The M'sian X-Files - Intricacies Of The New FBM KLCI

There is a lot of new information that one can get on the new index, which will help us to understand the index and the markets better. It will also help to get a better grasp as to the "integrity of the FBM KLCI" when it rises and falls.

a) Its just 30 counters instead of the old KLCI which had 100 counters.

b) The new index addresses issues such as liquidity and free float, and let's face it funds in general are really looking at just the top 30... heck throw in another 20 stocks and that's their universe.

c) There is a good chance that the 30 stocks will start to be traded at a premium to the rest as these are the must haves for all indexed funds, by all the big and small local funds, and by most of the foreign fund managers managing Asian portfolio so as to not be under performing the Asian benchmarks.

d) Having said that, part of the rise in the FBM KLCI over the last 2 weeks may be attributed to some of these sustained 'enforced buying' activity rather than by genuine equity players.

e) The new index is a skewed index. Banks and plantations alone have a total weighting of 55%. If you have banks, plantations and telco = 63%. If you add banks, plantations, power, gaming and telco = 85%. So, technically a fund manager need only look seriously at these FIVE SECTORS alone to do well, forget about the rest.

f) The new index will also affect how research houses form their analyst teams. They must cover the 5 sectors, there are 9 sector that are not covered by the new index. It is very likely that analysts in the following sectors better start covering a more important sector in order to stay relevant. The following are the 9 sectors that are deemed as "irrelevant", "need not exist", "unimportant to the Malaysian economy", "unnecessary to look at in order to gauge the overall health of the economy": technology, transportation, property, timber, insurance, construction, building materials, hotels and industrial products. Go figure!

g) The new index will make it that much "easier" for the index to be controlled - conspiracy theorists will agree with me whole-heartedly that this is to allow PNB-EPF-MOF-EPU to control the index better. So, the next time we see a major market correction, we may be able to withstand it better with the new index as all it takes is to mop up the 30 stocks ... even though those stocks outside of the top 30 may be seeing their share prices tumbling like a rock. Managed perception more important la... than real effects to the economy. Hey, like that, we may never ever see a major correction in the FMB KLCI... ever... especially if we keep launching new big funds to mop these buggers up. But I am only guessing here.

h) Now let's consider the sin stocks, gaming and tobacco, they account for 12% of the new index. This is an important consideration as most of the big local funds will not be touching these stocks. Can you "not be in control of the 12% of the index" and still manage funds that is compared to the FBM KLCI benchmark? If these 12% of the new index starts a bull run on its own, most of the local funds will be under performing the new index. Can you all see a danger here??? Staring at you in the face!!! The danger is ... if there ever occurs a situation where you get the gaming and tobacco stocks to be in a strong bull run outperforming the rest of the new indexed stocks ... could we safely say that the EPU-MOF will not be strong-armed or "influenced" by certain parties to "whack down the sin stocks" with excessive punitive measures ( additional gaming and duties above and beyond what is normally expected in a financial year)???

g) If you take Khazanah, Petronas and PNB as the investing triumvirate ... the 3 already control 12 out of the 30 stocks in FBM KLCI. If you are a nasty anti-government critic, you have enough loose thoughts to take this factor to the next level. I am not saying its a negative or a positive, but its a fact that is worth remembering. Be careful, as the greater the influence one has, the greater the responsibility to be prudent, transparent and professional.

h) Though most fund managers will want to stick to the FBM 100 as the benchmark for their performance, it will not be so easy. The drivel, the propaganda and focus have all been set to make FBM KLCI the index to watch, and because it was kinda close to the level where the old KLCI was, most will tend to take to this new index. Its much harder if you switch from a 1,100 index level to a 9,500 one ... kudos to the planners.

i) Of course detractors will point to the fact that the venerated Dow Jones Industrial Index is only made up of 30 stocks, and is an often quoted barometer, even though most professional funds benchmark their performance to the broader S&P 500. The big difference is that it will be a hundred times easier to try to "manipulate" the FBM KLCI than the Dow Jones Industrial Index. Actually, pick just any two stocks in the Dow Jones, I am VERY SURE the market cap of any two stocks will be bigger than total market cap of ALL stocks listed on Bursa - in fact just any ONE stock in the top 10 of DJIA will be enough to cover the entire market cap of Bursa. Not to belittle FBM KLCI but to put things in perspective.

Can I have my Datukship now??!! (yea, I don't really need one or want one... but I want to get on and off my plane faster la...).


p/s photos: Yukie Nakama

Decoding PNB's Investment Strategy Ahead

Time to try and decode PNB's investing strategy, as some have voiced concerns over its last few fixed priced funds, and its ability to maintain those returns. Some of the information have been extracted from articles in The Edge.

Four of the 10 PNB funds are known as fixed-price funds where the price per unit is fixed at RM1 regardless of how the market performed. There is a history behind this practice. The first PNB fund, Amanah Saham Nasional, was launched as a fixed-price fund in 1981 but it reverted back to market pricing in 1991 as per the trust deed. Soon after that, Amanah Saham Bumiputera, a fixed-price fund was launched in 1990 for investors not accustomed to market fluctuations. Altogether, there are four such funds by PNB.

Fixed-price funds are practically risk-free as investors get back whatever they put in if or when they redeem their investments. On top of that, you get generous returns of 7% to 8% every year. It is a very good deal indeed but on the other side of the coin, the actual value of the underlying investments is unknown, unlike other unit trust funds where you know the value of your investments at any point in time. The balance sheets of fixed-price funds are not disclosed in their annual reports, and the Securities Commission, the body governing the unit trust industry, grants these funds various exemptions from its guidelines on unit trust funds.

How can a fund keep paying 6%-8% a year in dividend, invested 60%-90% in local equities, and will always have a fixed price of RM1 NAV. You cannot get that anywhere else, can you? Is anybody even a bit curious? PNB is not almighty. What about the 1997-1998 Asian crisis, the Internet meltdown, the 9-11 period, the SARS debacle, and the very recent subprime global meltdown ... surely we all saw that equity prices were hammered for an extended period.

The way PNB would argue is that they do income smoothing, or something along those lines. That in good year, say they get an 11% return, they will keep some of the gains and declare only 7% in dividends. The excess would go into a special performance account to top up future years that they do not have stellar dividends. That sounds alright except that you still did not know the exact real NAV of these funds.

PNB could very well be paying 6%-8% dividend every year on these fixed price funds but the real NAV may be deteriorating below RM1.00, and we don't know because its not known. Should we be concerned if the actual collective real NAV of these fixed priced funds were to be say RM0.97, RM0.93 and RM0.88 for 2006, 2007 and 2008 respectively??? We can only assume that their real NAV is healthy.

In good or bad markets, the funds have consistently returned steady dividends in the high single digit. But the fact is, the returns are lower today than in the 1980s and 1990s when dividends and bonuses were in the double-digit realm (as high as 20% for ASN in 1981). But no one is complaining about the 7% to 8% annual return today considering that investments in the fixed-price funds are essentially risk-free — you get your principal back when you sell your units.

PNB is a unique institution. I can understand how they can generate double digit return in the early years (PNB was established in 1979). Pernas, which had been acquiring public-listed companies under foreign control, was compelled to transfer 13 of its companies, including Sime Darby Bhd and Malaysia Mining Corp Bhd, to PNB at cost. Malayan Banking Bhd was transferred to PNB after Bank Negara Malaysia stepped in to restructure the bank in 1967 following a bank run, which wiped out 40% of its deposit base. PNB also benefited from grants and interest-free loans from the government to facilitate the acquisitions. By 1989, PNB had transferred to ASN sizeable stakes in various listed entities. Similarly, ASB’s assets comprised those transferred from PNB. Furthermore, as a bumiputera institution and one of the biggest institutional investors in town, PNB is said to have been allotted shares in companies en route to listing at attractive prices, given the need to meet the 30% bumiputera shareholding requirement.

In the 90s PNB still had its channels as many big companies got listed, and IPOs generally performed outstandingly during the early 90s bull run. Over the last few yers, these mega IPOs have dried up. PNB will now have to rely on corporate finance and restructuring to generate value to its stable of companies. Hence, arguably, the Sime Darby's mega plantation scheme is the start of many more projects under PNB's auspices. PNB will now have to consolidate its stable of companies, put them into synergistic groupings to create more value. All that is very necessary to continue to support these fixed priced funds that still give 6%-8% dividend income every year and can always be redeemed at RM1.00 par.

So, the scepticism over PNB's ability to maintain these returns is genuine and needed to be asked. As to whether they can do it depends on execution, the advisors they have, and how astute they are at not just managing funds but including appointing the right people to manage the synergies and put the collective resources to work. Sime Darby is still digesting the huge plantation firms acquired. It is imperative that PNB maintain a very high standard of professionalism in its retention of top management executives in running these merged entities. PNB has to minimise the political interference to have political appointees - it has to manage with clear transparency with global best practices as their mantra.

The next big project for PNB has to be its many property companies under its stable. PNB have SP Setia and Mah Sing, and its stakes in these companies have been "rising strategically". In contrast, PNB has accumulated almost 20% in Mah Sing and has direct and indirect interests of close to 32.9% in S P Setia. Another company that PNB has bought a stake in is I-Bhd, where it has 18.1%. Sime Darby Property could be better placed in a property conglomerate as it has the largest landbank in the country. Sime Darby’s landbank in the Klang Valley stretches from the Guthrie Corridor in the north of Selangor, to Putrajaya, Seremban and Port Dickson. The 37,000 acres in its landbank is about as big as Kuala Lumpur and three times the size of Putrajaya.

PNB took Petaling Garden Bhd, Island & Peninsular Bhd and Pelangi Bhd private between 2005 and 2007. The three collectively own 7,200 hectares of land. Apart from land, PNB also has buildings in prime locations that can easily be packaged into a real estate investment fund (REIT). Within its fold is also Syarikat Perumahan Pegawai Kerajaan Sdn Bhd (SPPK), which has a good property development record. Because of its huge landbank, Mah Sing and S P Setia are said to be possible vehicles for PNB to unlock value.

It looks increasingly like PNB want Sime Darby to concentrate on plantations. Hiving off SDP to a merged Mah Sing-SP Setia vehicle would probably yield great value to Sime Darby and ramps up PNB's control in Mah Sing-SP Setia. PNB holds about 53% stake in Sime Darby, which wholly owns Sime Property.

Imagine if PNB injects the three property developers – Island & Peninsular Bhd, Petaling Garden Bhd and Pelangi Bhd – all privatised between 2005 and 2007, as well into the merged SPSetia-Mah Sing vehicle. Its a mega property concern for sure. The good thing is that it can consolidate its landbank in one major masterplan and plan much better strategically. It will be much better capitalised as well to venture into new markets with various "brands" for the right markets.

I doubt very much PNB will take SP Setia or Mah Sing private. Injecting what they have into SP Setia-Mah Sing would make much more sense. The whole shebang would require massive amount of capital for development and venturing into new markets, you wouldn't want to take that onto PNB's balance sheets as we could be talking in billions of ringgit every few years.

Other institutional shareholders of SP Setia include the Employees Provident Fund with 12%, Capital Group of the US also with 12%, and other foreign shareholders which hold another 14% in the company. On June 18, SP Setia announced the appointment of two nominees of PNB – Tan Sri Wan Mohd Zahid Mohd Noordin and Datuk Noor Farida Mohd Ariffin – as its new non-independent and non-executive directors. SP Setia’s two executive directors – Khor Chap Jen and Teow Leong Seng – resigned from their positions on the same day. However, both remain with the company in their existing capacity as executive vice-president in charge of property division (central) and executive vice-president/CEO of international business development respectively.


p/s photo: Maya Karin

Amanah Saham 1 Malaysia - A Boost To Equities?

More funds allocated to local equities, then it should boost equities right!?? Err, well, no actually. The Malaysian exchange is a relatively open exchange, funds can move in and out. If you want to "engineer" a higher market, then do like China, restrict the way foreign funds can move, restrict even more the way locals can invest, make it difficult to invest overseas.

You can establish more local funds, RM5bn here, RM10bn there, but all stocks will fall in line with a certain kind valuation parameters. Say, there is a 30% foreign funds participation now in the market, they are here because of certain growth assumptions relative to valuations offered. If you increase the amount via new local funds, yes it will create more buying, but institutional funds will also have the ability to take profit and seek out less expensive markets. So, say new funds add 5% demand for equities, that could be taking out foreign funds exiting the market by a similar quantum as the move up might look expensive.

The second assumption is that these RM10bn are new funds, these funds are from the public. Who is to say these funds would not have gone to buy equities as well on their own?

There is a danger which no one in mainstream media is saying. You are literally taking out these RM10bn from the economic system. Unless 100% of these funds are in fixed deposits, then the net effect is muted. If these funds come from disposable income, you can argue that the RM10bn is being sucked out of the system. If anyone studied the velocity of money, each RM1 circulating in the economy is actually worth about RM8 to the real economy. Too many of these funds is deflationary and slows domestic economic activity.

Why are ASM PNB funds seemingly being assumed to "guarantee" to return 6%-8% a year? That is not a true certainty. The track record is good though but its not a guarantee.

Think people, think. I do agree that the fund is ok, but we need to be aware of the wider implications and not be blinkered to think at a superficial level only. After all that, I still think this is a "good thing", but we do need to have an appreciation of how the whole thing works.

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KUALA LUMPUR, July 31 — Prime Minister Datuk Seri Najib Razak announced the establishment of the Amanah Saham 1 Malaysia (AS 1 Malaysia) fund consisting of 10 billion units on July 11 on the occasion of his 100th day in office. To be managed by Permodalan Nasional Bhd (PNB), the fund is accessible to all Malaysians and follows on the heels of an earlier fund of 3.3 billion units which were speedily snapped up by investors looking for safer investment options.

Long queues formed early last Wednesday for the remaining 1.6 billion units in the state-sponsored Amanah Saham Malaysia (ASM) when the units were offered to all after the Malay and Indian portions were not fully subscribed.

The ASM fund had originally allocated half of the 3.3 billion units to Malays, 30 per cent to Chinese, 5 per cent to Indians, and the balance to “other” races. It is unclear if the 1 Malaysia fund would have a similar allocation. That the remaining 1.6 billion units went in a few hours suggests overwhelming demand for the funds which offer superior returns to fixed deposit rates of 6-8 per cent versus 2-3 per cent.

Although the 1 Malaysia fund is three times bigger than the last ASM, the liquidity in the system is huge and with the pent-up demand still robust, sales could be brisk. Malaysia's biggest fund manager is expected to invest the proceeds back into the local stock market.

“I noticed an immediate spike in volume last week after the remaining units were sold,” said a stockbroker who is confident of a new market surge since PNB would have to invest the proceeds.

Indeed, market players attribute the recent stockmarket rally to government funds and institutions, since most retailers are only starting to nibble. However, some chartists have warned the market has run ahead of valuations.

Over the past weeks, the benchmark index has risen steadily to around 1,160. It comes after a new 30-constituent index — the FTSE Bursa Malaysia KLCI — replaced the 100-company Kuala Lumpur Composite Index in the first week of July. So many contend the improvement is due to the concentration of trade in the heavyweights, especially the top four — Maybank, Sime Darby, Tenaga and Commerce Asset Holdings.

Despite Malaysia being a regional laggard, foreigners remain underweight on its economy. Many still are unaware of recent measures to liberalise the economy, analysts say. In June, foreign funds acquired US$26 million (RM91 million) worth of local shares, less than a fifth a month previously, according to a CIMB Investment Bank report. — Business Times Singapore

p/s photo: Carmen Soo

My NS Strategy Advice For Valuecap

The Edge Daily wrote a good piece on Valuecap. Here are the main points:

a) Valuecap Sdn Bhd, the asset management company owned by Khazanah Nasional Bhd, Permodalan Nasional Bhd and the Pensions Trust Fund Council, will receive an injection of RM5 billion to invest in undervalued companies on the Kuala Lumpur Stock Exchange. The money, which doubles the size of Valuecap’s capital, is on loan from the Employees Provident Fund (EPF). Valuecap, which was set up in 2002 to add liquidity and volume to the market, has met these objectives.

b) Is Valuecap’s record of its return on investment matches the EPF’s benchmark. However, currently, Valuecap is believed to have about RM4.9 billion worth of investments in 70 companies. And it has been reported that since its inception to September 2007, Valuecap has paid out a total of RM135 million in dividends. Better public disclosure will help to ascertain whether this passes the standard tests for financial performance.

c) A check with the registrar of companies shows that it is in the black and has assets of RM7.5 billion. So Valuecap has some value. But what is the return that EPF will get on the RM5 billion?

d) Since it involves two government-related entities, disclosures must be made every year on the returns. Also, Valuecap should detail the stocks it has in its portfolio just like some of the listed small-cap funds. At the moment, nobody really knows the stocks in Valuecap’s portfolio.

e) The Valuecap story illustrates the importance of transparency in financial reporting to boost investor confidence and the need for clarity about the correct economic stimulus package to move the market sentiments in the right direction.

The blogging community has tried to capture more information on Valuecap's Holdings: copied from http://bursa-chat.blogspot.com/

UAC Bhd 3,222,700 4.33 %

Amway(M) Holdings Bhd 6,958,100 4.23 %

MBM Resources Bhd 10,010,200 4.14 %

Hume Industries Bhd 6,596,400 3.45 %

PPB Group Bhd 40,452,900 3.41 %

IOI Property Bhd 28,267,500 3.4%

KLCC Property Holdings Bhd 30,957,800 3.31 %

Petronas Dagangan Bhd 32,436,400 3.27 %

YTL Cement bhd 14,955,092 3.05 %

Uchi Technologies Bhd 11,318,200 3.03 %

Chintek Plantations Bhd 2,646,000 2.9 %

United Plantations Bhd 5,975,800 2.87 %

Star Publications (M) Bhd 21,148,500 2.86 %

JTI International Bhd 7,144,400 2.73 %

Boustead Properties Bhd 6,672,150 261 %

Bintulu Port Holdings Bhd 10,121,100 2.53 %

Shell Refining Company Bhd 7,589,300 2.53 %

British American Tobacco Bhd 6,505,200 2.28 %

Axis REIT 5,400,000 2.11 %

Quill Capital Trust 4,302,000 1.1%

OSK highlighted 11 potential targets on the Kuala Lumpur Composite Index (KLCI) that Valuecap may go for — MISC, Petronas Gas, DiGi, British American Tobacco, Petronas Dagangan, MAS, Sime Darby, Maybank, IOI, AMMB and MMC.

Comments: From available information, Valuecap performed well. From the list of portfolio companies, it appears that the financial decision making is above-board (i.e. free from being "forced" to invest in "linked or influential" companies). Hence all the more reason to be totally transparent in their undertakings, staffing and investing policies. Its EPF money, hence its the public's money, NOT the government's. If you lend money to someone, you have a right to know how it is going to be spent on.

We also need to know the terms of the agreement between Valuecap and EPF on the disbursement of loan. Are there minimum performance criteria? How are dividends treated or repatriated? What is the time frame for the loan? Can EPF recall the loan at its own discretion, just like EPF can redeem funds mandated to other fund managers. We must have clear arms-length terms. If the government has learnt anything from what the people want over the past 12 months, its more transparency, clarity, stewardship and purpose in policies and management of resources.

In my view, the establishment of Valuecap is OK and justifiable. It is very much in the same platform as HKMA's massive Tracker Fund (although it did not start off as a tracker fund or ETF). When there are massive volatility and imbalances in global capital flows, the establishment of such funds are justifiable and forward looking. You do not want the broader economy to be affected disastrously by such vagaries.

We have to acknowledge that for economies that are highly correlated to fortunes of their own stockmarkets, the establishment of such vehicles are justifiable and proper. Malaysia has one of the highest GDP that is listed among all capital markets. Hence the correlation and flow on effects of the stockmarket is extremely high for the local economy. If that figure is much lower, like many European developed countries, the need to intervene with such vehicles may not be deem as necessary.

My final point is what is the "exit strategy" or "long term strategy" for Valuecap. What happens when you dissolve the fund? You get the same amount of scrips being flooded back into the market. Yes, you can argue that 5 years down the road, when the KLCI is at 1,800 or higher and sentiment has improved, Valuecap may be able to selldown its positions gradually. But that strategy is defeatist in every sense. You will still have to restart another Valuecap the next time a similar situation were to occur in the future - its not a solid strategy.

My advice (and this is worth millions in fees, which I am waiving) is to list Valuecap as an ETF. The strategy should be to break it up into 3 equal tranches. Assuming the portfolio value reaches RM15 billion in a few years time, thats three very sizable ETF. I would recommend to list one in Nasdaq, where the bulk of global ETFs are traded. The other ETF should be listed in Tokyo, while the final one in Malaysia. Do not be blinkered in trying to list all on Bursa on the basis of misplaced pride alone.

The strategy would basically "take the free float" out of the stockmarket, thus ensuring long term sustainability and investing interest. By listing in Tokyo and Nasdaq, you are basically selling all the shares to foreign investors, but the shares do not get back to the market place at all. An ETF will hold the same amount of shares throughout its life, investors will buy and sell the ETF like a share but shares held inside the ETFs would not flow back to the market place.

The strategy basically makes it possible to "trade" Malaysian shares like an index almost 24 hours a day. From Bursa trading hours to US trading hours and then Tokyo trading hours.

Sigh, if I was a Binafikir partner, I would at least get a few million in advisory fees for this.

p/s photo: Christine Mendoza

The Performance Of PNB

Splendid or Fortunate or Well-Planned

Permodalan Nasional Berhad was incorporated on March 17, 1978. PNB was conceived as an important instrument of the Government's New Economic Policy to promote share ownership in the corporate sector among the Bumiputera. Prior to the establishment of PNB, shares allocated to individuals were seldom retained. When Bumiputera shareholders sold their shares, the profits generated were consumed and not reinvested. Through PNB, substantial shares acquired in major Malaysian corporations from funds provided by Yayasan Pelaburan Bumiputra or Bumiputra Investment Foundation were transferred to a trust fund and sold to the Bumiputera in the form of smaller units. By doing this, PNB ensured that these shares are retained, resulting in the cultivation of widespread savings habits. Total funds managed by PNB now surpassed RM50 billion.

However, that does not explain its ability to pay decent dividends year in year out. Even the best fund managers will find it tough. The main thing is that PNB recruited well, operated with a lot of transparency, and is accountable to the board of trustee. That sets the platform for a well managed company. The other factor why PNB garnered so much success is that they have a strong research and investment link - all invested companies are followed diligently.

In the 2004 annual report PNB remarked that it has invested in 322 companies of which 275 companies are listed. That means 85.4% of their holdings are listed. That means PNB has a stake in about a quarter of total listed firms on KLSE. Strong performance can be obtained depending on your entry price, even if the company's prospects are just so-so. One can safely surmise that PNB would have manage to obtain the bulk of shares at IPO price or even pre-IPO prices. This will form an excellent buffer to ensuring good performance.

In cases where PNB takes up shares allocation of a listed company, usually the placements will come at a discount, which again will provide a similar buffer. This is not to say that anyone can do PNB's job - they still have to develop the expertise to screen out companies that they don't want to hold any stakes. The fact that PNB has stakes in only 25% of total listed firms says a lot about selectivity.

The other reason for the good performance of PNB is in holdings of unlisted companies - these are usually undiscovered gems that are listable in 2-5 years time. Naturally if they are well nurtured, the gains upon listing will be manifold. PNB being PNB, will naturally have a solid networking and access to important incubation ideas and can leverage on their influence and capital. Their mandate is a powerful persuasion tool.

Besides that, PNB follows up with instilling good corporate governance practice via their nominee directors (167 nominee directors in 111 investee companies for year ended 2004).

PNB also cleverly "controls" significant sectors of the economy, thereby allowing them to exercise strategic moves to maximise efficiency and productivity within that sector. For example, PNB have significant stakes in Golden Hope Plantations and Island &Peninsular - the rationalisation exercise have created two more focused giants in plantation and property development.

Another useful example is in the area of Islamic banking. PNB acquired Bank Islam Holdings Berhad to strengthen its Islamic banking exposure. This complements PNB's Islamic insurance management (takaful) role through Syarikat Takaful Malaysia (via Bank Islam), Takaful Nasional (via Malaysian National Reinsurance) and Mayban Takaful (via Maybank). By leveraging on these linkages, PNB will be able to push these companies to develop and offer more Islamic financial products and at the same time have the ability to add more distribution power.

The best strategic play in recent times by PNB has been the consolidation of its holdings in Chemical Company of Malaysia. CCM is a highly attractive, efficient and profitable company. CCM controls the chemical and fertilizer industry in Malaysia. PNB have the following plantation companies such as Kumpulan Guthrie, Consplant and Golden Hope. This type of upstream-downstream value addedness is what PNB does well.

Their mantra - hire well, invest well, monitor well, synergy, synergy... the rest wil fall into place. So, is PNB really that great after all that - PNB has done a very creditable job, despite the fact that PNB does get some preferential share placements, it will not be sufficient to mask a badly run company - so credit is due, PNB did well.