Recent Views On Malaysia

• Growth forecasts revised down: 2008: 5.7% (IMF), 5.6% (ADB), 5.5%(WB) 5%(Govt), 4.8-7.2%(I-banks). Forecast for 2009: 4.8% (IMF), 4.5% (ADB); 0.5-5.6%(I-banks)
• Q3-08 GDP growth rate slowed to 4.7%y/y, lowest level in 3 yrs (2Q-08: 6.7%) led by decline in exports, easing investment (credit crunch, slowing demand).
• Export growth moderated in Q3 but stayed firm at 16.9% (Q208: 20.8%) due to high exports price and sustained demand of resource-based products; Imports went up by 10.3% (Q208: 9.9%); Net real export good and services declined by 14.8% (Q208: +20%)
• In Oct, exports fell 2.6% yoy due to low global demand for electronics and commodities; Total exports was declined to RM53.46bn ($14.69bn) from RM62.31 in Sep; Imports (RM43.84) also fell 5.3% from a year ago; Trade Surplus in Oct was RM9.62bn
  
• Govt. unveiled its RM7Bn stimulus package to boost domestic economy; revised down forecast GDP growth in 2009 to 3.5%; fiscal deficit at 4.8%;
• Growing concerns that economy will slump to below 3.5% growth in 2009 or even slip into a recession as US and global slump intensify starting late 2008; govt planning for fiscal stabilization program
• Industrial production grew only 0.9% y/y in Aug (weakest in a yr), Manufacturing production rose 0.8% (14-month low); Inflation, high production cost, subsidy bill may also impact consumption; investor sentiment weakening amid high inflation, political uncertainty
• Risks: slowing oil and commodity prices, global slowdown, slowdown in global (China) construction will impact commodity exports, the already slowing industrial production, pose risk to current a/c surplus; inflation and tax increases will impact consumer spending; depreciation of Asian currencies relative to ringgit
• Bank Negara: Growth will be affected in H2 2008 on slowing exports and inflation risk from food and energy prices; but domestic demand and energy/resource exports may lend support to growth; might use interest rates and fiscal stimulus to boost consumption and investment
• Morgan Stanley:Growth would slump to an eight-year low in 2009 as narrowed trade surplus amid slowing export demand and lower commodity price
  
• Mohamed Ariff: electrical and electronic sector is very vulnerable; to avoid recession, Malaysia has to support service sector, expected main engine for economic growth in 2009
• EIU: Growth will be hit by slowdown in fixed investment, consumption (unemployment in export sector)
• UBS: 0% GDP growth in 2009 due to weak exports to G7 countries, but weak global demand and easing energy and food price would lower inflation pressure at 1%
• Stan Chart: current account surplus to narrow in 2008 due to declining exports of Palm oil and electronics to U.S., EU, and Japan
• DBS: Growth will moderate as consumption, investment are slowing in spite of fiscal spending
• Citi: Growth to slow in spite of fiscal spending due to significant slowdown in manufacturing exports and domestic demand on global slowdown, fuel price hike
• MIERS: in spite of declining exports and manufacturing sector, fiscal stimulus and service sector will support domestic demand
• JP Morgan: fiscal spending, food subsidies, cash transfers for poor will support domestic demand
• ADB:GDP growth revised up due to temporary fiscal stimulus, accommodative monetary policy, support from commodity exports. Inflation is expected to remain elevated due to high food, oil prices and reduction in fuel subsidies
• World Bank: Downward revision to growth as political uncertainty hurts domestic/foreign investment and deep global slowdown impact exports

p/s photo: Vivian Hsu

Cash Rich Companies

In such turbulent times, you would want to work for a cash rich company. There are still a lot of cash residing in many listed companies. Below are the companies within the top 100 biggest market cap with the most net cash:

1) Berkshire Hathaway $106bn
2) Bank of China $100.6bn
3) Industrial & Comm Bank of China $89bn
4) China Construction Bank $81.5bn
5) ExxonMobil $28.2bn
6) Apple $24.5bn
7) Cisco Systems $19.9bn
8) Microsoft $18.7bn
9) Google $14.4bn
10) Nintendo $11bn
11) Roche $9.9bn
12) Intel $9.8bn
13) Pfizer $9.7bn
14) Qualcomm $6.4bn
15) CNOOC $6.1bn
16) Visa $5.2bn
17) China Life $4.3bn
18) Nokia $4.1bn
19) Chevron $4bn
20) Genentech $2.9bn
21) Wyeth $2.7bn
22) Statoil Hydro $2.2bn
23) Oracle $1.8bn
24) Axa $1.7bn
25) Bristol Myers Squibb $1.2bn

Out of the top 100 biggest companies in the world, only 29 are in a net cash position. Cash within a company won't be valued at a premium if the company is perceived to be just sitting on it. Cash per share valuation will only be relevant if its a good M&A candidate, thus ruling out most China companies. Cash basically only creates a buffer for NTA valuation, which is good if you are breaking up the company or selling the company, or distributing them as dividends.

Many of the companies use their cash as investing/ corp acquisition strategy: Berkshire Hathaway, the bulk of tech companies and also drug companies - they will acquire strategic stakes to protect their turf or to fuel growth via acquisition.

Companies that uses cash to buyback shares might as well give back as dividends. I am always against share buybacks. Taking them private usually will not happen as the size is too big. Actually if KKR and TPG were to pool their resources together, in a bull market setting, they can very well take some of them private... but certainly not in current market conditions.

Locally, there are very sizable cash rich companies, but to compare on absolute basis is a bit one dimensional. A better measure would be to take the cash per share and divide it as a percentage of market price. All in RM.

Net Cash / Paid up / Cash Per Share / % of Mkt Price
MAS 4.4bn / 1.25bn / 3.52 / 109%
-admirable considering that the company has had to deal with very high jet fuel prices over the past few years, as long as Jala is at the helm, MAS can be a core long term holding
Resorts 4.15bn / 5.68bn / 0.73 / 30%
Genting 2.16bn / 3.69bn / 0.58 / 14.8%
- the cost overruns at Sentosa and slumping revenue at overseas subsidiaries may stretch demand on its cash hoard, share buybacks will have to take a backseat, cautious on both stocks
PetGas 1.53bn / 1.978bn / 0.77 / 7.8%
Sime Darby 1.16bn / 5.997bn / 0.19 / 3.2%
- very low cash position for the world' biggest plantation company, simmering problems with integration of other big plantation firms, avoid for now
Proton 1.14bn / 549m / 2.07 / 110%
- solid buy for cash if the company can be sold to a foreign carmaker, cash alone worth more than the stock, i.e. its auto assembly assets are valued at less than zero
Bursa 1bn / 519m / 1.92 / 33%
Malaysia Airports 766m / 1.1bn / 0.69 / 29.8%
UMW 745m / 521m / 1.42 / 26.7%
DIGI 504.8m / 750m / 0.67 / 2.8%
Bintulu Port 488m / 400m / 1.22 / 21.7%
- often ignored but a good, solid, conservative company, core holding
Star Pub 457m / 738m / 0.62 / 19%
YNH 323m / 356.6m / 0.90 / 75.4%
- one of the better managed property companies
Asiatic 279m / 752m / 0.37 / 8.7%
Amway 244m / 164.3m / 1.48 / 21.5%
Carlsberg 222m / 308m / 0.72 / 19.6%
JT 213m / 261.5m / 0.81 / 18%
TH Plant 204.6m / 196m / 1.04 / 77%
- another conservative plantation company, if it can boost its CPO yield, valuations will fly


p/s photo: Yuri Ebihara

Top Yielding Stocks In Malaysia

As shares prices plummet, its hard to get a grasp on actual real yield as its a moving target. Here are the top high yield stocks. Use the information anyway you like as the KLCI hits 801:

a) Evergreen

b) Maybulk

c) Gamuda

d) Alliance Financial Group

e) IJM

f) Telekom Malaysia

g) Muhibbah

h) Public Bank

i) Guinness

j) DIGI

k) Ta Ann

l) Pos Malaysia

m) Tanjong

n) B Toto

o) BAT

p) Carlsberg

p/s photos: Shu Qi (Magnum ice cream never looked so good)