Saturday, 26 May 2018

1MDB: Dissecting One Of The World's Biggest Financial Scandals

Published on 5 May 2017

@1.00.30  What will you do with the money recovered from 1MDB?

@1.02.30  Who in Malaysia is chasing this money?

@1.04.00  What has Malaysia done about this?  Nothing.

The Attorney General of Malaysia has cleared the Prime Minister of any wrong doing.  So this is a perfect crime.
Malaysia is suppose to be the victim.  The victim itself seems to be totally unable to do anything ...  as long as the Prime Minister and his political appointees represent the people of Malaysia.

But then again remembers, crime pays.  Some of it anyway.  Lots of it.

Wednesday, 23 May 2018

1MDB: Malaysian Finance Minister lambasted Arul Kanda as "utterly dishonest and untrustworthy".

Image result for integrity hardworking intelligence

Malaysian Finance Minister, Lim Guan Eng, lambasted Arul Kanda as "utterly dishonest and untrustworthy".
"Arul Kanda claimed that all financial matters were handled strictly by the company CFO and he is uncertain what the value of these investments are – or whether they exist in the first place.
"It is completely unbelievable that a highly-paid and experienced investment banker can be so irresponsibly clueless as to not know whether RM9.8bil worth of investments are even real," said Lim.
Lim said he had instructed the ministry's legal advisers to review Arul Kanda's position as president of 1MDB.
The ministry will also appoint PwC to conduct a special position audit and review of 1MDB.

Check out the video


I answered what I knew, says Arul
FMT Reporters | May 24, 2018
The 1MDB boss says he answered based on what he knew in the absence of documents to back him.

Unfair of finance minister to put me in bad light
Arul Kanda Kandasamy

Wednesday, 16 May 2018

Hartalega 4Q net profit up 30%

Justin Lim/
May 15, 2018 18:54 pm +08

KUALA LUMPUR (May 14): Hartalega Holdings Bhd’s saw its net profit jump 30.7% to RM116.8 million in the fourth quarter ended March 31, 2018 (4QFY18), from RM89.4 million a year earlier.

The world’s largest synthetic glove manufacturer’s quarterly revenue rose by 17% to RM616.84 million, from RM527 million in 4QFY17. Earnings per share was at 3.53 sen in 4QFY18, compared with 2.72 sen the previous year.

For the full year (FY18), Hartalega reported a net profit of RM440.1 million or 13.29 sen per share, up 55.4% from RM283.3 million or 8.62 sen per share in the previous year. Revenue also increased 33.33% to RM2.4 billion, from RM1.82 billion in FY17.

Its group managing director Kuan Mun Leong said in the statement: “This marks another significant milestone for the Group. Our strategic plans continue to bear fruit, enabling us to deliver a strong performance on the back of increased sales volume, in tandem with our continuous expansion in production capacity and robust demand for nitrile gloves.”

On prospects, Hartalega expressed its confidence in propelling the group forward in the coming year, as it is driven by its strategic expansion plans and product innovation,” Kuan said.

“As we move forward, we are well on track to meet growing global demand, driven by our Next Generation Integrated Glove Manufacturing Complex (NGC). To this end, we have successfully commissioned all 12 production lines in Plant 4 of the NGC. We target to commence commissioning of Plant 5 in July 2018 and subsequently, the construction of Plant 6. We are also planning to construct an additional Plant 7, which will focus on small orders and specialty products,” Kuan added.

Additionally, Hartalega is also set to launch its antimicrobial gloves in Europe on May 31, 2018, Kuan said.

“We are also currently in the process of securing approval from the Federal Drug Administration to enter the US market with this latest product,” Kuan added.

Hartalega shares closed unchanged at RM6 today, with 4.9 million shares traded, giving it a market capitalisation of RM20.14 billion.

Hartalega - FY18… a Slight Anti-climax
Author: HLInvest | Publish date: Wed, 16 May 2018, 09:39 AM

Hartalega’s FY18 Core PATAMI of RM399.0m (+23.2% yoy) was below our expectation and consensus. Production capacity rose to 28.5bn with a utilization rate of 91% in FY18. Our forecast is unchanged and we maintain our HOLD rating albeit with a higher TP of RM6.17. We expect the share price will be supported by (i) it’s possible inclusion into the KLCI come June review (ii) sentiment driven weakness in the Ringgit will continue to whet investors’ appetite for export stocks.

Below expectations. FY18 core PATAMI of RM399.0m (+23.2% yoy) came in below at 94% and 92.4% of ours and consensus full year estimates, respectively. The lower than expected results were due to higher (i) energy costs (natural gas) (ii) butadiene prices and (iii) finance costs.

Dividends. Declared a third interim dividend of 2 sen/share (FY17: 8 sen/share).

YTD. Revenue grew 32.1% yoy to RM2.41bn on the back increased sales volume (+33% yoy), greater operational efficiencies and a higher utilization rate (FY18: 91% vs. FY17: 87%). EBITDA margins expanded by 2.8ppts (FY17: 23% vs. FY18: 25.8%). Subsequently, core PATAMI grew 23.2% yoy to RM398.0m on the above mentioned factors.

Yoy. Revenue grew 17.0% to RM616.8m on higher sales volume (+30.1%). EBITDA margin declined marginally by 0.2ppts to 26% as ASP saw downward pressure, offset by 17 extra lines yoy (4Q18:93 lines vs. 4Q17: 76 lines). Consequently core PATAMI grew by 10.3% yoy to RM98.6m.

Qoq. Revenue grew 2.3% qoq on higher sales volume (+5% qoq). Core PATAMI declined by 7.1% to RM98.6m qoq on competitive pricing whilst utilization rate declined to 89% from 91% qoq.

AMG. Production capacity rose to c.28.5bn pcs in FY18 with the current 93 lines having a utilization rate of 91%. Hartalega will launch their anti-microbial gloves (AMG) in Europe later this month, whilst simultaneously being in the midst of securing FDA approval for the US market. We are of the view that it will take some time for Hartalega to secure orders for its AMG given the products infancy in the market.

Outlook. Commissioning of plant 5 (4.7bn pieces) will commence in June CY18 followed by construction of Plant 6. Hartalega also announced its plans for Plant 7 which has been earmarked for specialty products with a capacity of c.2.6bn pieces. Moving forward we expect utilization rate to remain stable at c.89%-91% on the back of robust global demand, however we may see margin deterioration as more gloves capacity come on stream thus putting a downward pressure on ASP.

Forecast. Unchanged as the results were only marginally below expectations.

Maintain HOLD, TP: RM6.17. Despite the marginal results shortfall, we reckon there are short term sentiment driven factors that may warrant share price support (or even possible upside). These include: (i) possible inclusion into the KLCI come June review (ii) sentiment driven weakness in the Ringgit will continue to whet investors’ appetite for export stocks in the near term. Given such, we adjust our TP upwards to RM6.17 based on CY19 EPS pegged to PER of 37x (from 31.8x). Our ascribed PER of 37x represents 1SD above Hartalega’s 3 year historical PER.

Source: Hong Leong Investment Bank Research - 16 May 2018

Monday, 14 May 2018

A fresh new chapter for Malaysia. What a wonderful day!

The majority has voted against Barisan National in this election.

The transition of power to Pakatan Harapan has been smooth and peaceful.

All Malaysians, irrespective of whom they voted for, can now unite to move this nation to greater success, prosperity and happiness.

Many are thankful for those who have provided the leadership in this election.

One lady on the street was so happy with Tun.  Quoting her:  "I disliked Tun in the past.  Today he is 92 and now I wished he will be with us as our PM forever."

History has been rewritten.

Tun Mahathir's achievements and leaderships, over his lifetime have been noted.

He will be remembered as one of the most colourful and greatest among the top world leaders.

Image result for election malaysia 2018

Image result for election malaysia 2018

Wednesday, 9 May 2018

A Framework for Improving Decisions

Smart organizations can improve decision making in four steps:

1.  Identification
2.  Inventory
3.  Intervention
4.  Institutionalization

The four steps to improving decision making.

1.  Identification

Managers should begin by listing the decisions that must be made and deciding which are most important.

For example,

  • "the top 10 decisions required to execute our strategy: or 
  • "the top 10 decisions that have to go well if we are to meet our financial goals."

Some decisions will be rare and highly strategic. 

  • "What acquisitions will allow us to gain the necessary market share?"

Others will be frequent and on the front lines. 

  • "How should we decide how much to pay on claims?"

Without some prioritization, all decisions will be treated as equal - which probably means that the important ones won't be analyzed with sufficient care.

2.  Inventory

In addition to identifying the key decisions in 1 above, you should assess the factors that go into each of them.

  • Who plays what role in the decision?
  • How often does it occur?
  • What information is available to support it?
  • How well is the decision typically made?

Such an examination helps an organization understand which decisions need improvement and what processes might make them more effective, while establishing a common language for discussing decision making.

3.  Intervention

Having narrowed down your list of decisions and examined what's involved in making each, you can design the roles, processes, systems, and behaviours your organization should be using to make them.

The key to effective decision interventions is a broad, inclusive approach that considers all methods of improvement and addresses all aspects of the decision process - including execution of the decision, which is often overlooked.

4.  Institutionalization

Organizations need to give managers the tools and assistance to "decide how to decide" on an ongoing basis.

For example, the managers can be trained to determine whether a particular decision should be made

  • unilaterally by one manager, 
  • unilaterally after consultation with a group, 
  • by a group through a majority vote, or 
  • by group consensus.  
In addition, they can also determine

  • who will be responsible for making the decision, 
  • who will be held accountable for the results and 
  • who needs to be consulted or informed.

Companies that are serious about institutionalizing better decision making can often enlist decision experts to work with executives on improving the process.

For example, the members of a decision analysis group can

  • facilitate framing workshops; 
  • coordinate data gathering for analysis; 
  • build and refine economic and analytical modes; 
  • help project managers and decision makers interpret analysis; 
  • point out when additional information and analysis would improve a decision; 
  • conduct an assessment of decision quality; 
  • and coach decision makers.

Regularly assess and review to improve the quality of your decision making.

An organization that has adopted these four steps should also assess the quality of decisions after the fact.  The assessment should address not only actual business results - which can involve both politics and luck - but also the decision-making process and whatever information the manager relied on. 

The organization should regularly performs "look-backs" on major decisions, and assesses not only outcomes but also how the decision might have employed a better process or addressed uncertainty better.

The Hidden Traps in Decision Making

Making decisions is one of the most important things we do in our daily living.  It is also the toughest and riskiest in some situations.  Bad decisions can damage your career, business and finances, sometimes irreparably.

So where do bad decisions come from? 

In many cases, they can be traced back to the way the decisions were made:
  • the alternatives were not clearly defined,
  • the right information was not collected,
  • the costs and benefits were not accurately weighed.
But sometimes the fault lies not in the decision-making process but rather in the mind of the decision maker.  The way the human brain works can sabotage our decisions.

Psychological traps

There are a number of well-documented psychological traps that are particularly likely to undermine decision making.  These include:
  • heuristics#, 
  • biases and 
  • other irrational anomalies in our thinking.  

Your best defense is AWARENESS

There are specific ways you can guard against them.  However, the best defense is always awareness.  

By familiarizing yourself with these traps and the diverse forms they take, you will be better able to ensure that the decisions you make are sound and that the recommendations proposed by others (your subordinates or associates) are reliable.

Additional notes:

These are unconscious routines we use to cope with the complexity inherent in most decisions.  These routines serve us well in most situations.  These simple mental shortcuts help us to make the continuous stream of judgments required to navigate the world.  But, not all heuristics are foolproof.  The resulting decisions often pose few dangers for most of us, and can be safely ignore.  At times, the decisions arising from these heuristics can be catastrophic.  What make all these traps so dangerous is their invisibility.  Because they are hardwired into our thinking process, we fail to recognize them - even as we fall right into them.

Sunday, 6 May 2018

What I’ve Learned After Making More Than 5-Figures In Dividends

What I’ve Learned After Making More Than 5-Figures In Dividends

By The Fifth Person on December 28, 2015

As investors, we all love dividends. Other than the thrill of seeing a stock you own rise higher and higher in the stock market, receiving passive dividend income from your investments every year is something we all look forward to.

So if you’re more of an income investor and looking to invest for dividends, your stock portfolio will be markedly different from someone who’s investing for high growth and capital gain. The stocks that will give good, consistent dividends may not necessarily be the kind that will grow by 20-50% a year and vice versa.

So if you investing for dividends, you have to invest accordingly and only pick the best stocks that will give the passive dividend income you want. The question is: How?

Over the years, our investments have received more than 5-figures in dividends. So if you’re slightly lost and looking for some direction, here are 7 quick steps that we personally use to pick the best dividend stocks around: (Hint: You can’t just look at dividend yield alone!)

#1 Look for Mid-Large Cap Stocks

The best dividend stocks are usually large, mature companies with stable revenue, profits and cash flow. These companies have little growth left in them. Because these companies are no longer expanding aggressively, the majority of their earnings can be returned to shareholders as dividends.

On the other hand, a smaller, high-growth company needs more cash and resources to grow and expand its business, leaving less money to pay shareholders dividends (if any).

#2 Dividend Payout Ratio is 50% or More

If a company is large, stable and isn’t seeking to grow aggressively any more, then the majority of the profits it makes should be returned to shareholders. So look for a company with a dividend payout ratio of at least 50% or more. For example, NestlĂ© (Malaysia) returns over 90% of its earnings to shareholders as dividends.

If a company has a low payout ratio, ask yourself why the company is holding on to the cash. Unless they have a good reason to do so or have a way to generate exceptional returns for shareholders, the majority of profits should be paid out as dividends.

#3 Track Record of Paying Consistent Dividends

The company should have a long and stable track record of paying consistent/growing dividends to shareholders. No point if a company is large and successful and has profits to distribute as dividends, but chooses to pay them out inconsistently.

The best track record is to see a company pay a consistently growing dividend over the last 5-10 years. This shows that as the company grows more and more successful, the management is also willing to share the fruits of its labour with its shareholders.

#4 Company’s Fundamentals Must Be Sustainable

Many dividend investors tend to ignore the overall aspects of a company’s fundamentals and primarily focus on the amount of dividends they can receive from an investment. While dividend yield is obviously important for someone seeking dividends, it is also important to consider the overall health of the company.

A company with deteriorating fundamentals (e.g. falling revenue, profits, cash flow, fading economic moat, etc.) cannot sustain its dividend payout in the long term. The less revenue and profit it makes, the less dividends it can pay.

Furthermore, a company with falling revenues and profits will see its stock price fall in tandem over time as investors start to realize the company is no longer performing as well. This fall in value will eat into any dividend gains you might have had at the start — leaving you back at square one.

So always make sure the dividend company you want to invest in will remain fundamentally strong and robust for many years to come.

#5 Company has Low CAPEX

As a dividend investor, you prefer to invest in a company with low capital expenditure (CAPEX). A company with high CAPEX means that it has to continually reinvest its profits in maintaining its business operations, leaving less to distribute as dividends.

For example, airlines have very high CAPEX as they need to continually maintain their aircraft and upgrade them to newer models after a certain amount of years.

So look for a company that’s able to maintain/grow its business with minimal CAPEX.

If you want help, you can always kick start the idea by downloading our watchlist of dividend paying stocks below:

#6 Company has Stable Free Cash Flow

Ultimately, a company must have real cash (not just profits) to be able to pay dividends to its shareholders. Even if a company is profitable but has negative or inconsistent free cash flow, it will have trouble paying stable dividends.

A smaller company that is seeking to grow might have negative free cash flow as it expands its business. But a large, stable company that dominates its industry should be producing high amounts of free cash flow year after year.

#7 Yield Must Beat Risk-Free Rate

The dividend yield you receive from a stock should beat the risk-free rate of the country you reside in. The risk-free rate is the lowest return you can theoretically get “risk-free”over a period of time.

In the US, if you plan to invest your money for ten years, then the risk-free rate is usually based on the return of the 10-year US Treasury note which is currently around 2.30%. In Malaysia, the risk-free rate is usually based on the guaranteed interest your EPF gives you which is 2.5%. However, since 2000, EPF has been able to give out between 4.25% to 6.75%, which is more than the minimal guaranteed.

If your dividend yield can’t beat your risk-free rate, you might as well put your money with the US Treasury / EPF since you face less risk investing in a US Treasury note / EPF than investing in a stock to generate the same returns.

The Fifth’s Perspective

There you have it! Seven quick steps to help you pick the best dividend stocks to invest in. As you can see, there are lots more items to consider other than just dividend yield!

So remember to check these seven criteria whenever you’re looking to invest for dividends.