Wind Farms: eleven UK sites marked for development
Eleven sites around the English, Scottish and Welsh coastline have been earmarked as suitable to house ranks of giant wind turbines.
By Paul Eccleston
Published: 10:34PM BST 04 Jun 2008
It is the latest phase of an ambitious scheme to meet more of the UK's energy needs from natural and sustainable sources.
The government is committed to obtaining 20 per cent of all its energy from renewables by 2020 and offshore wind power has been identified as the key factor in reaching the target.
Related Articles
Offshore UK wind farm sites announced
Crown Estate did not tell locals about huge off-shore windfarm
World's largest wind farm scrapped in financial downturn
Wind farms could supply planet's power
Climate Change Act: Now the world faces its biggest ever bill
The UK is about to overtake Denmark as the world's largest generator of wind power and within five years we will be able to obtain as much power from wind as we do from nuclear plants.
Announcing the potential new sites the Crown Estate - which is responsible for managing the sea bed - said it will play a much bigger part in getting wind farms up and running in time to meet the 2020 deadline.
It will meet up to 50 per cent of the start up costs of new farms by helping developers get through complicated planning processes and with sourcing suitable turbines and getting them hooked up to the electricity grid.
Bidding for the new sites - round three of a long-term plan to increase the number of offshore wind farms - will begin almost immediately and contracts could be signed as early as next year.
If all the new farms are built it will more than triple the 8GW of power being developed offshore under rounds one and two of the scheme to 25GW and 33GW by 2020 which would be enough to theoretically provide enough power for every home in Britain.
Rob Hastings, the Crown Estate's director of marine estates, said "We recognise that the 2020 EU renewable energy target is a major challenge for the UK. It will demand a strategic vision, combining innovation in technology and energy infrastructure with sympathy for environmental concerns.
In partnership with wind farm developers, we will need to establish the best location for wind farms within the programme and gain consensus with key stakeholders to deliver each scheme. :
"We need to be sensitive to other marine users and conservation interests, and we have to deliver all this in the context of worldwide competition and a limited supply of new wind turbines.
Energy Minister Malcolm Wicks said wind power would help tackle two of the big challenges facing the country - climate change and energy security.
"The expansion of wind energy is already a real success story for the UK. We will shortly become the leading country in the world in terms of the number of wind farms operating offshore," he said.
"The Government is aware of the costs and supply challenges facing the industry and it's hoped the Crown Estate's investment and leasing programme for round three will provide developers with confidence to make investments much earlier on, like signing grid connection agreements or ordering turbines."
Maria McCaffery, Chief Executive of the industry body British Wind Energy Authority, said: "This is fantastic news for the UK wind industry, with Britain's seas now officially opened for business. This announcement has brought delivery of the 2020 renewable energy targets a great deal closer".
She added: "Wind energy is no longer a minority pursuit. With nearly half a gigawatt already installed and a further 8GW of schemes in the pipeline we are now a mainstream energy supplier."
The head of Greenpeace UK's climate campaign Robin Oakley said: "Offshore wind is a 21st century, frontier technology that can deliver clean electricity to every home in Britain and secure our energy supplies for years to come. Our country could be the Saudi Arabia of offshore wind - and John Hutton knows it.
Instead, he's lost in a nuclear fantasy and flatly refuses to introduce the policies that have delivered huge economic benefits for Germany and Spain, who now lead the world in renewable energy. Britain is sitting on a treasure chest of green collar jobs and clean, renewable energy - now we need to unlock it."
http://www.telegraph.co.uk/news/uknews/2075531/Wind-Farms-eleven-UK-sites-marked-for-development.html
Wednesday 21 October 2009
The Qataris profiting handsomely for taking the risk
Qataris bank £615m profit on rescue of Barclays
One of Barclays' Middle Eastern saviours has bagged a £615m cash profit from its £1.75bn gamble on the bank's recovery last year.
By Philip Aldrick, Banking Editor
Published: 8:51PM BST 20 Oct 2009
Comments 1 | Comment on this article
Towering profit: Qatar's sovereign wealth fund has banked £615m in a year from its investment in Barclays Photo: Ian Jones Qatar Holdings, the country's sovereign wealth fund, on Tuesday cashed in half of the £1.5bn of warrants it received in return for supporting last October's £7bn rescue fund-raising to keep the lender out of UK Government hands.
The warrants, which Qatar exercised at 197.775p a share, were sold in the market at 360p, realising a £615m cash profit for the Middle Eastern investor.
Related Articles
Sainsbury's rises on renewed talk of bid by Qatari Investment Authority
Abu Dhabi sheikh cashes in Barclays stake for £1.5bn profit
Barclays shares surge on iShare sale hope
Staveley bags herself a late stocking filler
Standard Chartered share price fall triggers capital review
UKFI rules out quick sale of bank sharesQatar is sitting on a £615m paper profit for the other half of the warrants it holds and a further £690m profit on the £500m of shares acquired at 153.276p. It has also been paid £175m in interest for the £1.25bn of reserve capital instruments that formed the bulk of the deal.
In total, Qatar has made a £2.14bn cash and paper profit on its £1.75bn investment in just one year.
Qatar was one of three Middle Eastern investors that came to Barclays' rescue after UK institutions shunned management attempts to raise capital when Lloyds Banking Group and Royal Bank of Scotland were part-nationalised last year. Barclays stayed out of state hands, but it had to offer highly generous terms to the three investors.
Between them, they have made a cash and paper profit of £5.4bn on a combined £5.3bn investment in just one year. His Highness Sheikh Mansour bin Zayed al-Nahyan, a member of the Abu Dhabi royal family, sold £2bn of his investment for a £1.45bn profit in June but has retained £1.5bn of warrants that are currently £1.2bn in profit.
Challenger, a vehicle owned by the Qatari royal family, is sitting on a £410m paper profit and has earned £25m in interest on its investment.
Credit Suisse placed Qatar's shares at an average of 360p largely with UK institutions.
Analysts pointed out that Barclays' shareholders were offered the chance to support the bank but declined and are now paying more than twice as much for the stock.
They were also given the opportunity at the time of the rescue refinancing to buy £1.5bn of manadatory convertible notes that switched into shares in June at 153.276p, under the same terms as the Middle Eastern investors. Only £1.25bn was taken up.
"They missed an opportunity and the Qataris are profiting handsomely for taking the risk," one analyst said
Qatar stressed that it remained "a long-term strategic shareholder in Barclays". It continues to be the bank's largest shareholder with a 7.1pc stake, diluted from 7.4pc due to the issue of 379m new shares as a result of the warrants being exercised.
John Varley, Barclays chief executive said the placing "will further broaden the base of our share register" and added: "Qatar is our largest shareholder and a key partner of the Barclays group."
The deal will also improve Barclays' core tier one ratio, the key measure of financial strength, from 8.8pc in June to roughly 8.95pc. The boost came about because Qatar had to pay the bank £750m for the new shares before selling them at a profit.
Bringing the Middle East investors on to the share register was highly controversial last year. The price paid was significantly more than what it would have cost to raise similar funds from the Government and the speed of the deal meant shareholders were not given first refusal on the deal, as is best practice.
However, the strategy of remaining independent has proved a success. Barclays shares have recovered from around 200p to 363¾p, down 18.3p yesterday due to the dilutive effect of the deal, while RBS shares have fallen from 66p to 46.58p and Lloyds from around 200p to 91.35p in the same period.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6390133/Qataris-bank-615m-profit-on-rescue-of-Barclays.html
One of Barclays' Middle Eastern saviours has bagged a £615m cash profit from its £1.75bn gamble on the bank's recovery last year.
By Philip Aldrick, Banking Editor
Published: 8:51PM BST 20 Oct 2009
Comments 1 | Comment on this article
Towering profit: Qatar's sovereign wealth fund has banked £615m in a year from its investment in Barclays Photo: Ian Jones Qatar Holdings, the country's sovereign wealth fund, on Tuesday cashed in half of the £1.5bn of warrants it received in return for supporting last October's £7bn rescue fund-raising to keep the lender out of UK Government hands.
The warrants, which Qatar exercised at 197.775p a share, were sold in the market at 360p, realising a £615m cash profit for the Middle Eastern investor.
Related Articles
Sainsbury's rises on renewed talk of bid by Qatari Investment Authority
Abu Dhabi sheikh cashes in Barclays stake for £1.5bn profit
Barclays shares surge on iShare sale hope
Staveley bags herself a late stocking filler
Standard Chartered share price fall triggers capital review
UKFI rules out quick sale of bank sharesQatar is sitting on a £615m paper profit for the other half of the warrants it holds and a further £690m profit on the £500m of shares acquired at 153.276p. It has also been paid £175m in interest for the £1.25bn of reserve capital instruments that formed the bulk of the deal.
In total, Qatar has made a £2.14bn cash and paper profit on its £1.75bn investment in just one year.
Qatar was one of three Middle Eastern investors that came to Barclays' rescue after UK institutions shunned management attempts to raise capital when Lloyds Banking Group and Royal Bank of Scotland were part-nationalised last year. Barclays stayed out of state hands, but it had to offer highly generous terms to the three investors.
Between them, they have made a cash and paper profit of £5.4bn on a combined £5.3bn investment in just one year. His Highness Sheikh Mansour bin Zayed al-Nahyan, a member of the Abu Dhabi royal family, sold £2bn of his investment for a £1.45bn profit in June but has retained £1.5bn of warrants that are currently £1.2bn in profit.
Challenger, a vehicle owned by the Qatari royal family, is sitting on a £410m paper profit and has earned £25m in interest on its investment.
Credit Suisse placed Qatar's shares at an average of 360p largely with UK institutions.
Analysts pointed out that Barclays' shareholders were offered the chance to support the bank but declined and are now paying more than twice as much for the stock.
They were also given the opportunity at the time of the rescue refinancing to buy £1.5bn of manadatory convertible notes that switched into shares in June at 153.276p, under the same terms as the Middle Eastern investors. Only £1.25bn was taken up.
"They missed an opportunity and the Qataris are profiting handsomely for taking the risk," one analyst said
Qatar stressed that it remained "a long-term strategic shareholder in Barclays". It continues to be the bank's largest shareholder with a 7.1pc stake, diluted from 7.4pc due to the issue of 379m new shares as a result of the warrants being exercised.
John Varley, Barclays chief executive said the placing "will further broaden the base of our share register" and added: "Qatar is our largest shareholder and a key partner of the Barclays group."
The deal will also improve Barclays' core tier one ratio, the key measure of financial strength, from 8.8pc in June to roughly 8.95pc. The boost came about because Qatar had to pay the bank £750m for the new shares before selling them at a profit.
Bringing the Middle East investors on to the share register was highly controversial last year. The price paid was significantly more than what it would have cost to raise similar funds from the Government and the speed of the deal meant shareholders were not given first refusal on the deal, as is best practice.
However, the strategy of remaining independent has proved a success. Barclays shares have recovered from around 200p to 363¾p, down 18.3p yesterday due to the dilutive effect of the deal, while RBS shares have fallen from 66p to 46.58p and Lloyds from around 200p to 91.35p in the same period.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6390133/Qataris-bank-615m-profit-on-rescue-of-Barclays.html
Return of high oil prices threatens real damage
Return of high oil prices threatens real damage
By Jeremy Warner Economics Last updated: October 20th, 2009
Interest rates at close to zero are driving the price of virtually everything else wild, so it should come as little surprise to see oil back above twelve month highs. OK, so it is still a long way from the crucifying $140 a barrel it reached in the summer of last year, but prices have nearly doubled so far this year and at more than $80 a barrel, they are again high enough to cause real economic damage.
By common agreement, it was the collapse of Lehman Brothers which plunged the world into deep recession, and no doubt the destruction of confidence in the banking system was a major cause. But what’s often over looked is the role played by high energy prices. These had reached crippling levels by the summer of 2008, and were causing real damage to industry and business. American consumers took one look at prices at the pumps and collectively decided to stop spending. This collapse in consumer and business confidence preceded the Lehman debacle.
The world economy is said to be a great deal less vulnerable to high oil prices than it was 30 or 40 years ago, but they still self evidently have the power to shock. Most post war recessions have been preceded by a spike in the oil price. So to see the price back at elevated levels (see accompanying chart) before a proper economic recovery has even taken hold is a cause for some concern.
Having peaked in the summer of last year at over $140 a barrel, the oil price then plunged. But now it is back up to over $80.
In part, today’s relatively high price is merely a function of dollar weakness. Abdallah El-Badri, Secretary General of OPEC, insists that there is no shortage of oil. The rally to more than $80 a barrel is driven by higher equity prices, the sliding dollar and speculation”, he told Bloomberg News.
There are plainly fundamental forces at work too. Emerging market economies, particularly those of China and India, are once more booming. Yet I suspect the main mischief is again speculation. With interest rates at close to zero, you cannot get a return on cash right now, so money is being poured into riskier assets, including commodities and oil.
An interesting article in the Financial Times this morning puts the near term upward pressure on oil prices down to heavy trading in options contracts ahead of the year end. Quite a lot of this activity is driven by forward hedging for real economy clients. But there is also a significant amount which is purely speculative in nature.
Is it right that speculators should once more be putting the health of the world economy at risk? Speculation, it is often said, only reflects underlying realities. The speculator only makes money if his bets mirror the real economy pressures of supply and demand. Maybe, but cheap money in the quantities now being provided by central bankers and governments creates distortions which stand to upset these delicate balances.
If the price gets back to $100 or more, a double dip recession in advanced economies would seem a virtual certainty. They are all still too fragile to be able to tolerate such a rise in costs.
Tags: Abdall El-Badri, banking crisis, Lehman Brothers, oil, oil price spikes, OPEC, recession, speculation
http://blogs.telegraph.co.uk/finance/jeremywarner/100001422/return-of-high-oil-prices-threatens-real-damage/?utm_source=Telegraph.co.uk&utm_medium=TD_oil&utm_campaign=Finance2110
By Jeremy Warner Economics Last updated: October 20th, 2009
Interest rates at close to zero are driving the price of virtually everything else wild, so it should come as little surprise to see oil back above twelve month highs. OK, so it is still a long way from the crucifying $140 a barrel it reached in the summer of last year, but prices have nearly doubled so far this year and at more than $80 a barrel, they are again high enough to cause real economic damage.
By common agreement, it was the collapse of Lehman Brothers which plunged the world into deep recession, and no doubt the destruction of confidence in the banking system was a major cause. But what’s often over looked is the role played by high energy prices. These had reached crippling levels by the summer of 2008, and were causing real damage to industry and business. American consumers took one look at prices at the pumps and collectively decided to stop spending. This collapse in consumer and business confidence preceded the Lehman debacle.
The world economy is said to be a great deal less vulnerable to high oil prices than it was 30 or 40 years ago, but they still self evidently have the power to shock. Most post war recessions have been preceded by a spike in the oil price. So to see the price back at elevated levels (see accompanying chart) before a proper economic recovery has even taken hold is a cause for some concern.
Having peaked in the summer of last year at over $140 a barrel, the oil price then plunged. But now it is back up to over $80.
In part, today’s relatively high price is merely a function of dollar weakness. Abdallah El-Badri, Secretary General of OPEC, insists that there is no shortage of oil. The rally to more than $80 a barrel is driven by higher equity prices, the sliding dollar and speculation”, he told Bloomberg News.
There are plainly fundamental forces at work too. Emerging market economies, particularly those of China and India, are once more booming. Yet I suspect the main mischief is again speculation. With interest rates at close to zero, you cannot get a return on cash right now, so money is being poured into riskier assets, including commodities and oil.
An interesting article in the Financial Times this morning puts the near term upward pressure on oil prices down to heavy trading in options contracts ahead of the year end. Quite a lot of this activity is driven by forward hedging for real economy clients. But there is also a significant amount which is purely speculative in nature.
Is it right that speculators should once more be putting the health of the world economy at risk? Speculation, it is often said, only reflects underlying realities. The speculator only makes money if his bets mirror the real economy pressures of supply and demand. Maybe, but cheap money in the quantities now being provided by central bankers and governments creates distortions which stand to upset these delicate balances.
If the price gets back to $100 or more, a double dip recession in advanced economies would seem a virtual certainty. They are all still too fragile to be able to tolerate such a rise in costs.
Tags: Abdall El-Badri, banking crisis, Lehman Brothers, oil, oil price spikes, OPEC, recession, speculation
http://blogs.telegraph.co.uk/finance/jeremywarner/100001422/return-of-high-oil-prices-threatens-real-damage/?utm_source=Telegraph.co.uk&utm_medium=TD_oil&utm_campaign=Finance2110
Former Big Bear Turns Baby Bull
Former Big Bear Turns Baby Bull
Posted By:Lee Brodie
Topics:Consumers | Economy (U.S.) | Recession | Stock Market | Stock Picks
It seems even the most bearish market mavens can’t fight the bullish momentum in this stock market. Wait until you find out who’s now a buyer of stocks.
Richard Bernstein, the former Merrill Lynch chief investment strategist, and one of the biggest bears we know is changing his tune.
People like me have underestimated the rebound, Bernstein says. What’s made him a believer?
You might remember the last time Bernstein was on Fast Money he told the traders – at the foundation of the stock market and the recovery is jobs. The market can’t sustain itself unless people are bringing home the bacon.
And although the unemployment rate continues to rise Bernstein is more focused on initial jobless claims which he and many others consider a leading indicator. And that number has started to decline.
In fact, when they were reported last week new jobless claims dropped to the lowest level since January. And that trend combined with low inflation likely means Americans will regain their appetite for spending.
Another way of saying that is – the economy is slowly getting better. “if you believe in the recovery this is the prime time to be a value investor.”
What’s the trade?
Bernstein says the best value are in junky names. “The companies that you’d hate to own tend to perform the best. In almost every industry go for lower quality companies."
Huh?
"In 1991 - a time period that was similar to now - 'C' and 'D' rated stocks by S&P went up 90% that year and continued to outperform for 4 years after that," he says.
Why?
"As the economy continues to improve investors shift from focussing on the balance sheet to focussing on the income statement and cash flow. And the junkiest companies have the greatest operating leverage so their cash flow just explodes," he says.
Although Bernstein doesn't reveal names he does says "consumer cyclical stocks probably have strong upside potential.
"History shows that as long as initial jobless claims trend downward the performance of consumer discretionary stocks [XLY 28.35 -0.30 (-1.05%) ] trend up," he concludes.
http://www.cnbc.com/id/33397834
Posted By:Lee Brodie
Topics:Consumers | Economy (U.S.) | Recession | Stock Market | Stock Picks
It seems even the most bearish market mavens can’t fight the bullish momentum in this stock market. Wait until you find out who’s now a buyer of stocks.
Richard Bernstein, the former Merrill Lynch chief investment strategist, and one of the biggest bears we know is changing his tune.
People like me have underestimated the rebound, Bernstein says. What’s made him a believer?
You might remember the last time Bernstein was on Fast Money he told the traders – at the foundation of the stock market and the recovery is jobs. The market can’t sustain itself unless people are bringing home the bacon.
And although the unemployment rate continues to rise Bernstein is more focused on initial jobless claims which he and many others consider a leading indicator. And that number has started to decline.
In fact, when they were reported last week new jobless claims dropped to the lowest level since January. And that trend combined with low inflation likely means Americans will regain their appetite for spending.
Another way of saying that is – the economy is slowly getting better. “if you believe in the recovery this is the prime time to be a value investor.”
What’s the trade?
Bernstein says the best value are in junky names. “The companies that you’d hate to own tend to perform the best. In almost every industry go for lower quality companies."
Huh?
"In 1991 - a time period that was similar to now - 'C' and 'D' rated stocks by S&P went up 90% that year and continued to outperform for 4 years after that," he says.
Why?
"As the economy continues to improve investors shift from focussing on the balance sheet to focussing on the income statement and cash flow. And the junkiest companies have the greatest operating leverage so their cash flow just explodes," he says.
Although Bernstein doesn't reveal names he does says "consumer cyclical stocks probably have strong upside potential.
"History shows that as long as initial jobless claims trend downward the performance of consumer discretionary stocks [XLY 28.35 -0.30 (-1.05%) ] trend up," he concludes.
http://www.cnbc.com/id/33397834
Improving Global Economy Shows Up in Earnings
Improving Global Economy Shows Up in Earnings
Published: Tuesday, 20 Oct 2009 | 9:27 AM ET Text Size By: Bob Pisani
CNBC Reporter
Topline beats take back seat to positive 2010 commentary. Six big names beat earnings estimates: Apple [AAPL 198.76 8.90 (+4.69%) ], Coke, Pfizer, United Technologies and Caterpillar all beat on the bottom line.
But something's different this time: a higher percentage are beating on the topline as well. Apple did. Even Dupont, Pfizer and UTX did.
What is different this time is that the big multinationals have reaped the benefits of an improving overseas market, along with the weaker dollar.
The improving global economy is showing up in several of today's comments.
Caterpillar's Jim Owens:
1) "the third quarter marked the low point for Caterpillar sales and revenues"
2) "we are seeing encouraging signs that indicate a recovery may be underway"
3) 2010: "we've already started planning for an upturn"
Elsewhere:
1) futures dropped at 8:30 AM ET as September Housing Starts and Permits were below expectations.
2) Caterpillar [CAT 59.61 1.76 (+3.04%) ] up 6 percent pre-open, came in at $0.64, way above the $0.06 expected. Sales were not a blowout: $7.3 billion vs. $7.49 billion consensus.
The bull consensus seems to be playing out: Q2-Q3 may indeed be the trough for production, and with inventories lean even a small improvement in orders will help the top and bottom line.
2010 preliminary guidance of an increase of 10 to 25 percent for sales is also a positive surprise.
3) UTX [UTX 65.34 -0.10 (-0.15%) ] at $1.14 beat by $0.02, and while revenues were a tad better than consensus cost cutting was the major factor in the beat. CEO Louis Chenevert said orders had "stabilized."
4) DuPont [DD Loading... () ] beat consensus by two cents and talked about improving demand across key markets. Here's an interesting stat: profit is up 11 percent, but top line dropped 18.3 percent. They narrowed their earnings outlook for the year...it now expects earnings of $1.95 to $2.05 per share versus previous estimate of $1.70 - $2.10.
5) Strong earnings from Texas Instruments [TXN 23.66 0.14 (+0.6%) ], as well as earlier strong report from Intel [INTC 20.18 -0.23 (-1.13%) ] and Apple should keep the semiconductors going. The SMH (Semiconductor HOLDR, the main ETF-type instrument professionals use to trade semis) has been strong all year, bottomed earlier than the S&P 500, and has had a stronger recovery in the past year.
6) Coca-Cola [KO 54.06 -0.73 (-1.33%) ] topped Street estimates by a penny. The soft drink maker says higher sales volume and cost cuts helped pop Q3 profits. Sales by volume rose 2%.
7) Pfizer [PFE 17.93 -0.05 (-0.28%) ] also beat the Street. The drug maker came in at $0.51 for Q3 excluding items vs. estimate of $0.48. Aggressive cost-cutting helped offset the negative foreign exchange and competition from cheaper generics.
http://www.cnbc.com/id/33395059
Published: Tuesday, 20 Oct 2009 | 9:27 AM ET Text Size By: Bob Pisani
CNBC Reporter
Topline beats take back seat to positive 2010 commentary. Six big names beat earnings estimates: Apple [AAPL 198.76 8.90 (+4.69%) ], Coke, Pfizer, United Technologies and Caterpillar all beat on the bottom line.
But something's different this time: a higher percentage are beating on the topline as well. Apple did. Even Dupont, Pfizer and UTX did.
What is different this time is that the big multinationals have reaped the benefits of an improving overseas market, along with the weaker dollar.
The improving global economy is showing up in several of today's comments.
Caterpillar's Jim Owens:
1) "the third quarter marked the low point for Caterpillar sales and revenues"
2) "we are seeing encouraging signs that indicate a recovery may be underway"
3) 2010: "we've already started planning for an upturn"
Elsewhere:
1) futures dropped at 8:30 AM ET as September Housing Starts and Permits were below expectations.
2) Caterpillar [CAT 59.61 1.76 (+3.04%) ] up 6 percent pre-open, came in at $0.64, way above the $0.06 expected. Sales were not a blowout: $7.3 billion vs. $7.49 billion consensus.
The bull consensus seems to be playing out: Q2-Q3 may indeed be the trough for production, and with inventories lean even a small improvement in orders will help the top and bottom line.
2010 preliminary guidance of an increase of 10 to 25 percent for sales is also a positive surprise.
3) UTX [UTX 65.34 -0.10 (-0.15%) ] at $1.14 beat by $0.02, and while revenues were a tad better than consensus cost cutting was the major factor in the beat. CEO Louis Chenevert said orders had "stabilized."
4) DuPont [DD Loading... () ] beat consensus by two cents and talked about improving demand across key markets. Here's an interesting stat: profit is up 11 percent, but top line dropped 18.3 percent. They narrowed their earnings outlook for the year...it now expects earnings of $1.95 to $2.05 per share versus previous estimate of $1.70 - $2.10.
5) Strong earnings from Texas Instruments [TXN 23.66 0.14 (+0.6%) ], as well as earlier strong report from Intel [INTC 20.18 -0.23 (-1.13%) ] and Apple should keep the semiconductors going. The SMH (Semiconductor HOLDR, the main ETF-type instrument professionals use to trade semis) has been strong all year, bottomed earlier than the S&P 500, and has had a stronger recovery in the past year.
6) Coca-Cola [KO 54.06 -0.73 (-1.33%) ] topped Street estimates by a penny. The soft drink maker says higher sales volume and cost cuts helped pop Q3 profits. Sales by volume rose 2%.
7) Pfizer [PFE 17.93 -0.05 (-0.28%) ] also beat the Street. The drug maker came in at $0.51 for Q3 excluding items vs. estimate of $0.48. Aggressive cost-cutting helped offset the negative foreign exchange and competition from cheaper generics.
http://www.cnbc.com/id/33395059
Market rebound continues confound analysts
BEHIND THE MONEY: Analysts Give Companies Easy Earnings Ride
Posted By:John Melloy
Topics:Recession
Earnings
Stock Market
Stock Picks
Companies:Goldman Sachs Group Inc.
Caterpillar Inc
There was a great Monty Python sketch called the "Twit Olympics" where one of the events entailed jumping over a row of matchbooks. Perhaps that's what we should rename this earnings season after looking at the parade of earnings beats this morning, which follow the incredible estimate-pounding performance so far this season.
For example, Caterpillar [CAT 59.61 1.76 (+3.04%) ] reported a profit of 64 cents a share, compared to the Thomson Reuters consensus estimate of 6 cents a share. Were Caterpillar analysts asleep at the switch? Maybe, because despite a 60 percent jump in Caterpillar shares in the quarter, they didn't raise their forecast one iota, according to Birinyi & Associates.
CATERPILLAR INC(CAT)
59.61 1.76 (+3.04%%)
NYSE
It seems that was the trend for the whole market too. As the S&P 500 [.SPX 1091.06 -6.85 (-0.62%) ] surged 15 percent in the third quarter, analysts kept lowering their earnings estimates for the period.
They expected a 21% drop in earnings for the quarter on July 1 and bumped that down to a 25% decline by the time the quarter ended, with the biggest downward revisions coming in the financial, industrial and energy sectors, according to Thomson Reuters. The biggest surprises we've seen so far have come from those sectors in Goldman Sachs [GS 184.89 -0.61 (-0.33%) ] last week and Caterpillar today.
Jon Najarian, co-founder of Optionmonster.com, said this makes sense because since analysts set the bar so low, the so-called whisper numbers out there are much higher this reporting season then he can last remember.
The Fast Money traders keep bringing up on our conference calls how one concern of theirs is that the momentum of this market rebound continues to confound credible strategists they follow, such as Doug Kass, President of Seabreeze Partners and T2 Partners' Whitney Tilson, that have called for its end. Maybe this relentless rally is puzzling because the numbers it's based upon aren't as good as they appear.
Posted By:John Melloy
Topics:Recession
Earnings
Stock Market
Stock Picks
Companies:Goldman Sachs Group Inc.
Caterpillar Inc
There was a great Monty Python sketch called the "Twit Olympics" where one of the events entailed jumping over a row of matchbooks. Perhaps that's what we should rename this earnings season after looking at the parade of earnings beats this morning, which follow the incredible estimate-pounding performance so far this season.
For example, Caterpillar [CAT 59.61 1.76 (+3.04%) ] reported a profit of 64 cents a share, compared to the Thomson Reuters consensus estimate of 6 cents a share. Were Caterpillar analysts asleep at the switch? Maybe, because despite a 60 percent jump in Caterpillar shares in the quarter, they didn't raise their forecast one iota, according to Birinyi & Associates.
CATERPILLAR INC(CAT)
59.61 1.76 (+3.04%%)
NYSE
It seems that was the trend for the whole market too. As the S&P 500 [.SPX 1091.06 -6.85 (-0.62%) ] surged 15 percent in the third quarter, analysts kept lowering their earnings estimates for the period.
Jon Najarian, co-founder of Optionmonster.com, said this makes sense because since analysts set the bar so low, the so-called whisper numbers out there are much higher this reporting season then he can last remember.
The Fast Money traders keep bringing up on our conference calls how one concern of theirs is that the momentum of this market rebound continues to confound credible strategists they follow, such as Doug Kass, President of Seabreeze Partners and T2 Partners' Whitney Tilson, that have called for its end. Maybe this relentless rally is puzzling because the numbers it's based upon aren't as good as they appear.
U.S. stocks, buoyed by optimism for an economic recovery, are instead poised to fall.
Hedge fund manager Tilson doubled bets vs stocks
Wed Oct 14, 2009 2:35pm EDT
NEW YORK, Oct 14 (Reuters) - Whitney Tilson, manager of hedge fund T2 Partners LLC, said on Wednesday he has doubled his bets that U.S. stocks, buoyed by optimism for an economic recovery, are instead poised to fall.
"We've doubled our short book from 30 percent to 60 percent and we've trimmed our long book from 120 percent to about 90 percent," Tilson said in an interview with Reuters.
Tilson predicted stocks would give back gains even as the Dow Jones Industrial Average .DJI briefly climbed above the psychologically important 10,000 level early Wednesday afternoon -- part of a stunning rebound for markets that were dominated by fear as recently as March.
"Investors have now gone from being too pessimistic to too optimistic in general," he said.
But Tilson said the Dow touching 10,000 does not translate into the real economy. He predicted that banks, particularly small and regional lenders, would be hobbled by loan losses for up to five years.
"Investors are thinking that the losses are going to start to diminish fairly quickly over the next year or two, and our best guess is that losses remain very high for the next couple of years," he said. (Reporting by Jennifer Ablan and Joseph A. Giannone, editing by Leslie Gevirtz)
http://www.reuters.com/article/bankruptcyNews/idUSWEN467420091014
Wed Oct 14, 2009 2:35pm EDT
NEW YORK, Oct 14 (Reuters) - Whitney Tilson, manager of hedge fund T2 Partners LLC, said on Wednesday he has doubled his bets that U.S. stocks, buoyed by optimism for an economic recovery, are instead poised to fall.
"We've doubled our short book from 30 percent to 60 percent and we've trimmed our long book from 120 percent to about 90 percent," Tilson said in an interview with Reuters.
Tilson predicted stocks would give back gains even as the Dow Jones Industrial Average .DJI briefly climbed above the psychologically important 10,000 level early Wednesday afternoon -- part of a stunning rebound for markets that were dominated by fear as recently as March.
"Investors have now gone from being too pessimistic to too optimistic in general," he said.
But Tilson said the Dow touching 10,000 does not translate into the real economy. He predicted that banks, particularly small and regional lenders, would be hobbled by loan losses for up to five years.
"Investors are thinking that the losses are going to start to diminish fairly quickly over the next year or two, and our best guess is that losses remain very high for the next couple of years," he said. (Reporting by Jennifer Ablan and Joseph A. Giannone, editing by Leslie Gevirtz)
http://www.reuters.com/article/bankruptcyNews/idUSWEN467420091014
Investors Are Getting Overly Enthusiastic
Wednesday, 16 Sep 2009
Investors Are Getting Overly Enthusiastic, Says Tilson
Posted By:Lee Brodie
Topics:Employment | Housing | Stock Market | Stock Picks
Companies:Berkshire Hathaway Inc. | Regions Financial Corp | Zions Bancorporation
All this week Fast Money is speaking with the handful of investors who saw the Wall Street crisis coming.
Whitney Tilson, the founder of T2 Partners, is widely known for predicting the mortgage meltdown. What does he see down the road from here?
He’s still bearish, very bearish.
"I'm worried that investors are getting overly enthusiastic. They see a couple of month-to-month sequential home price increases, (and they get excited). We saw the exact same thing a year ago. Don't get faked out by the seasonality."
"We think home prices have another year to go before they bottom and that's going to impact any stock that has exposure to the housing sector."
His outlook comes in stark contrast to what we've been hearing from countless market mavens and even Fed Chief Ben Bernanke who all seem to agree the recession is over.
The Wild Card
Although it appears the economy is improving, unemployment is not and Tilson thinks jobs are the wildcard that could derail the whole kit and kiboodle.
When people lose their jobs they’re able to hang on for a while. They may not pay credit cards but try and keep up with the mortgage. But after a while it become impossible to pay the mortgage.
"What happens to underwater homeowners when they're underwater? Do they walk away from their homes if its economically rational to do so?"
Tilson is betting they do.
As a result Tilson predicts that mortgage defaults are about to skyrocket— the same with consumer loans. In fact, the damage Tilson forecasts is kind of scary.
“There are probably going to be $700 billion of losses in total over the next 8 years and we’ve only seen a few billion of it because those loans haven’t reset,” he tells the traders.
Also Tilson fully expects trouble in commercial real estate. In a past interview he told the desk that "the reason it hasn’t suffered badly so far is that they’re dealing with interest only loans with 5 and 10 year re-sets. Borrowers have been able to make interest payments. It’s upon re-set that they probably won’t be able to refinance."
What’s the trade?
I'd look at regional banks. 50% of their assets are in commercial real estate which is just starting to tip over. I'd short the weaker players such as Regions [RF 5.83 0.13 (+2.28%) ] and Zions [ZION 17.23 -1.10 (-6%) ].
And in case you're wondering, Tilson's largest long position is Berkshire Hathaway [BRK.A 100270.00 --- UNCH (0) ].
What do you think? We want to know.
Do you think a massive number of mortgages and consumer loans are about to default because of rising unemployment?
Vote:
1. Yes, people can't keep up.
2. No, most people have jobs and that won't change.
http://www.reuters.com/article/bankruptcyNews/idUSWEN467420091014
Investors Are Getting Overly Enthusiastic, Says Tilson
Posted By:Lee Brodie
Topics:Employment | Housing | Stock Market | Stock Picks
Companies:Berkshire Hathaway Inc. | Regions Financial Corp | Zions Bancorporation
All this week Fast Money is speaking with the handful of investors who saw the Wall Street crisis coming.
Whitney Tilson, the founder of T2 Partners, is widely known for predicting the mortgage meltdown. What does he see down the road from here?
He’s still bearish, very bearish.
"I'm worried that investors are getting overly enthusiastic. They see a couple of month-to-month sequential home price increases, (and they get excited). We saw the exact same thing a year ago. Don't get faked out by the seasonality."
"We think home prices have another year to go before they bottom and that's going to impact any stock that has exposure to the housing sector."
His outlook comes in stark contrast to what we've been hearing from countless market mavens and even Fed Chief Ben Bernanke who all seem to agree the recession is over.
The Wild Card
Although it appears the economy is improving, unemployment is not and Tilson thinks jobs are the wildcard that could derail the whole kit and kiboodle.
When people lose their jobs they’re able to hang on for a while. They may not pay credit cards but try and keep up with the mortgage. But after a while it become impossible to pay the mortgage.
"What happens to underwater homeowners when they're underwater? Do they walk away from their homes if its economically rational to do so?"
Tilson is betting they do.
As a result Tilson predicts that mortgage defaults are about to skyrocket— the same with consumer loans. In fact, the damage Tilson forecasts is kind of scary.
“There are probably going to be $700 billion of losses in total over the next 8 years and we’ve only seen a few billion of it because those loans haven’t reset,” he tells the traders.
Also Tilson fully expects trouble in commercial real estate. In a past interview he told the desk that "the reason it hasn’t suffered badly so far is that they’re dealing with interest only loans with 5 and 10 year re-sets. Borrowers have been able to make interest payments. It’s upon re-set that they probably won’t be able to refinance."
What’s the trade?
I'd look at regional banks. 50% of their assets are in commercial real estate which is just starting to tip over. I'd short the weaker players such as Regions [RF 5.83 0.13 (+2.28%) ] and Zions [ZION 17.23 -1.10 (-6%) ].
And in case you're wondering, Tilson's largest long position is Berkshire Hathaway [BRK.A 100270.00 --- UNCH (0) ].
What do you think? We want to know.
Do you think a massive number of mortgages and consumer loans are about to default because of rising unemployment?
Vote:
1. Yes, people can't keep up.
2. No, most people have jobs and that won't change.
http://www.reuters.com/article/bankruptcyNews/idUSWEN467420091014
Diversifying your investment overseas
Which country/countries to invest in?
Take your pick: Vietnam, China, Indonesia, Thailand, Singapore, Hong Kong, Australia, US or UK.
Consider the 3 drivers in any stock markets:
1. Re-rating by analysts
2. Currency strengthening
3. Earnings re-rating
Take your pick: Vietnam, China, Indonesia, Thailand, Singapore, Hong Kong, Australia, US or UK.
Consider the 3 drivers in any stock markets:
1. Re-rating by analysts
2. Currency strengthening
3. Earnings re-rating
Tuesday 20 October 2009
There is intelligent speculation as there is intelligent investing.
April 14, 2009
Wellcare Group – An Intelligent Speculation?
Filed under: From the co-founders — Tags: Marcelo Lima, WCG, Wellcare Group — Jane Scottsdale @ 1:11 pm
Common stock investing is inherently risky, and those risks cannot be divorced from the rewards that come with them. Often, it isn’t easy to separate the speculative from the investment component of a common stock commitment. On this topic, Ben Graham, author of the classic The Intelligent Investor, has written most clearly:
Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone. There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are:
(1) speculating when you think you are investing;
(2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and
(3) risking more money in speculation than you can afford to lose.
With that caveat, here’s Wellcare Group (WCG), a stock that has a reasonable chance of going higher once its legal problems are resolved and its earnings normalized. As such, it may present an intelligent speculation.
First, a quick background. Wellcare is a healthcare management organization focused on Medicare and Medicaid, government-run entitlement programs for the elderly and low-income population. It has over 2.5 million members enrolled in its programs nationwide, with a large portion of them in Florida.
Its stock hovered around $120 per share when in October 2007 about 200 FBI agents raided its Tampa campus. The stock collapsed to $40, wiping out $3.3bn in shareholder value. The uncertainty was large; there was no official word of what the FBI raid was for, although newspaper reports stated that one of Wellcare’s subsidiaries had overbilled the government by $35m. In this context, the share price collapse was wildly overdone.
A quick resolution of the problem didn’t happen. Instead, the company went “dark,” not filing its quarterly and yearly financial statements and risking stock exchange delisting for its non-compliance. Periodic SEC filings kept shareholders apprised of the slow progress, but it wasn’t until early 2009 that things became clearer. The company finally filed all of its late financial statements and set a shareholder’s meeting – the first since the FBI raid – for July 30.
Wellcare is well capitalized. As of 12/31/2008, it had about $1.2 billion in cash and $153 million in debt. This debt proved to be another Achilles heel for the stock. When the company reported in 2008 that it was in technical default for not having filed its financial statements, the price dropped precipitously yet again. Fairholme Capital, which owns nearly 20% of the stock, bought a majority of the debt, likely in a move to protect its equity investment.
Throughout this misadventure, the stock has swung wildly, hitting a low of $6.12 in November and $6.23 in March of this year. Yet Wellcare’s core business remains sound, generating substantial free cash flows. The exact number for 2008 involves reversing a goodwill write-down and removing a non-recurring $103m in litigation expenses, but a normalized estimate of $4 in free cash flow per share is probably on the conservative side. While there is significant regulatory uncertainty surrounding its Medicare and Medicaid businesses, at the current price of around $13.80, it’s hard to find a way to lose.
Yet all of these uncertainties – particularly those surrounding the FBI investigation – are still large, which is where the speculative component of this investment comes in. There might be a probability of the government’s penalties being larger than expected. The company is also facing various lawsuits related to its illegal activities, including a class-action lawsuit. Defending against these will cost management’s time and shareholders’ cash.
On the other hand, Wellcare may soon begin conducting conference calls with shareholders and analysts, may soon settle with the government by paying a fine, and may ultimately get sold to a larger competitor, such as UnitedHealth Group. After it fired its disgraced former management, the board brought in Charles Berg, formerly a UnitedHealth executive, Oxford Health Plans CEO and “deal guy.”
With these factors in mind, and taking into account Graham’s three points above, Wellcare may seem like an intelligent speculation after all.
Marcelo P. Lima is a securities analyst. He may be reached at MPL4@cornell.edu
http://blog.valueinvestingcongress.com/2009/04/14/wellcare-group-%e2%80%93-an-intelligent-speculation/
http://blog.valueinvestingcongress.com/?utm_source=VIC&utm_medium=W&utm_campaign=BLOGLA09T
Wellcare Group – An Intelligent Speculation?
Filed under: From the co-founders — Tags: Marcelo Lima, WCG, Wellcare Group — Jane Scottsdale @ 1:11 pm
Common stock investing is inherently risky, and those risks cannot be divorced from the rewards that come with them. Often, it isn’t easy to separate the speculative from the investment component of a common stock commitment. On this topic, Ben Graham, author of the classic The Intelligent Investor, has written most clearly:
Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone. There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are:
(1) speculating when you think you are investing;
(2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and
(3) risking more money in speculation than you can afford to lose.
With that caveat, here’s Wellcare Group (WCG), a stock that has a reasonable chance of going higher once its legal problems are resolved and its earnings normalized. As such, it may present an intelligent speculation.
First, a quick background. Wellcare is a healthcare management organization focused on Medicare and Medicaid, government-run entitlement programs for the elderly and low-income population. It has over 2.5 million members enrolled in its programs nationwide, with a large portion of them in Florida.
Its stock hovered around $120 per share when in October 2007 about 200 FBI agents raided its Tampa campus. The stock collapsed to $40, wiping out $3.3bn in shareholder value. The uncertainty was large; there was no official word of what the FBI raid was for, although newspaper reports stated that one of Wellcare’s subsidiaries had overbilled the government by $35m. In this context, the share price collapse was wildly overdone.
A quick resolution of the problem didn’t happen. Instead, the company went “dark,” not filing its quarterly and yearly financial statements and risking stock exchange delisting for its non-compliance. Periodic SEC filings kept shareholders apprised of the slow progress, but it wasn’t until early 2009 that things became clearer. The company finally filed all of its late financial statements and set a shareholder’s meeting – the first since the FBI raid – for July 30.
Wellcare is well capitalized. As of 12/31/2008, it had about $1.2 billion in cash and $153 million in debt. This debt proved to be another Achilles heel for the stock. When the company reported in 2008 that it was in technical default for not having filed its financial statements, the price dropped precipitously yet again. Fairholme Capital, which owns nearly 20% of the stock, bought a majority of the debt, likely in a move to protect its equity investment.
Throughout this misadventure, the stock has swung wildly, hitting a low of $6.12 in November and $6.23 in March of this year. Yet Wellcare’s core business remains sound, generating substantial free cash flows. The exact number for 2008 involves reversing a goodwill write-down and removing a non-recurring $103m in litigation expenses, but a normalized estimate of $4 in free cash flow per share is probably on the conservative side. While there is significant regulatory uncertainty surrounding its Medicare and Medicaid businesses, at the current price of around $13.80, it’s hard to find a way to lose.
Yet all of these uncertainties – particularly those surrounding the FBI investigation – are still large, which is where the speculative component of this investment comes in. There might be a probability of the government’s penalties being larger than expected. The company is also facing various lawsuits related to its illegal activities, including a class-action lawsuit. Defending against these will cost management’s time and shareholders’ cash.
On the other hand, Wellcare may soon begin conducting conference calls with shareholders and analysts, may soon settle with the government by paying a fine, and may ultimately get sold to a larger competitor, such as UnitedHealth Group. After it fired its disgraced former management, the board brought in Charles Berg, formerly a UnitedHealth executive, Oxford Health Plans CEO and “deal guy.”
With these factors in mind, and taking into account Graham’s three points above, Wellcare may seem like an intelligent speculation after all.
Marcelo P. Lima is a securities analyst. He may be reached at MPL4@cornell.edu
http://blog.valueinvestingcongress.com/2009/04/14/wellcare-group-%e2%80%93-an-intelligent-speculation/
http://blog.valueinvestingcongress.com/?utm_source=VIC&utm_medium=W&utm_campaign=BLOGLA09T
Value Investing Congress 19th - 20th October, 2009
http://www.valueinvestingcongress.com/
An advanced seminar on value investing
How to Decipher Financial Statements, Avoid Value Traps and Pick Investment Winners
MONday MAY 4, 2009
7:30 - 8:00 AM
Registration
8:00 - 10:00 AM
How to Profit From the Mortgage Crisis:
Long Investments
• A beaten-down blue-chip
Case study: American Express
• Growth at a reasonable price (GARP)
and a beaten-down blue-chip
Case studies: Berkshire Hathaway & Wesco
• Out of favor financial
Case study: Resource America
• Distressed Debt
Case study: Subprime mortgage tranche
10:00 - 10:15 AM Break
10:15 - 10:45 AM
How to Not Lose Money in the Mortgage Crisis:
Stocks to Avoid
• Aggressive accounting, inadequate
reserving and the structure of CDOs
Case study: MBIA
10:45 - 11:30 am
Different Types of Value — Part One:
Piggybacking on Activism
• Piggybacking on structural activism
Case study: Wendy’s (Ackman)
• Piggybacking on operational activism
Case study: Wendy’s (Peltz)
• Catalyzing activism
Case study: CNET
11:30 AM - 12:00 Pm
Investor Irrationality and the Current
Market Meltdown
12:00 - 1:00 pm Lunch
1:00 - 3:00 Pm
Different Types of Value — Part Two:
Out of Favor Sectors (Retail/Consumer)
• Beaten down blue chip retailer and
piggybacking on activism
Case study: Target
• Profiting from a liquidation
Case study: Footstar
• Betting on a turnaround under new
leadership (1)
Case study: Borders Group
• Betting on a turnaround under new
leadership (2)
Case study: Wendy’s
3:00 - 3:15 pM Break
3:15 - 4:00 pM
Warning Flags
• Overvaluation
Case study: Netflix
• Overvaluation and unsustainable
business model
Case study: VistaPrint
4:00 - 5:00 pM
Different Types of Value —
Part Three
• An out-of-favor cyclical with too much debt
Case study: Huntsman
• Mispriced options
Case studies: dELiA*s, Ambassadors
International, TravelCenters of America,
PhotoChannel Networks, Proliance
International, General Growth Properties
5:00 - 6:00 pM
Networking Cocktail Reception
http://www.valueinvestingcongress.com/downloads/VICP09_Workshop_Agenda3.pdf
AGENDA
An advanced seminar on value investing
How to Decipher Financial Statements, Avoid Value Traps and Pick Investment Winners
MONday MAY 4, 2009
7:30 - 8:00 AM
Registration
8:00 - 10:00 AM
How to Profit From the Mortgage Crisis:
Long Investments
• A beaten-down blue-chip
Case study: American Express
• Growth at a reasonable price (GARP)
and a beaten-down blue-chip
Case studies: Berkshire Hathaway & Wesco
• Out of favor financial
Case study: Resource America
• Distressed Debt
Case study: Subprime mortgage tranche
10:00 - 10:15 AM Break
10:15 - 10:45 AM
How to Not Lose Money in the Mortgage Crisis:
Stocks to Avoid
• Aggressive accounting, inadequate
reserving and the structure of CDOs
Case study: MBIA
10:45 - 11:30 am
Different Types of Value — Part One:
Piggybacking on Activism
• Piggybacking on structural activism
Case study: Wendy’s (Ackman)
• Piggybacking on operational activism
Case study: Wendy’s (Peltz)
• Catalyzing activism
Case study: CNET
11:30 AM - 12:00 Pm
Investor Irrationality and the Current
Market Meltdown
12:00 - 1:00 pm Lunch
1:00 - 3:00 Pm
Different Types of Value — Part Two:
Out of Favor Sectors (Retail/Consumer)
• Beaten down blue chip retailer and
piggybacking on activism
Case study: Target
• Profiting from a liquidation
Case study: Footstar
• Betting on a turnaround under new
leadership (1)
Case study: Borders Group
• Betting on a turnaround under new
leadership (2)
Case study: Wendy’s
3:00 - 3:15 pM Break
3:15 - 4:00 pM
Warning Flags
• Overvaluation
Case study: Netflix
• Overvaluation and unsustainable
business model
Case study: VistaPrint
4:00 - 5:00 pM
Different Types of Value —
Part Three
• An out-of-favor cyclical with too much debt
Case study: Huntsman
• Mispriced options
Case studies: dELiA*s, Ambassadors
International, TravelCenters of America,
PhotoChannel Networks, Proliance
International, General Growth Properties
5:00 - 6:00 pM
Networking Cocktail Reception
http://www.valueinvestingcongress.com/downloads/VICP09_Workshop_Agenda3.pdf
Most Companies Yet To Disclose Remuneration Levels
October 20, 2009 20:03 PM
Most Companies Yet To Disclose Remuneration Levels, Says Ernst & Young
KUALA LUMPUR, Oct 20 (Bernama) -- Most Malaysian companies have yet to disclose the remuneration level of their executive directors and relate it with performance, according to an international public accounting firm.
Ernst & Young Malaysia, in its 2009 executive and board remuneration report, said though the level of disclosure on remuneration of executive directors increased, there was still a lack of information on the correlation between level of remuneration and company's performance.
Ernst & Young's performance and reward leader for the Far East, Dharma Chandran, said majority of the companies that were assessed did not report on performance measures.
"They tell you what they paid the executives last year and how much they paid remuneration (but) they did not say much in terms of what kind of performance measures that they used, whether revenue, profit or economic values as benchmark," he told a media briefing here Tuesday.
The report was made based on analysis of information in the annual reports of the top 100 companies on Bursa Malaysia's Main Market with the financial years ended 2008 and 2007.
According to the report, only 23 per cent of companies disclosed remuneration details for all individual directors as recommended in the Malaysian Code of Corporate Governance.
Though there was still lack of disclosure, Dharma said the increasing weighting towards variable pay indicated that Malaysian companies were responding to international trends and reviewing their strategies to ensure alignment with their business strategy and shareholder value creation.
However, there was a need for long-term incentives for these executive directors to create long-term values and keep real talent in the company, he said.
Dharma said most Malaysian companies offered short-term incentives based on company's performance rather than long-term incentives to these directors.
"For the remuneration to be balanced, a mixed of short-term and long-term incentives could drive better future for the company," he said.
Short-term incentives are usually in the form of annual bonuses while long-term incentives can be equity- or cash-based programme with a vesting period of more than one year.
Moving forward, total remuneration levels are expected to remain stagnant or assumed downward trend this year as Malaysian companies are still feeling the effects of a weak global economy, the report said.
-- BERNAMA
Most Companies Yet To Disclose Remuneration Levels, Says Ernst & Young
KUALA LUMPUR, Oct 20 (Bernama) -- Most Malaysian companies have yet to disclose the remuneration level of their executive directors and relate it with performance, according to an international public accounting firm.
Ernst & Young Malaysia, in its 2009 executive and board remuneration report, said though the level of disclosure on remuneration of executive directors increased, there was still a lack of information on the correlation between level of remuneration and company's performance.
Ernst & Young's performance and reward leader for the Far East, Dharma Chandran, said majority of the companies that were assessed did not report on performance measures.
"They tell you what they paid the executives last year and how much they paid remuneration (but) they did not say much in terms of what kind of performance measures that they used, whether revenue, profit or economic values as benchmark," he told a media briefing here Tuesday.
The report was made based on analysis of information in the annual reports of the top 100 companies on Bursa Malaysia's Main Market with the financial years ended 2008 and 2007.
According to the report, only 23 per cent of companies disclosed remuneration details for all individual directors as recommended in the Malaysian Code of Corporate Governance.
Though there was still lack of disclosure, Dharma said the increasing weighting towards variable pay indicated that Malaysian companies were responding to international trends and reviewing their strategies to ensure alignment with their business strategy and shareholder value creation.
However, there was a need for long-term incentives for these executive directors to create long-term values and keep real talent in the company, he said.
Dharma said most Malaysian companies offered short-term incentives based on company's performance rather than long-term incentives to these directors.
"For the remuneration to be balanced, a mixed of short-term and long-term incentives could drive better future for the company," he said.
Short-term incentives are usually in the form of annual bonuses while long-term incentives can be equity- or cash-based programme with a vesting period of more than one year.
Moving forward, total remuneration levels are expected to remain stagnant or assumed downward trend this year as Malaysian companies are still feeling the effects of a weak global economy, the report said.
-- BERNAMA
Graham's view of people who trade continuously
"Everyone knows that most people who trade in the market lose money at the end. The peopl,e who persist in trying it are either unintelligent, or willing to lose money for the fun of the game, or gifted with some uncommon and incommunicable talent. In any case, they are not investors."
"Too many clever and experienced people are engaged simultaneously in tryng to outwit one another in the market. The result, we believe, is that all their work and effort 'cancel out', so that ... each conclusion ends up by being no more dependable than the toss of a coin ... the activities of the stock market analysts are the same as the activities of a tournament of bridge expert. Everyone is very brilliant indeed, but scarcely anyone is so superior to the rest as to be certain of winning a prize .... because the analysts communicate freely with each other, it is as if all the contestants in the bridge tournament gathered around and argued with each other what strategy each should use."
"Too many clever and experienced people are engaged simultaneously in tryng to outwit one another in the market. The result, we believe, is that all their work and effort 'cancel out', so that ... each conclusion ends up by being no more dependable than the toss of a coin ... the activities of the stock market analysts are the same as the activities of a tournament of bridge expert. Everyone is very brilliant indeed, but scarcely anyone is so superior to the rest as to be certain of winning a prize .... because the analysts communicate freely with each other, it is as if all the contestants in the bridge tournament gathered around and argued with each other what strategy each should use."
All the clocks have no hands
We are all at a wonderful ball where champagne sparkles in every glass and soft laughter falls upon the summer air. We know, by the rules, that at some moment, terrorists will burst in through the terrace doors, killing many and scattering the survivors. Those who leave early will be saved, but the ball is so splended that no one wants to leave while there is still time. Everyone wants to enjoy one more dance and sip one more glass of champagne. So everyone keeps asking: "What time is it? What time is it?" We look around and find that all the clocks have no hands.
Final answer to stock values
There is no such thing as a final answer to stock values. A dozen experts will arrive at twelve different conclusions - Gerald Loeb
The barriers to success are psychological rather than physical.
What can an individual investor do?
Though it is believed that investment can be a very profitable field, it is only profitable to those who are strong of will and are prepared to work at it. There is no simple way to get rich quick in the stock market.
The barriers to success are psychological rather than physical. Psychological barriers are so much harder to cross for so few of us can bear the thought of not being part of a crowd.
Here are the words of advice from Dreman in his book Psychology and the Stockmarket.
".... the best chance an investor has is to stand apart from popular thinking. He must be willing to forego the thrill of being in unison with the market, in agreement with the expert opinion and with the exciting, seemingly surefire ideas currently in vogue.... This is no small sacrifice. To own the 'right' stocks in a rising market is a heady experience. There is a wonderful blend of monetary gain and ego satisfaction in being right in a popular manner.
Man is a social animal. To succeed, the investor has to be able to withstand the tremendous pressure leading to conformity... (he) will face a continuing flow of negative feedback from the market, from experts and from groups of people whom he respects. The reader may feel a little like the patient whose doctor has advised him to give up sex for this health. Some of us might just prefer to die happy."
Though it is believed that investment can be a very profitable field, it is only profitable to those who are strong of will and are prepared to work at it. There is no simple way to get rich quick in the stock market.
The barriers to success are psychological rather than physical. Psychological barriers are so much harder to cross for so few of us can bear the thought of not being part of a crowd.
Here are the words of advice from Dreman in his book Psychology and the Stockmarket.
".... the best chance an investor has is to stand apart from popular thinking. He must be willing to forego the thrill of being in unison with the market, in agreement with the expert opinion and with the exciting, seemingly surefire ideas currently in vogue.... This is no small sacrifice. To own the 'right' stocks in a rising market is a heady experience. There is a wonderful blend of monetary gain and ego satisfaction in being right in a popular manner.
Man is a social animal. To succeed, the investor has to be able to withstand the tremendous pressure leading to conformity... (he) will face a continuing flow of negative feedback from the market, from experts and from groups of people whom he respects. The reader may feel a little like the patient whose doctor has advised him to give up sex for this health. Some of us might just prefer to die happy."
Bulls versus Bears
"Only own those rare stocks whose earnings yield over the next few years will be much higher than the bond yields against which stock valuations must compete." Kenneth Fisher, son of Philip Fisher. Just like his father, the young Fisher is a conservative investor.
"When the earnings yield on stocks is very low relative to bond yields, stocks will fall. "
"No one can precisely 'time' the market. As PEs moved up from levels that were historically cheap to a range somewhat above long-term norms, pocket some of your equity profits now and build up your cash reserves to the 10%, then 15% and then 20% level."
"As the dream merchants continue to drive prices higher rapidly, raise more cash."
"The near term nod still goes to the bulls. Firstly, both Newton and experience have shown that a body in motion continues in motion until stopped by something more formidable than anything one can see at present. Second, there is simply too much liquidity in the world with no better place to flow."
"The market has only recently gotten carried away, and it can still correct these excesses in a mild, orderly fashion."
"When the earnings yield on stocks is very low relative to bond yields, stocks will fall. "
"No one can precisely 'time' the market. As PEs moved up from levels that were historically cheap to a range somewhat above long-term norms, pocket some of your equity profits now and build up your cash reserves to the 10%, then 15% and then 20% level."
"As the dream merchants continue to drive prices higher rapidly, raise more cash."
"The near term nod still goes to the bulls. Firstly, both Newton and experience have shown that a body in motion continues in motion until stopped by something more formidable than anything one can see at present. Second, there is simply too much liquidity in the world with no better place to flow."
"The market has only recently gotten carried away, and it can still correct these excesses in a mild, orderly fashion."
Hong Leong group in focus
Hong Leong group in focus
Written by Joseph Chin
Tuesday, 20 October 2009 13:23
KUALA LUMPUR: Shares of several companies in the Hong Leong group topped the gainers list at the midday break on Tuesday, Oct 20 while the broader market was mixed
Hong Leong Industries rose 34 sen to RM4.50, Hong Leong Financial Group 31 sen to RM6.49 and Hong Leong Bank 16 sen to RM7.41. Cement maker Tasek-PA gained 26 sen to RM3.50 but Tasek shares fell seven sen to RM3.73.
Written by Joseph Chin
Tuesday, 20 October 2009 13:23
KUALA LUMPUR: Shares of several companies in the Hong Leong group topped the gainers list at the midday break on Tuesday, Oct 20 while the broader market was mixed
Hong Leong Industries rose 34 sen to RM4.50, Hong Leong Financial Group 31 sen to RM6.49 and Hong Leong Bank 16 sen to RM7.41. Cement maker Tasek-PA gained 26 sen to RM3.50 but Tasek shares fell seven sen to RM3.73.
Singapore fund exits KFCH
Singapore fund exits KFCH
Tags: Arisaig Asean Fund Ltd | Lembaga Tabung Haji | QSR Brands Bhd
Written by Financial Daily
Tuesday, 20 October 2009 11:00
KUALA LUMPUR: Singapore-based Arisaig Asean Fund Ltd has exited KFC Holdings (Malaysia) Bhd after it sold all its 6.89% stake or 13.65 million shares last Thursday.
A filing with Bursa Malaysia showed the fund sold the shares in a married deal for an undisclosed price. The buyer of the stake was not revealed.
Arisaig Asean Fund was the third largest shareholder in KFCH and the share price had performed well in recent months. KFCH closed at RM7.50 on that day. Analysts said Arisaig Asean Fund had been reducing its stakes in several Malaysian companies to meet redemptions.
The single largest shareholder in KFCH is QSR BRANDS BHD [] which owns 50.25% or 99.63 million shares. The second largest shareholder is Lembaga Tabung Haji with 24.87% or 49.31 million shares. KFCH yesterday closed 50 sen higher at RM8, the highest since Nov 13, 2007.
This article appeared in The Edge Financial Daily, October 20, 2009.
Tags: Arisaig Asean Fund Ltd | Lembaga Tabung Haji | QSR Brands Bhd
Written by Financial Daily
Tuesday, 20 October 2009 11:00
KUALA LUMPUR: Singapore-based Arisaig Asean Fund Ltd has exited KFC Holdings (Malaysia) Bhd after it sold all its 6.89% stake or 13.65 million shares last Thursday.
A filing with Bursa Malaysia showed the fund sold the shares in a married deal for an undisclosed price. The buyer of the stake was not revealed.
Arisaig Asean Fund was the third largest shareholder in KFCH and the share price had performed well in recent months. KFCH closed at RM7.50 on that day. Analysts said Arisaig Asean Fund had been reducing its stakes in several Malaysian companies to meet redemptions.
The single largest shareholder in KFCH is QSR BRANDS BHD [] which owns 50.25% or 99.63 million shares. The second largest shareholder is Lembaga Tabung Haji with 24.87% or 49.31 million shares. KFCH yesterday closed 50 sen higher at RM8, the highest since Nov 13, 2007.
This article appeared in The Edge Financial Daily, October 20, 2009.
Lion Div further cuts stake in Parkson to 1.45%
Lion Div further cuts stake in Parkson to 1.45%
Tags: Amsteel Corp Bhd | Excel Step Investments Ltd | LDHB | Lion Corp Bhd | Lion Diversified Holdings Bhd | Megasteel Sdn Bhd | Parkson Holdings Bhd
Written by Ellina Badri
Monday, 19 October 2009 22:30
KUALA LUMPUR: LION DIVERSIFIED HOLDINGS BHD []'s (LDHB) subsidiary Excel Step Investments Ltd disposed of a total 36.74 million shares representing a 3.62% stake in PARKSON HOLDINGS BHD [] between June 29, 2009, and Oct 19, 2009, for RM185.8 million cash, to partly settle its deferred cash payments.
In a statement today, LDHB said 16.74 million shares were sold in the open market, with the remaining 20 million disposed off via a placement through JPMorgan Securities (Malaysia) Sdn Bhd.
It said its deferred cash payments payable were from its RM100 million acquisition of a 11.1% stake in Megasteel Sdn Bhd in February this year and its purchase of RM450 million Lion Corp Bhd Class B(b) bonds from Amsteel Corp Bhd, also in February.
It also said the balance of the proceeds from its share disposal would be used to repay borrowings and for working capital.
LDHB said following the disposal, its stake in Parkson was now reduced to 1.45%, adding that Excel Step held RM228.8 million redeemable convertible secured loan stocks 2007/2010 convertible into 57.2 million new Parkson shares.
"The LDHB group's original costs of investment in the 36.74 million Parkson shares was approximately RM147 million and the investment was made in Sept 2007," it added.
It said as of today, it had disposed of a total of 55.24 million Parkson shares, or a 5.44% stake, for a total cash consideration of RM272.3 million.
Between Apr 24 and June 26, it had disposed of a 1.82% interest in Parkson via the open market for RM86.5 million cash.
Tags: Amsteel Corp Bhd | Excel Step Investments Ltd | LDHB | Lion Corp Bhd | Lion Diversified Holdings Bhd | Megasteel Sdn Bhd | Parkson Holdings Bhd
Written by Ellina Badri
Monday, 19 October 2009 22:30
KUALA LUMPUR: LION DIVERSIFIED HOLDINGS BHD []'s (LDHB) subsidiary Excel Step Investments Ltd disposed of a total 36.74 million shares representing a 3.62% stake in PARKSON HOLDINGS BHD [] between June 29, 2009, and Oct 19, 2009, for RM185.8 million cash, to partly settle its deferred cash payments.
In a statement today, LDHB said 16.74 million shares were sold in the open market, with the remaining 20 million disposed off via a placement through JPMorgan Securities (Malaysia) Sdn Bhd.
It said its deferred cash payments payable were from its RM100 million acquisition of a 11.1% stake in Megasteel Sdn Bhd in February this year and its purchase of RM450 million Lion Corp Bhd Class B(b) bonds from Amsteel Corp Bhd, also in February.
It also said the balance of the proceeds from its share disposal would be used to repay borrowings and for working capital.
LDHB said following the disposal, its stake in Parkson was now reduced to 1.45%, adding that Excel Step held RM228.8 million redeemable convertible secured loan stocks 2007/2010 convertible into 57.2 million new Parkson shares.
"The LDHB group's original costs of investment in the 36.74 million Parkson shares was approximately RM147 million and the investment was made in Sept 2007," it added.
It said as of today, it had disposed of a total of 55.24 million Parkson shares, or a 5.44% stake, for a total cash consideration of RM272.3 million.
Between Apr 24 and June 26, it had disposed of a 1.82% interest in Parkson via the open market for RM86.5 million cash.
Hai-O riding high on China connection
Hai-O riding high on China connection
Tags: Changyu Pioneer Wine Co Ltd | China | Chinese herbs | Chinese medicated wines | Extensive network in China | Hai-O Enterprise Bhd | Tan Kee Hock
Written by Tony C H Goh
Monday, 19 October 2009 11:23
KUALA LUMPUR: HAI-O ENTERPRISE BHD [], widely known as a wholesaler and retailer of Chinese herbs and medicine, is now looking at expanding its reach in the wine, liquor and liqueur business by leveraging on its strong network in China.
“Currently, wines and liquor are considered as the second-liner products carried by the retail division. But with the current market trend towards drinking of red wine in the country, we foresee huge potential,” Hai-O’s general manager Tan Kee Hock said at the third Yantai International Wine Festival in Yantai, China, recently.
Hai-O has an extensive network in China, with business dealings dating back to 1975, particularly with Changyu Pioneer Wine Co Ltd, China’s oldest vineyard, which was established in 1892 and its biggest wine producer based in the wine-producing region of Yantai, Shandong province.
“As the sole distributor of Changyu’s wines in Malaysia, we are allocating a big portion of our promotion and advertising budget to raise awareness,” said Tan, who is in charge of the Chinese medicated wines, cooking wines, healthcare food and beverages division of the company.
Among Changyu products under the sole agency rights of Hai-O are Ling Zhi Medicated Liquor, Tze Pao San Pian Chiew, Te Zhi San Pian Chiew, Changyu Cabernet Dry Red Wine, Changyu Cabernet, Gernischt Dry Red Wine and Changyu Ice Wine.
While seeking to grow its wine and liquor business, multi-level marketing (MLM), wholesale and retailing are still the main contributors to Hai-O’s growth and revenue. It is exposed to all mainstream segments of Malaysia’s population, with the retail segment basically aimed at the Chinese, while MLM is mainly Malay-based.
For the fiscal year ended April 30, 2009 (FY09), Hai-O’s revenue increased 16% to RM435.2 million from RM373.8 million in the previous year. Net income rose 7% to RM52 million. The higher revenue reflects strengthening of the ringgit against the US dollar and the promotion of house-based products from the retail division.
The wholesale and retail division contributed RM16.8 million to the group revenue of RM148.6 million in the first quarter ended July 31, 2009 (1QFY10), down 11.2% from RM18.9 million in the previous quarter and 16.9% or RM20.2 million in the same period last year.
But given the promising potential of the wine industry in China, Hai-O believes its strategy of leveraging on the biggest wine company in the fast-developing Asian giant is likely to pay off. Hai-O has seen its share price jumping nearly 30% over the past three weeks to RM7.02 last Friday when it added another 12 sen, with 38,600 shares done.
Yantai is the largest wine-producing region in China, accounting for around 35% or one in every three bottles of wine produced there. The wine industry in China is the world’s 10th largest grape wine producer, and the only Asian country that produces grape wine on a commercial scale.
Other major grape wine players in China include Sino-French joint venture, Dynasty Winery Ltd and China Great Wall Wine Co, Ltd. Collectively, these top three wine producers control 40% of China’s wine market. Besides Shandong, some other famous wine-producing regions are found in Fujian and Guangdong provinces.
While growth in the traditional wine consumer countries has remained flat in the last 10 years, experts estimate that China would be the world’s most active wine market with a 36% growth through 2010. Over the same period, total global wine consumption is expected to grow at only 9.15%.
Research data from British research institute ISWR/DGR showed that based on current trends, total global wine consumption will reach 100 million litres by 2010, with China accounting for 5.58 million litres.
In a recent report on the company, RHB Research remained upbeat on Hai-O’s prospects going forward, even when there was a visible slowdown of the company’s retail and wholesale business.
This was largely due to the strong performance of its main business segment of MLM, for which the number of members has ballooned to more than 110,000 from 70,000 a year ago.
The company is well on track to surpass its internal target of 10% earnings growth in FY10. “Taking into account the robust 1QFY10 results and better-than-expected MLM sales, we raised our FY10-12 earnings forecasts by 22% to 28%,” said RHB.
“Hai-O’s attractiveness lies in its strong dividend payout policy of at least 50% of net earnings. Traditionally, the company has paid out above and beyond that amount, averaging 65% over the past five financial years.
“We project gross dividend per share for FY10 and FY11 to be at 54.5 sen and 57 sen, or a yield of 9.6% and 10%, respectively,” the research house added.
Some of the key risks include an unexpected reduction in dividend payout ratio to below 50% and the MLM division’s revenue coming in below expectations.
This article appeared in The Edge Financial Daily, October 19, 2009.
Tags: Changyu Pioneer Wine Co Ltd | China | Chinese herbs | Chinese medicated wines | Extensive network in China | Hai-O Enterprise Bhd | Tan Kee Hock
Written by Tony C H Goh
Monday, 19 October 2009 11:23
KUALA LUMPUR: HAI-O ENTERPRISE BHD [], widely known as a wholesaler and retailer of Chinese herbs and medicine, is now looking at expanding its reach in the wine, liquor and liqueur business by leveraging on its strong network in China.
“Currently, wines and liquor are considered as the second-liner products carried by the retail division. But with the current market trend towards drinking of red wine in the country, we foresee huge potential,” Hai-O’s general manager Tan Kee Hock said at the third Yantai International Wine Festival in Yantai, China, recently.
Hai-O has an extensive network in China, with business dealings dating back to 1975, particularly with Changyu Pioneer Wine Co Ltd, China’s oldest vineyard, which was established in 1892 and its biggest wine producer based in the wine-producing region of Yantai, Shandong province.
“As the sole distributor of Changyu’s wines in Malaysia, we are allocating a big portion of our promotion and advertising budget to raise awareness,” said Tan, who is in charge of the Chinese medicated wines, cooking wines, healthcare food and beverages division of the company.
Among Changyu products under the sole agency rights of Hai-O are Ling Zhi Medicated Liquor, Tze Pao San Pian Chiew, Te Zhi San Pian Chiew, Changyu Cabernet Dry Red Wine, Changyu Cabernet, Gernischt Dry Red Wine and Changyu Ice Wine.
While seeking to grow its wine and liquor business, multi-level marketing (MLM), wholesale and retailing are still the main contributors to Hai-O’s growth and revenue. It is exposed to all mainstream segments of Malaysia’s population, with the retail segment basically aimed at the Chinese, while MLM is mainly Malay-based.
For the fiscal year ended April 30, 2009 (FY09), Hai-O’s revenue increased 16% to RM435.2 million from RM373.8 million in the previous year. Net income rose 7% to RM52 million. The higher revenue reflects strengthening of the ringgit against the US dollar and the promotion of house-based products from the retail division.
The wholesale and retail division contributed RM16.8 million to the group revenue of RM148.6 million in the first quarter ended July 31, 2009 (1QFY10), down 11.2% from RM18.9 million in the previous quarter and 16.9% or RM20.2 million in the same period last year.
But given the promising potential of the wine industry in China, Hai-O believes its strategy of leveraging on the biggest wine company in the fast-developing Asian giant is likely to pay off. Hai-O has seen its share price jumping nearly 30% over the past three weeks to RM7.02 last Friday when it added another 12 sen, with 38,600 shares done.
Yantai is the largest wine-producing region in China, accounting for around 35% or one in every three bottles of wine produced there. The wine industry in China is the world’s 10th largest grape wine producer, and the only Asian country that produces grape wine on a commercial scale.
Other major grape wine players in China include Sino-French joint venture, Dynasty Winery Ltd and China Great Wall Wine Co, Ltd. Collectively, these top three wine producers control 40% of China’s wine market. Besides Shandong, some other famous wine-producing regions are found in Fujian and Guangdong provinces.
While growth in the traditional wine consumer countries has remained flat in the last 10 years, experts estimate that China would be the world’s most active wine market with a 36% growth through 2010. Over the same period, total global wine consumption is expected to grow at only 9.15%.
Research data from British research institute ISWR/DGR showed that based on current trends, total global wine consumption will reach 100 million litres by 2010, with China accounting for 5.58 million litres.
In a recent report on the company, RHB Research remained upbeat on Hai-O’s prospects going forward, even when there was a visible slowdown of the company’s retail and wholesale business.
This was largely due to the strong performance of its main business segment of MLM, for which the number of members has ballooned to more than 110,000 from 70,000 a year ago.
The company is well on track to surpass its internal target of 10% earnings growth in FY10. “Taking into account the robust 1QFY10 results and better-than-expected MLM sales, we raised our FY10-12 earnings forecasts by 22% to 28%,” said RHB.
“Hai-O’s attractiveness lies in its strong dividend payout policy of at least 50% of net earnings. Traditionally, the company has paid out above and beyond that amount, averaging 65% over the past five financial years.
“We project gross dividend per share for FY10 and FY11 to be at 54.5 sen and 57 sen, or a yield of 9.6% and 10%, respectively,” the research house added.
Some of the key risks include an unexpected reduction in dividend payout ratio to below 50% and the MLM division’s revenue coming in below expectations.
This article appeared in The Edge Financial Daily, October 19, 2009.
Top Glove eyeing acquisition targets in Malaysia
Top Glove eyeing acquisition targets in Malaysia
Tags: Influenza A (H1N1) | KM Lee | M&A | Malaysian entities | Medi-Flex Ltd | organic growth | Top Glove Corp Bhd
Written by Chong Jin Hun
Monday, 19 October 2009 11:21
KLANG: Top Glove Corp Bhd’s potential merger and acquisition (M&A) targets are most likely to be Malaysian entities and any such exercises will only be carried out at low and attractive prices, its managing director KM Lee said.
They will be financed via internal funds, helped by its net cash position of some RM176 million.
“It’s good to keep it (cash) handy in case the oppportunity of possible M&As comes our way,” Lee told The Edge Financial Daily in an interview.
Organic growth and M&As are expected to be key highlights of Top Glove’s intention to retain its supremacy in the international glove manufacturing sector. It aims to increase its present global market share of 22% to 30% by 2012.
Top Glove had in 2007 finalised the acquisition of a controlling stake in Singapore-listed rival Medi-Flex Ltd for some S$21 million (RM50.86 million).
The purchase of Medi-Flex, which owns two glove manufacturing plants in Klang and Banting in Selangor, was intended to help Top Glove expand its product range to include medical and cleanroom gloves.
Going forward, Lee said Top Glove was forecasting a conservative 10% annual revenue growth for the current and next financial year as the company builds more factories and expands its domestic production capacity.
With a cash hoard of RM176 million, Lee says Top Glove is in a good position to look for acquisitions that will help it maintain its position as the world's biggest rubber glove producer. Photo by Suhaimi Yusuf
For now, a larger output for Top Glove is deemed crucial to fulfil rising global demand for disposable gloves, due to the Influenza A(H1N1) outbreak.
Lee said these factories, to cost some RM35 million each, would be built on company-owned industrial land in Klang.
“Capacity expansion is the one (factor) that will see us moving forward in the long term. It’s quite traditional for us to build one to two factories every year.
“A lot also depends on how the A(H1N1) unfolds in the coming winter months (in the northern hemisphere),” he said.
Top Glove’s latest set of financials has improved. Net profit more than doubled to RM56.83 million in the fourth quarter ended Aug 31, 2009 from RM25.11 million a year earlier, helped by cost efficiency and higher demand for disposable gloves due to the A(H1N1) outbreak. Revenue rose 17.2% to RM427.35 million from RM364.53 million.
Full-year net profit rose 53.6% to RM169.15 million from RM110.1 million, while revenue increased by 10.9% to RM1.53 billion from RM1.38 billion.
Globally, Top Glove owns 19 factories, of which 17 are glove production facilities while the remaining two are latex concentrate plants in Thailand.
The company has 13 glove factories in Malaysia, and two each in Thailand and China. Together, they produce up to 31.5 billion pieces of gloves a year.
The company may also build more factories in Thailand and China to meet rising global demand for gloves.
Top Glove has allocated some RM70 million for capital expenditure (capex) in the current financial year ending Aug 31, 2010, to finance the CONSTRUCTION [] of two factories in Malaysia with a combined annual capacity of three billion pieces of gloves.
This article appeared in The Edge Financial Daily, October 19, 2009.
Tags: Influenza A (H1N1) | KM Lee | M&A | Malaysian entities | Medi-Flex Ltd | organic growth | Top Glove Corp Bhd
Written by Chong Jin Hun
Monday, 19 October 2009 11:21
KLANG: Top Glove Corp Bhd’s potential merger and acquisition (M&A) targets are most likely to be Malaysian entities and any such exercises will only be carried out at low and attractive prices, its managing director KM Lee said.
They will be financed via internal funds, helped by its net cash position of some RM176 million.
“It’s good to keep it (cash) handy in case the oppportunity of possible M&As comes our way,” Lee told The Edge Financial Daily in an interview.
Organic growth and M&As are expected to be key highlights of Top Glove’s intention to retain its supremacy in the international glove manufacturing sector. It aims to increase its present global market share of 22% to 30% by 2012.
Top Glove had in 2007 finalised the acquisition of a controlling stake in Singapore-listed rival Medi-Flex Ltd for some S$21 million (RM50.86 million).
The purchase of Medi-Flex, which owns two glove manufacturing plants in Klang and Banting in Selangor, was intended to help Top Glove expand its product range to include medical and cleanroom gloves.
Going forward, Lee said Top Glove was forecasting a conservative 10% annual revenue growth for the current and next financial year as the company builds more factories and expands its domestic production capacity.
With a cash hoard of RM176 million, Lee says Top Glove is in a good position to look for acquisitions that will help it maintain its position as the world's biggest rubber glove producer. Photo by Suhaimi Yusuf
For now, a larger output for Top Glove is deemed crucial to fulfil rising global demand for disposable gloves, due to the Influenza A(H1N1) outbreak.
Lee said these factories, to cost some RM35 million each, would be built on company-owned industrial land in Klang.
“Capacity expansion is the one (factor) that will see us moving forward in the long term. It’s quite traditional for us to build one to two factories every year.
“A lot also depends on how the A(H1N1) unfolds in the coming winter months (in the northern hemisphere),” he said.
Top Glove’s latest set of financials has improved. Net profit more than doubled to RM56.83 million in the fourth quarter ended Aug 31, 2009 from RM25.11 million a year earlier, helped by cost efficiency and higher demand for disposable gloves due to the A(H1N1) outbreak. Revenue rose 17.2% to RM427.35 million from RM364.53 million.
Full-year net profit rose 53.6% to RM169.15 million from RM110.1 million, while revenue increased by 10.9% to RM1.53 billion from RM1.38 billion.
Globally, Top Glove owns 19 factories, of which 17 are glove production facilities while the remaining two are latex concentrate plants in Thailand.
The company has 13 glove factories in Malaysia, and two each in Thailand and China. Together, they produce up to 31.5 billion pieces of gloves a year.
The company may also build more factories in Thailand and China to meet rising global demand for gloves.
Top Glove has allocated some RM70 million for capital expenditure (capex) in the current financial year ending Aug 31, 2010, to finance the CONSTRUCTION [] of two factories in Malaysia with a combined annual capacity of three billion pieces of gloves.
This article appeared in The Edge Financial Daily, October 19, 2009.
Carefully examine the possible alternatives when you invest
Buy Quality Stocks, Sell Treasuries, Says Mauboussin
Author of Think Twice offers advice on investors and investments.
By Russel Kinnel | 10-19-09 | 06:00 AM |
Michael Mauboussin thinks about where you should invest and how you should invest. As chief investment strategist at Legg Mason Capital Management, Mauboussin focuses on the economy, markets, and investor behavior. Mauboussin is also an adjunct professor at Columbia.
About the Author
Russel Kinnel is Morningstar's director of mutual fund research. He is also the editor of Morningstar FundInvestor, a monthly newsletter dedicated to helping investors pick great mutual funds, build winning portfolios, and monitor their funds for greater gains. Kinnel would like to hear from readers, but no financial-planning questions, please. Contact Author | Meet other investing specialists
His new book, Think Twice, examines why investors make mistakes if they leap to judgment and how they can correct that by carefully examining the possible alternatives and learning from their mistakes. I asked him about where the economy and markets are headed as well as lessons we can learn about how we make decisions. Check out his outlook for inflation, U.S. equities, and Treasuries as well as his advice on how we can all make better investors.
Q. It seems like a company's debt level has been all that mattered the past two years. Have the markets corrected for that enough that they'll be moving on to something else and if so what will that be?
A. If you take a step back, stock prices have two basic drivers: future cash flows and a discount rate that brings future values to the present. If you look back on 2007, we had good levels of cash flow--corporate America was near peaks in historical operating profit margin and return on invested capital--and the perceived levels of risk were very low.
All of that changed in 2008. First, the perception of risk skyrocketed, especially after the failure of Lehman Brothers in September. As a rough proxy for perceived risk in the equity market you can look at the VIX (more formally, the Chicago Board Options Exchange Volatility Index), which measures the implied volatility of S&P 500 Index options. Realized volatility in the past 80 or so years had been roughly 20 percent, but the VIX shot into the 80s. When the perception of risk rises, stock prices go down.
The second shoe to drop was earnings. Also in the fourth quarter of 2008, earnings estimates dropped rapidly. The one-two combination of lower anticipated cash flows and higher risk punished the market--probably to an excessive degree. When investors fear risk, of course, credit spreads--a measure of the interest rate companies have to pay to borrow--also rise and that makes people worry about companies with debt going bankrupt.
Since the March lows, we've seen some retrenchment of the concerns about cash flow and risk. As perceived risk levels drifted back toward more normal levels--the VIX today is in the low 20s--the riskier assets performed very well--the so-called "junk trade." The market got a second lift in the summer on the heels of second-quarter earnings, which on balance came in better than what was expected. Most of the positive surprise came as the result of cost cutting. Companies have aggressively managed their cost structures--which has left the residual of a sluggish labor market--and have been super diligent with working capital as well. But earnings through cost savings cannot go on forever.
If the markets are to continue to generate attractive returns, we will need to see good old-fashioned sales growth. In my opinion, the evidence is clearly pointing to a recovery, but naturally the data will show fits and starts.
Q. Investors have been buying up huge sums of bond funds and with it inflation risk. All of the different inflation hedges have their own flaws and strengths, so what's the best way to hedge some of that inflation risk?
A. My sense is that at least some of the appetite for bond funds represents less a love of bonds than a distaste for stocks. The poor 10-year results for the stock market have left a lot of equity investors with a bad taste in their mouths--even though history suggests that poor past market returns are a decent predictor of future returns (and vice versa).
Inflation does not appear to be an imminent threat--there is too much slack in the labor market and unused capacity. But how the government's stimulative steps, which were necessary in my view, ultimately influence inflation is anyone's guess. While I don't think it's a worry for the short-to-intermediate term, I would keep it on the radar screen.
So if you are worried about inflation risk, how might you play that in the stock market? The goal would be to find companies that have sustainable competitive advantages--moats around their businesses--that will allow them to increase the price of their good or service at a rate consistent with inflation. So a portfolio of high-quality stocks with this attribute, purchased at attractive prices, is a very sensible way to address this concern.
Q. Should investors do anything about the declining dollar in their portfolios?
A. While it's important to be mindful of the role of a declining--or rising--dollar in evaluating a company, I'm not sure investors should do anything specific about it. If you are convinced the dollar is going lower, you should short the dollar. But forecasting currencies is not an easy game to play, and I know that I have zero edge there. On a company by company basis, it makes some sense to consider various scenarios for the dollar, assess the probability of those scenarios, and judge what those scenarios imply about value.
Probably the best way to manage currency exposure is to have a properly diversified global portfolio. While I'm optimistic about the future of the United States, I'm also a subscriber to what Fareed Zakaria calls the "rise of the rest." In other words, the U.S. should continue to do well but other parts of the globe may do relatively better. So long-term investors should have exposure to various markets around the globe.
Q. Where are the greatest opportunities in investing today?
A. One area that looks interesting in the U.S. market is quality companies. These are businesses that have high returns on invested capital, decent pricing power, good economic moats around their businesses, solid balance sheets, and good operating histories. These companies tended to trade at generous valuations in the late 1990s and have spent most of the 2000s treading water. Even considering the current recession, these businesses have grown sales and profits while sustaining good economic returns.
You can go down the list of the S&P 50 (50 largest by market cap in S&P 500) and find a number of these companies. And if they do well, it'll be harder for active managers to beat the market because the S&P 500 is a market-capitalization-weighted index and many money managers are underexposed to these kinds of businesses.
Q. What are the least attractive areas today?
A. A natural consequence of the high level of risk aversion has been a large move in U.S. Treasury securities. When you look at the 10-year note with a 3.4 percent yield, it's a reasonable case that equity markets will deliver much higher returns in the next decade--even adjusted for risk. So what may appear to be among the least risky assets may be among the riskiest, at least if you take opportunity cost into consideration.
Q. Your new book, Think Twice, suggests that we can avoid many mistakes by reviewing our gut reaction. How can we effectively review a decision so that we make the right call?
A. The main theme of the book is that in certain situations, your mind is going to want to go down one path to a solution when there is a better path. This is not true in all situations. In the book, I identify eight areas where this can occur. So you want to prepare for these decisions by learning about possible mistakes, recognize the mistakes in context, and apply tools to mitigate them.
I also offer some specific advice at the end of the book. Let me share a couple of those ideas. The first is to keep a decision-making journal. When you make a decision, write down what you decided, what you expect to happen, and why. If you're so inclined, you might even take note of how you feel physically and emotionally.
The journal allows you to periodically audit your decisions--effectively giving yourself feedback. It can also help you sidestep hindsight bias, the tendency to think you knew more in the past than you actually did. You can also see instances when you were right for the wrong decisions. Dealing honestly with those decisions is hard work.
Q. What's a common mistake that a fund investor might avoid by properly reviewing a decision?
A. One common mistake is a reliance on the inside view versus using the outside view. With the inside view, you try to solve a problem by gathering information, and using that unique set of input to decide. It's the natural way we do things in any planning task. The outside view, by contrast, looks at a problem as part of a larger reference class. It basically allows you to ask the question: When someone else was in this position, what happened?
A reliance on the inside view generally leads to forecasts that are too optimistic. If you've ever done a renovation to your house you know the feeling: Renovations always seem to come in above budget and behind plan. The outside view provides a better, and more grounded, assessment.
So, for instance, investors can use the outside view when working on their models. We have lots of data about corporate growth rates and return on invested capital patterns. An investor can check their assumptions against the larger reference to see if they make sense.
Q. It sounds like this is a rebuttal to Malcolm Gladwell's Blink, which argues our instant reaction is usually on the money. What did he miss?
A. I believe in the role of intuition in decision making, but I certainly don't glorify it. By and large, I believe that people rely more on their intuition than they should.
Here's how I think about it. Psychologists often distinguish between two mental systems, creatively called System 1 and System 2. System 1 is fast, automatic, and hard to train. When you jump at the sight of a snake, you have System 1 to thank. System 2 is slow, requires input, and can be trained. It's your analytical mind. If you do something repeatedly, some aspects of System 2 thinking slip into System 1. Consider the first time you drove a car; you had to think about each action very deliberately. But after time and experience, you internalized many of the tasks, and driving migrated mostly from System 2 to System 1.
Intuition works when you have a System 1 that is well trained. Think of a chess master, or a finely trained soldier. But note that for System 1 to work effectively, you need to deal with situations that are linear and consistent. If you're dealing with decisions in a realm where the outcomes are nonlinear or the statistical properties change over time, intuition will fail because your System 1 doesn't know what's going on.
Increasingly, professionals are forced to confront decisions related to complex systems, which are by their very nature nonlinear and have changing statistical properties. This definitely applies to investing and business. So you have to be very careful if you rely on intuition.
http://news.morningstar.com/articlenet/article.aspx?id=311863
Author of Think Twice offers advice on investors and investments.
By Russel Kinnel | 10-19-09 | 06:00 AM |
Michael Mauboussin thinks about where you should invest and how you should invest. As chief investment strategist at Legg Mason Capital Management, Mauboussin focuses on the economy, markets, and investor behavior. Mauboussin is also an adjunct professor at Columbia.
About the Author
Russel Kinnel is Morningstar's director of mutual fund research. He is also the editor of Morningstar FundInvestor, a monthly newsletter dedicated to helping investors pick great mutual funds, build winning portfolios, and monitor their funds for greater gains. Kinnel would like to hear from readers, but no financial-planning questions, please. Contact Author | Meet other investing specialists
His new book, Think Twice, examines why investors make mistakes if they leap to judgment and how they can correct that by carefully examining the possible alternatives and learning from their mistakes. I asked him about where the economy and markets are headed as well as lessons we can learn about how we make decisions. Check out his outlook for inflation, U.S. equities, and Treasuries as well as his advice on how we can all make better investors.
Q. It seems like a company's debt level has been all that mattered the past two years. Have the markets corrected for that enough that they'll be moving on to something else and if so what will that be?
A. If you take a step back, stock prices have two basic drivers: future cash flows and a discount rate that brings future values to the present. If you look back on 2007, we had good levels of cash flow--corporate America was near peaks in historical operating profit margin and return on invested capital--and the perceived levels of risk were very low.
All of that changed in 2008. First, the perception of risk skyrocketed, especially after the failure of Lehman Brothers in September. As a rough proxy for perceived risk in the equity market you can look at the VIX (more formally, the Chicago Board Options Exchange Volatility Index), which measures the implied volatility of S&P 500 Index options. Realized volatility in the past 80 or so years had been roughly 20 percent, but the VIX shot into the 80s. When the perception of risk rises, stock prices go down.
The second shoe to drop was earnings. Also in the fourth quarter of 2008, earnings estimates dropped rapidly. The one-two combination of lower anticipated cash flows and higher risk punished the market--probably to an excessive degree. When investors fear risk, of course, credit spreads--a measure of the interest rate companies have to pay to borrow--also rise and that makes people worry about companies with debt going bankrupt.
Since the March lows, we've seen some retrenchment of the concerns about cash flow and risk. As perceived risk levels drifted back toward more normal levels--the VIX today is in the low 20s--the riskier assets performed very well--the so-called "junk trade." The market got a second lift in the summer on the heels of second-quarter earnings, which on balance came in better than what was expected. Most of the positive surprise came as the result of cost cutting. Companies have aggressively managed their cost structures--which has left the residual of a sluggish labor market--and have been super diligent with working capital as well. But earnings through cost savings cannot go on forever.
If the markets are to continue to generate attractive returns, we will need to see good old-fashioned sales growth. In my opinion, the evidence is clearly pointing to a recovery, but naturally the data will show fits and starts.
Q. Investors have been buying up huge sums of bond funds and with it inflation risk. All of the different inflation hedges have their own flaws and strengths, so what's the best way to hedge some of that inflation risk?
A. My sense is that at least some of the appetite for bond funds represents less a love of bonds than a distaste for stocks. The poor 10-year results for the stock market have left a lot of equity investors with a bad taste in their mouths--even though history suggests that poor past market returns are a decent predictor of future returns (and vice versa).
Inflation does not appear to be an imminent threat--there is too much slack in the labor market and unused capacity. But how the government's stimulative steps, which were necessary in my view, ultimately influence inflation is anyone's guess. While I don't think it's a worry for the short-to-intermediate term, I would keep it on the radar screen.
So if you are worried about inflation risk, how might you play that in the stock market? The goal would be to find companies that have sustainable competitive advantages--moats around their businesses--that will allow them to increase the price of their good or service at a rate consistent with inflation. So a portfolio of high-quality stocks with this attribute, purchased at attractive prices, is a very sensible way to address this concern.
Q. Should investors do anything about the declining dollar in their portfolios?
A. While it's important to be mindful of the role of a declining--or rising--dollar in evaluating a company, I'm not sure investors should do anything specific about it. If you are convinced the dollar is going lower, you should short the dollar. But forecasting currencies is not an easy game to play, and I know that I have zero edge there. On a company by company basis, it makes some sense to consider various scenarios for the dollar, assess the probability of those scenarios, and judge what those scenarios imply about value.
Probably the best way to manage currency exposure is to have a properly diversified global portfolio. While I'm optimistic about the future of the United States, I'm also a subscriber to what Fareed Zakaria calls the "rise of the rest." In other words, the U.S. should continue to do well but other parts of the globe may do relatively better. So long-term investors should have exposure to various markets around the globe.
Q. Where are the greatest opportunities in investing today?
A. One area that looks interesting in the U.S. market is quality companies. These are businesses that have high returns on invested capital, decent pricing power, good economic moats around their businesses, solid balance sheets, and good operating histories. These companies tended to trade at generous valuations in the late 1990s and have spent most of the 2000s treading water. Even considering the current recession, these businesses have grown sales and profits while sustaining good economic returns.
You can go down the list of the S&P 50 (50 largest by market cap in S&P 500) and find a number of these companies. And if they do well, it'll be harder for active managers to beat the market because the S&P 500 is a market-capitalization-weighted index and many money managers are underexposed to these kinds of businesses.
Q. What are the least attractive areas today?
A. A natural consequence of the high level of risk aversion has been a large move in U.S. Treasury securities. When you look at the 10-year note with a 3.4 percent yield, it's a reasonable case that equity markets will deliver much higher returns in the next decade--even adjusted for risk. So what may appear to be among the least risky assets may be among the riskiest, at least if you take opportunity cost into consideration.
Q. Your new book, Think Twice, suggests that we can avoid many mistakes by reviewing our gut reaction. How can we effectively review a decision so that we make the right call?
A. The main theme of the book is that in certain situations, your mind is going to want to go down one path to a solution when there is a better path. This is not true in all situations. In the book, I identify eight areas where this can occur. So you want to prepare for these decisions by learning about possible mistakes, recognize the mistakes in context, and apply tools to mitigate them.
I also offer some specific advice at the end of the book. Let me share a couple of those ideas. The first is to keep a decision-making journal. When you make a decision, write down what you decided, what you expect to happen, and why. If you're so inclined, you might even take note of how you feel physically and emotionally.
The journal allows you to periodically audit your decisions--effectively giving yourself feedback. It can also help you sidestep hindsight bias, the tendency to think you knew more in the past than you actually did. You can also see instances when you were right for the wrong decisions. Dealing honestly with those decisions is hard work.
Q. What's a common mistake that a fund investor might avoid by properly reviewing a decision?
A. One common mistake is a reliance on the inside view versus using the outside view. With the inside view, you try to solve a problem by gathering information, and using that unique set of input to decide. It's the natural way we do things in any planning task. The outside view, by contrast, looks at a problem as part of a larger reference class. It basically allows you to ask the question: When someone else was in this position, what happened?
A reliance on the inside view generally leads to forecasts that are too optimistic. If you've ever done a renovation to your house you know the feeling: Renovations always seem to come in above budget and behind plan. The outside view provides a better, and more grounded, assessment.
So, for instance, investors can use the outside view when working on their models. We have lots of data about corporate growth rates and return on invested capital patterns. An investor can check their assumptions against the larger reference to see if they make sense.
Q. It sounds like this is a rebuttal to Malcolm Gladwell's Blink, which argues our instant reaction is usually on the money. What did he miss?
A. I believe in the role of intuition in decision making, but I certainly don't glorify it. By and large, I believe that people rely more on their intuition than they should.
Here's how I think about it. Psychologists often distinguish between two mental systems, creatively called System 1 and System 2. System 1 is fast, automatic, and hard to train. When you jump at the sight of a snake, you have System 1 to thank. System 2 is slow, requires input, and can be trained. It's your analytical mind. If you do something repeatedly, some aspects of System 2 thinking slip into System 1. Consider the first time you drove a car; you had to think about each action very deliberately. But after time and experience, you internalized many of the tasks, and driving migrated mostly from System 2 to System 1.
Intuition works when you have a System 1 that is well trained. Think of a chess master, or a finely trained soldier. But note that for System 1 to work effectively, you need to deal with situations that are linear and consistent. If you're dealing with decisions in a realm where the outcomes are nonlinear or the statistical properties change over time, intuition will fail because your System 1 doesn't know what's going on.
Increasingly, professionals are forced to confront decisions related to complex systems, which are by their very nature nonlinear and have changing statistical properties. This definitely applies to investing and business. So you have to be very careful if you rely on intuition.
http://news.morningstar.com/articlenet/article.aspx?id=311863
Monday 19 October 2009
KNM 19.10.2009
http://spreadsheets.google.com/pub?key=tRskke5FybslzPlCGkTtM4Q&output=html
This stock fell off the cliff. Presently, it is not classified as an investment grade stock. There is much speculation on this stock. There is some uncertainty of its business performance in the near term. Hopefully, clarity will surface soon.
Latest qtr EPS (Q2, 09) = 1.82 sen
annualised EPS = 1.82 x 4 = 7.28 sen
Current Price = $ 0.82
Current PE (annualised EPS) = 82 / 7.28 = 11.3
"Buy from a sucker, sell to a sucker"
The “buy from a sucker, sell to a sucker” school of speculation is that for anyone to make money through the purchase and subsequent resale of a stock without the actual value of that stock increasing, he/she must rely upon the ignorance of either the seller or the buyer or both.
The odds are definitely against not being the sucker on either one or the other end of that transaction.
It's another way of expressing the "Greater Fool Theory." "I may be a fool to buy this stock at this price; but I'll find another fool to buy it from me at a higher price." This is what fueled many exploded "bubbles."
The odds are definitely against not being the sucker on either one or the other end of that transaction.
It's another way of expressing the "Greater Fool Theory." "I may be a fool to buy this stock at this price; but I'll find another fool to buy it from me at a higher price." This is what fueled many exploded "bubbles."
Buy good companies at reasonable prices.
Buffett's strategy for coping with a down market is to approach it as an opportunity to buy good companies at reasonable prices.
Buffett makes concentrated purchases. In a downturn, he buys millions of shares of solid businesses at reasonable prices.
And even in a bear market, although Buffett had billions of dollars in cash to make investments, in his 2009 letter to Berkshire Hathaway shareholders, he declared that cash held beyond the bottom would be eroded by inflation in the recovery.
Buffett makes concentrated purchases. In a downturn, he buys millions of shares of solid businesses at reasonable prices.
And even in a bear market, although Buffett had billions of dollars in cash to make investments, in his 2009 letter to Berkshire Hathaway shareholders, he declared that cash held beyond the bottom would be eroded by inflation in the recovery.
Know When to Sell
Indefinite growth is not a realistic expectation, yet investors often expect rising stocks to gain forever. Putting a price on the upside and the downside can provide solid guidelines for getting out while the getting is good. Similarly, if a company or an industry appears to be headed for trouble, it may be time to take your gains off of the table. There's no harm in walking away when you are ahead of the game.
(To learn more about when to get out of a stock, see To Sell Or Not To Sell.)
http://www.investopedia.com/articles/stocks/07/when_to_sell.asp
(To learn more about when to get out of a stock, see To Sell Or Not To Sell.)
http://www.investopedia.com/articles/stocks/07/when_to_sell.asp
Buying good companies when the headline news is bad
Buying good companies when the headline news is bad is the hardest thing to do (psychologically), but it's the simplest way to buy low. And buying low makes it a lot easier to sell high.
It's Different This Time – Or Is It?
In 2009, the global economy fell into recession and international markets fell in lockstep. Diversification couldn't provide adequate downside protection. Once again, the "experts" proclaim that the old rules of investing have failed. "It's different this time," they say. Maybe … but don't bet on it. These tried and true principles of wealth creation have withstood the test of time.
Discovering if we learnt the lessons of Black Monday, October 1987 Crash
From The Times October 19, 2009
Discovering if we learnt the lessons of Black Monday
Gerard Lyons: Economic view
Today is the twenty-second anniversary of Black Monday. On this day in 1987 stock markets around the world crashed. The Dow Jones fell 22.6 per cent in one day, London shed one fifth of its value over two days. The newspapers and television were full of pictures of traders in panic. Sound familiar?
Reflecting on 1987 is interesting in its own right and has lessons for today. Many of the factors that led to the 1987 crash are now being repeated around the globe: equity markets seen as out of touch with reality; concern about the twin US trade and budget deficits; and worries about the dollar.
Poor US trade figures on the preceding Thursday had spooked the markets, which had been worried already by a small interest rate hike by the Germans the week before.
That rise had triggered worries that global policy co-ordination was at an end. The period from September 1985 to the summer of 1987 was the golden era of policy co-ordination, with the Plaza and Louvre accords marking a time when the G7 acted together to first weaken and then stabilise the dollar. By October 1987, co-ordination was at an end.
The crash led to fears of a depression and prompted central banks to pump liquidity into the markets and to cut interest rates. The Bank of England base rate was 10 per cent on Black Monday and reached a low of 7.5 per cent the following May. At the time, I wrote in The Times of the problems to come. A year later, in October 1989, base rate was up to 15 per cent. Boom then became bust.
Today’s crisis has been worse, as the financial system almost collapsed, jobs have been lost, firms have gone bust. As a result, the policy response has been more aggressive. But, as in 1987, perhaps the stimulus may work better and quicker than initially expected.
If anything, Black Monday was a watered-down version of what we have experienced now and an early warning sign of the underlying volatility of markets. Then, there was talk of pro-cyclicality on the way up and down, triggered by programmed trading systems.
Also, I remember a speech by Robin Leigh-Pemberton, the Bank of England Governor, in February 1988 in which he placed the blame on regulation and supervision and said: “This will have implications for the capital resources that participants must be required to maintain.” Banks, we were then told, must learn the lessons about credit exposure and capital adequacy. How times change? Not much it would seem.
These issues were still centre stage ten days ago at the International Monetary Fund (IMF) meetings in Istanbul, where the mood was one of optimistic caution. Relief that policy had pulled us back from the brink was mixed with fears of over-regulation and concerns that we may be sowing the seeds of the next crisis.
The global outlook depends on the interaction between three key factors: the economic fundamentals; the policy response; and confidence. In Istanbul, the outlook for policy was at centre stage.
Central banks and policymakers in the West appear to be keen to co-ordinate their exit strategies from their stimulus. This is something they plan to discuss at next spring’s IMF meetings in Washington. Yet the next six months might test this accord to the full. There is every likelihood of a strong bounce over that time, as previous policy easing feeds through.
Just as we saw with the Bundesbank rate rise in early October 1987, coming months may force many countries to think about tightening policy to suit domestic needs. This great dilemma is already being played out across the world.
In recent weeks Israel and Australia have raised rates. The further east one goes, the greater the temptation to tighten policy. Indonesia and India have already hinted at higher rates, South Korea is in two minds, while behind the scenes in China policymakers appear to be at odds. There, the worries of the Premier and State Council over exports and jobs may take precedence over central bank concerns about asset price inflation.
The dilemma for many countries is that tightening early may attract hot money inflows, as investors seek higher yields. Waiting, however, may trigger asset price inflation, with liquidity flowing into equities and property, as we have seen recently in China. The question is: can any large exporting nation really tighten monetary policy before the United States, or indeed Europe, given that these are the destinations of the bulk of goods and services?
In view of such uncertainty, many countries appear keen to build up their defences, to be prepared for any eventuality. The lesson of Asia over the past decade has not been lost. After its crisis in 1997-98, Asia’s holding of global currency reserves rose from one third to two thirds now, the bulk in dollars. Others look set to follow suit.
It is not in anyone’s interests to actively sell the dollar, in case this triggers the collapse they fear. Thus, what I call passive diversification is taking place. As reserves rise, less and less are going into the dollar, although it still receives the lion’s share.
Over time, more countries will want to manage their currency against the countries with which they trade. If foreign exchange reserves were to reflect trade patterns, then $2.3 trillion of the present $6.8 trillion of global foreign exchange reserves would have to move out of the dollar. The private sector is already cautious.
As the dollar declines, the gainers are commodity currencies, gold, the euro and the yen.
Not everyone is happy. This dampens recovery prospects in countries whose currencies are appreciating and adds to problems for the most fragile economies in the eurozone. It is also adding to pressure on Asian countries, particularly China, to let their currencies strengthen. Perhaps this merits a repeat of the 1985 Plaza Accord to prevent an inevitable currency crisis.
Yet one currency that seems unlikely to rally against the dollar is sterling. In part, this is because of market caution towards the UK. It is also because a weaker pound is seen as central to Britain’s policy stance. This is alongside the need for a prolonged period of low interest rates and a much tighter fiscal stance.
The UK has had the biggest devaluation in its history. Yet there have been few squeals, as it has been gradual and is taking place in an environment where competition is tough and inflation is not a problem. As history has shown us, sterling remained the world’s reserve currency long after the UK’s economic power had peaked.
This is relevant in considering the dollar’s prospects now. The general feeling in Istanbul was that there are no alternatives to the dollar. Perhaps that is right, but the dollar and sterling face hard times ahead. If there is one thing this crisis and that of Black Monday have taught us, it is not to ignore the fundamentals.
• Gerard Lyons is chief economist at Standard Chartered
http://business.timesonline.co.uk/tol/business/columnists/article6880225.ece
Discovering if we learnt the lessons of Black Monday
Gerard Lyons: Economic view
Today is the twenty-second anniversary of Black Monday. On this day in 1987 stock markets around the world crashed. The Dow Jones fell 22.6 per cent in one day, London shed one fifth of its value over two days. The newspapers and television were full of pictures of traders in panic. Sound familiar?
Reflecting on 1987 is interesting in its own right and has lessons for today. Many of the factors that led to the 1987 crash are now being repeated around the globe: equity markets seen as out of touch with reality; concern about the twin US trade and budget deficits; and worries about the dollar.
Poor US trade figures on the preceding Thursday had spooked the markets, which had been worried already by a small interest rate hike by the Germans the week before.
That rise had triggered worries that global policy co-ordination was at an end. The period from September 1985 to the summer of 1987 was the golden era of policy co-ordination, with the Plaza and Louvre accords marking a time when the G7 acted together to first weaken and then stabilise the dollar. By October 1987, co-ordination was at an end.
The crash led to fears of a depression and prompted central banks to pump liquidity into the markets and to cut interest rates. The Bank of England base rate was 10 per cent on Black Monday and reached a low of 7.5 per cent the following May. At the time, I wrote in The Times of the problems to come. A year later, in October 1989, base rate was up to 15 per cent. Boom then became bust.
Today’s crisis has been worse, as the financial system almost collapsed, jobs have been lost, firms have gone bust. As a result, the policy response has been more aggressive. But, as in 1987, perhaps the stimulus may work better and quicker than initially expected.
If anything, Black Monday was a watered-down version of what we have experienced now and an early warning sign of the underlying volatility of markets. Then, there was talk of pro-cyclicality on the way up and down, triggered by programmed trading systems.
Also, I remember a speech by Robin Leigh-Pemberton, the Bank of England Governor, in February 1988 in which he placed the blame on regulation and supervision and said: “This will have implications for the capital resources that participants must be required to maintain.” Banks, we were then told, must learn the lessons about credit exposure and capital adequacy. How times change? Not much it would seem.
These issues were still centre stage ten days ago at the International Monetary Fund (IMF) meetings in Istanbul, where the mood was one of optimistic caution. Relief that policy had pulled us back from the brink was mixed with fears of over-regulation and concerns that we may be sowing the seeds of the next crisis.
The global outlook depends on the interaction between three key factors: the economic fundamentals; the policy response; and confidence. In Istanbul, the outlook for policy was at centre stage.
Central banks and policymakers in the West appear to be keen to co-ordinate their exit strategies from their stimulus. This is something they plan to discuss at next spring’s IMF meetings in Washington. Yet the next six months might test this accord to the full. There is every likelihood of a strong bounce over that time, as previous policy easing feeds through.
Just as we saw with the Bundesbank rate rise in early October 1987, coming months may force many countries to think about tightening policy to suit domestic needs. This great dilemma is already being played out across the world.
In recent weeks Israel and Australia have raised rates. The further east one goes, the greater the temptation to tighten policy. Indonesia and India have already hinted at higher rates, South Korea is in two minds, while behind the scenes in China policymakers appear to be at odds. There, the worries of the Premier and State Council over exports and jobs may take precedence over central bank concerns about asset price inflation.
The dilemma for many countries is that tightening early may attract hot money inflows, as investors seek higher yields. Waiting, however, may trigger asset price inflation, with liquidity flowing into equities and property, as we have seen recently in China. The question is: can any large exporting nation really tighten monetary policy before the United States, or indeed Europe, given that these are the destinations of the bulk of goods and services?
In view of such uncertainty, many countries appear keen to build up their defences, to be prepared for any eventuality. The lesson of Asia over the past decade has not been lost. After its crisis in 1997-98, Asia’s holding of global currency reserves rose from one third to two thirds now, the bulk in dollars. Others look set to follow suit.
It is not in anyone’s interests to actively sell the dollar, in case this triggers the collapse they fear. Thus, what I call passive diversification is taking place. As reserves rise, less and less are going into the dollar, although it still receives the lion’s share.
Over time, more countries will want to manage their currency against the countries with which they trade. If foreign exchange reserves were to reflect trade patterns, then $2.3 trillion of the present $6.8 trillion of global foreign exchange reserves would have to move out of the dollar. The private sector is already cautious.
As the dollar declines, the gainers are commodity currencies, gold, the euro and the yen.
Not everyone is happy. This dampens recovery prospects in countries whose currencies are appreciating and adds to problems for the most fragile economies in the eurozone. It is also adding to pressure on Asian countries, particularly China, to let their currencies strengthen. Perhaps this merits a repeat of the 1985 Plaza Accord to prevent an inevitable currency crisis.
Yet one currency that seems unlikely to rally against the dollar is sterling. In part, this is because of market caution towards the UK. It is also because a weaker pound is seen as central to Britain’s policy stance. This is alongside the need for a prolonged period of low interest rates and a much tighter fiscal stance.
The UK has had the biggest devaluation in its history. Yet there have been few squeals, as it has been gradual and is taking place in an environment where competition is tough and inflation is not a problem. As history has shown us, sterling remained the world’s reserve currency long after the UK’s economic power had peaked.
This is relevant in considering the dollar’s prospects now. The general feeling in Istanbul was that there are no alternatives to the dollar. Perhaps that is right, but the dollar and sterling face hard times ahead. If there is one thing this crisis and that of Black Monday have taught us, it is not to ignore the fundamentals.
• Gerard Lyons is chief economist at Standard Chartered
http://business.timesonline.co.uk/tol/business/columnists/article6880225.ece
Poh Kong 19.10.2009
http://spreadsheets.google.com/pub?key=th6Y8kWFmNXekgYj_wo6byA&output=html
This is a challenging time for the gold retailers. With gold price going upwards, the prices of their products are higher. This will reduce the demand for these discretionary products. The inventories sold will have to be replaced by new inventories bought at higher prices. There is also the risk of price fluctuations. The gold price can goes up as well as down. These retailers will also have to hedge against these fluctuations. If they got this right, there is exceptional gain. On the other hand, a wrong bet can be a costly affair indeed, especially for those with little working capital.
Did you profit from the best stock rally in the last 10 years?
More specifically, how much of your investment money was in equity in March 2009? One prominent blogger by his admission was 30% or so anxiously invested in first half of this year. But salutation and hooray to those with 80% or more invested in stocks in March 2009. :-)
The Investment World is Changing
Two Images Summarize the Current State of the Investing World
http://seekingalpha.com/article/167118-two-images-summarize-the-current-state-of-the-investing-world
http://seekingalpha.com/article/167118-two-images-summarize-the-current-state-of-the-investing-world
Maxis prepares to relist in Malaysia's largest IPO ever
Maxis prepares to relist in Malaysia's largest IPO ever
By Anette Jönsson | 15 October 2009
Two years after being taken private, Maxis will relist the domestic portion of its business, offering investors a high-quality yield play.
The Malaysian stockmarket is getting ready for its largest initial public offering ever and it is a familiar face that will be rejoining its ranks. Just over two years after Maxis Communications (MCB) was privatised by its controlling shareholder, Malaysia's largest provider of mobile communication services is about to return with an IPO that looks set to raise about $3 billion.
Like most other companies that are relisted following a privatisation, however, it is a smaller and more streamlined company that is currently being pre-marketed. Most notably, the company's mobile businesses outside Malaysia -- primarily the mobile operations in India and Indonesia -- will stay with the unlisted parent company. The change is signalled by the fact that the unit preparing for a listing is named Maxis Berhad, while Maxis Communications will remain a private entity that will hold the international businesses as well asa controlling stake in Maxis Berhad (from here on referred to as Maxis).
Sceptics have noted that Maxis is the portion of the company that remains after the high-growth businesses in India and Indonesia has been taken out, suggesting that this will be a much less exciting business than it was before it was taken private in June 2007. This is indeed true -- at least with regard to the removal of the fastest growing portions of the business -- though the feedback from domestic investors, in particular, suggests there are still reasons to be excited.
Sources involved in the offering note that, before the privatisation, investors were not that keen on the international business, which they saw as a drain on the company's cashflow. Indeed, much of what the company was earning from the steady and cash-generative domestic operations went straight into the funding of its overseas expansion, leaving shareholders with few benefits and a lot of execution risk.
A similar argument is outlined by Maxis in the preliminary listing prospectus as it lists the reasons behind the buyout and de-listing: The principal shareholder at the time, Ananda Krishnan-controlled Binariang, believed that the overseas expansion [existing and future] "would significantly change the financial and risk profile of MCB due to uncertainties surrounding the investment and regulatory environments in new markets, the substantial capital expenditure required, which may strain MCB's cashflow and dividend payment capability, and the increase in gearing to finance such...investments in new markets, which may result in higher borrowing costs."
"As such, Binariang undertook the privatisation of MCB as it believed that private ownership would accord greater flexibility for MCB to realise its vision to be a leading telecommunications company and to adopt a capital structure consistent with the change in its funding and risk profile," Maxis said.
"Previously the minority shareholders didn't get much of the yield. Now, the interests of the parent company and the minority shareholders are aligned," said one source, noting that Maxis has promised to pay out 75% of its annual earnings as dividends. "The company is giving the market what it wanted two years ago."
What investors who buy into the restructured listing candidate will get is a company with a leading position in the domestic market and very strong cashflow generation -- the free cashflow yield is estimated at 6%-7%. Given its size, Maxis will also be a bell-weather stock in the Malaysian market and is expected to go into all the benchmark indices, meaning investors who follow Malaysia or the telecom sector will pretty much have to buy it. Meanwhile, domestic investors are already well-familiar with the company and its ability to make money.
That should ensure a successful IPO at least, but that is not to say that Maxis will be an instant hit once it starts trading. Malaysia is a mature mobile market with a 100% penetration rate and while Maxis is the dominant player with a 46% share of the post-paid market and 38% of the pre-paid subscriptions, it does have competition from the number two and three players -- Celcom, which is owned by Axiata (formerly TM International), and DiGi.
"People don't question the quality [of Maxis], they question the growth and how much competition there is in the market," said the earlier quoted source.
The level of competition will be of particular importance in the wireless broadband segment of the market, which is viewed as a key growth area, particularly in light of the fact that 50% of the Malaysian population is estimated to be younger than 25. The country already has 15.9 million internet users and, over the past three years, they have increasingly started to access the internet through various mobile and wireless devices.
However, in a sense, the Malaysian telecom market is less competitive than other Asian markets as the key players have been expanding overseas and, just like Maxis did in its previous reincarnation, they use their domestic operations to fund this expansion. As a result, the Malaysian telecom operators have refrained from price wars that may have had a negative impact on their cashflow and margins. Aside from the mobile business, Maxis also offers fixed-line and international gateway services.
Maxis will be offering 30% of the company, or 2.25 billion shares, all of which are existing shares sold by MCB. About 7.8% of the deal will be earmarked for retail investors and another 50% will be offered to Malaysian investors recognised as Bumiputras (indigenous investors). The remainder will be split between other domestic institutional and international investors. Reducing the number of available shares even further, sources say the company is in discussion with a number of potential cornerstone investors.
Because of its greater market share, analysts argue that Maxis should trade at a premium to DiGi and Axiata, which indeed it did when it was listed as MCB. DiGi, which is viewed as the closest comparable because most of its businesses are in Malaysia, currently trades at a 2010 enterprise value-to-Ebitda multiple of 7.3 and at a price-to-earnings ratio of 14.9 times. Analysts estimate its free cashflow yield at 6.8%.
Axiata, which aside from Malaysia also has mobile operations in Indonesia, Cambodia, Mauritius, Thailand, Sri Lanka, Bangladesh, Pakistan, Iran and Singapore, trades at a 2010 EV/Ebitda multiple of 7, a P/E ratio of 16.8 times and at a free cashflow yield of 4.5%.
While Maxis will only set the price range ahead of the formal roadshow, which is scheduled to kick off on October 23, there is a maximum price of M$5.50 per share attached to the Bumiputra tranche. That price would value Maxis at an EV/Ebitda multiple of 9.6 and a P/E multiple of 16.5 and would imply a free cashflow yield of 6.2%.
A price of M$5.50 per share would also suggest a deal size of M$12.4 billion ($3.6 billion). That will be more than double Petronas Gas's $1.1 billion IPO in 1995, which still ranks as the country's largest listing, according to Dealogic. Maxis Communications' own IPO in 2002 raised $803 million, which makes it the second largest.
Maxis' final price is expected to be fixed in the week of November 9 and the shares should start trading by mid-November. CIMB, Credit Suisse and Goldman Sachs are joint global coordinators and joint bookrunners for the offering, with J.P. Morgan, Nomura and UBS joining them at the bookrunner level.
http://www.financeasia.com/article.aspx?CIaNID=114764
By Anette Jönsson | 15 October 2009
Two years after being taken private, Maxis will relist the domestic portion of its business, offering investors a high-quality yield play.
The Malaysian stockmarket is getting ready for its largest initial public offering ever and it is a familiar face that will be rejoining its ranks. Just over two years after Maxis Communications (MCB) was privatised by its controlling shareholder, Malaysia's largest provider of mobile communication services is about to return with an IPO that looks set to raise about $3 billion.
Like most other companies that are relisted following a privatisation, however, it is a smaller and more streamlined company that is currently being pre-marketed. Most notably, the company's mobile businesses outside Malaysia -- primarily the mobile operations in India and Indonesia -- will stay with the unlisted parent company. The change is signalled by the fact that the unit preparing for a listing is named Maxis Berhad, while Maxis Communications will remain a private entity that will hold the international businesses as well asa controlling stake in Maxis Berhad (from here on referred to as Maxis).
Sceptics have noted that Maxis is the portion of the company that remains after the high-growth businesses in India and Indonesia has been taken out, suggesting that this will be a much less exciting business than it was before it was taken private in June 2007. This is indeed true -- at least with regard to the removal of the fastest growing portions of the business -- though the feedback from domestic investors, in particular, suggests there are still reasons to be excited.
Sources involved in the offering note that, before the privatisation, investors were not that keen on the international business, which they saw as a drain on the company's cashflow. Indeed, much of what the company was earning from the steady and cash-generative domestic operations went straight into the funding of its overseas expansion, leaving shareholders with few benefits and a lot of execution risk.
A similar argument is outlined by Maxis in the preliminary listing prospectus as it lists the reasons behind the buyout and de-listing: The principal shareholder at the time, Ananda Krishnan-controlled Binariang, believed that the overseas expansion [existing and future] "would significantly change the financial and risk profile of MCB due to uncertainties surrounding the investment and regulatory environments in new markets, the substantial capital expenditure required, which may strain MCB's cashflow and dividend payment capability, and the increase in gearing to finance such...investments in new markets, which may result in higher borrowing costs."
"As such, Binariang undertook the privatisation of MCB as it believed that private ownership would accord greater flexibility for MCB to realise its vision to be a leading telecommunications company and to adopt a capital structure consistent with the change in its funding and risk profile," Maxis said.
"Previously the minority shareholders didn't get much of the yield. Now, the interests of the parent company and the minority shareholders are aligned," said one source, noting that Maxis has promised to pay out 75% of its annual earnings as dividends. "The company is giving the market what it wanted two years ago."
What investors who buy into the restructured listing candidate will get is a company with a leading position in the domestic market and very strong cashflow generation -- the free cashflow yield is estimated at 6%-7%. Given its size, Maxis will also be a bell-weather stock in the Malaysian market and is expected to go into all the benchmark indices, meaning investors who follow Malaysia or the telecom sector will pretty much have to buy it. Meanwhile, domestic investors are already well-familiar with the company and its ability to make money.
That should ensure a successful IPO at least, but that is not to say that Maxis will be an instant hit once it starts trading. Malaysia is a mature mobile market with a 100% penetration rate and while Maxis is the dominant player with a 46% share of the post-paid market and 38% of the pre-paid subscriptions, it does have competition from the number two and three players -- Celcom, which is owned by Axiata (formerly TM International), and DiGi.
"People don't question the quality [of Maxis], they question the growth and how much competition there is in the market," said the earlier quoted source.
The level of competition will be of particular importance in the wireless broadband segment of the market, which is viewed as a key growth area, particularly in light of the fact that 50% of the Malaysian population is estimated to be younger than 25. The country already has 15.9 million internet users and, over the past three years, they have increasingly started to access the internet through various mobile and wireless devices.
However, in a sense, the Malaysian telecom market is less competitive than other Asian markets as the key players have been expanding overseas and, just like Maxis did in its previous reincarnation, they use their domestic operations to fund this expansion. As a result, the Malaysian telecom operators have refrained from price wars that may have had a negative impact on their cashflow and margins. Aside from the mobile business, Maxis also offers fixed-line and international gateway services.
Maxis will be offering 30% of the company, or 2.25 billion shares, all of which are existing shares sold by MCB. About 7.8% of the deal will be earmarked for retail investors and another 50% will be offered to Malaysian investors recognised as Bumiputras (indigenous investors). The remainder will be split between other domestic institutional and international investors. Reducing the number of available shares even further, sources say the company is in discussion with a number of potential cornerstone investors.
Because of its greater market share, analysts argue that Maxis should trade at a premium to DiGi and Axiata, which indeed it did when it was listed as MCB. DiGi, which is viewed as the closest comparable because most of its businesses are in Malaysia, currently trades at a 2010 enterprise value-to-Ebitda multiple of 7.3 and at a price-to-earnings ratio of 14.9 times. Analysts estimate its free cashflow yield at 6.8%.
Axiata, which aside from Malaysia also has mobile operations in Indonesia, Cambodia, Mauritius, Thailand, Sri Lanka, Bangladesh, Pakistan, Iran and Singapore, trades at a 2010 EV/Ebitda multiple of 7, a P/E ratio of 16.8 times and at a free cashflow yield of 4.5%.
While Maxis will only set the price range ahead of the formal roadshow, which is scheduled to kick off on October 23, there is a maximum price of M$5.50 per share attached to the Bumiputra tranche. That price would value Maxis at an EV/Ebitda multiple of 9.6 and a P/E multiple of 16.5 and would imply a free cashflow yield of 6.2%.
A price of M$5.50 per share would also suggest a deal size of M$12.4 billion ($3.6 billion). That will be more than double Petronas Gas's $1.1 billion IPO in 1995, which still ranks as the country's largest listing, according to Dealogic. Maxis Communications' own IPO in 2002 raised $803 million, which makes it the second largest.
Maxis' final price is expected to be fixed in the week of November 9 and the shares should start trading by mid-November. CIMB, Credit Suisse and Goldman Sachs are joint global coordinators and joint bookrunners for the offering, with J.P. Morgan, Nomura and UBS joining them at the bookrunner level.
http://www.financeasia.com/article.aspx?CIaNID=114764
Learning the Ropes of Investing
Learning the Ropes of Investing
Six Benefits of Joining an Investment Club
© Odiete Eneakpodia
Oct 18, 2009
The path to financial freedom goes beyond just earning money from a regular job and saving it. Successful wealth accumulation begins when we learn how to multiply our money.
A lot of people are today familiar with the need to invest their money however they don’t have the requisite knowledge to make profitable investment decisions especially since the world of investment is fraught with risks and uncertainties.
One way to build knowledge and gain confidence about investing is through investment clubs.
1. What is an investment club?
2. Benefits of investment clubs
(Access to investment ideas that could boost your personal investment activities
Club meetings provide you access to smart ideas on attractive investment opportunities such as what stock is currently a must buy in the market, new private placement opportunities etc. Sharing in the research of others and the extra bonus of a group setting for discussing investment ideas and issues often enriches the quality of our investment decision making.
Many clubs also develop unique learning activities that could include listening to and watching investment training videos from top investment experts, playing investment games like cash flow 101 developed by Robert kiyosaki, attending investment workshops, etc.)
3. You could become your own stock analyst
(One thing a rookie investor can learn form joining and participating in the activities of your investment club is the skill to pick stocks he wants to invest in rather than relying on his intuition or his stock broker.
It gives him the skill to analyze stocks and other investments on his own before putting his money. This knowledge acquired will prove useful in his own personal investment activities.)
4. Leverage the power of numbers to minimize risk
5. Build wealth gradually and achieve financial independence
(Joining an Investment club enables a newbie investor master the discipline of setting aside a part of your income periodically to invest an ideal strategy to gradually build wealth and achieve financial independence.)
6. Social networking
Read more: http://investment.suite101.com/article.cfm/learning_the_ropes_of_investing#ixzz0UKk1xBKa
Six Benefits of Joining an Investment Club
© Odiete Eneakpodia
Oct 18, 2009
The path to financial freedom goes beyond just earning money from a regular job and saving it. Successful wealth accumulation begins when we learn how to multiply our money.
A lot of people are today familiar with the need to invest their money however they don’t have the requisite knowledge to make profitable investment decisions especially since the world of investment is fraught with risks and uncertainties.
One way to build knowledge and gain confidence about investing is through investment clubs.
1. What is an investment club?
2. Benefits of investment clubs
(Access to investment ideas that could boost your personal investment activities
Club meetings provide you access to smart ideas on attractive investment opportunities such as what stock is currently a must buy in the market, new private placement opportunities etc. Sharing in the research of others and the extra bonus of a group setting for discussing investment ideas and issues often enriches the quality of our investment decision making.
Many clubs also develop unique learning activities that could include listening to and watching investment training videos from top investment experts, playing investment games like cash flow 101 developed by Robert kiyosaki, attending investment workshops, etc.)
3. You could become your own stock analyst
(One thing a rookie investor can learn form joining and participating in the activities of your investment club is the skill to pick stocks he wants to invest in rather than relying on his intuition or his stock broker.
It gives him the skill to analyze stocks and other investments on his own before putting his money. This knowledge acquired will prove useful in his own personal investment activities.)
4. Leverage the power of numbers to minimize risk
5. Build wealth gradually and achieve financial independence
(Joining an Investment club enables a newbie investor master the discipline of setting aside a part of your income periodically to invest an ideal strategy to gradually build wealth and achieve financial independence.)
6. Social networking
Read more: http://investment.suite101.com/article.cfm/learning_the_ropes_of_investing#ixzz0UKk1xBKa
KLSE Market Performance last week
Asian Economic News
--------------------------------------------------------------------------------
Malaysian Shares May End Win Streak
10/18/2009 6:41 PM ET
(RTTNews) - The Malaysian stock market has finished higher now in four consecutive sessions, collecting more than 20 points or 1.9 percent to hit a fresh closing high for the year. The Kuala Lumpur Composite Index moved above the 1,255-point plateau, but now analysts are forecasting a modest retreat at the opening of trade on Monday.
The global forecast for the Asian markets suggests weakness, thanks to disappointing economic and earnings news out of the United States. Technology and financial stocks are expected to be under pressure, although strength among the commodities - especially oil - may provide some support. The European and U.S. markets finished modestly lower on Friday, and the Asian markets are forecast to follow that lead.
The KLCI finished modestly higher on Friday, thanks to firm support from the financial stocks and the plantations, while the industrial issues saw more modest gains.
For the day, the index added 9.91 points or 0.80 percent to finish at 1,256.77. Volume was 1.147 billion shares worth 1.217 billion ringgit. There were 481 gainers and 239 decliners, with 238 stocks finishing unchanged.
Among the gainers, DBE Gurney Resources, SKP Resources, TA Enterprise, Sime Darby, Maybank, CIMB Group, Tenaga, IOI Corp and Genting all finished higher.
http://www.rttnews.com/Content/AsianMtUpdates.aspx?Node=B3&Id=1096268
--------------------------------------------------------------------------------
Malaysian Shares May End Win Streak
10/18/2009 6:41 PM ET
(RTTNews) - The Malaysian stock market has finished higher now in four consecutive sessions, collecting more than 20 points or 1.9 percent to hit a fresh closing high for the year. The Kuala Lumpur Composite Index moved above the 1,255-point plateau, but now analysts are forecasting a modest retreat at the opening of trade on Monday.
The global forecast for the Asian markets suggests weakness, thanks to disappointing economic and earnings news out of the United States. Technology and financial stocks are expected to be under pressure, although strength among the commodities - especially oil - may provide some support. The European and U.S. markets finished modestly lower on Friday, and the Asian markets are forecast to follow that lead.
The KLCI finished modestly higher on Friday, thanks to firm support from the financial stocks and the plantations, while the industrial issues saw more modest gains.
For the day, the index added 9.91 points or 0.80 percent to finish at 1,256.77. Volume was 1.147 billion shares worth 1.217 billion ringgit. There were 481 gainers and 239 decliners, with 238 stocks finishing unchanged.
Among the gainers, DBE Gurney Resources, SKP Resources, TA Enterprise, Sime Darby, Maybank, CIMB Group, Tenaga, IOI Corp and Genting all finished higher.
http://www.rttnews.com/Content/AsianMtUpdates.aspx?Node=B3&Id=1096268
Subscribe to:
Posts (Atom)