization grows and flourishes, Trump Entertainment Resorts, of which I am a stockholder, has languished. The Trump Organization’s portfolio of residential, commercial, hotel, and golf properties has expanded all over the world, while Trump Entertainment Resorts has yet to diversify outside of Atlantic City. I have watched the collapse in enterprise value of the Atlantic City Tropicana, where bondholders’ values have been reduced to almost nothing. I do not want to take part in a similar fiasco here.
  
  “Some time ago, I made an offer to buy the company in the hopes that I might be able to reverse its fortunes, but the bondholders turned me down. Now I will study and watch as the horrible and outrageous fees being paid to lawyers and consultants will suck the blood from the company. This internal turmoil will be compounded by dramatically deteriorating revenues across the board for casino companies in Atlantic City as the market tanks and competition from local markets grows. Again, look what has happened at the Tropicana.
  
  “These are very tough times in Atlantic City. Almost every company is in serious financial trouble. Despite this, I will be watching closely and at some point in the future, I hope to return. I have many friends in Atlantic City and have great respect for the Casino Control Commission and other representatives of the State of New Jersey. Even though I am relinquishing my position on the Board of Directors, I remain very concerned about Trump Entertainment Resorts. I will give strong consideration to saving what was once a great casino hotel operation that bore my name. But unfortunately it is clear that I will have to work from the outside — the existing bondholder control will not permit a brighter future.”

The troubles in Trump Entertainment Resorts had been highlighted before in past blog posting here: Betting On The Casino Industry?

Hartalega Posts 119% Jump In Profit

Caught this article on Star Business: Hartalega posts 119% jump in profit

Naturally this stirred my interest.

This is what Star reported.

• HARTALEGA Holdings Bhd’s net profit surged 119.5% to RM22.23mil for the third quarter ended Dec 31 2008 from RM10.13mil in previous corresponding period.
  
  In a statement to Bursa Malaysia yesterday, the rubber glove maker says the higher profit was due to improvements in the production process and favourable exchange rates as well as contribution from its new, advanced glove production lines, which have a higher capacity.
  
  Revenue jumped 65.4% to RM119.06mil from RM72mil previously, while earnings per share (EPS) soared 119.4% to 9.17sen from 4.18sen.
  
  The company says it has a positive outlook for the year thanks to the lower natural and synthetic latex price and favourable exchange rates.
  
  “We expect the strong demand to continue into the (fourth quarter) despite the economic downturn,” it says.
  
  The group says it is optimistic of achieving its forecast net profit of RM55.46mil for the financial year ending March 31, 2009.

Am I impressed?

No, I am not too impressed.

I do have my reasons and here are my flawed reasoning.

Comparison made with the previous corresponding period last year is rather meaningless for me because Hartalega was only listed back in April 2008. So I am hardly impressed with Star Business's header for this news article.

Last quarter, Hartalega announced a net earnings of 18.3 million. See: Quarterly rpt on consolidated results for the financial period ended 30/9/2008. So this would equate to an improvement of around 21%. Which is fairly impressive but it pales in comparison to what the news article is suggesting.

Obviously many would argue against q-q comparisons and given the fact that Hartalega was only listed last April, I for one, feel that it's way too early to pass judgement on Hartalega's earnings performances.

Balance sheet looks rather slightly below average too for me.

MTouche: Talk Is Simply So Cheap, yes?

Talk is always cheap because supply always exceeds demand!

Tell me if there is no truth in that statement.

Posted last year: Update On MTouche

Let me repeat what was posted in that posting.

Made the following two blog postings on Mtouche back in February 2008, MTouche and MTouche Reports Its Quarterly Earnings!

What we had was a stock whose stock price was falling off the cliff and the management came out in the press defending it's poor 2007 performance.

First artice was published on Star Biz on Feb 9th 2008, After a tough year and another article was featured on the Edge a couple of days later on Feb 11th 2008, 11 Feb 2008: Corporate: Worst is over, says mTouche

Some of the points mentioned by the boss then was:

• In defence of 2007
  
  No doubt, 2007 was a challenging year for the company. Up to the nine months to September 2007, the company recorded net profit of RM5.4mil.
  
  As indicated in its announcement to Bursa Malaysia, the poor results were largely due to higher expenses from its new subsidiaries, provision of doubtful debts and higher depreciation and amortisation of intellectual property.

and

• Yet, business-wise, Goh, who is also the CEO, describes 2007 as a "bad" and "difficult" year. That's no surprise. For one, it has yet to convince Japanese mobile phone companies to buy M-Bit. The same could be said of the company's stock price. From an all-time high of RM4.18 on Nov 15, 2006, investors sold down mTouche's shares to as little as 47 sen late last month, after earnings disappointed most of last year. Its recent rights issue was about 9% undersubscribed despite attracting excessive applications. It remains to be seen if 4Q2007 numbers — tentatively slated for release on Feb 15 — will be any different. Last Monday, the shares closed at 58 sen.
  
  "Last year was a bad year. Some acquisitions did not do as well as expected and I think we were also punished for over-expanding… We streamlined operations last year, took in new people, got rid of unhealthy parts that are not strategic to our growth going forward," Goh says.

Last night, MTouche posted losses totalling 36 million! ( see temp link on Bursa website: Quarterly rpt on consolidated results for the financial period ended 31/12/2008 )

Well what happened again?

What happened to the promises made last February? What happened to Worst is over, says mTouche ?

And this is what the company has to say..

For the financial quarter ended 31 December 2008, the Group recorded a LBT of
approximately of RM36.2 million as compared to PBT of RM0.3 million from the previous quarter. The LBT for the current quarter is due to the expenses as detailed below which affected the overall results of the Group:

v) provisions for impairment of intangible assets and goodwill amounting to approximately RM18.2 million;
vi) provisions for impairment of investments amounting to approximately RM5.6 million;
vii) provisions of doubtful debts amounting to approximately RM2.4 million made in compliance with the Group’s accounting policy and
viii) share of loss from its associate company namely GMO Limited of approximately RM6.3 million.

Current Destruction Of Global Wealth

Do you know that a trillion seconds would equate to about 31,688 years 269 days 17 hours 34 minutes 25 seconds? And this includes leap years.

So how about 20 trillion seconds?

Now imagine 20 trillion dollars!

And keeping it real - especially those who loves stats - the following article should be read, Destruction of global wealth tops $20trn

• By Karen Remo-Listana on Wednesday, February 11, 2009
  
  Top international investment banks have confirmed that the world is now experiencing the worst global financial crisis since the Great Depression with the global wealth losses amounting to $20 trillion (Dh73.4trn).
  
  Morgan Stanley, HSBC and The Bank of New York Mellon Corporation (BNYM) unanimously say that the credit crisis has led to the biggest shock to world wealth since the Second World War.
  
  The Great Depression was the largest and most important economic depression in modern history and is used in the 21st century as an example of how far the world's economy can fall. And like the current financial crisis, the Great Depression originated in the United States.
  
  Historians most often use as a starting date the stock market crash on October 29, 1929, known as Black Tuesday. The depression had devastating effects in virtually every country, rich or poor. International trade plunged by half to two-thirds, as did personal income, tax revenue, prices and profits. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was halted in many countries.
  
  But the current crisis is more than just a depression, says Richard Hoey, chief economist of BNYM. "We expect a severe global recession rather than a depression," he said in a statement sent to Emirates Business.
  
  "The global economy was in freefall in the fourth quarter of 2008 and this should continue in the early months of 2009.We agree with the view this is the greatest global financial crisis since the Great Depression," he added.
  
  According to Morgan Stanley's estimates, the result of the current financial crisis has been a destruction of world wealth, which since mid 2007 has amounted to approximately $20trn (or down 16 per cent from its peak, which has been estimated at $125trn by the United Nations).
  
  "This is the largest absolute and percentage decline in world wealth since the physical destruction of the Second World War," said the New York-based bank holding company.
  
  It added that while the US has seen the biggest shock to housing wealth, most other countries now also have negative trends in this key element of global wealth.
  
  In addition, the US dollar value of local equity indices fell by more than the S&P 500 in almost all cases in 2008. This shock to wealth is reinforcing the negative impact from the breakdown of the normal functioning of the financial system on household and corporate confidence. Estimates of the wealth effect on consumption in the US suggest an approximate three to five per cent decline in consumption for every $1 of wealth lost.
  
  Morgan Stanley said that the $12.5trn loss of US household wealth is therefore generating an estimated $375bn-$625bn drain on consumption spending, or a shock to consumption of 2.6 per cent to 4.3 per cent of US GDP.
  This is in addition to the business cycle effects on US GDP of loss of income due to rising unemployment and the weakness of global demand.
  
  The problem, it added, is not only the destruction of wealth but also the leverage, which exists against key elements of that wealth – particularly housing – that retains its nominal value. This threatens to create debt and deleveraging spiral.
  
  The leverage of the US household sector is at $14.6trn at the end of third quarter of 2008 compared to $14.1trn at the end of third quarter of 2007. As a ratio of net worth, Morgan Stanley estimates that leverage for the household sector by the end of fourth quarter was around 28 per cent, up almost 10 percentage points since the 2001-2002 recession.
  
  Edward Marlow, Managing Director, Principal Investments, HSBC UK, said that unlike the recession in the mid-1970s and the early 1980s, which is associated with inflation, the problem is now associated with deflation largely because the supply of credit is drying up.
  
  "HSBC's outlook is that global GDP will shrink in 2009 – making it the worst global downturn in the post war period," he told the Commonwealth in Dubai Summit. "The credit crunch is a global phenomena that started in the US and the UK and other over-borrowed countries and economies. All countries are now in trouble especially emerging markets, which have been dependent on foreign borrowing."
  
  And while HSBC forecasts a 3.1 per cent growth in emerging markets especially in China and India, he said bank lending continues to drop, cross border capital continues to diminish, capital injection is now divert funds away from emerging markets. "Governments are now going to control capital allocation for the foreseeable future," Marlow added.
  
  The problem, says Hoey, is not just concentrated on the supply of credit as the demand for borrowing for new spending (as opposed to refinancing) is also likely to be weak. He said the major erosion in consumer net worth should limit the demand for new consumer debt while in the corporate sector, excess capacity should tend to restrain capital spending.
  
  Companies in the region have also seen the ripple effect of the credit crunch. According to RAKBank – one of the few in the UAE that continues to lend – liquidity shortage is just one of the faces of the story.
  
  "There is liquidity shortage – it's a common knowledge," said Graham Honeybill, the bank's general manager. "The problem occurred last year when customers simply didn't want to borrow. What drives borrowing in this market is confidence and when you think that you are going to lose your job then you are not going to borrow. Because of that, a lot of banks experienced reduced demand."
  
  Dubai Group – a conglomerate of banking, investments and insurance companies – on the other hand sees "a lot" of firms looking for money, particularly because the regional and international markets are in a credit contraction mode.
  
  "I cannot give you an exact number but the number of companies looking for money is no different now than it was a year or two years ago. Just by then it was growth money now it is to replace credit contraction," Tom Volpe, CEO of Dubai Group.
  
  Hoey of BNYM said it is critical that policy-makers have a correct diagnosis of the severity of the financial crisis and should continue to be proactive in responding aggressively to it.
  
  This contrasts with the experience of the 1930s and the Japanese stagnation after the Nikkei bubble.
  
  "The good news is that policy is powerful, policymakers have a correct diagnosis of the situation and their ability and willingness to be proactive in adopting stimulative monetary and fiscal policies is quite high," he said.
  
  "The bad news is that economic declines linked to systemic banking crises and house price busts have a history of being prolonged, so a very aggressive policy response is required in order to achieve a long recession rather than a more prolonged decline."
  
  BNYM thus expects an economic decline lasting roughly a year-and-a-half with economic activity lower in 2009 than in 2008 in nearly all developed countries and the overall global economy should be roughly flat in 2009, well below potential trend growth.
  
  And the result is a substantial rise in unemployment rates worldwide and rising protectionist pressures. It expects the recession trough to occur close to mid-2009 in response to monetary ease, fiscal stimulus and an end to inventory liquidation.
  
  However, the end of actual economic decline is unlikely to be regarded as the beginning of prosperity, Hoey said.
  
  "Instead, we expect a 'post-recession pre-prosperity phase' in late 2009 and in 2010. Whereas recessions dominated mostly by the inventory cycle are likely to have a V-shaped bottom, recessions dominated by a burst bubble of asset prices and systemic financial crises are not," he added.
  
  "The end of economic decline by mid-2009 is likely to be followed by several quarters of subpar recovery, and then by a somewhat better recovery in 2010."

20 trillion is simply godzilla size!

Europe Is In Its Deepest Recession!

Posted on cnbc.

• The euro zone economy saw its deepest contraction on record in the fourth quarter of 2008, data showed on Friday, boosting pressure on the European Central Bank to cut interest rates by 50 basis points in three weeks.
  
  Gross domestic product in the 15 countries using the euro in the last three months of 2008 shrank 1.5 percent against the previous quarter for a 1.2 percent fall year-on-year, the European Union statistics office Eurostat said on Friday.
  
  "Now it's official: the euro zone economy is in its deepest recession since the end of the Second World War," said Christoph Weil, economist at Commerzbank.
  
  "The collapse of exports and a sharp fall in investments were most probably the main reasons for the slump," he said.
  
  Economists polled by Reuters had expected a 1.3 percent quarterly drop after 0.2 percent contractions in the second and third quarters, and a 1.1 percent year-on-year decline.
  
  "This Friday the 13th is living up to its name. Eurostat has just released 'scary' GDP numbers," said Martin van Vliet, economist at ING.
  
  "The best we can hope is that the fourth quarter marked the worst quarter in terms of the pace of contraction," he said.

read rest of the news here: http://www.cnbc.com/id/29176693

See also Europe's Economy Shrinks Most Since 1995 as ECB Considers Deeper Rate Cuts

• Feb. 13 (Bloomberg) -- Europe’s economy contracted the most in at least 13 years in the fourth quarter, compounding pressure on the European Central Bank to reduce interest rates to the lowest ever next month.
  
  Gross domestic product in the euro region declined 1.5 percent from the previous three months, the European Union’s statistics office in Luxembourg said today. That was more than the 1.3 percent economists expected and the most since euro-area GDP records began in 1995. From a year earlier, GDP fell 1.2 percent in the fourth quarter, the only full-year drop on record.
  
  With the first recession in the euro’s 10-year history deepening, companies from carmaker Renault SA to software-maker SAP AG are cutting jobs and scaling back production. Six ECB policy makers, including President Jean-Claude Trichet, have said the central bank may cut rates to a record low from the current 2 percent and consider other measures to stimulate growth.
  
  “The news is dire,” said Kenneth Wattret, senior economist at BNP Paribas SA in London who correctly forecast today’s data. “Compared to the early 1990s recession, which was painful, this is twice as big.”
  
  The economies of both Germany and France, the two largest in the euro region, shrank by the most in more than two decades in the latest quarter. Spain, Italy, the Netherlands and Austria also contracted in the final three months of last year, national statistics offices reported. The U.K. economy, the euro area’s biggest trading partner, shrank 1.5 percent in the quarter.
  
  ‘More Radical’
  
  For the euro region, “we see at least another three quarters of contraction, and we should brace for a huge rise in unemployment,” BNP’s Wattret said. “The ECB will cut by at least half a point next month and may have to consider something even more radical.”
  
  The euro interbank offered rate, or Euribor, for three-month loans fell to a record low on speculation the ECB will reduce its key rate next month. The rate dropped two basis points to 1.94 percent today, the European Banking Federation said.
  
  That is the lowest since the euro’s introduction in 1999 and down from a record 5.39 percent on Oct. 10. The three-month euro overnight index average rate, which shows traders’ expectations for the central bank’s key rate, was at 0.98 percent, down from 1.2 percent at the end of January and 1.73 percent on Dec. 31.
  
  ECB board members Lucas Papademos, Juergen Stark and Jose Manuel Gonzalez Paramo as well as Spanish central bank Governor Angel Fernandez Ordonez and Belgian Governor Guy Quaden said this week that the Frankfurt-based bank may cut rates next month.
  
  ‘Difficult Year’
  
  “The latest data and survey indicators point to a substantial decline in real gross domestic product in the fourth quarter,” ECB Vice President Papademos said on Feb. 11. “Stormier weather may still lie ahead,” and “a further easing of monetary policy may be appropriate” in March.
  
  The economic slump may leave European policy makers under pressure at this weekend’s meeting in Rome of finance ministers and central bankers from the Group of Seven industrial nations. U.S. Treasury Secretary Timothy Geithner plans to encourage colleagues to take “bold actions” to reverse the economic and financial crisis, according to a U.S. Treasury official, and the Bank of England has announced plans to start buying commercial paper.
  
  The contraction in Europe “is worse than the U.S.,” said Jim O’Neill, chief economist at Goldman Sachs Group Inc. in London. “Given the shock started in the U.S., that’s quite an achievement.”
  
  The U.S. economy contracted 1 percent in the fourth quarter from the prior three months, when it shrank 0.1 percent, according to the EU statistics office. From the year-earlier quarter, U.S. GDP declined 0.2 percent.
  
  Economic Slump
  
  In Europe, demand for everything from software to cars is withering. SAP, the world’s biggest maker of business-management software, said on Jan. 28 that it will slash more than 3,000 jobs and freeze salaries this year as the economic slump hurts demand. European car sales plunged 27 percent in January to the lowest level in two decades, the European Automobile Manufacturers’ Association said in Brussels today.
  
  Infineon Technologies AG Chief Executive Officer Peter Bauer said yesterday that Europe’s second-largest maker of semiconductors faces a “difficult year” filled with “many tough challenges.”
  
  The global economy will grow the least since World War II this year as more than $2 trillion of losses from the financial crisis cripple banks, the International Monetary Fund predicted Jan. 28. The euro region will contract 2 percent in 2009, the IMF forecast. Today’s data showed the euro-area economy expanded 0.7 percent last year, down from 2.7 percent in 2007.
  
  The ECB in January cut the benchmark rate to 2 percent, the lowest in the bank’s 10-year history, and kept the rate unchanged on Feb. 5. The next decision is due March 5.
  
  “The economy took a breathtaking turn for the worse at the end of last year,” said Nick Kounis, an economist at Fortis Bank NV in Amsterdam. “The figures so far add to the already strong case for the ECB to do more.”
  
  

A Look At CSC Steel Latest Quarterly Earnings

CSC Steel announced its earnings tonight.

It suffered massive losses!

However, one really should not be to shocked given the massive plunge in steel prices and its demand. And as suggested in the posting More Views On CSC Steel, losses could be expected.

What interest me was what CSC Steel has to say in its earnings note.

• B1. Review of performance
  The Group achieved revenue and loss before tax for the current quarter of RM205.1 million and RM58.5 million respectively. This represents a reduction of RM94.0 million or 31.4% lower in revenue than that of its corresponding quarter. As a result of the revenue contraction, profit before tax of RM16.3 million in the corresponding quarter was reduced by RM74.9 million or 458.3% lower to a loss before tax of RM58.5 million.
  
  Despite the drastic drop in demand and selling prices of our steel products as a result of the global financial crisis and the inventory write-downs of RM58.3 million, the Group still achieved profit before tax of RM52.0 million for the whole year.
  
  B2. Variation of results against preceding quarter
  The Group’s revenue has decreased drastically by 47.3%, from RM389.2 million in the preceding quarter to RM205.1 million in this quarter. The decrease in revenue is due to sales volume contraction and lower selling prices of our steel products.
  
  The decrease in revenue together with inventories write-down have resulted Group’s profit before tax to reduce by 305.5% from RM28.5 million in the preceding quarter to a loss of RM58.5 million this quarter.
  
  B3. Current year prospects
  The credit crisis triggered in the United States since September 2008 has badly hit the confidence of consumers and world economy, which has resulted in steel prices in the fourth quarter 2008 dropping drastically after it reached historical high in third quarter 2008. As the demand for steel products was also shrinking significantly, most of the steel manufacturers worldwide have suffered substantial losses.
  
  However, we foresee that the steel prices and demand may improve in view of the decrease in oil and raw material prices, the bailout plans for restructuring the financial market and economic stimulus packages instituted. The steel market in China has already shown signs of improvement lately.
  
  Demand for steel in China has increased and this has brought about increases in steel prices. If the supply of steel could be controlled to match demand, the global steel market may stage a rebound in the near future. Based on the Group’s performance since early 2009, the Group is optimistic of achieving profitability for first quarter 2009, barring unforeseen circumstances. The rest of the year remains unpredictable.

It's balance sheet is commendable. Really. Do please have a look yourself. :P

However what I did not like about CSC remains.

Back in November, I wrote the following: Regarding CSC Steel'sCurrent Earnings And Its Investments In Marketable Securities

Yes another of them local corporate who dabbles too much! (see Pintaras Jaya Announced Massive Losses In Their 'Investments' as another example!)

The following is from today's earnings notes.


And CSC continued to be overly aggressive with these marketable securities!

It sold some 19.5 million worth of securities and purchased some 19.3 million worth of securities!

Yup, holy cow!

Does CSC Steel management reckon that they are super duper investor/traders or what????

What is happening? Arghhhhhhhhhhhh!!!!

Now what I am failing to understand is that CSC now states its marketable securities now has a market cost of 46.12 million with a market value of 47.57 million. (It has paper profits what! So what on earth am I mumbling about?) With a total loss of only 89 thousand.

Now look at what's stated in its quarterly earnings last November, Quarterly rpt on consolidated results for the financial period ended 30/9/2008.

Now compare this screen shot taken from CSC quarterly earnings notes in November

with this.

The market cost of these securities went down from 56.16 million (market value of 57.3 million) to a market cost of 46.12 million (market value of 47.57 million).

And CSC achieved this with a loss of 89 thousand!

WOW!

CSC Steel management must have super duper hindsight and super duper trading skills yes?

How?

My DeaRest Valentine

I Love You Too!

:D

Different Way To Describe Plunging Export Numbers

LOL!

You be the judge, yes? :D

Yesterday I posted the following Plunging Export Numbers!. It was a simple news wire from Dow Jones.

On today's Star Business, we get Malaysia's trade surplus widens

• Friday February 13, 2009
  Malaysia's trade surplus widens
  By LEE KIAN SEONG and RACHAEL KAM
  
  It grew 24% to RM11.67b in December on higher trade value
  
  KUALA LUMPUR: Malaysia recorded a trade surplus of RM11.67bil in December, a 24% increase from the same month in 2007, thanks to higher trade value.
  
  However, the total trade in December was valued at RM80.51bil, a fall of 18.6% from December 2007.
  
  International Trade and Industry Deputy Minister Datuk Liew Viu Keong said Malaysia’s total trade in 2008 was valued at RM1.185 trillion, an increase of 6.8% from 2007, surpassing the RM1 trillion mark for the third consecutive year.
  
  “Total exports last year rose by 9.6% to RM663.51bil, while imports increased by 3.3% to RM521.5bil, resulting in a total trade surplus of RM142.01bil for the whole year,” he told a media conference yesterday.
  
  
  He said the performance was precipitated by a 16% export growth in the first nine months and the decline of 18.3% in the last quarter last year.
  
  “Malaysia’s exports contracted 14.9% to RM46.09bil in December last year compared with the same month in 2007. It was the weakest recorded for the year due to the contagion effect from the global financial crisis,” he said.
  
  On a month-on-month basis, exports declined by 11% from November, while imports were lower by 14.5%.
  
  On a year-on-year basis, liquefied natural gas (LNG), machinery, appliances and parts, transport equipment, non-metallic mineral products and jewellery registered increase in exports in December.
  
  The major exported products in December included electrical and electronic (E&E) products (36.9%), LNG (11.2%), palm oil (7.7%), chemicals and chemical products (5.2%), crude petroleum (3.9%), machinery, appliances and parts (3.7%), refined petroleum products (3.6%), wood products (2.8%), manufactures of metal (2.6%) and optical and scientific equipment (2.2%).
  
  Exports to Japan recorded a 53.9% growth to RM8.34bil in December due to the higher exports of LNG, while exports to the US totalled RM5.5bil compared with RM7.88bil in December 2007 mainly due to the decline in exports of E&E products.
  
  Meanwhile, exports to China amounted to RM3.68bil compared with RM5.24bil in December 2007, attributed mainly to lower exports of E&E products, palm oil, crude rubber, refined petroleum products, rubber products and crude petroleum.
  
  Total imports in December fell 23.1% to RM34.42bil from the same month in 2007.
  
  Liew said industries were looking for positive outcomes from the various economic stimulus packages introduced in major economies after the first three months of 2009.
  
  “Industries are taking various measures to reduce operational and production costs, improve efficiency and productivity while intensifying promotional activities to seek new export opportunities in niche areas,” he said.
  
  He urged Malaysian businesses to allocate their resources carefully and continue to invest in promotion and marketing initiatives to sustain visibility as well as the confidence of their clientele.
  

Special One TV

I am a huge, huge fan! :D

This week's is really special. Arse-SHAVEN!

Plunging Export Numbers!

Caught this on Dow Jones.

Malaysia December Exports Plunge The Most In 7 Years

• KUALA LUMPUR (Dow Jones)--Malaysia's exports slumped the most in seven years in December, as the global economic downturn curbed demand for the country's key products.
  
  Economists say exports will likely continue to fall in the first quarter of this year, hurting the trade-driven economy.
  
  "The numbers just went off the cliff," said David Cohen, director of Action Economics in Singapore.
  
  Malaysia's exports fell 14.9% to MYR46.09 billion ($12.79 billion) in December from a year earlier, worse than market expectations, due to lower shipments of electrical and electronics products and chemical products, data released Thursday showed.
  
  The contraction was the most severe since September 2001, when exports plunged 21%.
  
  Imports fell 23.1% on year to MYR34.42 billion, sharply weaker than MYR40.28 billion in November, the Ministry of Trade & Industry said in a statement.
  
  The trade surplus in December, however, rose to MYR11.67 billion from MYR11.49 billion the month before.
  
  The median forecasts of 12 economists polled by Dow Jones Newswires had called for a 9.0% contraction in December exports, a 11.9% fall in imports and a trade surplus of MYR9.6 billion.
  
  Cohen said the sharp slowdown wasn't a complete surprise. "The pattern in Malaysia follows that in the rest of the region and reflects the collapse in global demand," he said.
  
  He said demand and trade will not likely recover in the near term and this will affect the country's growth rate.
  
  "The economy will do well if it manages between 0% and 1% growth this year," he said.
  
  Standard Chartered economist Alvin Liew said exports from Malaysia would likely "suffer" this year from declining demand for manufactured goods such as electronics and falling commodities such as crude petroleum and palm oil.
  
  "We project Malaysia exports will likely contract by 11.9% in 2009," Liew said, noting that the last time exports contracted by such a magnitude was in 2001, by 10.4%.
  
  On month, exports declined 11% in December while imports were lower by 14.5%.
  
  Shipments of electrical and electronics goods, the country's biggest export, fell 25.6% on year to MYR17.0 billion.
  
  Chemical and chemical products exports dropped 28% to MYR2.40 billion while palm oil exports eased 6.1% to MYR3.55 billion.
  
  For the full year, Malaysia' exports rose 9.6% to MYR663.51 billion, while imports grew 3.3% to MYR521.5 billion.
  
  Liew said Malaysia's exports fared better than regional counterparts like Singapore largely thanks to the huge commodities boom in the first half of last year.

Performance Of Gold During Recession

I was reading Robert Prechter's editorials on Elloitwave.com when I came upon this page: Deflation gold relationship.

The ending passage caught my attention.

• The research in Prechter's March 2008 Theorist (contact customer service for reprints) shows that even after Congress created the central bank, no one made money holding gold in a recession or depression for two generations (see data below).

No one made money holding gold in a recession or depression for two generations???

WOW!

• In 1970, things changed dramatically. Investors lost interest in stocks and for a decade preferred to own gold instead. The same change occurred again in 2001. But, as we will see, recession had nothing to do with either of these periods of explosive price gain in precious metals.
  
  To understand the deflation gold relationship, the time period one studies can make a huge difference. If we were to show the entire record from 1792, gold would show almost no movement on average during economic contractions or deflation. If we only showed 1969 to the present, it would show much more fluctuation. To give a