What is an Unmin? It is short for Unaccompanied Minor which is an airline term for children travelling on aircraft alone. In the vast majority of cases they are schoolchildren travelling too or from their parents’ overseas posting during holiday times. Frankly they can be an absolute pain in the butt. I should know. I was one.
These kids are handed over at the airport to an airline employee (often known as an ‘Auntie’) whose job it is to escort them to their final destination. Each child is supposed to wear a neck ribbon with a plastic pouch containing their documentation and identifying them as ‘young travellers’. If I recall my documents went in my back pocket and the pouch got flushed down the first toilet. Perhaps this is why so many airport toilets get blocked?
Actually you might be amazed by what gets flushed down airport toilets especially the one just before customs. I have seen everything from drugs to diapers and once a cardboard box of dried Nigerian fish. The most interesting thing I saw was a man taking one small suitcase and putting it into a second larger one. He then went to the baggage handling desk and reported the small case as missing whilst stating it was full of valuable designer clothes! Anyway, I digress, back to the Unmins.
As an airline manager based in Africa it was partly my job to manage these thrice yearly migrations, especially as I knew most of the parents in the region. I felt responsible for getting little Katie or Josh back to the bosom of their family although frankly I think the last person they needed or wanted to see was me. I think they felt I cramped their style somewhat especially as, with my childhood experiences, I knew all their tricks.
The girls were probably the worst. They would arrive at the airport all demure in their school uniforms and behave like butter would not melt in their mouths. Until they got on the plane that is. Immediately the seat belt light went off they would dash to the toilet where they created a long slow moving queue. Woe betides any aging gentleman traveller with a weak bladder because relief would be a long time coming.
What came out was not what went in. The plain little uniformed schoolgirl had transformed into an excellently made up woman in tight fashionable clothes that walked up the cabin aisle like it was a catwalk and then ordered a large gin. It all became very confusing and I once outraged a young woman from Barclays Bank by insisting she took her tarty clothes off and got back into her uniform!
The worst time was night flights. They used to party hard especially when the smuggled alcohol came out. I once caught two kids ‘at it’ under a blanket until I poured the contents of an ice bucket over them before things went too far. Another budding entrepreneur was charging boys $1 a feel. One irate passenger complained to me that the two children in front of him were drunk and rowdy. He said he was someone senior in giant oil company and there would be consequences. I did not have the heart to tell him the two kids were sons of his Chief Executive.
These Unmins did have their uses as some savvy passengers began to discover. They travelled the same routes all the time and knew the aircraft and any transit stops backwards. If you followed them you found all the short cuts, best bars and cheapest duty free sales and could save time and money. It was uncanny the way they knew which immigration queue was going to move fastest.
It was a relief to get to our destination. Women used to rush to the toilet and come out girls again. Strong mints were chewed to hide the smell of alcohol on breath and those ghastly pouches were placed over necks. They would walk off the plane like angels and choirboys. Occasionally we would have to grab one who tried to wander off and I once had to stop a lad skateboarding down the taxiway at Lusaka after a Boeing 737.
Everyone used to breathe a sigh of relief. Until it was time for them to go back to school that is!
What does a hotel brand really mean?
Does that seem a weird question? Probably so but what I am trying to say is, does the logo over the door actually mean, or importantly guarantee anything? Is it saying ‘This is a Hilton, Holiday Inn, Four Seasons or whatever and this means you should expect and get what that brand markets?
This question is borne from spending many years trying to truly understand and make sense of the hospitality industry. It is a vital sector yet commentators and industry bodies barely notice it when compared to say airlines. What does make it so very different? And why should anyone need to care?
I think the difference is ownership hence my original question. You see there are quite a few different ownership scenarios within a single brand. Because a hotel displays say Hilton over the door does not mean it is owned by Hilton. Very often it is owned by someone completely different but Hilton has the management or marketing contract to run it and is employed by the owner to deliver an agreed profit. They are an employee of the owner and have to act accordingly.
So what I am saying is that if you negotiate with a hotel chain you may not be speaking to someone who has absolute control over policy, inventory or pricing with all their properties. Hence you can find yourself in a position where various properties opt out of some commercial agreements which are good for the whole family but not for them. It is a bit like a global TMC who has to sacrifice profit in one location to deliver a good deal in other countries. Most TMCs have had to come to terms with this but I do not think hotels have.
The issue becomes even more convoluted when you are dealing with hotel consortiums. These are mainly pure marketing organisations where hotels (of a certain comparable quality) link their properties to an umbrella brand in order to take on the big boys and achieve global coverage. Again, this does not mean that such consortiums can tell these hotels what to do as far as pricing and inventory is concerned.
Probably still the most influential person in any hotel is its General Manage who can, and do, instruct their reservations office to close out heavily discounted negotiated corporate rates if they think they can sell for more. Even worse for the bigger corporations is when their travellers tell them that the hotel ‘price at the door’ is cheaper than that negotiated by their procurement department. Sounds familiar?
Another side effect of confused and disparate ownership is the woeful lack of management information you get fro the hotel industry. The only really useful thing IATA does for airlines is it provides a standardised language and reporting base that is essential for meaningful information. Hotels do not have this type of global format hence they all do things in different ways. You really would be shocked by how little they know about their customers and what they spend.
So what am I trying to say? I am advising all buyers to find out exactly what control/ownership of key properties a chain or consortium has. Maybe you should insist on key contract clauses like last room availability and lowest price on the day. Perhaps require countersignature by the GMs of the main hotels confirming they understand and support the contract. Finally, why not think of ways to make your oh so wise travellers become willing watchdogs by actively encouraging them to test the system. You know how they love it so!
By the way, I have mentioned a few hotel brands in this post. This has been purely for general illustrative purposes only and does not imply that I was refering directly to them.
This question is borne from spending many years trying to truly understand and make sense of the hospitality industry. It is a vital sector yet commentators and industry bodies barely notice it when compared to say airlines. What does make it so very different? And why should anyone need to care?
I think the difference is ownership hence my original question. You see there are quite a few different ownership scenarios within a single brand. Because a hotel displays say Hilton over the door does not mean it is owned by Hilton. Very often it is owned by someone completely different but Hilton has the management or marketing contract to run it and is employed by the owner to deliver an agreed profit. They are an employee of the owner and have to act accordingly.
So what I am saying is that if you negotiate with a hotel chain you may not be speaking to someone who has absolute control over policy, inventory or pricing with all their properties. Hence you can find yourself in a position where various properties opt out of some commercial agreements which are good for the whole family but not for them. It is a bit like a global TMC who has to sacrifice profit in one location to deliver a good deal in other countries. Most TMCs have had to come to terms with this but I do not think hotels have.
The issue becomes even more convoluted when you are dealing with hotel consortiums. These are mainly pure marketing organisations where hotels (of a certain comparable quality) link their properties to an umbrella brand in order to take on the big boys and achieve global coverage. Again, this does not mean that such consortiums can tell these hotels what to do as far as pricing and inventory is concerned.
Probably still the most influential person in any hotel is its General Manage who can, and do, instruct their reservations office to close out heavily discounted negotiated corporate rates if they think they can sell for more. Even worse for the bigger corporations is when their travellers tell them that the hotel ‘price at the door’ is cheaper than that negotiated by their procurement department. Sounds familiar?
Another side effect of confused and disparate ownership is the woeful lack of management information you get fro the hotel industry. The only really useful thing IATA does for airlines is it provides a standardised language and reporting base that is essential for meaningful information. Hotels do not have this type of global format hence they all do things in different ways. You really would be shocked by how little they know about their customers and what they spend.
So what am I trying to say? I am advising all buyers to find out exactly what control/ownership of key properties a chain or consortium has. Maybe you should insist on key contract clauses like last room availability and lowest price on the day. Perhaps require countersignature by the GMs of the main hotels confirming they understand and support the contract. Finally, why not think of ways to make your oh so wise travellers become willing watchdogs by actively encouraging them to test the system. You know how they love it so!
By the way, I have mentioned a few hotel brands in this post. This has been purely for general illustrative purposes only and does not imply that I was refering directly to them.
Hap Seng Consolidated Revisited
Assume 1,000 Hap Seng Consolidated
Cost = RM7,500
Bonus Issue: 2,000 shares
Total shares: 3,000 shares
Rights Issue (1 for 5): 600 shares @ RM1.33 = RM798
Warrants Issue (1 for 5): 600 warrants free
Total cost: RM8,298
Holdings: 3,600 shares + 600 warrants
Theoretical ex-all share price: RM3.00 - RM3.20
Theoretical warrant price: RM1.50 - RM1.80
Dividend @ 11 sen = RM396
Shares Value: RM10,800 - RM11,520
Warrants Value: RM900 - RM1,080
Potential Proceeds: RM12,096 - RM12,996
Cost of Investment: RM8,296
Potential Return (on the 3 month exercise): +45.8% to +56.6%
I am not the only one punching the calculator. The proposed placement of 124.532m new shares @ RM6.49 will bring about some RM808.21m cash to the company. Of that sum, RM240m is for capital expensiture for the existing group's businesses. RM300m is to pay down borrowings, and RM268m for working capital.
The rights issue will bring about another RM654m cash to the company. Of that, some RM220m is for potential land acquisition, RM200m for repayment of borrowings and RM234m for working capital.
Thats a lot for working capital if you add RM268m plus RM234m = RM502m.
Considering the amount for working cap and expansion, the company has injected a war chest of RM502m + RM460m = RM962m. In addition it will be paying down some RM500m in borrowings as well.
The new paid up will see some 2.689bn shares plus 448m warrants.
My theoretical ex-all price is based on the new fundamentals for the company, I could wrong or over-optimistic here of course. As things stand the ex-all price is around RM2.30. Judging from the lucrative exercise, there should be few sellers leading up to the ex-date. It should be well supported up to RM8.00.
Tokyo Rising Day 1 & 2
In Tokyo for now ... Pierre Gagnaire is a 2 Michelin star chef. Its pattserie is at the lobby.
Will be trying its degustation menu later on Saturday. Life is too short.
I must say, his tart was pretty mind blowing.
I must say, his tart was pretty mind blowing.
Days 1 and 2 at Tokyo ... had to rush back to Shinjuku Washington to get the Nagasaki beef .. the Manhattan Table serves very good Miyago Prefecture beeft and Nagasakui tenderloin. They are not your Kobe beef or wagyu beef type ... more like great OZ or NZ material, but much softer yet flavourful.
The yolky, chicken don at Roponggi.
The unexpected Shiseido Gallery building selling sweet stuff @ Ginza. Pretty good macarons.
TT Pierre Gagnier, the 2 Michelin star chef's pattiserie @ ANA Intercontinental Hotel.
Green tea and strawberry mousse.
Green tea and strawberry mousse.
Passengers Behaving badly – Concorde
I really have been a very lucky man in that I have flown Concorde at least a dozen times. During those flights I encountered many strange and downright surreal moments but none that had the same impact as one flight from Barbados to London.
We were coming towards the end of a two week holiday when the phone call came. It was BA and they asked us if we would possibly mind flying back two days early as one of their jumbos had technical problems creating an enormous backlog of passengers needing to get home. They had decided to offer ‘selected’ travellers the chance of returning earlier using spare seats on their daily Concorde service.
My wife Judith was not amused by the proposed shortening of our holiday but Anna (our daughter) rightly realised that this might be the one chance in her lifetime to fly on this beautiful aircraft so we agreed. Our decision was also helped by the fact we were on agent discount tickets which meant it was practically certain we would be the first to be chucked off our booked flight anyway!
Having decided to make the most of it we arrived at Bridgetown airport in plenty of time to enjoy the lounge and board the flight. At the risk of sounding snobbish we could not believe the state of the people in the departure lounge who were presumably waiting for a charter flight. They were noisy and mainly drunk with numerous wild kids that were left to run amok throughout the building. It was one of those groups you sometimes see and thank your lucky stars they were someone else’s problem. We retreated to the first class lounge and hid until our flight was called.
Finally they announced boarding and off we went to the aircraft. The place was still bedlam as the rampaging hordes had been tanking up on duty free spirits but we got through most of them by the time we found our gate. We stopped and waited but felt more and more uneasy as the near rioting holiday makers started lining up behind us. We then realised that these folk had received the same phone call from BA and were coming with us. It seems the only folk prepared to give up a day or two of their holidays were those on the cheapest packages and agency/airline staff.
The looks on the cabin crews faces was a picture. There was Concorde, the ultra first class flagship of the BA fleet. The aircraft of choice of film stars, diplomats, and captains of industry. And it was filling up with drunks, delinquents and rapacious souvenir hunters that were totally committed to wringing every last benefit of their once in a lifetime trip.
We roared off into the sky and the fun started almost immediately. Practically every stewardess call button was pressed simultaneously and all you could hear above the engines was the staccato calls of drinks orders and the yells from children as they ran up and down the aisle. One of the stewardesses started crying saying she had been groped and the bonafide Concorde passengers squeezed themselves as far forward as possible abandoning two thirds of the aircraft to the mob. There they were being taunted by a bear of a man with a huge stomach and a torso decorated by tattoos and a string vest with no armpits. He was waving a bottle of Dom Perignon champagne by the neck whilst demanding they sing with him.
The next parts of the plane to be hit were the toilets. Some small child started a trend by graffitiing the walls with rude drawings and badly spelt words . He had a huge imagination. They and the rest of the cabin were stripped of anything that was not firmly attached including some seat upholstery and life jackets. It was an absolute nightmare that was only slightly relieved when the captain threatened to have them all arrested on arrival. It was something I have never witnessed before or since but I found out afterwards that they were not a random crowd but in fact a large wedding group returning home. No wonder they all looked like each other and gelled so well! I understand the aircraft had to be taken out of service after for a few days.
My other trips on Concorde were far less eventful. The only thing I particularly noticed was the slightly inquisitive and smug way passengers used to look at each other. Almost like a very exclusive mainly new money club. I did have one more funny moment when I was waiting outside one of the small toilets. They really were tiny and I could hear someone manoeuvring clumsily inside. Finally the door opened and a man came out. I was halfway in when I noticed there was a woman still in there arranging her clothes. I had heard of the ‘mile high’ club before but not the ‘stratosphere’ version.
It was a wonderful aircraft and I wish it was still flying
We were coming towards the end of a two week holiday when the phone call came. It was BA and they asked us if we would possibly mind flying back two days early as one of their jumbos had technical problems creating an enormous backlog of passengers needing to get home. They had decided to offer ‘selected’ travellers the chance of returning earlier using spare seats on their daily Concorde service.
My wife Judith was not amused by the proposed shortening of our holiday but Anna (our daughter) rightly realised that this might be the one chance in her lifetime to fly on this beautiful aircraft so we agreed. Our decision was also helped by the fact we were on agent discount tickets which meant it was practically certain we would be the first to be chucked off our booked flight anyway!
Having decided to make the most of it we arrived at Bridgetown airport in plenty of time to enjoy the lounge and board the flight. At the risk of sounding snobbish we could not believe the state of the people in the departure lounge who were presumably waiting for a charter flight. They were noisy and mainly drunk with numerous wild kids that were left to run amok throughout the building. It was one of those groups you sometimes see and thank your lucky stars they were someone else’s problem. We retreated to the first class lounge and hid until our flight was called.
Finally they announced boarding and off we went to the aircraft. The place was still bedlam as the rampaging hordes had been tanking up on duty free spirits but we got through most of them by the time we found our gate. We stopped and waited but felt more and more uneasy as the near rioting holiday makers started lining up behind us. We then realised that these folk had received the same phone call from BA and were coming with us. It seems the only folk prepared to give up a day or two of their holidays were those on the cheapest packages and agency/airline staff.
The looks on the cabin crews faces was a picture. There was Concorde, the ultra first class flagship of the BA fleet. The aircraft of choice of film stars, diplomats, and captains of industry. And it was filling up with drunks, delinquents and rapacious souvenir hunters that were totally committed to wringing every last benefit of their once in a lifetime trip.
We roared off into the sky and the fun started almost immediately. Practically every stewardess call button was pressed simultaneously and all you could hear above the engines was the staccato calls of drinks orders and the yells from children as they ran up and down the aisle. One of the stewardesses started crying saying she had been groped and the bonafide Concorde passengers squeezed themselves as far forward as possible abandoning two thirds of the aircraft to the mob. There they were being taunted by a bear of a man with a huge stomach and a torso decorated by tattoos and a string vest with no armpits. He was waving a bottle of Dom Perignon champagne by the neck whilst demanding they sing with him.
The next parts of the plane to be hit were the toilets. Some small child started a trend by graffitiing the walls with rude drawings and badly spelt words . He had a huge imagination. They and the rest of the cabin were stripped of anything that was not firmly attached including some seat upholstery and life jackets. It was an absolute nightmare that was only slightly relieved when the captain threatened to have them all arrested on arrival. It was something I have never witnessed before or since but I found out afterwards that they were not a random crowd but in fact a large wedding group returning home. No wonder they all looked like each other and gelled so well! I understand the aircraft had to be taken out of service after for a few days.
My other trips on Concorde were far less eventful. The only thing I particularly noticed was the slightly inquisitive and smug way passengers used to look at each other. Almost like a very exclusive mainly new money club. I did have one more funny moment when I was waiting outside one of the small toilets. They really were tiny and I could hear someone manoeuvring clumsily inside. Finally the door opened and a man came out. I was halfway in when I noticed there was a woman still in there arranging her clothes. I had heard of the ‘mile high’ club before but not the ‘stratosphere’ version.
It was a wonderful aircraft and I wish it was still flying
Direct Connect – The first significant skirmish in a long campaign.
Christmas is supposed to be a time of peace and goodwill to all men but it also heralds the onset of a new year and, in turn, leads to encouragement of change. This can be illustrated by American Airlines who gave TMCs and their clients an early Christmas present of new cost and selected online agencies (OTAs) in particular to feel their power. The OTAs have started to respond with Expedia pulling American from their inventory. Obviously a lot more complex than that but you got the drift?
Immediately both sides are claiming victory. AA say their volume is growing and Expedia say they are not losing business. Meanwhile the travel world looks on at this test case. People really want to see if an OTA (or any TMC for that matter) can successfully move business or if airlines really can call all the shots. Whoever is perceived as the winner may set a radical trend in the industry and possibly change it considerably. Certainly if AA succeeds then many will follow after them
The trouble is that in reality this test of strength will prove very little in the business travel arena. Reason being that companies like Expedia hold only a pin prick of the worlds corporate travel market and the little they have is mainly towards the lower end in company size terms. In my personal opinion what American has done is picked a soft target to start with. The giant TMCs with their giant corporate accounts would be a different matter altogether. A smaller entity with a different client-base and business model is much easier quarry but one which they can get much tactical mileage from.
For instance how can anyone state at this very early stage that they are wining this argument? American says they grew in December. Big deal. This cannot be zeroed down to success in this issue. Growth compared to what? Has not economic recovery got more to do with it? How much of American’s corporate market share is Expedia anyway? Yet they sagely point to some meaningless figures.
I do not think there will be any winner in this but I can say with a fair degree of certainty that the argument is a precursor to major industry change. Is that so bad? Probably not but with all change there is pain attached. Pain moves around the supply chain as quickly as cost and usually goes full circle. The airline will add cost and work to the TMC, The TMC will go to their clients, increase their charges and tell them why. The big corporate will go to the airlines and mitigate their increased cost by demanding compensation through their deal. The model has changed. But has it really and to whose benefit?
Like everyone else I will watch with interest and try to read between the lines to see where this will take us. As for the forthcoming figures and rhetoric? I will take them all with a pinch of salt and suggest you do the same.
Immediately both sides are claiming victory. AA say their volume is growing and Expedia say they are not losing business. Meanwhile the travel world looks on at this test case. People really want to see if an OTA (or any TMC for that matter) can successfully move business or if airlines really can call all the shots. Whoever is perceived as the winner may set a radical trend in the industry and possibly change it considerably. Certainly if AA succeeds then many will follow after them
The trouble is that in reality this test of strength will prove very little in the business travel arena. Reason being that companies like Expedia hold only a pin prick of the worlds corporate travel market and the little they have is mainly towards the lower end in company size terms. In my personal opinion what American has done is picked a soft target to start with. The giant TMCs with their giant corporate accounts would be a different matter altogether. A smaller entity with a different client-base and business model is much easier quarry but one which they can get much tactical mileage from.
For instance how can anyone state at this very early stage that they are wining this argument? American says they grew in December. Big deal. This cannot be zeroed down to success in this issue. Growth compared to what? Has not economic recovery got more to do with it? How much of American’s corporate market share is Expedia anyway? Yet they sagely point to some meaningless figures.
I do not think there will be any winner in this but I can say with a fair degree of certainty that the argument is a precursor to major industry change. Is that so bad? Probably not but with all change there is pain attached. Pain moves around the supply chain as quickly as cost and usually goes full circle. The airline will add cost and work to the TMC, The TMC will go to their clients, increase their charges and tell them why. The big corporate will go to the airlines and mitigate their increased cost by demanding compensation through their deal. The model has changed. But has it really and to whose benefit?
Like everyone else I will watch with interest and try to read between the lines to see where this will take us. As for the forthcoming figures and rhetoric? I will take them all with a pinch of salt and suggest you do the same.
The Reinvention Of Hap Seng Consolidated
You know some stock tips, you give to people, they will mostly not follow because they had a look at the chart. Hap Seng Consolidated is like that. The stock did not have any major corporate exercises in recent years. The deep embedded value of this company appeals to many. However, when it started moving about 6 weeks ago, many long term holders would have taken the opportunity to cash out. Why not, it gave more than a 100% return.
When a counter is not a speculative counter but one which is fundamentals or value driven, e.g. DRB Hicom, Hap Seng Consolidated, BIMB, Kumpulan Fima ... we need to put on a different set of thinking cap. Look at the presumed catalysts, analyse the likelihood of these catalysts coming to fruition, assess the "character" of the stock (i.e. management and owners) ... you would be able to form a better view.
Another critical assessment is whether the stock is overbought, do you have a feel who is taking shares from the market at higher prices, do you have a sense of churning or stock distribution at certain levels ... Then you will get a better grip on whether the end buyers are solid or for trading purposes only.
Then analyse the presumed corporate exercise, not all are great value add, you have to distinguish between genuine unlocking of values or a meaningless exercise.
I am focusing on Hap Seng Consolidated because I really like the purported corporate exercise. Whether its a share split or bonus issue, this seemingly benign thing will bring about substantial liquidity to the counter.
The reinvention includes institutionalising their shareholder base from a largely owner/retail to owner/institutional. Some of you may have picked up on the crossing of a 12m block to a new buyer, reported to be UBS. The involvement of the foreign investment bank may be the key to the entire exercise. UBS may hold, collect more shares or distribute to foreign institutional clients - all of which are highly positive to reinventing Hap Seng Consolidated.
Part of the exercise is supposed to include warrants and a special dividend of between 40-70 sen. Enough said.
Valuation wise, the counter has been below RM4.00 because research coverage has been poor, lack of institutional support, the size and liquidity have been lackluster for a long time... fundamentally every single business unit of the company is doing well. Its high time we have another Sime Darby, look at how dismal and disappointing Sime Darby has been and yet it trades at 18x forward earnings still. Hap Seng Consolidated is likely to make 50 sen per share in 2010 alone, which is why when all the cards fall together, it should go to RM8.00-8.50 as a base valuation (or 15x 2011 earnings, still a discount to Sime Darby).
Malaysian stocks are getting more attention and the timing is right to put Hap Seng Consolidated next to Sime Darby or Boustead as genuine options with sufficient liquidity and stellar management to boot.
To top it all off, the reinvention may only be just a makeover of the same old lady, but you end up with the same old lady - to that end, the company has embarked on a grand expansion plan into Vietnam and Indonesia. In particular Indonesia, where its range of business units appear to have marked out growth strategies to replicate their business model. This is a key attraction to foreign funds as it kills two birds with one stone. Indonesia is a more favoured market among emerging market funds, and Hap Seng is into the very critical businesses that will give them the right exposure.
HSC Businesses:
Quarry and Building Materials
Benefit from projects. The 2011 Budget announcement had largely focused on construction and development. Construction boom. Even without government support, private initiatives have been burgeoning with many property developments being sold and continued developments. Plans for towers of buildings in the Klang Valley had continued to surface constantly. With the ongoing and even more upcoming developments, demand for building materials could potentially accelerate. Hap Seng Trading was appointed by Malaysian Mosaics Bhd on 30 June 2009 as its sole and exclusive distributor of MML tiles in Malaysia. Recently there was a privatization of MML which indicates value in the company. This hints positively to the segment.
Plantation
Owns 52.53% of Hap Seng Plantations. Hap Seng Plantations is predominantly an oil palm planter in Sabah. It is an efficient planter with large economies of scale. Earnings rerating. CPO prices has increased rapidly over the half a year. With the large increase, earnings of planters are expected to increase substantially. Stock price increase in the industry has currently lagged the potential increase in net profits. Moreover, the USD has been strengthening against the ringgit, giving strength and competitiveness to the CPO against other oils especially soybean oil.Hap Seng is synergistically tied to its fertilizer division as well. High Efficiency. HSP is one of the most efficient planters in the industry with FFB yields of 21.5 metric tons per hectare and an OER of 21.6%. Moreover, HSP has a contiguous plantation which offers far more efficiency and scale than planters with plots of land in various locations. The group has a FFB yield of close to 700,000 metric tonnes per year. The group also operates 4 mills.
Plantation land
The total area of Hap Seng Plantations estates is 39,803 hectares. Hap Seng Plantations operates on one contiguous block of plantation land of approximately 36,354 hectares between Lahad Datu and Sandakan region, in addition to two smaller plantations of 1,276 hectares in Tawau and 2,173 hectares in Kota Marudu. 34,467 hectares of planted area comprises 32,576 hectares of matured oil palm and 1,891 hectares of immature plantings.
Agrobusiness-Fertilizer
Malaysia and Indonesia. Hap Seng’s fertilizer business is primarily in Malaysia and
Indonesia. We do see some growth in the sector with higher CPO prices and as Indonesia’s plantation acreage increases and matures. Currently a very large amount of plantation land is maturing and coming onstream annually. The fertilizer business is complementary and synergistic to Hap Seng’s plantation segment. This is especially the case with rising CPO prices whereby demand of fertilizer normally increases.
Property development
Hap Seng’s property focus has been primarily on low-rise residential properties in major urban centres. Hap Seng’s key development area has been in Sabah. Hap Seng has developments in Tawau, Sandakan, Kota Kinabalu in Lahad Duta. Hap Seng has developments in all 3 key segments including residential, industrial and commercial. Branching out into Klang Valley. Hap Seng has ventured into the Klang Valley in recent years through D’Alpinia located in Puchong. It is located in the fringes of Puchong close to Seri Kembangan and Putrajaya. It is a relatively large development of 76 acres of land and is of a build and sell concept. The units are of modern contemporary design. Phase 1 was launched in late 2009.
Automotive
Hap Seng is involved in automotive through Hap Seng Auto Sdn Bhd,Hap Seng Industrial Sdn Bhd and Hap Seng Star Sdn Bhd. Hap Seng Auto is involved in the distribution of Mercedes-Benz logging trucks, general-purpose trucks, buses, passenger vehicles and spare parts in Sabah and Sarawak. Hap Seng Auto Sdn Bhd is also the sole distributor for Mitsubishi Fuso commercial vehicles in East Malaysia. Hap Seng Industrial Sdn Bhd fabricates and assembles logging truck trailers, tankers and other industrial transport vehicles. Hap Seng Star Sdn Bhd is an authorized dealer of Mercedes-Benz and Smart vehicles in the Klang Valley. In April 2010, Hap Seng Star Sdn Bhd took over Hap Seng Auto Sdn Bhd’s role as the sole authorized dealer of Mercedes-Benz and Mitsubishi Fuso in East Malaysia.
Group synergy
Hap Seng’s property arm plays a synergistic role with the group. Hap Seng’s property arm benefits directly from its quarry & building materials arm and provides the latter with ongoing orders. Hap Seng’s property arm could benefit from lead time, consistency in demand and product quality. Hap Seng’s property arm could also benefit indirectly from their Credit Financing arm as it also serves construction and property related businesses.
Property Holdings
The group’s flagship Menara Hap Seng has seen a high occupancy rate of 94% for its tower block and 88% for its podium. The division continues to contribute substantially to the division, providing it strong cash flows and relatively stable earnings. Hap Seng has a 1.1 acre freehold land adjacent to the building and the 31,000 sq ft 1 ½ storey Hap Seng Star Mercedes-Benz showroom. The showroom has very premium frontage of Jalan P Ramlee and Jalan Sultan Ismail in the Central Business District of Kuala Lumpur. The area has the potential to be redeveloped into a very premium and high visibility commercial block.
NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
When a counter is not a speculative counter but one which is fundamentals or value driven, e.g. DRB Hicom, Hap Seng Consolidated, BIMB, Kumpulan Fima ... we need to put on a different set of thinking cap. Look at the presumed catalysts, analyse the likelihood of these catalysts coming to fruition, assess the "character" of the stock (i.e. management and owners) ... you would be able to form a better view.
Another critical assessment is whether the stock is overbought, do you have a feel who is taking shares from the market at higher prices, do you have a sense of churning or stock distribution at certain levels ... Then you will get a better grip on whether the end buyers are solid or for trading purposes only.
Then analyse the presumed corporate exercise, not all are great value add, you have to distinguish between genuine unlocking of values or a meaningless exercise.
I am focusing on Hap Seng Consolidated because I really like the purported corporate exercise. Whether its a share split or bonus issue, this seemingly benign thing will bring about substantial liquidity to the counter.
The reinvention includes institutionalising their shareholder base from a largely owner/retail to owner/institutional. Some of you may have picked up on the crossing of a 12m block to a new buyer, reported to be UBS. The involvement of the foreign investment bank may be the key to the entire exercise. UBS may hold, collect more shares or distribute to foreign institutional clients - all of which are highly positive to reinventing Hap Seng Consolidated.
Part of the exercise is supposed to include warrants and a special dividend of between 40-70 sen. Enough said.
Valuation wise, the counter has been below RM4.00 because research coverage has been poor, lack of institutional support, the size and liquidity have been lackluster for a long time... fundamentally every single business unit of the company is doing well. Its high time we have another Sime Darby, look at how dismal and disappointing Sime Darby has been and yet it trades at 18x forward earnings still. Hap Seng Consolidated is likely to make 50 sen per share in 2010 alone, which is why when all the cards fall together, it should go to RM8.00-8.50 as a base valuation (or 15x 2011 earnings, still a discount to Sime Darby).
Malaysian stocks are getting more attention and the timing is right to put Hap Seng Consolidated next to Sime Darby or Boustead as genuine options with sufficient liquidity and stellar management to boot.
To top it all off, the reinvention may only be just a makeover of the same old lady, but you end up with the same old lady - to that end, the company has embarked on a grand expansion plan into Vietnam and Indonesia. In particular Indonesia, where its range of business units appear to have marked out growth strategies to replicate their business model. This is a key attraction to foreign funds as it kills two birds with one stone. Indonesia is a more favoured market among emerging market funds, and Hap Seng is into the very critical businesses that will give them the right exposure.
HSC Businesses:
Quarry and Building Materials
Benefit from projects. The 2011 Budget announcement had largely focused on construction and development. Construction boom. Even without government support, private initiatives have been burgeoning with many property developments being sold and continued developments. Plans for towers of buildings in the Klang Valley had continued to surface constantly. With the ongoing and even more upcoming developments, demand for building materials could potentially accelerate. Hap Seng Trading was appointed by Malaysian Mosaics Bhd on 30 June 2009 as its sole and exclusive distributor of MML tiles in Malaysia. Recently there was a privatization of MML which indicates value in the company. This hints positively to the segment.
Plantation
Owns 52.53% of Hap Seng Plantations. Hap Seng Plantations is predominantly an oil palm planter in Sabah. It is an efficient planter with large economies of scale. Earnings rerating. CPO prices has increased rapidly over the half a year. With the large increase, earnings of planters are expected to increase substantially. Stock price increase in the industry has currently lagged the potential increase in net profits. Moreover, the USD has been strengthening against the ringgit, giving strength and competitiveness to the CPO against other oils especially soybean oil.Hap Seng is synergistically tied to its fertilizer division as well. High Efficiency. HSP is one of the most efficient planters in the industry with FFB yields of 21.5 metric tons per hectare and an OER of 21.6%. Moreover, HSP has a contiguous plantation which offers far more efficiency and scale than planters with plots of land in various locations. The group has a FFB yield of close to 700,000 metric tonnes per year. The group also operates 4 mills.
Plantation land
The total area of Hap Seng Plantations estates is 39,803 hectares. Hap Seng Plantations operates on one contiguous block of plantation land of approximately 36,354 hectares between Lahad Datu and Sandakan region, in addition to two smaller plantations of 1,276 hectares in Tawau and 2,173 hectares in Kota Marudu. 34,467 hectares of planted area comprises 32,576 hectares of matured oil palm and 1,891 hectares of immature plantings.
Agrobusiness-Fertilizer
Malaysia and Indonesia. Hap Seng’s fertilizer business is primarily in Malaysia and
Indonesia. We do see some growth in the sector with higher CPO prices and as Indonesia’s plantation acreage increases and matures. Currently a very large amount of plantation land is maturing and coming onstream annually. The fertilizer business is complementary and synergistic to Hap Seng’s plantation segment. This is especially the case with rising CPO prices whereby demand of fertilizer normally increases.
Property development
Hap Seng’s property focus has been primarily on low-rise residential properties in major urban centres. Hap Seng’s key development area has been in Sabah. Hap Seng has developments in Tawau, Sandakan, Kota Kinabalu in Lahad Duta. Hap Seng has developments in all 3 key segments including residential, industrial and commercial. Branching out into Klang Valley. Hap Seng has ventured into the Klang Valley in recent years through D’Alpinia located in Puchong. It is located in the fringes of Puchong close to Seri Kembangan and Putrajaya. It is a relatively large development of 76 acres of land and is of a build and sell concept. The units are of modern contemporary design. Phase 1 was launched in late 2009.
Automotive
Hap Seng is involved in automotive through Hap Seng Auto Sdn Bhd,Hap Seng Industrial Sdn Bhd and Hap Seng Star Sdn Bhd. Hap Seng Auto is involved in the distribution of Mercedes-Benz logging trucks, general-purpose trucks, buses, passenger vehicles and spare parts in Sabah and Sarawak. Hap Seng Auto Sdn Bhd is also the sole distributor for Mitsubishi Fuso commercial vehicles in East Malaysia. Hap Seng Industrial Sdn Bhd fabricates and assembles logging truck trailers, tankers and other industrial transport vehicles. Hap Seng Star Sdn Bhd is an authorized dealer of Mercedes-Benz and Smart vehicles in the Klang Valley. In April 2010, Hap Seng Star Sdn Bhd took over Hap Seng Auto Sdn Bhd’s role as the sole authorized dealer of Mercedes-Benz and Mitsubishi Fuso in East Malaysia.
Group synergy
Hap Seng’s property arm plays a synergistic role with the group. Hap Seng’s property arm benefits directly from its quarry & building materials arm and provides the latter with ongoing orders. Hap Seng’s property arm could benefit from lead time, consistency in demand and product quality. Hap Seng’s property arm could also benefit indirectly from their Credit Financing arm as it also serves construction and property related businesses.
Property Holdings
The group’s flagship Menara Hap Seng has seen a high occupancy rate of 94% for its tower block and 88% for its podium. The division continues to contribute substantially to the division, providing it strong cash flows and relatively stable earnings. Hap Seng has a 1.1 acre freehold land adjacent to the building and the 31,000 sq ft 1 ½ storey Hap Seng Star Mercedes-Benz showroom. The showroom has very premium frontage of Jalan P Ramlee and Jalan Sultan Ismail in the Central Business District of Kuala Lumpur. The area has the potential to be redeveloped into a very premium and high visibility commercial block.
NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.
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