Big Talk From AirAsia Again

LOL! They say that talk is really cheap because supply is more than demand.

Saw the following newsclip.

• KUALA LUMPUR (AFP)--Malaysian budget carrier AirAsia Wednesday scrapped administrative charges to boost passenger numbers but said it hasn't been hurt by the downturn that has affected most airlines worldwide.
  
  Chief executive officer Tony Fernandes said the company would lose MYR400 million ($113 million) a year by getting rid of the charges but said he wanted to keep a promise of providing the lowest fares.
  
  "I continue to remain bullish. Any product that can reduce cost will make more profit," he said.
  
  "I have been in the business for the last seven years. There has been perpetual headwinds such as the outbreak of SARS (Severe Acute Respiratory Syndrome in Asia in 2003) and tsunami. We will continue to grow," he added.
  
  "We are going the extra mile to live-up to our brand promise to have the lowest fares in the market," he said, adding that passengers now need to pay only the fare and airport tax.
  
  "With no admin fee more people will travel with AirAsia, especially in view of the current economic uncertainties," Fernandes added. Administration charges range from MYR22 to MYR43 per person.
  
  The world's airlines are expected to lose $9 billion this year, industry body IATA said early this month in a drastic reassessment of the worst slump the industry has ever faced.
  
  Carriers in all regions are expected to report losses in 2009, with Asia-Pacific airlines - once the brightest spot of the industry - accounting for more than a third of the global losses at $3.3 billion.
  
  Fernandes said AirAsia won't defer arrivals of its Airbus A320 aircraft while its route expansion plans remained on track despite the bleak outlook of the sector.
  
  "We are not affected by the swine flu outbreak. We have not deferred our plane orders. We are doing very well. We are growing our capacity," he said as the carrier planned to add Colombo to its route in August.
  
  Fernandes said its new fleet of A320s were fuel savers, which helped to lower operational cost.
  
  "Next week we will let go all our (16) Boeing 737s. We will then have a brand new A320 fleet," he said. It currently has 62 A320s.
  
  AirAsia became the world's biggest customer for the Airbus A320-200 after placing an order for 175 aircraft in December 2007, with an option for 50 more. Deliveries are expected to run until 2014.
  
  AirAsia last month said its profits rose 26% in the three months to March, as it defied the economic downturn and boosted passenger numbers.
  
  The carrier posted net profits of MY203.2 million for the first quarter, compared with MYR161.3 million a year earlier

LOL! So much big talk.

Hey.. would he mind stating how much of the 203.2 million in profits in the first quarter was boosted by extraordinary gains???

LOL!!!

Talk is too cheap.

PS... if can make so much money, why isn't AirAsia not paying Malaysia Airport for the airport taxes it collected? See AirAsia And The Airport Tax Issue

Banks Fudging The Foreclosure Numbers?

Saw the following article posted on MSNBC: Not paying mortgage, yet stuck with keys

• A growing number of American homeowners are falling into financial limbo: They're badly behind on payments, but their banks have not yet foreclosed.
  
  The backlog of seriously delinquent mortgages, which so far affects about 1 million borrowers, is a shadow over hopes for a rebound in the nation's housing markets. It masks the full extent of the foreclosure crisis and threatens to depress prices even further just as some parts of the country are hinting at recovery. For lenders, it could portend even more financial losses tied to the mortgage meltdown.
  
  "It just means foreclosure rates are going to keep rising," said Patrick Newport, an economist for IHS Global Insight... read rest of article here

Badly behind on payments but yet their banks have not yet foreclosed?????

Holy cow!!!!

Since when have bankers been sooooooooooooo kind with foreclosures???

Would it be wrong to say that the bankers are being so kind for their own sake in trying to make their own books look nice???

Who Is Going To Lend US Money To Fund Its $2 Trillion Deficit?

Pimco's Bill Gross talked about it in his newsletter Staying Rich in the New Normal

• The immediate question is who is going to buy all of this debt? Estimates suggest gross Treasury issuance of up to $3 trillion this calendar year and net offerings close to $2 trillion – almost four times last year’s supply. Prior to 2009, it was enough to count on the recycling of the U.S. trade/current account deficit to fund Treasury borrowing requirements. Now, however, with that amount approximating only $500 billion, it is obvious that the Chinese and other surplus nations cannot fund the deficit even if they were fully on board – which they are not. Someone else has got to write checks for up to $1.5 trillion additional Treasury notes and bonds...... (do read rest of Bill Gross letter here )

Henry Blodget acknowledged the debt issue back in May in his editorial on Business insider highlighting what John Mauldin had been saying.Why Are Rates Rising? Maybe Lenders Think We're Screwed

• Second, long-term rates are going up because traders are realizing that the world's big economies will need to issue trillions of dollars of new debt to pay for all their deficit spending...and there's just not enough dumb money in the world. Put differently, where is all this money going to come from?
  
  John Mauldin ran some numbers on this over the weekend. The US is in trouble. Japan's in trouble. Germany's in trouble. The UK's in trouble. Spain is in trouble. European banks are in trouble. All of the aforementioned countries, including the US, will be running deficits of over 10% a year, likely for several years to try to stave off economic collapse.
  
  The US deficit alone will eat $1.8 trillion next year, forcing the US to issue $1.8 trillion of new debt. When you go out a few years and add in the other countries, the amount of new money required gets very big very fast. And, again, the big question is...where is that money going to come from?
  
  Here's John Mauldin:
  
  The world is going to have to fund multiple trillions in debt over the next several years. Pick a number. I think $5 trillion sounds about right. $3 trillion is in the cards for the US alone, if current projections are right.
  
  The US trade deficit is now down to under $350 billion a year. The Fed can monetize a trillion [buy debt directly from the Treasury, thus printing new money]. Maybe... US savings are going to go up, but where is the incentive to buy ten-year debt at 3.5%? Four-year debt under 2% doesn't do much for your savings growth. Even with monetization and the Chinese buying our debt with the dollars we send them, that still leaves the bond market about $1.5 trillion short, give or take $100 billion...
  
  I think the bond market is looking at the mountain of debt that will have to be somehow sold and wondering where such a colossal sum will come from. Where do you find $10 trillion in the next ten years for US debt?
  
  And that is just for US government debt. $5 trillion for new global debt in the next two years? In a deleveraged world? How much will the other countries need? What about money needed for businesses and mortgages and credit cards and so on?
  
  If you add $10 trillion to the current $11.3 trillion (including Social Security trust funds, etc.), that totals $21 trillion in 2019. Let's be generous and suggest that interest rates will only be an average of 5%. That would be an interest-rate expense of over $1 trillion. That is 25% of projected revenues and 20% of expected expenses. And that assumes you have nominal growth of over 4% for the next ten years. If growth is less, tax revenues will be less.

Scary? Or perhaps you think that all these folks are simply singing the same tune.

Here is another set of opinion from famed Canadian fund manager Eric Sprott of Sprott Asset Management

Some bits of what Eric wrote...

• The US government raised $705 billion worth of new debt in 2008. The debt was raised to pay for a $455 billion budget deficit and $250 billion in “supplemental appropriations” for the wars in Iraq and Afghanistan. In 2009, the US government will (and must) sell $2.041 trillion in new debt. This debt will pay for a projected budget deficit of $1.845 trillion, supplemental appropriations of $196 billion for Iraq and Afghanistan, a fund for pandemic flu response and a line of credit to the IMF. In fiscal 2009, the United States must find buyers for almost three times the debt that was issued last year.
• Given the current state of the economy, it seems frighteningly apparent that a threefold increase in the debt purchased by the account holders listed above is a mathematical impossibility. There is simply not enough money in the present economy to support a tripling bond issue in the normal course of business. To confirm this, we have grouped together similar debt holders in order to assess their potential buying capability for fiscal 2009, which ends on September 30th.
• The Federal Reserve’s policy of Quantitative Easing is failing. The US budget is ludicrous, spending is out of control, spending promises are out of control, the world knows it - and we know it. For all the pundits who see the economy improving over the next year, we invite you to explain to us how this debt crisis will resolve itself without significant turmoil. We’ve tabulated the numbers above - and they do not lie. ( source: here - recommended reading. :D )

And here is my favourite pun... Where Is Ze Moola babe?

How now my dearest brown cow?

Regarding John Master Selling Its Entire Business

I was reading the following comments posted on Star Business. John Master’s ‘retirement’ an eye-opener.

I was confused by some comments.

• Rarely would that scenario be pictured of a still healthy albeit marginally profitable listed company that has basically decided to call it a day on the stock exchange.

I was wondering what 'marginally profitable' meant. Making little money?

Instead of trying to decipher what the writer meant, I decided to do my 'Getting Information From Bursa Malaysia Website'

The first link under Historical records showed was Quarterly rpt on consolidated results for the financial period ended 31/3/2009 - and this was John Master or JMI's Q4 earnings.

I decided to check every fiscal year Q4 earnings reported each May.

Quarterly rpt on consolidated results for the financial period ended 31/3/2009 - fiscal year 2008 lost 2.29 million.

Quarterly rpt on consolidated results for the financial period ended 31/3/2008 - fiscal year 2007 made 2.574 million.

Quarterly rpt on consolidated results for the financial period ended 31/3/2007 - fiscal year 2006 lost 10.474 million.

Quarterly rpt on consolidated results for the financial period ended 31/3/2006 - fiscal year 2005 lost 25.440 million.

Quarterly rpt on consolidated results for the financial period ended 31/3/2005 - fiscal year 2004 made 1.502 million.

Without even using a calculator, it's rather clear that JMI had been lost more money than it made the past 5 years!!!

Would you call this a marginally profitable company???

The JMI chart shown in the Star Business article is rather interesting.

And many would say that JMI is a perfect example why one should not invest long term.

I do not quite agree completely.

Yes, JMI never did recover from the dizzy peak of 10.20 it hit back in 1997. (WOW that must be one heck of a bull run back then eh?).

And yes, holding it long term since 1997 (12 years is rather long, yes?) would have been nothing but disaster for the investor.

But...but... buttttt..... where's the justification to hold it so long?

Was JMI even an investment grade stock?

Look at the recent 5 years quarterly links posted above. JMI was LOSING money during this period!

Surely, one would reasoned that JMI was a rather poor company and that there is no justification in holding JMI long term!

Yes?

And if I scrolled deep down JMI's historical quarterly earnings, JMI was losing money way back in its fiscal year 1999! Quarterly rpt on consolidated results for the financial period ended 31/3/2000 (can see the losses and the previous year losses back in 2000?)

So in this JMI example, holding long term (12 years) in a rather poor company isn't a good wise option yes?

Anyway the Star article continues..

• The company is relatively debt free with only RM5.5mil in short-term borrowings. It has RM43mil in cash, or a cash backing of 35 sen a share.
  
  Most of its assets are in the form of inventories (RM67mil) and receivables (RM39.7mil). Plant and machinery carries a value of RM2.8mil on the balance sheet and land for development is another RM2.4mil.

From it's latest quarterly earnings, one can see that the cash balances was boosted by disosal of property.

• Financially, JMI has hinted that it was treading on water. It says its financial future is uncertain and the prospects for the industry it operates in are tough.
  
  Competition in this business is fierce and there will always be places where it’s cheaper to produce a piece of garment than Malaysia. Economics and profitability will rule and the directors might feel that the company is fighting a losing battle on that front.
  
  It argues those conditions make any future dividend payments doubtful. Even though business conditions are tough and outlook uncertain, there is an offer to bid for the assets of JMI from three directors of the company related to the founder of the company who retired in May last year.

Here's the news article on JMI: John Master to sell entire business

AirAsia And The Airport Tax Issue

Interesting comments made on the airport issue between AirAsia and Malaysia Aiports.

On the Edge Financial Daily No special privilege for AirAsia to owe airport taxes

• KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) has never accorded AirAsia Bhd or any other airline the special privilege of owing airport taxes, Prime Minister and Finance Minister Datuk Seri Najib Razak said.
  
  He said although AirAsia was in arrears of RM65 million to MAHB on airport taxes, the airport operator was in the midst of negotiating with the low-cost carrier on the issue and he was confident that the two parties would be able to reach a settlement in the nearest possible time.
  
  "Drastic action cannot be applied by MAHB on AirAsia as it would affect the operations at the low-cost carrier terminal (LCCT) and cause a negative result on MAHB as operator and manager of the airport," Najib said in a written reply to Wee Choo Keong (Wangsa Maju-PKR) yesterday.
  
  Wee had asked the finance minister to state why MAHB accorded AirAsia the special privilege of owing RM65 million in airport taxes (as at Feb 28, 2009) when passengers had already paid the tax in advance, and when AirAsia had reportedly been making huge profits since its inception.
  
  Later, Wee told The Edge Financial Daily that AirAsia was merely a collecting agent for the airport tax and would technically be in criminal breach of trust if it failed to remit what was collected to MAHB.
  
  "I'm sure the figure in arrears is higher than RM65 million now. The issue of negotiation between MAHB and AirAsia should not have risen in the first place," he noted.
  
  Wee said it was pointless to collect airport tax from passengers if the taxes collected were kept for other purpose by AirAsia, adding that airport tax is a non-negotiable item and that MAHB had failed in its statutory duty on the tax collection.
  
  "Passengers who have cancelled their flights should also know they are entitled to be refunded with full airport tax although they may be penalised on their airfare," he added.

Rather interesting.

If what's said is true and AirAsia HAD ALREADY collected airport taxes, then why isn't AirAsia paying Malaysia Airports what it collected?

Surely the money collected belongs to Malaysia Airports, yes?

Citic's Problems Blows Right Open!

Posted last year David Webb's Time-Bomb Warning On Citic Pacific Should Not Be Dismiss and also early this year Citic Pacific's Chairman And MD Face Securities Probe.

Flashback of David Webb's article last October.

• It turns out that little old ladies buying minibonds aren't the only ones to have been taken in by structured financial products. Hang Seng Index member (for now) CITIC Pacific Ltd (CP, 0267.HK) stunned the market this evening with the extremely late announcement that they are sitting on realised and unrealised losses of HK$15.5bn (US$1.99bn), due to foreign exchange exposures the Company was aware of six weeks ago (although the losses have grown) but had failed to tell investors until now.

On today's Edge Financial Daily Auditor finds irregularities at Citic Securities, shares fall. ( Citic Securities which is China's BIGGESTbrokerage company and Citic Pacific is the company's listed unit in Hong Kong)

• SHANGHAI: Citic Securities Co said today that state auditors had discovered some irregularities at the firm, sending shares of China's biggest-listed brokerage tumbling.
  
  China's National Audit Office spotted problems in Citic Securities' financial treatment of incentives related to its brokerage business, the Beijing-based company said in a statement to the Shanghai Stock Exchange.
  
  The irregularities occurred in 2007, before related rules were published, and would not have any impact on the company's performance or published results, it said.
  
  In a routine check last year, state auditors also uncovered irregularities at Industrial & Commercial Bank of China (ICBC) and China Construction Bank (CCB), according to separate exchange filings. Corrections had been made and the findings had no impact on business, both lenders said.
  
  Citic Securities shares fell nearly 5% at one point before closing 2.88% lower at 28.32 yuan (RM14.69). That compares with a 0.12% dip in the benchmark Shanghai Composite Index.
  "The impact of such problems should be short-term and negligible. The market is over-reacting," said Tian Liang, analyst at Ping An Securities Co. "We're optimistic on the future performance of the company, which would benefit from big stock market turnover and upcoming initial public offerings (IPOs)."
  
  ICBC shares rose 1.31% and CCB shares ended up 3.31% in Shanghai, lifted by a broader rise in banking shares.
  
  Citic Securities shares have gained more than 50% this year, as the stock market rallied and trading volume surged. Citic Securities also stands to benefit from China's resumption of initial public offerings this month.
  
  Next year, big companies such as Agricultural Bank of China and China Mobile may sell shares publicly in China, potentially giving Citic Securities a boost in underwriting revenue, analyst Tian said.
  
  Citic Securities' problems were found in a state audit conducted between March and June last year at its parent Citic Group, China's biggest financial conglomerate.
  
  The inspection came after the group's Hong Kong-listed unit, Citic Pacific, posted US$2 billion (RM7.1 billion) in losses from unauthorised bets in volatile foreign exchange markets.
  
  In addition to Citic Securities, irregularities were found at some other units of Citic Group, the statement said.
  
  Citic Securities' problems occurred in 2007, before the government published rules in April 2008 to regulate the country's brokerage business, the company said in the statement.
  
  "We paid high attention to the government audit, and actively cooperated," Citic Securities said. "We corrected our mistakes as we were being audited." — Reuters

UEM Land Makes Nice Recovery

Since I had blogged previously on UEM Land in the postings UEM Land Hit With Damac Group Withdrawal In Nusajaya Project and UEM Land Comes Tumbling Down!, I thought I make the following update with this news brief from Business Times.

Briefly, Damac Group withdrew from the Nusajaya project. Today, Khazanah has came out making a bold statement.

• No major issue in finding new buyer for Iskandar land: Azman
  
  KHAZANAH Nasional Bhd says it sees "no major issue" in finding new investments to replace the Dubai property developer which recently dropped a land purchase deal in Iskandar Malaysia.
  
  Damac Properties (Malaysia) Sdn Bhd, one of Dubai's largest private developers, recently said it would not pursue the plan to buy land in Nusajaya for RM396.5 million.
  
  "It's not a major issue. The Damac plot of land is a good site and there is interest shown for the site.
  
  "We are confident there will be replacement coming in," Khazanah's managing director Tan Sri Azman Mokhtar told reporters in Petaling Jaya yesterday.

Hmmm... what do you think?

RM396.5 million is not a small investment yes?

Business isn't too booming yes?

Anyway, how interesting that this interview was given yesterday afternoon. Yup, the stock had a nice recovery yesterday. :D

Here's the 5 minute chart, showing the NICE turnaround.

Oooo... this is not a stock recommendation. So I really have no idea if you can lose money trading this stock. :D

Baltic Dry Index Ends Lower And CIMB Expects BDI to Average 2500pts for 2010

The Baltic Dry Index closed much lower again. Second down day for the index - ending the previous 7 days of advances.





CIMB Research had a report out on the Dry Bulk Shippers yesterday and they are underweight for the sector.

• Price arbitrage favouring commodity imports explains BDI increase. The substantial rise in the Baltic Dry Index over the past six months, despite global weakness in steel production and electricity demand, has been driven singlehandedly by China. As freight-inclusive cost of iron ore and coal imports fell below domestic alternatives from the start of 2009, Chinese steel mills and independent power producers accumulated significant amounts of foreign ore and thermal coal. In 4M09, China imported 22.9% more iron ore even though crude steel production rose a mere 0.7%. China also purchased 71% more coal from Australia and Indonesia during 5M09 even though electricity production fell 4% yoy.
  
  • Are we past the year’s peak? However, the tsunami of imports may be coming to an end. Adding the rise in the fob prices of commodities and the more expensive freight, the cfr prices of imports have now closed the gap with domestic Chinese prices and are now more expensive in some cases. If this situation prevails, we expect Chinese buyers to return to domestic sources and reduce their imports. This could cause the average BDI for 2H09 to be lower than in 1H09.
  
  • 10% hoh capacity growth in 2H may be possible. With freight rates now comfortably above breakeven operating costs, dry bulk owners are likely to accept newbuilding deliveries rather than defer them further, especially since the majority of 2009 orders may have already been financed. We expect capacity growth of about 10.2% hoh in 2H, against just 3.1% growth in 1H. This could result in a moderation of the BDI levels over the next six months.
  • Maintain UNDERWEIGHT on dry bulk shipping. We believe that the odds of a correction in the BDI in the next six months are significantly higher following the convincing rise in cfr import prices over the past few weeks. We are currently forecasting the BDI to average 3,000 points in 2H09 vs. more than 4,000 points currently and an average of 2,000 points in 1H. This will take our full-year average to 2,500 points, up from our previous forecast of 1,000 points. For 2010, we expect the BDI to also average 2,500 points (previous forecast 1,200 points) while for 2011, we are retaining our forecast of 3,000 points. According to Imarex data, the BDI futures for 3Q09 is priced at 2,825 points, which is 31% lower than the current level, while the futures curve for 4Q09 is priced at an even lower 2,350 points.
  
  • We are retaining all our Underperform recommendations except for Pacific Basin which we downgrade from Neutral to Underperform. We will revise our earnings forecasts for the new BDI expectations after going through a comprehensive review. We expect TTA and Pacific Basin to be profitable in CY10, against our current loss forecast, while PSL should see higher profits and STX lower losses. We do not anticipate a change in our recommendations. Our target prices remain intact for the time being. We believe that stockmarket valuations have priced in significant positives for the dry bulk sector. Investors should take profit before the expected moderation in China’s commodity imports in 2H09.
  
  

oO .... look at CIMB's target price for Maybulk!

Here is how Maybulk is doing.

Not looking too sharp and perhaps taking profit instead of selling at a loss would have been a smart option the other day!

How now my dearest Moo Moo Cow?

:D