Saturday, October 28, 2006

What's wrong with my Sugar Pie Honey Bunch?

I said the following in my earlier post:

Meanwhile... Sugar closed at 2.80... which means Sugar is now worth closed to 280 million ringgit. (277 mil to be precise!)

What's so wrong with that?



That's losses since fy 2001.

2. Any improvement lately?

3. Cash piggy bank.

4. How about this?


What do you think of that Petronas story now?

And oh... how high should Sugar Pie Honey Bunch fly?



or 0.50?

Regarding WCT Land again.

Previous posting on WCT Land can be found here

Just received a comment made by Annon to John. And since the original posting is buried deep in the blog, I thought I reproduce the blog posting and all its replies again.


  • Would be very much appreciate if you could share your opinions, good or bad, on WCTLAND.

WCT Land is the property arm of WCT Enginerring. It was listed at end 2004 via the reverse takeover of Bescorp Industries.

And under part of the takeover exercise, some loan stocks were issued. ( see
this announcement ).

The issue to note is the straight conversion (no cash involved) of 1 loan stock into 2 new ordinary shares upon expiry (do note, there's an option to convert early but the condition isn't as attractive. These loan stocks has a 5-year maturity and expires in 2009. Currently there are 120 million loan stock shares and 321.900 million ordinary shares of WCT Land. And depending on your personal investing strategy, do not discount the dilution effects caused by the loan stocks. Meaning to say, if you are a shorter term investor, then this issue is not going to effect you that much but if you believe that WCT Land has a great prospect in the future and plan to buy and hold for a couple of years, then you should be aware that your earnings could be drastically diluted when these loan stocks are converted into ordinary share.

WCT Land's main development project and its main forte is the BBT project (Bandar Bukit Tinggi) in Klang. The size of this project stated back in 2004 was around 534 ha. As you know, the Bandar Bukit Tinggi is in the Southern Klang region and is now known as the commercial hub of Klang. And for some investors, some might be concerned over this factor, for they view a developer with just one main project as risky and also they might be a bit biased over its future prospect. And perhaps this could be one of the reasons why the performance of the stock is rather lacklusture since its listing.

Which is why the need for this developer to expand beyond BBT. And recently there was an article in the Edge Daily titled:
WCT Land's RM196m project in Kota Kinabalu.

This stock is extensively covered by both Affin Securities and Standard and Poors and can be viewed at Bursa eResearch website.


Thanks for your sharing.

I have few questions regards WCTL 2005 financial report vs 2004. Hope you can help.

No doubt WCTL had posted a good result in PBT & PAT. But I have few quesries regards it's Balance Sheet & Cash Flow.

1. Cash is increased from 172mil to 206mil (+34mil), but it has new drawdown of term loan 72mil. Is this healthy?

2. I am doubt with it's Cash Flow especially on "Change in working capital" segment. Why suddenly all criterias in this segment increase so much compared to 2004? Anything goes wrong?

3. In overall of it's cash flow, WCTL actually shows negetive flow in 2005, if he did not drawdown it's new term loan of 72mil. Am I right?

posted by John : 2:45 PM

Hi John,

I am not too sure since I really do not follow this stock at all. Anyway gimme sometime to check on it.



Gnerally, when the cash is increased because of a loan, one has to be prudent to see where the money is going into. For WCT land, you just have to check and see the reason for the loan and where WCT Land is spending the loan. Is the loan used as capital expenditure in new development projects? Has bought any new land? Has entered into any jv? etc, etc.

On the 'working capital' thingy. Sorry me not accountant. So I am not too sure what is happening here.

How do I rate its cash flow right now? Hard to say and definately too early to pass judgement. As it is, WCT Land is one township champion. Hence, it is utmost important that it ventures into new areas, new projects. Hence, there could be some justifications here.


Hi Moola,

Thanks for your view. Ya, now I have better picture about WCTL spending...


Hi John,

To answer some of your questions on WCT Land's Cash Flow;-

1. Most property development companies may sometimes face timing recognition on their billings to customers and billings from suppliers. Hence, that may explain the high working cap.

2. For property developers in Malaysia, majority of the cash is locked under Housing Development Act (HDA), whereby no other usage is allowed except for payments for expenses related to building costs on sold residential property. Commercial properties are not subject to HDA.

3. From its 2005 Annual Report, it mentioned that they acquired two pieces of development land in Kelana Jaya and Kota Kinabalu for major commercial and high-end residential properties respectively. Hence, the cash outflow. Also, WCT Land starts to venture out of Klang and into other types of development, which I personally view as a positive move.

4. Recently, if you catch the story, Jusco has signed up a 25 Years Lease with subsi of WCT Land to manage the AEON Bukit Tinggi Shopping Centre, the largest in Malaysia. I wonder if that of Klang gonna be another Bandar Utama.

5. One downside or upside (depends on how you perceive the stock) of WCT Land's share price is that it is trading within its NTA but 40% less its IPO price. Perhaps, as the old saying is that property counters in Malaysia tend to be slower compared to other sector.

Hope these helps.

posted by Anonymous : 1:47 PM Oct 28th 2006.
Many thanks to Anon for your comments.

The US Economy

Saw this headlines on the CNN website:Economy weakest in three years

  • NEW YORK ( -- Economic growth slowed to the weakest pace in more than three years in the third quarter, as the government's main gauge of the strength of the U.S. economy came in much lower than analysts had forecast.

    Gross domestic product (GDP), the broadest measure of the nation's economy, grew at a 1.6 percent annual rate in the quarter, the Commerce Department said, down from the 2.6 percent rate in the second quarter.

And check out this commentary from Peter Schiff ( C.E.O. and Chief Global StrategistEuro Pacific Capital, Inc. )

  • Denial is Not Just a River in Egypt
    by Peter Schiff

    This morning's release of disappointing GDP figures for the third quarter capped a week of bad economic news. Nevertheless, Wall Street bulls continued to march to the pleasant beat of the "soft landing" scenario. The Fed's benign policy statement provided the soothing cadence upon which the National Association of Realtors chanted their rosy outlook for the housing market, despite more evidence supporting the opposite. However, a "soft landing" simply cannot be willed into existence no matter how many embrace it as a sure thing.

    The 1.6% growth rate announced today was the slowest since the first quarter of 2003, and was highlighted by the biggest drop in home building in 15 years as well as record high trade deficits which subtracted .58% from the GDP. Some on Wall Street focused their attention on the higher than expected 3.1% rise in consumer spending as further confirmation that the "soft-landing" has been achieved. But the fact that over-leveraged consumers went deeper into debt to buy imported products is hardly worth celebrating.

    In its October 25th policy statement, the Fed declared that "the economy seems likely to expand at a moderate pace" and that "inflation pressures seem likely to moderate over time." While this sentiment is the very essence of the "soft landing" hypothesis, it is totally unsupported by the data. First, it is premature to conclude that the current slowdown will not culminate in a recession. In fact, the weight of the evidence, particularly in housing and autos, suggests not only a recession, but a severe one.

    The Fed's rosy outlook on inflation seems to be based solely on the recent decline in oil prices. However this overlooks the fact that the underlying long-term trend for oil prices is still up (despite the recent pullback), and that prices of non-energy related commodities have been surging to new highs. Further, the potential for a sharp drop in the dollar which would likely accompany any recession would exert additional upward pressure on consumer prices and interest rates and downward pressure on the economy, exacerbating both inflation and the recession simultaneously.

    As if denial of economic weakness wasn't great enough among Wall Street strategists and the Fed's board of governors, nowhere is it more extreme than among realtors. This week the National Association of Realtors heralded the first back-to-back monthly decline in home prices since 1990 as "setting the stage for a stable market" and indicated that "the worst was behind us." My guess is that if the NAR's chief economist David Lereah had been the newscaster covering the arrival of the Hindenburg in New Jersey in 1937 (rather than Herb "Oh the Humanity" Morrison), it too would have been described as a "soft landing."

    Lereah suggested that the slight dip in inventory of unsold homes was evidence that a bottom had been reached. However, this decline more likely resulted from discouraged sellers temporarily removing their homes from the market rather then legitimate transactions. My guess is that sellers will simply re-list these homes in the spring, on the assumption that "new listing" status during what is typically a strong home-buying season will increase the odds of an actual sale. However, my feeling is that by then the inventory of unsold homes will swell to new records, as more sellers with similar strategies list their properties as well.

    Inventories of new homes also fell, but only as a result of developers slashing prices by 9.3%, the most in 36 years. In fact, were sales prices reduced to reflect the value of seller provided incentives, actual price decline would have been much greater, perhaps the greatest ever. It will be interesting to see how the real estate Rumplestilskins attempt to spin gold out of this straw.

Friday, October 27, 2006

Sugar is TOO Sweet!!

Saw this news clip.

Sugar Bun acquires oil and gas firm

Sugar Bun Corp Bhd via its wholly owned subsidiary Borneo Oil and Gas Corp Sdn Bhd (Borneo O&G) has acquired Borneo Oil (Thailand) Ltd (BOT) for RM15,000 which would be used as a vehicle to venture into the oil, gas and energy industry.
In a statement on Oct 27, Sugar Bun said Borneo O&G is an umbrella holding company set up by Sugar Bun as part of an internal reorganisation exercise to diversify into new businesses.
BOT is a shelf company incorporated in Labuan with a paid-up capital of US$1 (RM3.65). The company plans to increase BOT’s paid-up capital to US$2.5 million

Rm15,000 for a US$1.00 company?

Oh, then there is this news story.

Sugar Bun targets RM300m Petronas job
By Francis Fernandez

October 23 2006
Business Times

SUGAR Bun Corp Bhd, the country's biggest homegrown fast-food franchise, is targeting a RM300 million oil and gas contract from Petroliam Nasional Bhd (Petronas), sources say.

Request information about University of Phoenix to

The Sarawak-based firm is setting up an oil and gas division to boost income and has hired a director of Petronas Gas Bhd.

Shares of Sugar Bun have surged 209 per cent so far this year, outperforming the broader market that rose 8.8 per cent in the same period.

The stock jumped 12 per cent to close at RM2.18 on Friday, while its warrants were up 13 per cent to RM1.62.

This month alone, Sugar Bun has made three important statements to Bursa Malaysia on its new business. Among them is the appointment of Abd Hamid Ibrahim as an independent director.

Abd Hamid is also a director of Petronas Gas and Muhibbah Engineering (Malaysia) Bhd.

"Hamid will assist in this direction and with his vast experience in the oil industry and in particular having successfully led Petronas, the group is confident that in the event the negotiation does materialise, he will be able to ensure its successful implementation," Sugar Bun said in a statement early last week.

The negotiation it was referring to was briefly outlined in a statement to Bursa Malaysia on July 17, when the Sugar Bun group outlined an internal restructuring plan.

In the July statement, Sugar Bun said that "the group is presently exploring the possibility of entering into the oil, gas and energy related industries".

A new company, Borneo Oil & Gas Corp Sdn Bhd, has been set up for this purpose.

Sugar Bun may also see the emergence of a group of high net worth Singapore investors as substantial investors, sources said.

Details remain sketchy, but the Singapore investors may be buying new shares of the company under a private placement of up to 10 per cent of the company's paid-up capital.

Last Friday, Sugar Bun placed out 9,400,000 placement shares at an issue price of RM1.60 per share. The issue price, which was fixed on October 16, represents a discount of 8.3 per cent from the five-day weighted average market price of Sugar Bun's shares up to and including October 13 of RM1.7449.

The placement shares will be quoted on the second board of Bursa Malaysia in due course, the company said in a statement to the stock exchange.

Sugar Bun posted a net loss of RM2.15 million for the second quarter ended July 31 2006, against a net loss of RM2.42 million a year ago. Revenue was RM4.48 million compared with RM5.99 million before.

Petronas job worth how much?

Petronas job so easy to get hor... :s18: :s18: :s78: :s18: :s18:

Anyway.... there was this announcement on Bursa.

Article entitled : "SUGAR is rumoured to have won RM300 million Petronas contract"

Contents :

With reference to Bursa's letter dated 27 October 2006 on the above matter , we wish to make the following clarification with regards to your query on the news articles appearing in Nanyang Siang Pau , Nanyang Business , page C 3 , Friday , 27 October 2006 as appended below :-

(i) "Sugar Bun Corporation Berhad will be awarded a contract worth RM300 million from Petronas"

We wish to clarify that we are at this moment unaware of any such RM300 million contract with Petronas. We also wish to inform that we have not authorised anyone to divulge any of our Group's business dealings to the press.

(ii) " Sugar Bun may also see the emergence of Singapore investors as substantial shareholders.....the Singapore investors may be buying up 10% of the Company's paid up capital under a private placement."

With regards to this article , we wish to inform that out of the list of placees that have taken up the 9,400,000 ordinary shares representing 10% of the paid up share capital of the Company under the recently completed private placement exercise , two (2) individuals that have taken up placement of 1,500,000 and 1,000,000 shares respectively are from Singapore. The
particulars of all the placees have already been submitted to the relevant authorities as required under the said exercise.

Meanwhile... Sugar closed at 2.80... which means Sugar is now worth closed to 280 million ringgit. (277 mil to be precise!)

:s49: :s49: :s49: :s49: :s49:

Life is TOO wonderful!!!


Yung Kong

Blogged on this before ( here )

Recently I made some notes on this stock (on July 26th) and the coloured commentaries were inserted as my notes on what's happening.


Look at some of the reasonings made by Dynaquest to justify their buy recommendation...

  1. Low PE multiple 8.1x.
  2. DIY of 2.33% nett
  3. Current price of 1.29 at 3-year low
  4. Growth stock: (5-Yr: 5.31% & 10-Yr: 11.25%).

* Some reasons not to buy? => look at the above. What the writer from Dynaquest did was he based the buy reasoning on yardsticks. And the reasonings were simply flimsy.

1. Ze debt issue. See how Dynaquest analyst IGNORED the issue about the massive build-up in debts... debts went from 44.89million to rm194 million? Ah.. remember how some argued that borrowings is needed to finance growth? And that in order to stay on top of the game, further capital expansion and continued spending on research is needed. => some have argued that debt is needed for capex. True. But at end results, like Yung Kong and also my favourite, Mieco, has simply proved that to ass-u-me that such a capex is good is simply hazardous to the investor. Remember what might be good for the company might not be good for the investor!

On the other hand, the argument is simply on how prudent the management is. No one has said that capital expansion is bad or said that borrowing is bad... but... there should a limit on how much a company should spend. By being too aggressive capital expansion could be deemed reckless. One cannot use capital expansion as an excuse. There is a saying that one should only buy a hat that fits their head.
=> how true is the statement in red!

Ahh... such classical arguments... anyway... Dynaquest argued that the proposed rights issue by Yung Kong would help lessen this debt issue in the near future.

2. Low PE. I have always argued that the PE only reflects how the stock is trading in the market when gauged against its earnings. It states NOT about the quality of the stock. Simply put.. not all low PE stocks would equate to a great investment.
=> Remember a low PE stock does NOT make the stock good.

3. DIY of 2.33%
... err.... not terribly exciting isn't it? =>True? Look at the price of Yung Kong versus its DIY. Remember when Dynaquest wrote that article, Yung Kong was trading around 1.29.

4. Trading at a 3 year low? Waahh... does that justifies an investment?
=> Same issue with low PE right? And to use 'trading at a 3 year low' as an excuse to buy the stock for investment is never a sure win thingy!!!

5. Growth stock? The following table highlights Yung Kong track record. Where is the growth? All I see is a very inconsistent company. => This one.. Dynaquest writer should simply be shot!!!! Where was the growth?


Yung Kong announced its earnings today.

It's not too bad, although it's margins are rather so razor thin..


is this the turnaround the investor is waiting for? Now if one was still optimistic of this company's future, wouldn't this have been a better time to consider the stock compared to what Dynaquest had written from day one? (remember Dynaquest started their buy recommendation on this fella since April 2005. Price then was 1.27! Price of YungKong now? 0.805!!!)

About the Real Estate hype..

Read this article posted by Michael Pento ( Delta Global Advisors, Inc.) ( article link here )

  • Dont Believe the Real Estate Hype
    by Michael Pento

    The Federal Reserve's pause in its rate hiking campaign has dovetailed with the decline in energy prices and interest rates sending the Dow Jones to record territory. It is now universally accepted by the market that the slowdown in housing and the economy will result in a soft landing, one that keeps the Fed on hold and G.D.P. at trend growth or slightly below. These market cheerleaders have embraced this perfect scenario and the recidivism to their behavior prior to the equity collapse of 2000 may be to the downfall of investors. What is being overlooked by most pundits is that the unraveling of the housing bubble will be much longer lasting and more damaging to the consumer than anticipated.

    During 2007, approximately $1trillion of the $9 trillion in outstanding mortgages will reset. The increase in these adjustable rates will send consumers' monthly payments hundreds of dollars higher and cause many more foreclosure homes to enter into this already saturated market. According to the Indymac bank of California (the 7th largest mortgage originator in the nation), up to 4% of home owners might lose their home in the next few months. That's four times the average rate of borrowers who normally default on their loan!

    Remember the axiom that as goes the housing market, so goes the economy. One has to look beyond home equity extraction which has reached a total of $600 billion per year. When you account for the durable goods, commodities and labor that are supported by the housing market you begin to realize the expanse of the spectrum related to this part of the economy. What is difficult to factor into the equation is consumer's response to flat or declining home values. It is reasonable to assume that their current negative savings rate (it was negative for only two other years 1932-1933) will again turn positive as consumption declines.

    A key point that must be stressed again is that home builders are still expanding supply well beyond the intrinsic demand. Home construction is running at 1.7 million units while actual demand is about 1.15 million units. This could add another .55 million units to an already near record 4 million unsold homes. In order for the market to achieve balance, home construction must drop below population growth and price to income ratios must fall. Neither of those situations is occurring. Sellers have been trying to avoid lowering their asking prices; this has kept year-over-year declines muted and hence caused prognosticators to claim the bottom as been reached and the worst is over for real estate.

    Through real estate, many banks are exceeding federal guidelines regarding concentrated loan exposure. According to Fed Reserve data, ten states have over 50% of total banks in violation of guidelines for real estate loans, meaning the dangers of a banking debacle similar to the S&L crisis are elevated. New Jersey-based home builder Kara Homes, for example, filed for chapter 11 bankruptcy protection after defaulting on nearly $300 million in debt. But the stock market is too busy rejoicing over better than expected pro-forma earnings reports to worry about financial disruptions like bank failures or home builder bankruptcies.

    What appears evident is that the economy is slowly weakening due to housing and the decrease in money supply and credit (inflation). Since the Fed mistakenly measures inflation as growth, we can predict that G.D.P. rates will be declining for at least the next two quarters. And the equity markets are not pricing in the shortfall in earnings which should accompany the slowing economy. Keep an eye out for an unusually weak Durable goods number on Thursday or G.D.P. number on Friday; any crack in the soft landing mantra would prove damaging for stocks, especially after this huge rally. This leads me to present the best play in the market today: invest in the stocks of balloon companies -- you know, the ones you tie "For Sale" signs onto.

New home prices data

There's an update on CNN on new home prices: here

  • NEW YORK ( -- New home prices took their biggest hit in more than 35 years in September, the government said Thursday, the latest sign that builders are struggling to unload a glut of unsold homes as the nation's real estate market cools.

    The lower prices may have worked, as the annual pace of new home sales climbed 5.3 percent to 1.08 million last month, according to the Census Bureau report. Economists surveyed by had forecast a reading of 1.05 million, which would have been flat with the initial August reading.

    But the median price of a new home tumbled 9.7 percent from a year earlier to $217,100. It was the sharpest drop since December 1970, when prices posted an 11.2 percent decline, and was the fourth largest year-over-year decline on record.

    The September price slump also marked a 9.3 percent decline from August and a 15.5 percent drop from the record high price of $257,700 posted in April of this year.

Hmm... a non-issue in a 'bullish' Dow?

So who's really hurting from all these drop in 'market prices'?

I wonder.

Here's something interesting: Top 10 foreclosure markets

And Chris Puplava piece on his FSO Market wrap is certainly worth a read: Housing & Energy Economic Review

Take a look at this chart posted.

Figure 1. NAHB HMI

Source: Dismal Scientist, Data: National Association of Home Builders

Thursday, October 26, 2006

View from the other side of the housing issue.

Saw this article posted on MSNBC.

There some folks who are positive.

link to article here

The Art of Fighting the Market!

Reading Warren Buffett's Letters on the issue of the professional money managers reminded me of the series of articles written in 2004 by one Mr.Henry Blodget. Oh yeah, that bugger Henry Blodget, that bugger that made that amazing Amazon BUY call from US150.00 to US400.00 a share in Dec 1998.

Anyway, I thought it would do me good to re-read some of the stuff Blodget wrote when he was asked to post at the Slate website in 2004, during the trial of one Martha Stewart.

Here is some interesting stuff written in
Part IV

  • And this isn't even the real problem. The real problem is that, in any stock-picking effort, you and your adviser will be competing with thousands upon thousands of full-time professionals engaged in nothing but trying to find and exploit tiny information advantages that other full-time professionals miss. These full-time professionals are smart, nimble, experienced, well-trained, well-equipped, and deeply plugged in, so much so that they often finish exploiting valuable information before you (or CNBC) even know it exists (and, even so, most of the pros still can't beat the market!). To beat the market, you have to capitalize on other investors' mistakes, and, in this effort, no matter how alert and dedicated your adviser is, the two of you will be at a major disadvantage.
  • So what are financial advisers good for? The best ones, in my opinion, will do less, not more. They will be decent, trustworthy people you feel comfortable with. They will help you allocate your assets appropriately and keep your costs low—a strategy that will usually generate less compensation for the advisers but higher returns for you.

In Smart? Skillful? Probably Just Lucky

  • Because stocks and markets can only go up or down, analysts, strategists, and investors often have at least 50-50 odds of being "right." (The odds that any specific stock will rise are likely worse than those for the S&P 500, but on average, they are probably still close to 50-50.) Fifty-fifty odds are pretty good odds—better than any you'll find in Las Vegas, for example (and it is worth noting that ubiquitous awareness of this doesn't stop millions from jetting to the desert and gleefully throwing money away). Because the stock market is not random, moreover, but loosely tracks the growth of profits and dividends, forecasters who predict the market is going to rise have better than 50-50 odds (over time, profits and dividends usually increase). Here's the catch, though. Human psychology being what it is, stock forecasters—and those who evaluate them—almost never factor these odds into their assessments of the forecasters' skills. (In 1998, when I suggested that Amazon's stock might eventually hit $400 a share, some media observers reacted with first shock and then adulation, as though the odds against this were 1,000-to-1; given the conditions at the time, I thought they were better than even). Similarly, those who buy stocks and make money almost never realize that a monkey should win about 50 percent of the time. Instead, they congratulate themselves on their acumen—they were right!—and double down. In a bull market, when the odds that the market, at least, will rise are even better than 2-in-3 (from 1982 to 1999, the S&P 500 rose 15 out of 18 years, or 83 percent of the time), most people forget their "mistakes" and increasingly come to believe that the next investing best seller should be titled George Soros, Warren Buffett, and Me.

  • This is not to say that all investing success is luck—it isn't. Some people are better than average, and, over time, some of them will generate superior returns. (According to John Bogle's Common Sense on Mutual Funds, approximately one in six mutual fund managers has enough skill to consistently beat the market after costs—1 in 6.) This skill, however, has little to do with the simplistic price predictions that dominate most market discourse. It stems from discipline, patience, experience, and methodologies that lead to a rare ability to determine when the odds are distinctly good or bad. Skilled investors aren't immune from losses—far from it. They are just talented enough that eventually, gradually, their skill allows them to win.

And in another more shocking piece, Blodget writes What Stock Analysts Are Good For

  • If this is so, then what the heck are stock analysts for? Why are thousands of analysts being paid zillions of dollars to do work that, on average, apparently isn't worth the cost of the chairs the analysts sit on?
    The answer is complex. First, it turns out that stock analysts are valuable—sometimes very valuable—but not in the way that most of the public and financial press think. Specifically, casual observers view analysts simply as "stock-pickers," when stock-picking is often one of the least helpful services they provide. An
    analyst's goal is to help investors make decisions, a mission that encompasses not only rating stocks, but also providing industry expertise, trend-spotting, evaluating scuttlebutt and gossip, interviewing management and customers, and shaping mountains of raw data into coherent projections
  • Which brings us back to the original question: If, despite all these efforts, the market is so hard to beat, why have analysts at all? The simple answer—a tautological one—is that as long as there are investors who try to beat the market, there will be analysts who, one way or another, try to help them. The more profound answer is that one of the reasons the market is so hard to beat, even for professionals, is that, in aggregate, analysts and investors are good at what they do (evaluating, distributing, wringing the profit out of every piece of information). After an 18-year bull market, of course, the number of analysts has ballooned beyond what is needed to get the job done—the world probably doesn't need 24 analysts covering Microsoft, for example—but Wall Street is nothing if not laser-focused on the bottom line. Over time, if the market stays stagnant, many analysts will eventually be exploring other professions. But there will always be Wall Street jobs for the best of them.

And in The Trouble With CNBC and Smart Money and …

  • The sad truth is that sound investment policy is boring. Diversify, reduce costs, aim to earn the market rate of return—even Stephen King would have trouble telling stories about that. But for the financial media to survive—at least the financial media devoted to helping you "profit" from reading/watching/listening—they have to suggest, over and over again, that there are exciting new places to put your money or dangerous places to remove it from. They have to tantalize you with the latest, greatest mutual funds or the "Ten Hot Stocks for 2005." They have to make you drool by observing, again and again, that every dollar invested in Microsoft's IPO in 1986 would be worth about $300 today. (Next time, it will be you!) They have to enumerate new ways to refinance your house, consolidate your debt, track your investments, pick better stocks, beat the pros, buy treasuries, retire rich, or make millions. They have to keep you watching, listening, and reading, or else they—not you, they—will go bankrupt.
    Unfortunately, the underlying message of such commentary—Do something!—is often hazardous. Once you have gotten the investing basics right, you should do almost nothing. Every time you make a change, you incur costs—transaction costs, tax costs, psychological costs, and opportunity costs. You also, in many cases, decrease your odds of success. The least predictable investment decisions are those focused on the short term (months and years). The most predictable, meanwhile, are those focused on the long term (decades). To the media, of course, the long term is death. How often will you pay or tune in to be told that you shouldn't do anything, that nothing has changed? Answer? Never. So the media must find other ways to keep you entertained.

And in Born Suckers , Blodget states the following!!!!!

  • This self-defense guide would not be complete if I did not address the greatest Wall Street danger of all: you.
    Human beings, it turns out, are wired to make dumb investing mistakes. What's more, we are wired not to learn from them, but to make them again and again. If there is consolation, it is that it's not our fault. We are born suckers.

Self-attribution Bias: We attribute our successes to ourselves, and we blame our losses on others or bad luck. This hobbles us in two ways. First, we don't learn from our mistakes because we don't see them as mistakes. Second, we assume we are skilled or smart when we're just lucky.

The Gambler's Fallacy: We tend to believe, incorrectly, that if a flipped coin has come up heads three times in a row it is more likely come up tails next time. Similarly, just because a stock or market has gone up or down for a while doesn't mean it is more likely to go the other way soon.

Prospect Theory: We have an irrational tendency to sell our winners to lock in profits and keep our losers to avoid taking losses. This causes us to sell too early when the market is going up and too late when it is going down. We also feel the pain of loss more than the pleasure of gain and, therefore, blow out losing positions in panic when we should just hang on.

Conservatism Bias and Confirmatory Bias: Once we form opinions, we tend to overvalue information that reinforces them and undervalue information that undermines them (conservatism bias). We even tend to seek out supporting information (confirmatory bias). Thus, we irrationally cling to incorrect conclusions, and, to paraphrase Simon and Garfunkel, hear what we want to hear and disregard the rest.

Overoptimism: We tend to be overoptimistic and overconfident. According to James Montier, when students are asked whether they will perform in the top half of their class, an average of 80 percent say yes. This tendency makes it easier for part-time hobbyists to dismiss a century's worth of academic research showing that only a tiny fraction of full-time professionals can beat the market.

Outcome Bias: We tend to evaluate decisions based on outcomes instead of probabilities. Thus, we congratulate ourselves for stupid choices that happen to turn out well and vow to never again make smart choices that happen to turn out badly. Our errors get reinforced, and our wise decisions rejected.

Buffett's "Rearview Mirror": We base our expectations for the future on what has happened in the recent past. Thus, we are most bullish at the end of long bull markets, when we should be most bearish, and most bearish at the end of long bear markets, when we should be most bullish.

Hindsight Bias: When we reflect on the past, we imagine that we knew what was going to happen when we didn't. As James Montier puts it, "You didn't know it all along, you just think you did." This allows us to imagine, for example, that we knew that the tech boom of the late '90s was a bubble and that everyone who suggested otherwise was an idiot or crook. It also makes us overconfident about our ability to predict what will happen next.

Here is the link to the archives of what Blodget has written

Ghost Towns

How about this article?

  • New 'Ghost Towns' Sprout Up in Las Vegas

    There are more signs this week that the Las Vegas housing market is cooling down. In September, the median price for a home was $285,000. That's exactly the same as it was one year ago.

    And experts say there's been a 21.5-percent decline in new home building permits in the past year. The number of new permits requests in September was the lowest since December 2001.

    The housing market slow down is bringing back a wild, Wild West staple, the ghost town.

    There are valley neighborhoods where vacant homes seem to outnumber the homes where people are living.

The article then continues by saying "The problem is buyers aren't buying". So houses are built but buyers aren't buying.

  • The trend is there's a supply that exceeds the demand and it's Economics 101. When the supply exceeds the demand, a couple of things happen. Prices are starting to come down and we just have more inventory than we have buyers right now," Love explains.

    This is creating "ghost town" neighborhoods that can be found all across the valley where vacant homes out number the occupied ones.

    Love has sold houses in Las Vegas market for 20 years and says one thing that's added to this trend is the buyer's mentality.

    "They're not buying. They're sitting on the sidelines. These investors that own all these vacant properties they can't sell are turning to rental markets. So they're renting them out at actual rents that are much less than what these people would pay if they were owning them."

    It seems the only way to get rid of these ghost towns and breathe life into neighborhoods across the valley is to cater to the potential homebuyer.

    Right now there are about 22,000 existing homes on the market across the valley and 9,800 of them are vacant.

9800 out of 22000!!!


The Dow Rallys on BUT..

Another rally by the Dow. Dow closed at 12,134.68.


What about news like this? Doesn't it matter?

Record drop for home prices

The article stated that..

  • Home prices posted their biggest drop on record in September while sales fell for the sixth month in a row, a real estate group said Wednesday - the latest signs that the housing market is still weakening.

Six months in a row!

The article then reminds that "Month-to-month declines in home prices are not uncommon, but a year-over-year drop is a more serious sign of a slumping housing market."

I wonder how many more signs are needed? Consider the following recent headlines from CNN website.

  • Foreclosures spiked in August
    Rising payments on adjustable-rate mortgages contribute to 53% jump in foreclosures.
    By Les Christie, staff writer
    September 13 2006: 2:45 PM EDT

    NEW YORK ( -- With real estate markets slowing and mortgage rates well above levels of recent years, times are getting tougher for homeowners - the number of homes entering into some stage of foreclosure is surging, according to a survey released Wednesday.
  • Housing starts tumble
    Builders pull back on new projects, permits as latest reading shows real estate market even weaker than forecast.
    By Chris Isidore, senior writer
    September 19 2006: 10:50 AM EDT

    NEW YORK ( -- Home builders slammed on the brakes in August as starts on new homes sank to their lowest level in more than three years, and a drop in permits signaled more weakness ahead for the real estate market.
  • Home prices: 1st drop in 11 years
    Sales slow, prices hit by second biggest year-over-year drop on record; surge of homes for sale seen keeping prices weak.
    By Chris Isidore, senior writer
    September 25 2006: 1:41 PM EDT
    NEW YORK ( -- Home sales slowed and a key measure of prices fell for the first time in 11 years last month, spurred by the biggest glut of new homes on the market in more than a decade, an industry group said Monday.

Houston, do you think we have a problem?

Oh, today's CNN market rap was named rather nicely. A stock rally about nothing

Wednesday, October 25, 2006

Back Dating of Stock Options & Back Door Options!

If stock options isn't bad enough, the backdating of these stock options are even more blatant!

Here are two set of articles on this issue.


    Personally, I think the backdating issue is less about valuation and more about the character of the folks running the companies that are involved. This is something that matters a lot to some investors, and relatively little to others. The first step here is to look into the continuity of the board and executive team from the time the alleged backdating took place until today. In some cases, you may find that there's been near-wholesale turnover in the executive suite, and if that's the case, you may be looking at a stock that's selling off unnecessarily. Don't forget the board, though--if the same board members are still in place, they should be held accountable. (And if any board members received backdated options as a part of their annual grants, they should be publicly flogged.)

    So, if the same folks are still running the company, what do you do? In my opinion, backdating options ranks up there with the most blatant accounting frauds by misleading investors on a variety of fronts. It deliberately severs the link between pay and performance while presenting the veneer of a performance-based compensation plan, and it causes overstated cash flow by claiming a tax deduction for a potentially nondeductible expense.

    However, all of these issues pale in comparison to one simple point: Executives who engaged in backdating were not putting shareholders first. They were not acting as owner-partners seeking to maximize the value of the firm, but rather as grasping hired hands seeking to maximize their own wealth at the expense of others. At the end of the day, that's all you really need to know.

Here's an article posted on Fortune recently.

link to article

  • Monday, October 16, 2006
    The real options-backdating culprits

    Almost every day there's another one, a top executive thrown out of his job for backdating options. These are some otherwise perfectly respectable people we're talking about: William McGuire at United Health, Shelby Bonnie at CNET, Andrew McKelvey at Monster. Even Apple's Steve Jobs has gotten tangled in the backdating web, although there are no signs that he'll lose his job over it.

    When supposed wrongdoing is this widespread, one can't help but wonder: Are there really this many willful rule-breakers in corporate America, or did somebody change the rules on these guys in midstream?

    I'm tempted to lean ever-so-slightly toward the second answer. What was done was clearly against the rules, but those rules were until recently treated with such disdain in the business world and even by many investors that it's perhaps understandable that so many executives saw no harm in breaking them.

    First, a brief explanation of options backdating: Say your company's stock is trading for $15, and it gives you 100 options--expiring in 10 years--to buy that stock at $10 a share. So far, so good. As Holman Jenkins argued in The Wall Street Journal last week (not available online unless you have a financial relationship with Dow Jones & Co.), there's nothing intrinsically wrong with giving employees' in-the-money options. It's just like giving them restricted stock, or cash.

    What's wrong is reporting in a company's financial statements that the $10 options were granted at some time in the past when the stock happened to be selling for $10 a share. Until this year, options priced at the money (that is, with the stock trading for $10, you get an option to buy a share for $10) were considered free for accounting purposes--while an option granted in the money (with the stock at $15, you get an option to buy it for $10) was counted as a compensation expense.

    This accounting distinction was of course entirely loopy. When last I checked this afternoon, United Health stock was trading at $48 a share. Meanwhile, an option to buy a share of United Health for $50, expiring in Jan. 2009, was selling on the American Stock Exchange for $10. That is, even out-of-the-money options have value.

    In 1993, after long deliberation, the members of the Financial Accounting Standards Board--the people who determine what constitutes a General Accepted Accounting Principle--acknowledged this truth with a proposed accounting standard requiring that all employee options be valued with one of the mathematical models widely used in the options-trading world (the Black-Scholes model or the related binomial model).

    Then all hell broke loose. In what should go down as one of the most shameful episodes in modern business history, corporate America bullied FASB into backing down. Silicon Valley was loudest in its opposition, but all the big business groups joined in. Joe Lieberman was enlisted as the chief hatchet man on Capitol Hill (his more vocal allies included Bill Bradley, Barbara Boxer, and Phil Gramm), sponsoring a 1994 resolution--which passed 88-9--urging FASB not to change accounting for options, and making threatening noises about effectively shutting the board down if it didn't comply.

    There were and still are valid objections to the method FASB proposed for valuing options. It takes a fleeting estimate--the valuation set by the Black-Scholes or binomial model on the day the option is granted--and sets it in earnings-statement stone.

    But you can't make a serious accounting case for treating options as free, which is what most of FASB's opponents were after. So they couched their argument in economic terms: By motivating employees and aligning their interests with shareholders, options were promoting economic growth. Expensing options would thus hurt the economy, which made it a bad thing. The same argument can be made about expensing cash paychecks, of course, but that didn't seem to bother anybody at the time.

    This victory of politics over accounting logic had consequences. As Warren Buffett, a lonely voice in support of FASB back in 1994, told me in 2002: "Once CEOs demonstrated their political power to, in effect, roll the FASB and the SEC, they may have felt empowered to do a lot of other things too." Buffett was referring to the accounting shenanigans at Enron and Worldcom, but the connection to the options backdating scandal is much more direct.

    After the Enron and Worldcom meltdowns, the political climate shifted. More and more companies began expensing options voluntarily, and in 2004 FASB finally pushed through its rule. Starting this year, all options granted to employees have to be expensed.

    But the backdating offenses coming to light now (thanks to the work of University of Iowa business school professor Erik Lie) almost all predate 2002. They were committed back in a day when virtually every significant business organization in the country was arguing that options shouldn't be expensed, a view endorsed by the Big Six accounting firms (yes, there were six back then), Congress, and even a lot of big money managers. In such an environment, it wasn't all that out of line for the people at United Health and CNET and Monster and Apple and Comverse and Broadcom and Brocade to think tweaking the grant date of an option was a mere technicality.

    I am not saying don't blame them, blame society. I'm saying blame them and society--society in this case consisting of the American Electronics Association, the Business Roundtable, the big accounting firms, Joe Lieberman, you name it. The guilt is shared pretty widely here.

And as if that is not all, how about this article? Back Door Options!

link to article

  • As backdating options continues to ensnare corporate officers, a Boston-based company called American Tower has faced questions from the SEC and U.S. Attorney's office over its use of backdating. But backdating isn't the only eyebrow-raising element of their compensation strategies.

    American Tower (Charts) has a market cap of $15 billion and owns the infrastructure, such as towers and rooftop structures, that wireless companies lease. Last May the company announced that a special committee of independent directors was reviewing its option-granting practices; in September, American Tower said it will have to restate more than three years of financial results. But a close look at its filings also reveals that top executives have made tens of millions from stock in subsidiary companies - information you won't see in the compensation table of its proxy statement.

    hidden numbers
    In the standard table in American Tower's proxy - the one that lists the salaries, bonuses and other compensation for the five highest-paid employees - you see that an executive named Michael Gearon, the company's vice chairman and the president of its international business, has earned $2 million in cash over the past three years and has gotten 665,000 options.

    In 1998, Gearon sold Gearon Communications to American Tower and joined the company. He still lives in Atlanta, where his firm was based, and is a part-owner of the Atlanta Hawks. General counsel William Hess earned $1.8 million in cash and got 370,000 options over the past three years.

    But in the tables detailing options exercises there's a footnote that says that during 2004, American Tower's Brazil operation, called ATC South America, granted "certain employees," including Gearon and Hess, options to purchase common stock of ATC South America at an exercise price of $1,349 per share. Those separate options were exercised in October 2005.

    The footnote says that the "value realized" by Gearon and Hess was approximately $11.5 million and $2.7 million, respectively, and refers you to another section of the proxy called "Related Party Transactions." This section of proxies became notorious in the wake of Enron, because it's where CFO Andy Fastow's infamous partnerships were actually disclosed to investors.

    In this section of American Tower's proxy, you learn that in March 2004 Gearon paid $1.2 million for a 1.6 percent stake in ATC South America; in October 2005, American Tower expects to pay him $3.7 million for that stake. Plus, Gearon got options - worth some $11.5 million a year and a half later - to acquire 6.7 percent of ATC South America. (Hess's options allowed him to acquire 1.6 percent of ATC South America.)

    And you learn about another entity, ATC Mexico. Back in 2004, Gearon and Hess exercised their "previously disclosed" rights to require American Tower to buy their stakes in that entity. Afterward Gearon collected $36.2 million, much of it in American Tower stock that has since more than tripled.

    If you check American Tower's 2005 10-K, you'll learn - in footnote 11 - that Gearon used just $1.7 million of cash plus a $6.7 million loan from American Tower to buy his stake in ATC Mexico.

    So Gearon picked up cash and stock worth well over $30 million (a figure that doesn't take into account the stock's recent uptick) in these side deals - payments that aren't reflected in the compensation table in the proxy.

    Hess and the others got some $20 million. Why would Gearon get all this additional money for running the international business when his job description is to run the international business? Why isn't this compensation disclosed in the compensation tables?

    "It's a matter of judgment on the part of the company and its advisors," says Kenneth Laverriere, a partner at New York law firm Shearman & Sterling. "It's a close call."

    James Taiclet, American Tower's CEO, says these agreements were put in place in 2001 when the international business didn't exist, and were done to provide Gearon and his team with the "incentive to take the risk" of building the business. He points out that Brazil and Mexico now account for 13 percent of the company's revenues and says "shareholders have benefited tremendously." He also says the agreements are "very thoroughly disclosed in the appropriate places."

    Not that investors seem to care about any of this. American Tower's stock has doubled since 2005. That has helped Gearon, who's sold stock worth $40 million over that time period, grow his fortune even more

See the same ironic issue? Investors does not seem to care because American Tower's stock has doubled since 2005!


Does this mean that as long as the stock doubles, the company and the exceutives could play their funky music any which way?

My oh my, what a wonderful world.

Here's the summary of the Back Door Options as stated on the cnn article.

  • How Backdoor Options Work
    Deep in American Tower's proxy lurks a sneaky scheme.
    1. American Tower sets up a subsidiary.
    2. Executives are allowed to purchase stock in the subsidiary.
    3. Execs acquire stock through cash and a loan; they also get options to buy more shares.
    4. The executives can force AT to buy them out within a certain period of time.
    5. AT's purchases net employees millions in profits.

Tuesday, October 24, 2006

Good fund manager(s) makes a difference.

Star Business had been running a series of articles on Investing. I truly enjoyed it...


Take a look at the following comments.

  • In this final part of our weekly series exploring investment opportunities, we look at options for a person who has at least RM1mil to invest.

    WHILE there are a variety of investment products in the market, their performance is subject to the expertise of the fund manager.

    According to Singular Asset Management chief investment officer Teoh Kok Lin, there is increasing accessibility to products as more and more products are being “unitised”; hence the fund manager “makes the difference.”

    A fund manager would be able to customise products according to the client's risk appetite and portfolio, he said.

    How a fund manager manages risks depends on his investment philosophy. Some focus on value while others on growth, he said.

    While the philosophy could be similar, how they implement it would be subject to their individual characteristics, he added.

    For Teoh himself, he looks for value in specific companies that are “unloved and unpolished gems.”

    On selecting a fund manager, he said it was important to look at the track record and the kinds of risk that the funds were undertaking.

    AmInvestment funds management division chief executive officer Datin Maznah Mahbob shared similar views.

    “Usually we look at the fund manager's track record over one year, three and five years,” she said.

Ok, I really DO agree that the fund manager makes a huge difference.


In this industry, the fund management industry, good talent is limited. And worse still, these good ones they do not stay with a fund for a long time. Sometimes better job opportunity is available or offered and these fund manager(s) could switch for a better paying career. It's a possibility.

So for us, the investor, knowing and insisting that our funds, our hard-earned money is managed only by the best fund manager is a must but the investor should never discount the possibility that the TOP GUN fund manager will manage our funds forever and ever. Fund managers could always switch to another job.

Kirby's Blast From the Past.

Read this article. Thought I share with everyone here.


Former Fed Chairman Alan Greenspan had a few “choice” words for his Russian counterparts late last week when he warned them that their refusal to allow the Ruble to meaningfully appreciate against the dollar may have inflationary consequences.

Greenspan Warns
Russian Authorities Against Investing in U.S. Dollar
Created: 20.10.2006 12:52 MSK (GMT +3),
Updated: 15:43 MSK
Russia should be wary about the inflationary impact of buying U.S. dollars to insulate its economy from an influx of foreign earnings from oil exports, former Federal Reserve Chairman
Alan Greenspan said on Thursday, Oct. 19

Tulips Come To Mind...

Greenspan went on to point out that Russia’s massive Trade Surplus – owing to 600 million per day in oil revenue – [implied] should naturally lead to a rising domestic currency as petrodollars are repatriated – an event or process dubbed “Dutch

Dutch Disease refers to the potential negative long-term impact of one explosive sector —- oil, in the case of Russia —- which boosts the value of the currency, making locally produced goods less competitive compared to foreign goods.

He warned that artificially depressing their currency to cure “Dutch Disease” – by buying foreign currencies like dollars - could lead to inflationary problems down the road.

The Russian Central Bank has intervened in the foreign exchange market by buying U.S. dollars to slow the ruble’s growth. The move, however, fuelled money supply growth of about 45 percent and inflation of around 10.9 percent in 2005.

Wow, money supply growth of 45%. That sure sounds inflationary, doesn’t it? Me wonders whether that 45% growth rate refers to the Russian equivalent of M3? That would be the very same measure of money supply that Sir Alan banished in the U.S. - as one of his last official acts as Chairman of the Federal Reserve – isn’t it?

Anyhow, Greenspan goes on to “speculate” about the Ruble’s future prospects as a “potential” Reserve Currency – and he points out how important the “rule of law” is – as a fundamental precondition for such an occurrence. Me wonders, again, speaking of rules in law - if he might be referring to such fundamental things as “habeas corpus” – an inalienable, basic human right since the 12th century that the U.S. recently discarded. Who knows, Greenspan always did have a way with words – didn’t he?

Friday, October 20, 2006

Tanjung Offshore reaches OSK Target!

On 4th October, there was an article on Business Times which states the following:

  • OSK Research has raised its recommendation to a 'buy' with a target price of RM2.69..

Tanjung Offshore closed at 2.68 yesterday and is currently trading at 2.71.

There is a strange and funny regarding the way OSK recommended this stock. Take a look at the recent chain of events.

Firstly, Tanjung Offshore reported its earnings on 28/8/06.

Well, the earnings in all honesty wasn't too happening, in fact perhaps it was kind of dismal. So folks like OSK decided to give it a downgrade. Which was rather rational in my opinion.

  • Tuesday, August 29, 2006


    Price RM2.43 Target RM2.34

    Time for a Breather
That was their header of their research report. A downgrade from 2.43 to 2.34. Kinda miniscule isn't it?

Downgrade to TAKE PROFIT. Adjusting for the 1-for-2 bonus issue (ex-17 th August), TGOFFS has appreciated by 63.5% since our initiation on the 13 th of April. Although we remain positive on the company’s long term prospects, we feel that such an excellent run up presents investors with an opportunity to TAKE PROFIT while awaiting for more good news in coming months. To also note that the 46.4m shares and 9.3m warrants from the bonus issue will be listed today.

And the stock, Tanjung Offshore did fall. Well, as 'MUCH' as to about 2.32.


consider this issue. What OSK did then was rather amazing. OSK then quickly released a report, upgrading it to NEUTRAL!

  • NEUTRAL (upgraded) Price RM2.32 Target RM2.34

    A More Reasonable Price

    Share Price corrected to Fair Valu
    e. Since we downgraded TGOFFS on the 29 th of August, the share price has dropped by 4.5% to a more reasonable level close to our fair value. We feel this correction was important as TGOFFS share price had run too far ahead of fundamentals at that point of time.

:s54:See the price target? 2.34!!! :s54:

Any how and any which way is also possible. They downgraded to 2.43 to 2.34 and when the stock falls to 2.32, they quickly upgraded the stock back to 2.34!!!

Makes you wonder, doesn't it?

And this was their reasoning...

Upgrade to NEUTRAL. Although we are maintaining our forecasts at this juncture, due to the reasons above and the potential upside from possible asset acquisitions, we upgrade TGOFFS back to a Neutral. We remain very positive on management and the outlook of the overall industry.

It's like... errr... why bother downgrading in the first place? Right?

And look at the frame in which all happened. That initia Downgrade was posted on 29th Aug. The UPGRADE article was then made on 7th Sept.

See how fast their opinions changed??

And then, on Oct 3rd 2006, they wrote the following. (That Business Times article was based on this write-up.)


here were their reasonings...

  • New Contracts. TGOFFS announced a RM10m contract to supply electrical switchgear to Larsen & Toubro for the Petronas lube oil plant in Melaka. Aside from this, TGOFFS had also announced a new contract for the provision of Siemens gas turbine maintenance services for Petronas Carigali worth RM13m for 5 years. These contracts indicate that TGOFFS is still actively seeking to grow the engineering equipment and maintenance services businesses.

    Delay in MOPU.
    .. Although the Cendor MOPU was delivered to the site on schedule, we understand that there was a 1 month delay in the production due to factors beyond TGOFFS control. The announcement of the additional 10% stake in the Cendor MOPU will also be delayed until November due to restructuring in the MOPU partners. We have only factored in contribution from the additional 10% stake in our FY07 forecasts and make no changes to this slight delay but the 1 month oil production delay reduces our MOPU GP forecast by RM0.2m.

    …offset by higher contract & margin expectations.
    Given the new contracts announced and our expectations for more contracts in 4Q, we are bumping up our engineering equipment revenue by 3.5% and our margins to 8% (previously 7.7%). We also revise up FY07 GP margins for the offshore vessel business to 45% and for drilling rig rental to 5.9% in line with industry figures. As a result, our FY07 net profit is up by 10.7% closer to management’s guidance.

    Marine vessels looking goo
    d. Pinang 3 & 4 are to be delivered to TGOFFS by mid and end October respectively. We understand that Petronas will be releasing more contracts for vessels soon and TGOFFS hopes to lock in Pinang 3 and 4 into long term contracts as well as secure other contracts before ordering new ships.

    With all 4 support vessels launched and given the strong demand forecasted for offshore vessels, we are revising our Price to Book multiple for TGOFFS from 3.0x to 3.5x. Together with our earnings upgrade, our fair value (on average of PER and P/BV) is raised to RM2.69 and
    we upgrade TGOFFS back to a BUY.

So, currently Tanjung Offshore stock price is trading well past 2.69.

I do wonder what is next.

Friday, October 13, 2006

Puncak Niaga

Here is an interesting news comments link.

Puncak plans cash reward for shareholders

A Puncak Niaga's director has confirmed that such a plan was discussed at a board meeting yesterday, but he declined to reveal further information
Here are some issues.

A director of the company, who spoke strictly on condition of anonymity, confirmed that such a plan was discussed at a board meeting yesterday, but he declined to reveal further information.
Hmmm... correct me if wrong but isn't this director LEAKING out insider news?

Hey, is this even allowed???

Puncak Niaga is also awaiting a bumper cash payment from the Government via a 15 per cent automatic payment which was supposed to kick off in January this year.

Under the agreement, if Puncak Niaga did not receive the increment on time, the payment would be backdated when the Government increases the water tariff and Puncak Niaga will also receive some form of cash compensation from the Government for being patient.

The big bumper cash Puncak that Puncak is waiting for...


There was an article on The Edge yesterday evening.

Puncak mulls RM1.25 per share capital repayment
By Thomas Soon, 12 Oct 2006 8:51 PM

Puncak Niaga Holdings Bhd shareholders are expected to be rewarded with a bumper cash payout of RM1.25 per share on the prospects of its assets and debts being taken over by Finance Ministry-owned Pengurusan Aset Air Bhd (PAAB).

This part of the article..

Energy, Water and Communications Minister Datuk Seri Dr Lim Keng Yaik said on Oct 10 that the government would soon start to take over the assets and debts of water service operators via PAAB.
He said the pilot project would see PAAB taking over the water assets in Melaka and Negeri Sembilan by year-end via agreements with the state governments. PAAB is now talking to other state governments and "other operators like Ranhill Utilities Bhd and Syabas (have indicated interest as well)." Puncak Niaga holds a 70% stake in Syabas.
Although the new water management arrangement will turn concessionaires into mere water services operators, an analyst said Puncak Niaga would, however, still be a main water player in the country.

The govt to take over Puncak's debts and Assets????

Errr... is this even possible???

Thursday, October 12, 2006

ViTrox: How to Poop Up a Stock!!


Say you have a stock that has just broken up broken its base of 0.60 and is now trading around 1.05. And this stock price appreciation was done in less than one month time.

Now imagine, you are an analyst and you are asked to give a positive comment on the stock. And of course a high Target Price for the stock.

And to make matters worse, this stock was just listed recently and back then, folks gave it an IPO fair value of just 36 sens. Remember stock is now trading at 1.05 ok?

Just imagine.

Now say this stock is earning some 2.4 to 2.5 mil per quarter. So for current fiscal year, this stock should earn some 9-10 million for its 2006 fiscal year.

Are we ready to begin our task?

Just imagine the following conversation between A (the writer) and B (the Bossie).

A: Bossie, I know how. I shall project fy 2007 earnings at 18.8 million for this fella. Is it enough?
B: Are you nuts? This is not going to cut it.

A: Not enough. I project the next fiscal year earnings, fy 2008, to be at 27.9 million. Is that enough?
B: Ahh... you are getting smarter each day. That's it, that's the ticket!! 27.9 million it is!! Make the target price as high as possible!
A: Ok Bossie. 1.80 enough?
B: Good boy!

Incredible isn't it?

Me think so too!!!

Look at what it is happening here.

Vitrox. A year ago.

  • ViTrox fair value at 36 sen

    September 10 2005

    SHARES of ViTrox Corp Bhd, a maker of systems that help chipmakers inspect their products, should be fairly valued at least at its reference price of 36 sen apiece, two research houses said.

    The company, which is en route for listing on Malaysian Exchange of Securities Dealing and Automated Quotation Bhd (Mesdaq) Market on September 12, had issued 17.6 million new shares of 10 sen each at 60 sen per share.

    However, it has also offered a 2-for-3 bonus issue and these bonus shares would also start trading on the first day, which means the theoretical ex-bonus price is 36 sen.

    SBB Securities Sdn Bhd has given a fair value of 36 sen a share for ViTrox while Jupiter Research put a fair value of 43 sen, a 19 per cent premium over its reference price.

Here is how ViTrox has traded..

See how nicely ViTrox has appreciated lately? The stock went zoom, zooming from 60 sen base to 1.04.

And this morning, I saw this Kenanga research on it. Well, for a stock that had clearly appreciated so much, I find it so incredible that Kenanga has managed to write such a positive write-up on it.

Here are the main points it made.

  • Home grown technology dynamo

    Company Report BUY RM1.04 Initiating Coverage (Target: RM1.80)

    12 October 2006

    l A home grown technology dynamo which is gain significant market acceptance in Asia Pacific region, Vitrox Corporation Berhad ("Vitrox") is the leading machine vision solutions provider in Malaysia, catering particularly to the semiconductor industry.

    l Rising trend of integrated circuit ("I/C") consumption especially in consumer electronics should continue to underpin demand for automation equipment and hence machine vision inspection system s.

    l Three champion products namely machine vision system, automated optical inspection ("AOI") and electronics communication (I/O cards) hardware should propel growth going forward, underpinned by strong value propositions in terms of price / performance to the end clients .

    l Extremely vibrant growth outlook with the company expected to grow a staggering 72.3% CAGR between 2006 and 2008 as the company’s new key products namely, AOI and gained traction in the market place.

    l Outstanding profitability with net margins of 40% and above as company leverage on its intellectual property in addition to 12-year tax free pioneer status.

    l Initiating coverage with a Buy. Our 12-month target price for the stock is RM1.80 using a 10x FY08 P/E instead of 8x given its explosive growth.

    Catalysts including (1) Rising demand for automation equipment, (2) strong value propositions to end clients in terms of price / performance / back-up service and (3) sterling CAGR of 72.6% in the next two years.

See how the 12-month target price is at 1.80 and is based on FY2008 earnings estimates?

Well have a look at the table below to see how nicely they project this fy2008 earnings.