The Ryder Cup Experience
Some Business Lessons
Its been an amazing week, probably the best week in golf for a very long time. Not that I am a particularly good golf player, I mean, I tell people I am a "natural", no lessons required..., yea, a natural 120! But, I play more for laughs and don't take my golf too seriously. So, what went wrong (again) for the Americans??
1) Technically and on merit, the US players in general are ranked higher on the world stage, though if more European players played on the US tour, they could figure higher in the rankings. However, without a doubt, you have Woods and Mickelson, its like having Ronaldhino and Drogba in your team. It was so obvious, the Americans were too individualistic in spirit and attitude. Just look at them standing together in a group, while golf is a very solo thing, the Ryder Cup is certainly not.
Biz Lesson - No point hiring or having primma donnas in your company, even though they may be highly qualified unless they come with strong people skills as well, and can get acceptance quickly. Nothing ruins a company faster than a "virus" in the team. It distracts and distances.
2) Team spirit and comraderie are not useless feel-good stuff. Just look at the European team. They run on things other than their ability. You can sense that they are playing more for each other, while the Americans, especially Woods and Mickelson were largely playing for themselves and concerned with how they'd be viewed. To cultivate "team spirit", one must be genuine, it cannot be forced. Tom Lehman knows the team needed team spirit but the characters just did not gel.
Biz Lesson - Team spirit cannot be coerced. It has to cultivated genuinely. Aligning common interests and goals. They have to fight for something more than themselves. The sense of achievement for the team. A lot of it could be due to the fact that Europeans play more team sports when they were younger, while American golfers tend to concentrate on golf from young, hence golf is very much a personal, solo game - you play for yourself. In Europe, you have football, rugby, cricket, etc... and coming from various countries under a common "association" brings with it a sense of "for the greater good". This is empowerment, you empower the players by signalling them as a crucial team members just by being picked from a pool of high quality players. Just look at how disappointed Thomas Bjorn felt after realising he had not been picked by Woosie. By bringing the idea of having the cream of the crop, they feel empowered to performed. If you look at the rookies in the US team, they don't even know why they were picked in the first place. Too many rookies.
3) No money involved. When no money is involved, what are you playing for?? Does the Ryder Cup mean more to the Europeans than the Americans, you betcha. Most Europeans make a lot less money than the American golfers (with the exception of the top few), there is a history, there is a bit of David vs Goliath thing, and the ugly American fans a behaviour a few years back still leaves a sour taste ... and as a group, the Europeans are really good buddies, and not just people you meet at golf tournaments. I don't think Woods and Mickelson would have each other over their house for dinner, would you?
Biz Lessons - Most employees will be motivated enough with monetary incentives, but it will not be enough - things like personal enrichment, sense of achievement, loyalty, recognition, respect, being empowered are all essential things as well.
4) Individuals vs Friends. Most of the Americans came over in their private jets, enough said. Most Americans play only in America. Europeans are more cosmopolitan, open and need I say it, humble. What's with the aggressive high-fives, fist-pumping, adrenaline hoo-yeahs ... the irritable "get in the hole" mostly by the Americans. Humility, quiet dignity, no need to rub it it when you are in front...
Biz Lessons - Always better to have team players.
5) Empowerment. Look at Woosie's captain's picks, Darren Clarke and Westwood. They did not get picked on just merit but on trust and belief on the part of Woosie, both won all their matches.
Biz Lessons - People will feel appreciated and valued when they are recognised and given proper responsibility / recognition, especially when the chips are down. They dig deeper.
OZ, OZ, OZ ... Oil, Oil, Oil
Received a well written reply on my post on oil prices, my comments in blue.
investequities said...
Hi Dali, nice write-up on the energy sector. However there are a few points that are quite confusing. Hopefully you can clarify further. Thanks. You have mentioned that oil price should not drop too much too fast as that could easily ignite good-feelings among consumers (especially in the US where their housing starts and activity depends largely on sentiment and liquidity). Too fast a drop may cause housing figures in the US to spike up and may leave the Fed with no choice but to raise rates again come the next round. If I remember correctly, the FED's have to raise interest rate 17 times this year to control inflation which is mainly due to the spike in oil prices. As such,it would be safe to say that,with the current downtrend in the oil price inflation should moderate and this renders further increase in rates by Fed's unjustifiable. The Fed's are concern about the housing market too but it is not the only indicator that they look for to determine the interest rate directions. My take is that,if the housing market growth is good and yet inflation is within limits, the Fed's will not increase rates further as it will impede economic growth.
(Your views are correct. However, we may be assuming that the Fed incorporated too much weightage on oil in their rate hike decisions. If you postulate correctly, 17 times straight - the first 10 times had nothing to do with oil as oil only starting behaving bullishly over the last 2 years. Inherently, the US economy was supported by the strong domestic consumerism especially in housing. Many peopl question why the US can allow such heavy deficits and yet many governments keep buying their Treasuries. It boils down to 3 main pillars - military supremacy (leader of the free world, it has more implied economic leadership); US consumption supported because investors are willing to buy US assets, be it Treasuries, stocks, real estate, etc... the whole system is underpinned by US superiority in technology and business productivity (especially in finance, medical stuff and retail); thirdly, the whiole world thinks that normal US citizen has very low savings rate compared to the rest of the developed / developing world, that's because most did not incorporate housing as a form of savings, in fact ask any American, the bulk of their assets are tied in housing. Hence I view housing as a very important factor in the eyes of the Fed. Strong housing prices also acts as a refinancing tool for further consumerism, which is what the Fed fears the most. That will eat away at "savings" and raise their average debt financing levels. Hence, when you take away the oil factor, the wait and see attitude by many may turn into an avalanche in housing starts. Bears watching closely.)
Amaranth hedge funds,as its name implies, its a hedge fund. My question is,why are they not hedge in their investment portfolio? Too much are invested in the energy sector which resulted in significant losses in its funds.
(Yes, hedge funds are supposed to be hedged in some way or another, but it is not imperative unless written into their charter or code of conduct / discipline when asking for investors to invest. Most in fact are pure long or short, even when they have long and short, they are not properly hedged in the same sector or currency. Generally, those trading with quant models may be closer to being called a hedge fund. Hence to most, hedge funds are simply labeled a such to reward performance with a 20% cut on gains and promote secrecy.)
You have mentioned that you expect oil price to be in the range of USD62 - USD64 for the rest of the year. However, I would like to point out that most oil analyst report or articles that I have read predicts a lower range of about USD50 - USD60. Some of the reasons cited are : 1) More funds are expected to suffer losses and this will cause many funds to reduce or pull out completely their investment in the energy sector thus causing the price to plummet further. 2) IEA predicts a lower demand for energy consuption next year. 3) Probe on BP for price manipulation by the US authorities. 4) A large amount of speculative premium are not there any more. 5) New energy discoveries. 6) Increase in usage of alternative energy source such as biodiesel,ethanol,solar and etc. 7) Calmer geopolitical enviroment.Iran is willing to negotiate now.Less riots in Nigeria. 8) Opec is not cutting production now.Cutting production by the oil cartel might backfire according to some analyst.Part of the premium in the oil price is due to the market perception that there are no or limited extra capacity currently. By cutting production this fear premium is removed. Predicting oil price is highly debatable and your guess is as good as mine. However its a relieve that price had fallen and we look forward that the government will not increase our petrol price next year.
( If you remember just 3-4 months back, we read tons of article on why "oil prices will stay above US$80 and have a likelihood to challange for US$100 within 12 months" - who hasn't come across dozens of these articles. Unfortunately, when we are bearish, we whip ourselves into a frenzy and everything is half-empty. And we do the opposite when the sun is shining and the bulls are dancing gaily in the fields. We have to balance with realism, terrorism is not over, OPEC can easily reduce output, there are still pockets of violence in oil producing countries especially in Africa ... so blue skies are hurricanes which has been given some botox... it ain't pretty when the medicine runs out...)
Received a well written reply on my post on oil prices, my comments in blue.
investequities said...
Hi Dali, nice write-up on the energy sector. However there are a few points that are quite confusing. Hopefully you can clarify further. Thanks. You have mentioned that oil price should not drop too much too fast as that could easily ignite good-feelings among consumers (especially in the US where their housing starts and activity depends largely on sentiment and liquidity). Too fast a drop may cause housing figures in the US to spike up and may leave the Fed with no choice but to raise rates again come the next round. If I remember correctly, the FED's have to raise interest rate 17 times this year to control inflation which is mainly due to the spike in oil prices. As such,it would be safe to say that,with the current downtrend in the oil price inflation should moderate and this renders further increase in rates by Fed's unjustifiable. The Fed's are concern about the housing market too but it is not the only indicator that they look for to determine the interest rate directions. My take is that,if the housing market growth is good and yet inflation is within limits, the Fed's will not increase rates further as it will impede economic growth.
(Your views are correct. However, we may be assuming that the Fed incorporated too much weightage on oil in their rate hike decisions. If you postulate correctly, 17 times straight - the first 10 times had nothing to do with oil as oil only starting behaving bullishly over the last 2 years. Inherently, the US economy was supported by the strong domestic consumerism especially in housing. Many peopl question why the US can allow such heavy deficits and yet many governments keep buying their Treasuries. It boils down to 3 main pillars - military supremacy (leader of the free world, it has more implied economic leadership); US consumption supported because investors are willing to buy US assets, be it Treasuries, stocks, real estate, etc... the whole system is underpinned by US superiority in technology and business productivity (especially in finance, medical stuff and retail); thirdly, the whiole world thinks that normal US citizen has very low savings rate compared to the rest of the developed / developing world, that's because most did not incorporate housing as a form of savings, in fact ask any American, the bulk of their assets are tied in housing. Hence I view housing as a very important factor in the eyes of the Fed. Strong housing prices also acts as a refinancing tool for further consumerism, which is what the Fed fears the most. That will eat away at "savings" and raise their average debt financing levels. Hence, when you take away the oil factor, the wait and see attitude by many may turn into an avalanche in housing starts. Bears watching closely.)
Amaranth hedge funds,as its name implies, its a hedge fund. My question is,why are they not hedge in their investment portfolio? Too much are invested in the energy sector which resulted in significant losses in its funds.
(Yes, hedge funds are supposed to be hedged in some way or another, but it is not imperative unless written into their charter or code of conduct / discipline when asking for investors to invest. Most in fact are pure long or short, even when they have long and short, they are not properly hedged in the same sector or currency. Generally, those trading with quant models may be closer to being called a hedge fund. Hence to most, hedge funds are simply labeled a such to reward performance with a 20% cut on gains and promote secrecy.)
You have mentioned that you expect oil price to be in the range of USD62 - USD64 for the rest of the year. However, I would like to point out that most oil analyst report or articles that I have read predicts a lower range of about USD50 - USD60. Some of the reasons cited are : 1) More funds are expected to suffer losses and this will cause many funds to reduce or pull out completely their investment in the energy sector thus causing the price to plummet further. 2) IEA predicts a lower demand for energy consuption next year. 3) Probe on BP for price manipulation by the US authorities. 4) A large amount of speculative premium are not there any more. 5) New energy discoveries. 6) Increase in usage of alternative energy source such as biodiesel,ethanol,solar and etc. 7) Calmer geopolitical enviroment.Iran is willing to negotiate now.Less riots in Nigeria. 8) Opec is not cutting production now.Cutting production by the oil cartel might backfire according to some analyst.Part of the premium in the oil price is due to the market perception that there are no or limited extra capacity currently. By cutting production this fear premium is removed. Predicting oil price is highly debatable and your guess is as good as mine. However its a relieve that price had fallen and we look forward that the government will not increase our petrol price next year.
( If you remember just 3-4 months back, we read tons of article on why "oil prices will stay above US$80 and have a likelihood to challange for US$100 within 12 months" - who hasn't come across dozens of these articles. Unfortunately, when we are bearish, we whip ourselves into a frenzy and everything is half-empty. And we do the opposite when the sun is shining and the bulls are dancing gaily in the fields. We have to balance with realism, terrorism is not over, OPEC can easily reduce output, there are still pockets of violence in oil producing countries especially in Africa ... so blue skies are hurricanes which has been given some botox... it ain't pretty when the medicine runs out...)
Slippery When On A Slide
sopskysalat said: One issue in everyone's mind, "is the oil dropping too fast and too much?"
I did mention before that we needed the oil price not to drop too much too fast as that could easily ignite good-feelings among consumers (especially in the US where their housing starts and activity depends largely on sentiment and liquidity). Too fast a drop may cause housing figures in the US to spike up and may leave the Fed with no choice but to raise rates again come the next round. That is the danger. However, when we look at the down trend in oil price, it looks too fast and smooth. The massive losses suffered by the hedge fund Amaranth could cause some of the hedge funds to also unwind their positions. Just how big is hedge funds? Amaranth lost a US$6 billion bet in natural gas and there are 7,000 hedge funds, so its anybody's guess as to how much big bets are placed on oil and gas futures. We have to remember that oil and gas futures have been on a sharp uptrend for the last 2 years, a trend is your friend, and with the Israel/Lebanon thing this year, one can asume most funds better on higher prices. If you mark the correction in oil and gas prices, it only started a few weeks back, and hence we haven't seen the last of the blood-letting in some hegde funds. We can expect a few more hedge funds to report bloodied returns.
Locally, the sharply lower oil prices now questions the viability of biodiesel. According to some estimates, the processing and logistics cost combined means the oil would have to stay above US$55 for biodiesel to remain competitive. That is on an open market, but we have to remember that given the choice, certain countries, in particular, Europe and US would choose to favour biofuels. That will come in the way of lower taxes, duties or even incentives. Thus it could push the cost-competitive price of oil down to US$50 and still be viable for biodiesel. Like I said before, the company jumping in early into biodiesel may be a bit riskier. The smarter old dogs like PPB, IOI, KL Kepong have all stayed away, because the rationale is there will not be "supernormal profits" with producing biodiesel. The delivery logistics and consumer acceptance are not certain. To me, biodiesel is just another arm of downstream for palm oil, nothing spectacular. Yes, it may add 10%-15% to new consumption a year, and that will be reflected in CPO prices, which benefits all producers, not just biodiesel producers.
Why is oil prices falling? Beside the hedge fund effect, the main thing boosting prices for the past 6 months have been fear. Especially fear of Iran imposing sanctions or disrupting supplies should the Lebanon and Israel conflict escalate. Some have even factored in the possibility that the hurricane damage to the US gulf coast refineries may exacerbate the problem. Both turn out to be wet-fuses. Fundamentally, US Energy Department figures released showed that crude oil inventories were 5% higher than a year ago, and diesel and heating oil inventories were 11% higher.
Psychologically, the oil price rally have faded somewhat. The bull rally in oil lasted almost 2-3 years, and within that time, traders and hedge funds played among themselves, like a pack of wolves with a carcass, they can whip themselves into a frenzy, now that the dust has settled, they realise that its still just one carcass. Due to the prolong period of the bull phase, it forced a lot of government and private sector initiatives to come up with solutions to high oil prices. Biofuels and wind farms ventures were rushed out with many private equity funds launched to promote new renewable energy ventures. Like it or not, a trend has started, it may take some time before any of these new energy sources replaces fuel, but just 5% in 2 years time will take a lot of pressure off oil prices. Its a cumulative thing.
Of course, all that also depends on how OPEC reacts, so far when oil reached US$61, Saudi Arabia said that the current oil price was reasonable. Hence we may only see OPEC coming out with real cuts in supply should it fall below US$55 or thereabouts.
To answer the question: yes, oil is dropping too fast; but it has probably overshot on the downside, I see oil stabilising around US$62-64 for the rest of the year. Oil at the current price brings more benefits than the negatives, i.e. potentially higher rates by Fed.
sopskysalat said: One issue in everyone's mind, "is the oil dropping too fast and too much?"
I did mention before that we needed the oil price not to drop too much too fast as that could easily ignite good-feelings among consumers (especially in the US where their housing starts and activity depends largely on sentiment and liquidity). Too fast a drop may cause housing figures in the US to spike up and may leave the Fed with no choice but to raise rates again come the next round. That is the danger. However, when we look at the down trend in oil price, it looks too fast and smooth. The massive losses suffered by the hedge fund Amaranth could cause some of the hedge funds to also unwind their positions. Just how big is hedge funds? Amaranth lost a US$6 billion bet in natural gas and there are 7,000 hedge funds, so its anybody's guess as to how much big bets are placed on oil and gas futures. We have to remember that oil and gas futures have been on a sharp uptrend for the last 2 years, a trend is your friend, and with the Israel/Lebanon thing this year, one can asume most funds better on higher prices. If you mark the correction in oil and gas prices, it only started a few weeks back, and hence we haven't seen the last of the blood-letting in some hegde funds. We can expect a few more hedge funds to report bloodied returns.
Locally, the sharply lower oil prices now questions the viability of biodiesel. According to some estimates, the processing and logistics cost combined means the oil would have to stay above US$55 for biodiesel to remain competitive. That is on an open market, but we have to remember that given the choice, certain countries, in particular, Europe and US would choose to favour biofuels. That will come in the way of lower taxes, duties or even incentives. Thus it could push the cost-competitive price of oil down to US$50 and still be viable for biodiesel. Like I said before, the company jumping in early into biodiesel may be a bit riskier. The smarter old dogs like PPB, IOI, KL Kepong have all stayed away, because the rationale is there will not be "supernormal profits" with producing biodiesel. The delivery logistics and consumer acceptance are not certain. To me, biodiesel is just another arm of downstream for palm oil, nothing spectacular. Yes, it may add 10%-15% to new consumption a year, and that will be reflected in CPO prices, which benefits all producers, not just biodiesel producers.
Why is oil prices falling? Beside the hedge fund effect, the main thing boosting prices for the past 6 months have been fear. Especially fear of Iran imposing sanctions or disrupting supplies should the Lebanon and Israel conflict escalate. Some have even factored in the possibility that the hurricane damage to the US gulf coast refineries may exacerbate the problem. Both turn out to be wet-fuses. Fundamentally, US Energy Department figures released showed that crude oil inventories were 5% higher than a year ago, and diesel and heating oil inventories were 11% higher.
Psychologically, the oil price rally have faded somewhat. The bull rally in oil lasted almost 2-3 years, and within that time, traders and hedge funds played among themselves, like a pack of wolves with a carcass, they can whip themselves into a frenzy, now that the dust has settled, they realise that its still just one carcass. Due to the prolong period of the bull phase, it forced a lot of government and private sector initiatives to come up with solutions to high oil prices. Biofuels and wind farms ventures were rushed out with many private equity funds launched to promote new renewable energy ventures. Like it or not, a trend has started, it may take some time before any of these new energy sources replaces fuel, but just 5% in 2 years time will take a lot of pressure off oil prices. Its a cumulative thing.
Of course, all that also depends on how OPEC reacts, so far when oil reached US$61, Saudi Arabia said that the current oil price was reasonable. Hence we may only see OPEC coming out with real cuts in supply should it fall below US$55 or thereabouts.
To answer the question: yes, oil is dropping too fast; but it has probably overshot on the downside, I see oil stabilising around US$62-64 for the rest of the year. Oil at the current price brings more benefits than the negatives, i.e. potentially higher rates by Fed.
Branding For Bursa
I was talking with a friend on how many government and semi government bodies needed to brand themselves just like the private sector companies. We remember the branding by Standard Chartered Bank of old. Who can forget the very effective slogan/branding:
Standard Chartered
BIG, STRONG & FRIENDLY
That worked well, very well indeed. A lot of companies nowadays do not stand for anything, if you do not know what drives at the core of your company, you do not deserve the full value of how well your company is doing, because you did not appreciate how/why the company did well. So, these companies will be doomed when trouble and strife come-a-looking for them. If you did not know why you did well, you will not know what to do when the shit hits the fan. Good fortune comes more from good luck for these companies rather than from good planning and execution.
If you ask CIMB's top management about their branding and core values, you can bet they have an answer, and their strategy to get to where they are now is not by accident. It is easy for all companies to say employees are the core of the company, but what did the company do to "execute as a strategy". Just look at CIMB, recruited well, pay even better, empower them to allow them to dictate terms and grow their units, do not micro-manage ... Just looking at the first few items, most companies would not even get their gears started - but they will mouth them in annual reports and emblazoned them as corporate slogans. That's also why most GLCs fail, the failure to incorporate ideals/objectives with execution ability. Many can write well and come up with reams of good thoughts (i.e. Mahathirism to the max), execution... well, if it happens, its more due to luck rather than good planning and execution.
So, for Bursa Malaysia, the branding/slogan would look something like this
Bursa Malaysia
DEFENSIVE, HIGH YIELDING & LAGGARD
Actually, the first two are good things, we are defensive nowadays due to the good fundamentals surrounding the ringgit, good trade figures and surpluses and room for more appreciation over the next 2 years. High yielding, well, I have already mentioned that we pay the best dividends in the region. Laggard, well, that speaks for itself. Some say that the reason why the local index is a laggard is because it is weighted excessively towards the few big stocks, i.e. the top 10% probably determine 50-60% of the index component. Hence the poor performance of these group will skew the performance of the whole group. Yes, that might be the case, but there are big and small companies as well in every country. Why are the big ones in our country not performing well? We got gas, we got oil, we got oil palm ... all did spectacularly well over the last 3 years and still we look like Bangladesh Stock Exchange. Big or small may skew the index but it does not detract from overall poor performance.
I was talking with a friend on how many government and semi government bodies needed to brand themselves just like the private sector companies. We remember the branding by Standard Chartered Bank of old. Who can forget the very effective slogan/branding:
Standard Chartered
BIG, STRONG & FRIENDLY
That worked well, very well indeed. A lot of companies nowadays do not stand for anything, if you do not know what drives at the core of your company, you do not deserve the full value of how well your company is doing, because you did not appreciate how/why the company did well. So, these companies will be doomed when trouble and strife come-a-looking for them. If you did not know why you did well, you will not know what to do when the shit hits the fan. Good fortune comes more from good luck for these companies rather than from good planning and execution.
If you ask CIMB's top management about their branding and core values, you can bet they have an answer, and their strategy to get to where they are now is not by accident. It is easy for all companies to say employees are the core of the company, but what did the company do to "execute as a strategy". Just look at CIMB, recruited well, pay even better, empower them to allow them to dictate terms and grow their units, do not micro-manage ... Just looking at the first few items, most companies would not even get their gears started - but they will mouth them in annual reports and emblazoned them as corporate slogans. That's also why most GLCs fail, the failure to incorporate ideals/objectives with execution ability. Many can write well and come up with reams of good thoughts (i.e. Mahathirism to the max), execution... well, if it happens, its more due to luck rather than good planning and execution.
So, for Bursa Malaysia, the branding/slogan would look something like this
Bursa Malaysia
DEFENSIVE, HIGH YIELDING & LAGGARD
Actually, the first two are good things, we are defensive nowadays due to the good fundamentals surrounding the ringgit, good trade figures and surpluses and room for more appreciation over the next 2 years. High yielding, well, I have already mentioned that we pay the best dividends in the region. Laggard, well, that speaks for itself. Some say that the reason why the local index is a laggard is because it is weighted excessively towards the few big stocks, i.e. the top 10% probably determine 50-60% of the index component. Hence the poor performance of these group will skew the performance of the whole group. Yes, that might be the case, but there are big and small companies as well in every country. Why are the big ones in our country not performing well? We got gas, we got oil, we got oil palm ... all did spectacularly well over the last 3 years and still we look like Bangladesh Stock Exchange. Big or small may skew the index but it does not detract from overall poor performance.
Must Read - Bumi Armada Experience
"whereiszemoola" has posted a brilliant blog on Bumi Armada, dated 16th September. In fact, it should be required reading for everyone at the SC and Bursa. There is alsoa substantive commentary by Claire Barnes of the respected Appollo Investment Management company, which invested in Bumi Armada. She articulated very well on why rules/regulations get bent and the SC/Bursa did not do the right thing for minority investors. You wonder why our index still trails the regional markets, this is symptomatic of the disease invading the entire system. Unbelievable to see Ananda Krishnan being involved in something like this... and even more ludricous to see reports that after delisting, they will now try to list it again ... you think all investors are cows or mushrooms?? The experience for one international fund manager was soured, and it is just the tip of the iceberg. Sure enough, most of those at SC were not responsible for what happened, now is the time to turn the tide. The public whipping of Aeneas is good, let it continue.
http://whereiszemoola.blogspot.com/
"whereiszemoola" has posted a brilliant blog on Bumi Armada, dated 16th September. In fact, it should be required reading for everyone at the SC and Bursa. There is alsoa substantive commentary by Claire Barnes of the respected Appollo Investment Management company, which invested in Bumi Armada. She articulated very well on why rules/regulations get bent and the SC/Bursa did not do the right thing for minority investors. You wonder why our index still trails the regional markets, this is symptomatic of the disease invading the entire system. Unbelievable to see Ananda Krishnan being involved in something like this... and even more ludricous to see reports that after delisting, they will now try to list it again ... you think all investors are cows or mushrooms?? The experience for one international fund manager was soured, and it is just the tip of the iceberg. Sure enough, most of those at SC were not responsible for what happened, now is the time to turn the tide. The public whipping of Aeneas is good, let it continue.
http://whereiszemoola.blogspot.com/
Tenaga Covered Warrant A&B
xatomic wrote: Hi Salvatore, I follow your blog quite often and always do admire your freespoken and candid views on the market and other interesting issues.I would appreciate your views on Tenaga now if you can do a write-up, especially the warrants coz I remember you wrote bout it before last time. Tenaga-CB seems to be trading at ridiculously low premium compared to its counterpart Tenaga-CA. At the current price relative to the mother share, the premium is only 5.7% compared to 18.6% for the latter.The expiry date difference is only 3 months and gearing is much higher, so why the difference in valuations? Is the market undervaluing the warrant now?
Tenaga-CA 28/1/08 Ex px RM7.96 Warrant px RM2.04
Tenaga-CB 19/10/07 Ex px RM4.54 Warrant px RM0.79
Tenaga-CA premium would be 2.04+7.96 divided by 10.00 = 0%
Tenaga-CB premium would be (2 x 0.79)+ (2 x 4.54) divided by 10.00 = 6.6%
So, in actual fact Tenaga-CB is costlier than Tenaga-CA. The crux being the CA is one warrant for one Tenaga share while the CB is two warrant to convert into one Tenaga share. So you would have to buy 2 CB warrant to get the same effect. In terms of gearing CA would get a gearing of 10.00/2.04 = 4.9x. For CB, the gearing should be calculated as 10.00/2 x 0.79 = 6.3x. CB has a higher gearing, CA has 3 months more till expiry, so in my assessment, both are fairly valued with CA being more a value proposition if one were to consider buying now as the premium is zilch.
xatomic wrote: Hi Salvatore, I follow your blog quite often and always do admire your freespoken and candid views on the market and other interesting issues.I would appreciate your views on Tenaga now if you can do a write-up, especially the warrants coz I remember you wrote bout it before last time. Tenaga-CB seems to be trading at ridiculously low premium compared to its counterpart Tenaga-CA. At the current price relative to the mother share, the premium is only 5.7% compared to 18.6% for the latter.The expiry date difference is only 3 months and gearing is much higher, so why the difference in valuations? Is the market undervaluing the warrant now?
Tenaga-CA 28/1/08 Ex px RM7.96 Warrant px RM2.04
Tenaga-CB 19/10/07 Ex px RM4.54 Warrant px RM0.79
Tenaga-CA premium would be 2.04+7.96 divided by 10.00 = 0%
Tenaga-CB premium would be (2 x 0.79)+ (2 x 4.54) divided by 10.00 = 6.6%
So, in actual fact Tenaga-CB is costlier than Tenaga-CA. The crux being the CA is one warrant for one Tenaga share while the CB is two warrant to convert into one Tenaga share. So you would have to buy 2 CB warrant to get the same effect. In terms of gearing CA would get a gearing of 10.00/2.04 = 4.9x. For CB, the gearing should be calculated as 10.00/2 x 0.79 = 6.3x. CB has a higher gearing, CA has 3 months more till expiry, so in my assessment, both are fairly valued with CA being more a value proposition if one were to consider buying now as the premium is zilch.
And They Are Off ...
Rohan_888 said...
A payout of 77% on Malaysian horseracing is just way too low, especcially for place bets and win bets on favorites. If they (turfclubs + totalisator + government) seriously want to try to get a chunk of the bookie turnover they have to increase the payout. By increasing the dividends, by rebates or both. If they combine this with state-of-the-art technology, then the bookie only has one advantage left: punters can bet with them on credit. Both Singapore and Hong Kong have started giving rebates, when will Malaysia wake up?
My Take - Yes, that's the third pillar of eradicating illegals. I mean, the NFO payout ratio is even worse. Racing clubs should aim for 85% at least, then life would be a lot tougher for bookies. Right now bookies can comfortably offer 20% discount on each ticket and still come out on top.
Rebates for big ticket bets is a wierd thing. Its like racing clubs are acknowledging the strength of illegal bookmaking. But the small punters lose out. The rebates almost matches the discounts given by illegals, but the clubs must look deeper into why they bet with illegals - convenience, no cash upfront, can bet last minute, sometimes even cancelling bets last minute - fear of bookies absconding is surprisingly low, unlike 4D illegals, where people who bet big would want to bet with the official operator and not illegals.
But cleaning up Malaysian/Singapore racing will take a huge effort, you have to implement and see that rules are being exercised, suspend and fine accordingly. Plus increase prize money substantially. Sack all the club and committee members of existing turf clubs, put in professional managers at all levels - stewards, stipes, starters, vets, committee members - racing in our country is just as hard to move as the politics, its ingrained and vested interest abound. Everyone is a crony, has a crony ...
Rohan_888 said...
A payout of 77% on Malaysian horseracing is just way too low, especcially for place bets and win bets on favorites. If they (turfclubs + totalisator + government) seriously want to try to get a chunk of the bookie turnover they have to increase the payout. By increasing the dividends, by rebates or both. If they combine this with state-of-the-art technology, then the bookie only has one advantage left: punters can bet with them on credit. Both Singapore and Hong Kong have started giving rebates, when will Malaysia wake up?
My Take - Yes, that's the third pillar of eradicating illegals. I mean, the NFO payout ratio is even worse. Racing clubs should aim for 85% at least, then life would be a lot tougher for bookies. Right now bookies can comfortably offer 20% discount on each ticket and still come out on top.
Rebates for big ticket bets is a wierd thing. Its like racing clubs are acknowledging the strength of illegal bookmaking. But the small punters lose out. The rebates almost matches the discounts given by illegals, but the clubs must look deeper into why they bet with illegals - convenience, no cash upfront, can bet last minute, sometimes even cancelling bets last minute - fear of bookies absconding is surprisingly low, unlike 4D illegals, where people who bet big would want to bet with the official operator and not illegals.
But cleaning up Malaysian/Singapore racing will take a huge effort, you have to implement and see that rules are being exercised, suspend and fine accordingly. Plus increase prize money substantially. Sack all the club and committee members of existing turf clubs, put in professional managers at all levels - stewards, stipes, starters, vets, committee members - racing in our country is just as hard to move as the politics, its ingrained and vested interest abound. Everyone is a crony, has a crony ...
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