It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.
Charles Dickens, A Tale of Two CitiesEnglish novelist (1812 - 1870)
Here's The Ad:
Friends have been saying how difficult it was to try and catch the ad, well now that its on youtube, np lah.
http://www.youtube.com/watch?v=Jmc4ZkB12Z0
What An AD By Petronas
We all love the festivity ads and commercials by Petronas - they are always hearfelt, nostalgic and meaningful ... remembering better times and sees the goodness in Malaysians ... that the more different we are, the more things we have in common. Well, when you have Yasmin Ahmad's sensitivity and creative brilliance, its a potent mix.
But have you seen the new Merdeka ad??? OMG, what a daring one! It shows a guy being asked to build a sampan to pay off his debt ... in the end the creditor friend gave the boat to him as a gift which will allow him to be independent and make a decent living. The new boat sank, and the tag lin at the end was in Malay but its resounding, loosely translated: Are what we putting in now able to carry us to the future, what our future will be depends on what we put in now.
Now, I don't know about you but its amazing that this was passed by the Ministry of Information. Yes, the ad was meant for all Malaysians, but one could not help but think of our government. Its very daring, its very timely ... just for that I will try to pump at Petronas as much as I can.
The nuances within the commercial is what makes it special and daring. The guy who owes money said he didn't have money to buy resources to build the sampan. The creditor friend said its OK, he can use the resources and wood available at his house to build the sampan. The symbolism, the symbolism.
Catch the ad if you can cause I believe it could be pulled off the air soon. Some bigwigs are bound to be sitting in their living room thnking, "Hey, its about .... ".
http://www.youtube.com/watch?v=Jmc4ZkB12Z0
Views On Selected Stocks
SD, Whats your take on Dialog, Equine and RBLand? Reckon its good? When u reckon this toxic debt scenario will peter off? Will there be a run this week prior to the Budget?
12:14 PM
Salvatore_Dali said...
yusuf,dialog = overpriced, considering the projects they got... sapcrest, coastal and ramunia the way to goequine = fortunes tied with connections, if connex go down, the stock is kaput, connex is in icu now
rbland = nta of rbland is 1.80 only, above 2.50 u r paying too much premium for ijm properties injection, might as well wait for requotation after absorption for better entry px, or just go into Talam as next possible exercise, the catalysts are looking good for talam anyway
Subprime = thrashed the subject to death, pls re-read old postings
Budget = personal n corp tax cuts definitely, nothing to shout about, all the corridors also announced and strategised to death already, whats new, no budget rally
Hold Till When?
For those long or very long in China H-shares covered warrants, you should be feeling good. Now, many are asking "hold till when"? You have to monitor the Shanghai and Hongkong markets to get a sense of perspective. You also have your own investing objectives.
Some Pointers :
a) If your aim is to get 50% or 100% returns, you can get out soon, if not already.
b) If you generally agree with what I have been writing on H-shares' attraction, then you should HOLD TILL the buggers expire. This is because the entire H-shares discount scenario, pouring in of China money into H-shares will play itself out over 6-12 months.
c) The longer term factor in that most will have to requote their shares back to Shanghai can only narrow the discount. We should see some having dual listings in HK and Shanghai. Some may completely leave HK and just list in Shanghai owing to government's directive and its more lucrative to re-sell shares in Shanghai (easier to raise funds and get better valuations).
d) Or, they will more likely use my strategy prediction - keep dual listing, but keep buying free float in HK H-shares, then re-sell for a subsequent second listing in Shanghai.
e) Of course, if the China markets start to look shaky dropping by more than 100 points a day, you may want to take profits and wait for re-entry levels.
I can also sense some holders will want to trade these covered warrants instead of holding to maturity, that's their perogative. The need to time the markets and incur transaction costs may/may not work in your favour. If you bought at 10 sen or lower, just let it ride, you would be amazed at the price at expiry. Then we might be able to say we have a 5-bagger or even a 10-bagger.
Where Do You Go To, My Lovely?
I was intrigued by the timely article by The Edge back in July on the "high receivable among certain Mesdaq companies". whereiszemoola has been tearing companies to shreds over these doubtful issues. I have changed my positive view to a negative view on Nextnation based on the surge in receivables. I will be trying to go through each one of those companies highlighted by The Edge. First on the chopping board is Airocom.
From their website: Airocom is a provider of Value-Added Wireless Messaging Platform and Telecom Applications Development. Airocom develops scaleable messaging solutions and telecommunications software via smart partnerships with customers and suppliers.
Airocom provides consumers, enterprises, mobile operators, service providers, carriers, portals and ISPs a complete end-to-end solution to their present communications needs. Our homegrown and flagship product, AiroGate Wireless Messaging Gateway provides maximum performance and availability and has been deployed widely by Malaysia’s mobile communication operators, service providers and enterprises.
Airocom was only listed on Mesdaq on 27 April 2006, and things already does not look that good. Surprisingly, the revenue and net profit figures were excellent in 2005, somehow the listing did not bode well at all for the company and management. Revenue slumped by some 75% and net profits of 5.4m in 2005 became a loss of 3.1m in 2006??? The chairman of the company is Datuk Ali Kadir, the former SC's chairman, and I thought he did a good job at SC. Vellapan??? To be fair, unlike other dubious counters, Datuk Ali Kadir has been adding shares to his stake a few times in the months of April and May this year. At least he is not disposing like crazy.The supposed CEO Jalaluddin Jaffar resigned in July 2007. In the annual report it stated that the company have a significant concentration of credit risk in the form of outstanding balances due from Mekong Communication Corp Sdn Bhd and PT Ochabawez Dinamika Persada, which together makes up 92% of receivables. Just look at the receivables. The merchant bank bringing the company to list can easily see that the receivables in 2005 was already 19.8m or more than 90% of the revenue for 2005, and nearly 4x the net profit figure. No warning bells, simple first year accounting student would have red-flagged this.
So, who actually gave permission for this company to list? Did the Bursa or SC even go through the figures and projections? Were the merchant bankers at Ambank sleeping or just signing off on the deal with their eyes closed? The company almost immediately went into losses less than 12 months after being listed. How can investors have any kind of confidence in Mesdaq listings? One or two good ones out of twenty is a terrible hit rate. You get better odds at Magnum and the horses.
We have to bring up the role of the sponsor / merchant bank bringing these companies to Mesdaq, what were they thinking of? Where is the "due diligence"? Was there a proper examination of the solidity of the business model? If it went from a profit to a loss after a few years, I can absolve much of the merchant bank's role. Guys, the company went into the red less than 12 months after listing???
2005 / 2006
Revenue 21.1m / 4.8m
Net Profit 5.4m / -3.1m
Receivables 19.8m / 23.9m
Airocom has a 52 week high low of 0.34 to 0.11 and at present has been rarely traded at 0.14. Airocom's slogan, "get unwired", ... well things are really unraveling fast! Somebody should be asking a lot of people a lot of questions.
SAFE earmarked Tianjin's Binhai New Area for the trial run. In a statement on its website yesterday, the forex regulator designated Bank of China's (3988) Tianjin branch and its Hong Kong-based securities arm BOC International to handle transactions. All mainland citizens will be allowed to invest and it is not limited to residents of northern Tianjin.
The New Investing Paradigm
I still think that the subprime thing is just a small thing, however the blowout due to the repercussions of subprime give rise to many fresh lessons in the continually evolving investment paradigm. You can call it the globalisation effects. Unless you still have walls around your stock markets like China, you are no longer immune to seemingly unrelated hiccups 10,000 miles away.
Put it another way - almost every asset class or sectors or country effects will have an effect on your stock portfolio, whether you like it or not, whether you have even heard of them in the first place is immaterial. Hence you can be safely buying and keeping Public Bank and UMW and IJM, but something could have happened to cause wild gyrations in gold futures due to a no-export and no-gold trade rule put up by Russia, leading to a 25% jump in gold prices. Now, nothing PB, UMW or IJM does is in any way related to gold or even something as far away as Russia. But the thing is NOTHING is unrelated anymore. By virtue of the leveraged hedge funds seeking out investments in every nook and corner of the world, all investments are related, whether you like it or not!
Imagine a US$2 billion hedge fund, they gear up by borrowing an additional 100% in Kiwi-carry trade, and then gear up another 100% doing a yen-carry trade. Now the fund has US$6 billion in investible funds. The US$2 billion borrowed on Kiwi dollars is used to invest in Singapore REITs which are yielding 5.5% in Sing dollars - the bet being the Sing dollar will appreciate at least 4% against the Kiwi dollar over the next 12 months, and the REIT yields give a good buffer. Then with the other US$2 billion in yen carry trade, borrowed at a ridiculous rate of 1.0%, the fund invests in hot markets such as Malaysia, HK, Singapore and Vietnam shares. Again the rationale being the stocks there are hot and the currency outlook all looks better than the yen. The remaining US$2 billion is invested in American instruments. Now somebody in the firm decides to sell US$500m in gold futures as a hedged bet against oil as the volatility indicates a spread play. They get caught in the 25% gold price correction, investors got wind of the US$500m losses from the gold exposure gone bad. Hedge fund put up no-redemption as each US$1m redemption will require them to dump US$3m in actual stocks. They sell stocks where they could get liquidity fast.
This kind of scenarios will play out more often in the future. As long as leveraged hedge funds' portfolio have 10 different assets exposure, each of the 10 asset class will be related whether you like it or not. As investors, its not enough to study capital flows, yield differentials, economic growth rates and inflationary rates. You have to open your eyes to Colombian stocks and maybe even English football clubs because certain hedge funds have bought heavily in them, etc... you get the drift. Hence its time for more regulations to have all hedge funds reveal their asset class exposure so that this information is known to all. Money supply growth figures have been compounding in most countries leading to high liquidity in the financial systems. Unfortunately a disproportionate amount has found its way to pump up private equity and hedge funds. The sheer size and the ability to leverage easily makes the hedgies the probable root cause of this new investing paradigm shift. The sheer size of many of these hedge funds forced them to bet big stakes in order to obtain alpha returns - these big bets can only be in certain instruments, and many of these quants think alike, thus ending up making similar bets: when there is even a little wobble in these instruments, the whole chain reaction gets magnified along the way.
Its the new investing paradigm, get used to it. On the flip side, we can also benefit from the new paradigm - when they are throwing out the baby with the bathwater, you know they are being irrational, and you can easily spot stocks that have been battered for nonsensical reasons.
Equity Strategy from Morgan Stanley: Credit market turmoil in the US is likely to extend the period of sluggish US growth well into 2008. It may also slow Europe and the commodity producers. The fallout in Asia, however, should be limited, given Asia’s strong momentum, liquidity boom and potential for stimulus. We foresee Asia outperforming the US like it did in the early1990s. On our indicator checklist, we believe we are close to the trough in this correction. The implications of the US credit squeeze: The housing downturn will deepen, declines in housing related employment will accelerate, household debt burdens will rise, and wealth effects unwind, in our view. Whilst the US is vulnerable to downside risks, Federal Reserve support should be quickly forthcoming if the outlook deteriorates.
The move came in the aftermath of France's largest listed bank BNP Paribas shutting the door on withdrawals of funds worth 1.6 billion euros, tied to subprime securities. BNP Paribas said it can not provide a fair value of the holdings of the funds, regardless of their quality or credit rating. Credit issues spilled deeper into the European markets, engulfing more of the continent's banks, and concerns grew that losses could multiply. BNP's woes and ECB's firefighting move sparked a sell-off in all major European markets
Just the hint of a selldown could send US bond yields further up, probably destroyng the US housing market, sending the US ecnomy into recession, and exert a substantial correction in the US dollar (10%-20%). Can you imagine the repercussions? It is estimated that China holds more than US$900bn in a mix of US bonds. Xia Bin, finance chief at China's Development Research Centre (which has cabinet rank), kicked off what appears to be government policy, with a comment last week that Beijing's foreign reserves should be used as a "bargaining chip" in talks with the US. "Of course, China doesn't want any undesirable phenomenon in the global financial order," he said. He Fan, an official at the Chinese Academy of Social Sciences, went further yesterday, letting it be known that Beijing had the power to set off a dollar collapse, if it chose to do so. "China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US Treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency," he told China Daily.