Currency Trading

Currency can be traded much like securities or as derivatives.

The purposes for trading vary but generally can be distilled down to either:

• speculation or 
• hedging.

Currency Speculation

Currency speculation can be a lucrative pursuit for skilled traders.

By analyzing macroeconomic variables such as inflation, interest rates, income levels, and governmental policies, currency traders can place bets on a currency with the hope of profiting from them.

Currency speculation can be complicated by the combination of market forces, the outcome of which can be difficult to predict.

Currency trading is complicated.   

[For example:

• A trader decides he wants to bet on the euro because he believes the European Central Bank will raise interest rates.
• At the same time, countries across the European Union are reporting substantial increases in inflation.
• This trader learns that one of the largest currency hedge funds is selling its position in the euro.]

There is no foolproof algorithm for predicting what will happen to a particular currency as a result of movements in influential variables.

No one can predict the direction currency will take 100 percent of the time.

Currency Hedging

Currency hedging is a practice that can be employed 

• by anyone taking a relatively large speculative position in a currency or 
• by a business seeking to manage risk.

Here are several protective hedging strategies:

• Options
• Forwards
• Futures

[Suppose Company X starts buying parts from a supplier in Europe.

Part payments are made in euros and are due 30 days after receipt of the parts

The euro seems to be rising against the dollar, which leaves Company X rather vulnerable.

In fact, if the euro rises significantly by the time payment is due, it could wipe out a good portion of Company X's expected profits.

What can the company do?

Here are several protective hedging strategies:

1.  Options.  

Buy calls on euros.

If the euro rises, the call becomes worth more, offsetting the increased payment amount owed to the supplier.

The downside of this strategy is that calls come at a price.

2.  Forwards

Company X can structure a forward contract to lock in a specific exchange rte, thus hedging from any exchange rate fluctuations.

The forward rate would be the specified exchange rate at which the currency will be exchanged.

3.  Futures

Company X can purchase a currency future requiring a standard amount of currency to be exchanged at a specific exchange rate on a specific settlement date.

Company X could purchase the future on an exchange, enabling the company to sell the future if rates hold or reverse. ]

[Now, suppose Company X sells its products in Europe and payments are made in euros.

The company stopped buying parts from Europe and now merely exports its products to Europe.

Sales are often credit-based, leaving the company with hefty accounts receivable.

What happens if these credit payments are owed 30 days after the customer takes possession?

If the euro fell against the dollar, the company would see its profits erode.

Hedging strategies can be employed by using the tools mentioned previously:

1.   Options

Buy puts on euros.

If the euro falls, the puts become worth more, offsetting the decreased payment amount owed to the company by its customers.

2.  Forwards

Just as before, Company x could create a forward contract to lock in the rate received from its customers.

3.  Futures

Company X could purchase dollar futures.  

If the euro declines against the dollar, the dollar future will increase, off-setting any loss of value on the receivable.]

Currency Arbitrage

Arbitrage allows an investor or trader to capitalize on pricing discrepancies.  

Arbitrage is used widely in the currency markets and usually takes on the following forms.

Locational Arbitrage

Locational arbitrage is based on the idea that one can buy currency at one location and sell it immediately at another location, instantaneously locking in a profit.  

A pricing discrepancy in the market allows for this.  

Arbitrage opportunities are generally short-lived, so you have to act fast, and usually the market corrects itself quickly.

Triangular Arbitrage

What if you could buy dollars with pounds, exchange the dollars for euros, and then exchange the euros back to dollars, earning a tidy profit during this round trip?

To determine whether a triangular arbitrage opportunity exists, you first would determine the cross exchange rate for dividing the USD to euro rate by the USE to GBP rate.

This would give you a cross exchange rate, GBP to euro.

This tells you that the bank is offering too many euros for pounds, which means the arbitrage opportunity does indeed exist.

You earned a profit because the bank overstated the cross exchange rate.

You were able to capitalize on this and earned a profit in the process.

The Biggest Problem in Currency Trading

The BIGGEST PROBLEM currency market players face is not understanding why currency exchange rates move in a particular direction when the factors affecting currency indicate something else

Unfortunately, the driving forces behind currency do not always indicate a definitive outcome; that is why currency trading is not for the faint of heart.

How to manage currency fluctuations and how to profit from them?

Nearly identical products sold in different countries can have major price differences when currency exchange is factored into the equation.

Directional shifts in currency exchange rates could allow one to hedge against or even profit from those shifts.

In a global economy, currency plays a pivotal role in the way transactions are structured.

From investment banking to corporate management, currency is involved in nearly all international financial decisions.

As the global economy becomes more complex, currency issues will continue to evolve.



Currency Exchange Rates

With the advantages of selling to the world come the challenges of managing global finance.

Currency plays a prominent role in the way businesses conduct their business and to whom they sell.

Financial managers must develop currency strategies to manage their receivables and payables.


For example, if the US dollar drops against the Malaysian Ringgit, it could hurt a Malaysian exporting company whose receivables are denominated in US dollar.

If the Malaysian Ringgit increases in value against the US dollar, it could raise the Malaysian foreign  owned company's manufacturing costs and perhaps cause management to consider moving its manufacturing facilities abroad.

Shifts in currency exchange rates can affect how much a company ultimately earns; therefore, a solid understanding of currency will allow management to craft an effective strategy to address unexpected shifts.



Determining the Exchange Rate

The exchange rate of any currency is its price.

It indicates how much of one currency is needed to buy one unit of another currency.

Suppose it takes 1 US dollar to purchase MR 3.50.  The value of 1 US dollar would be MR 3.50.

The value of 1 MR in US dollars therefore would be 0.2857 US dollar (1 US dollar/ MR 3.50).



How is this value determined?

What causes that 1 US dollar to equal MR 3.50 and 1 MR to equal 0.2857 US dollar?

Currency is no different from anything that is bought or sold, and therefore, economic principles determine its price.

A currency price is based on the price at which demand for that currency equals supply of that currency.  This is known as the equilibrium exchange rate.

Changes in supply and demand affect the exchange rate.



Currency Supply and Demand Curve:  

The supply curve for the currency is upward-sloping.  The supply of the currency increases when the value of the currency is strong.

The demand curve for the currency is downward-sloping.  The buyers tend to demand more of something when its price is lower.

For example, Americans would be more likely to exchange their dollars for yen when the value of the yen is lower.  This enables American consumers and corporations to buy more Japanese products at lower price.

When the value of yen is higher, demand for yen will be lower as Americans are less likely to exchange their dollars for yen as Japanese products are now more expensive.


Factors That Affect Currency Exchange Rates

The following factors have a direct impact on exchange rates.

Relative Inflation

If the US experiences higher inflation relative to Japan, U.S. goods become more costly than Japanese goods.

As a result, American consumers will demand Japanese substitutes.

This will increase the demand for Japanese yen needed to purchase Japanese products.

At the same time, the supply of yen for sale probably will decrease as Japanese holders of yen are less likely to buy American products, which are now more expensive.

The increased demand for yen and the decreased supply of yen will push the price of yen higher.


Interest Rates

If U.S. interest rates rise relative to Japanese interest rates, the supply of yen for sale will increase as more holders of yen will want to purchase dollars to earn more interest in dollars.

As a result, the value of yen will decrease.

Furthermore, the demand for yen should decrease because investors would rather deposit their money in American banks and therefore will demand dollars more than yen.

The decrease in demand combined with the increase in supply will cause a drop in the value of yen as a result of rising interest rates in the United States.


Income

If income levels in the United States increase while income levels in Japan remain unchanged, demand for Japanese goods should increase along with yen.

The shift in relative income is not likely to affect the supply of yen as a change in U.S. income levels will do little to incentivize Japanese yen holders to exchange more yen for dollars.

The increase in demand therefore should raise the exchange rate as American consumers probably will buy more Japanese products overall.

Speculation

Speculators can cause dramatic movements in currency prices.

They may base their trades on economic predictions or in some cases on expectations of what other high-volume traders will do next.

As more market participants move in tandem, currency values are often driven less by economic fundamentals and more by momentum traders.


Government

By imposing trade barriers and foreign exchange barriers, governments can affect currency values indirectly.

They do this by making it more difficult for foreign businesses to engage in import and export activity, which in turn will affect supply and demand for currency.

At the same time, a government can buy or sell its country's currency, which will affect its supply and ultimately its value.

Government policy changes, however, may not achieve the desired outcome when it pertains to currency .... or anything else for that matter.


Interaction of Factors

Any combination of these factors can affect currency in unpredictable ways.

If you could predict precisely how a combination of factors will affect currency values, you would be busy trading currency from your private island!

Understanding the turmoil in Syria.

Stocks and Bonds

The balance sheet helps us understand the overall financial health of a company.

A major factor in determining financial health is the company's underlying capital structure.

What is the best way to capitalize a company?  Is it equity or debt?  The answer is that it depends, as both debt and equity have their advantages.


Debt

Debt offers the following advantages.

1.   Lenders have no direct claim on future earnings.  Debt can be issued without worries about a claim on earnings.  As long as the interest is paid, the company is fine.

2.  Interest paid on debt can be deducted for tax purposes.

3.  Most payments, whether they are interest or principal payments, are usually predictable, and so a company can plan ahead and budget for them.

4.  Debt does not dilute the owner's interest, and so an owner can issue debt and not worry about a reduced equity stake.

5.  Interest rates are usually lower than the expected return.  If they are not, a change in management can be expected soon.



Debt securities can take a number of different forms, the most common being bonds.

Bonds are obligations secured by a mortgage on company property

Bonds tend to be safer from the investors' standpoint and therefore pay lower interest.

Debentures, in contrast, are unsecured and are issued on the strength of the company's reputation, projected earnings, or growth potential.

Debentures, being far riskier, tend to pay more interest than do their more secure counterparts.




Equity

Equity has the following advantages:

1.  Equity does not raise a company's break-even point.  A company can issue equity and not have to worry about achieving performance benchmarks to fund the equity.

2.  Equity does not increase the risk of insolvency, and so a company can issue equity and not have to worry about any subsequent payments to service that equity.  Equity is essentially capital with unlimited life and so a company can issue equity and not have to worry about when it comes due.

3.  There is no need to pledge assets or offer by personal guarantees when equity is issued.



Equity can take a number of different forms.

A simple form of equity is common stock.

This type of stock offers no limits on the rate of return and can continue to rise in price indefinitely.

There are no fixed terms; the stock is issued and the holder bears the stock.

Preferred stock entitles the holders to receive dividends at a fixed or adjustable rate of return and ranks higher than common stock in a liquidation.

Preferred stock may have anti-dilution rights so that in a subsequent stock offering, preferred stockholders may maintain the same equity stake.

Convertible securities are highly structured in nature and are based on certain parameters.  As the word convertible indicates, they may convert into other securities.

Among the most common are warrants and options.

Warrants and options stand for the right to buy a stated number of shares of common or preferred stock at a specified time for a specified price.

There are also convertible notes and preferred stock, which refer to the right to convert these notes to some common stock when the conversion price is more favourable than the current rate of return.

Valuation

To get ahead, be creative.

No matter what a client desired, a good banker could always tweak the numbers a bit and could produce the numbers:

• a higher selling price,
• a lower purchase price, 
• stronger margins,
• lower capital costs.

Valuation Basics

Time Value of Money

Present Value   

Methods of Valuation

Valuation is far more of an art than a science.

"The value of that work is $1 million, because that is what the buyer and seller agreed on."

With detailed valuation models, the key factors that drove a company in the past, along with those which will continue to drive it in the future, can be examined.

Both sides are able to form a better picture of the potential as well as the risks associated with this company.

Through this process of dialogue, they hope to be able to build a consensus.  With a little luck, they just might close a sale.

There are numerous uses for valuation.   

A few of the more common ones are:

• Venture capital
• Initial public offerings
• Mergers and acquisitions
• Leveraged buyouts
• Estate and tax settlements
• Divorce settlements
• Capital raising.
• Partnerships
• Restructuring
• Real estates
• Joint ventures
• Project finance.

Even if you have no dealings in these types of transactions and more specifically, no interest in them, it is important to have at least a basic understanding of the underlying principles and techniques of valuation.

Why?   Because so much of what we do and so much of what governs out personal lives is driven by these principles.

• The simple decision to lease or buy a care is driven by valuation.
• The decision to own or rent an apartment is driven by valuation.
• Changes in the stock market that might affect your job are a function of valuation.

It is important that each one of us understand the basics of valuation because we no longer can rely on the experts on Wall Street, in corporate America, and at the big accounting firms.

Ultimately, we all bear some responsibility because we were the ones who failed to educate ourselves.

Various Methods of Valuation

• Replacement Method
• Capitalization of Earnings
• Excess Earnings Method
• Discounted Cash Flow Valuation
• Comparable Multiple Valuation
• Net Present Value
• Internal Rate of Return

Putin's comments on Trump and the US Election

Tesco Grows Its Market Share For the First Time in 5 Years

The supermarket giant’s turnaround plan appears to be working.

Tesco grew market share for the first time in five years over the last three months, the clearest sign to date that Britain’s biggest supermarket chain is recovering from years of turmoil to accelerate away from rivals.

"Tesco has attracted a further 228,000 shoppers through its doors to help the grocer grow to a 28.2% share of the market – its first year-on-year market share gain since 2011,” said Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel.

“Sales growth has been strongest among family shoppers, while improved trading from its larger supermarket and Extra stores has supported this month’s gains.”

Tesco shares traded up 2% to 205 pence, outperforming Britain’s bluechip index which was trading 0.8% higher.

http://fortune.com/2016/10/18/tesco-sainsburys-market-share/

Interesting Donald Trump tough Interview

Trump versus Clinton: The issues in US election.

Trump Panama City Florida



FULL EVENT: Donald Trump 30K Rally in Panama City, Florida 10/11/2016 Trump Live Panama Speech

Warren Buffett's US Federal Tax: Are you surprised or amazed by the amount of US Federal tax paid by Warren Buffett?

Warren Buffett released his US Federal tax returns.

He reported an income of about US 40 million and paid about US 2 million last year.

I am surprised by the small amount of reported income and Federal tax he paid relative to his actual wealth in the US billions of dollars.

However it is all legal within the tax code.

He receives US 100,000 a year in salary for managing Berkshire Hathaway.

This too places him in a lower tax bracket.

This US election has provided insights into how the rich uses the tax code to pay the minimum amount of tax legally.

The tax code should be revamped to seal up all the loop holes and simplified too.

The tax accountants are doing a great job reducing the taxes of the super rich.

It is not illegal but is it fair and reasonable?  

Top Glove achieved another record performance despite intense competition

PRESS RELEASE
Top Glove CorporationBhd


TOP GLOVE MARKS ANOTHER RECORD YEAR

Group achieves historical highs in Revenue and Profit

Shah Alam, Wednesday, 12 October 2016 – Top Glove Corporation Bhd (“Top Glove”) today announced its results for the Fourth Quarter (“4QFY16”) and full year ended 31 August 2016 (“FY2016”), marking yet another record year, with historical highs in both full year Revenue and Profit.

Posting another outstanding performance for the financial year 2016, the Group attained its highest Revenue ever of RM2.9 billion, an increase of 15.1% over FY2015. Meanwhile Profit Before Tax and Profit After Tax each also registered record highs, at RM442.6 million and RM362.8 million,
respectively representing an upturn of 21.8% and 29%. Volume (quantity sold) was also at an all-time high, notwithstanding intensifying competition and pricing pressure.

The robust set of numbers was attributed to several improvement initiatives which have proven instrumental in enhancing quality and cost efficiency, the twin pillars of Top Glove’s time-tested success formula. A stronger USD, as well as lower raw material prices earlier in the financial year, also boosted the Group’s performance.

For 4QFY16, the Group achieved Revenue of RM722.1 million and Net Profit of RM65.8 million, delivering growth of 7.4% and 4.8% respectively, compared with 3QFY16, notwithstanding intensive competition and cost increases stemming from hikes in minimum wage, as well as the natural gas tariff.

On a year-on-year comparison, 4QFY16 results were relatively softer, with a marginal increase in Revenue of 1.8%, while Profit After Tax declined by 36.2%. The less favourable comparison came on the back of a challenging environment in 2HFY16, as tailwinds from 1HFY16 gradually turned to
headwinds. Increased competition in the second half of the financial year also led to a downward revision of the average selling price, while volatility in raw material prices and forex created a mismatch in the cost pass-through system.

On Top Glove’s performance, its Executive Chairman, Tan Sri Dr Lim Wee Chai remarked, “We have done well in FY2016. Amidst a challenging business environment with substantial cost increases and intense competition, we have achieved another record performance and our best year yet!” “This is a credit to the internal quality and efficiency enhancements we have been implementing continually, as well as our management team and staff, who have worked hard to ensure we deliver a performance worthy of the Top Glove name” he added.

Top Glove which celebrates its 25th anniversary this year, remains on expansion mode. The Group completed the expansion of Factory 27 (Lukut) in August 2016 while the expansion of Factory 6 (Thailand) is expected to be completed by November 2016. Meanwhile, in progress is the construction of a new facility, Factory 30 (Klang), expected to commence production by April 2017, by which time Top Glove will have a total of 540 production lines and a production capacity of 52.4 billion pieces of gloves per annum. With a view to expanding its production capacity, the Group also recently acquired a factory in Klang (Factory 31). The facility is estimated to be able to produce 6 billion pieces of gloves per annum, with Phase 1 targeted to be operational by mid-2017. Top Glove will continue to pursue M&A opportunities that synergise with its current business, both in similar or related industries.

On 28 June 2016, the Group successfully completed its secondary listing on the Mainboard of the Singapore Exchange, an exercise undertaken to add and create value for its shareholders and stakeholders.

Honouring its commitment to enhance shareholder value, the Board of Directors has proposed a final dividend of 8.5 sen, bringing the total FY2016 dividend payout to 14.5 sen, subject to shareholders' approval at the upcoming AGM in January 2017. This represents a 26% increase in dividend per share compared with the previous financial year and a dividend payout ratio of 50.3%.

As at 31 August 2016, the Group also maintained a healthy balance sheet and a positive net cash position of RM303.7 million.

Top Glove foresees a competitive business landscape ahead, with the likelihood of oversupply and eventually, industry consolidation taking place. However, the Group is confident of overcoming any challenges that may arise by enhancing its cost management and optimising the efficiency of its production lines. The Group views the potential consolidation as an M&A opportunity.

Notwithstanding its commendable results, Tan Sri Dr Lim asserts, “We do not take our achievement for granted. Continuous improvement in quality and efficiency is our duty and an ongoing journey for us. This will ensure we stay healthy and competitive for another 25 years and beyond”.




http://www.financialreport.biz/File/2016/10/12/7113%20-%201308477838029.pdf

Investing in economic moats. A lot of investors wasted time on margin of safety and suffered a large opportunity cost.

Overestimating and Underestimating an Economic Moat

For those who invest into economic moats, be mindful of two possibilities.

1.   Overestimating a moat:  

This means (over-)paying for value creation that will never materialize.

2.   Underestimating a moat:

This means there is a large opportunity cost.  

On finding a good business opportunity, invest in it as it is going to compound at high rate.  

This avoid the suffering of opportunity cost.

Wasting time on margin of safety and not a lot on opportunity cost is the problem of a lot of investors.



Moats matter in a long run.

Most of the investors own securities for a short period of time.

Moats matter in a long run.

Most investors focus on short-term changes in price and not long term changes in moats.

Finding moats means finding efficiency of business.


Quantitative versus Qualitative factors

The quantitative data in market tends to be very efficiently priced.

Qualitative insight is understanding the structural characteristics of the business.

All the information is in the past, but all the value is in the future.

The future value creation will come from the things you see today and not necessarily the information that occurred in past.

The economic moats have a significant effect in keeping the organizations at the top and it is a good defense of an organization against competitors.


http://investingjournal.io/investing/economic-moats-pay-dorsey/

Investing in Economic Moats

High profits attract attention which makes more people invest.

As a result,the profit of companies decreases over time for most of the companies as competition comes in.

There are companies who defy economic gravity by creating structural advantages, economic moats.

The moats insulate and buffer them against competition.

Thus, they keep super-normal returns on capital for a longer duration.


Insight of intangible assets having effect on Moats

1. Brands

Being well known is not sufficient.

There needs to be a change in the consumer behaviour by increasing the willingness to pay or reducing the search costs thus resulting in the increase of the value of the company.

2. Patents

Despite being legal, they are subject to expiry, challenge and piracy.

To rely on patents as a moat there is need of portfolio of them as it is hard to invalidate one or the other.

3. Licenses/approvals

It is not easy to get a license or approval and it serves as a solid moat.




Restraints to try new businesses

1.  Switching cost effect

Switching to competitive products is expensive and time-consuming.

Service relationships can be sold in the form of maintainance by attaching a service to the product.

By providing high benefit to cost ratio, it is more beneficial when switching business is being looked for.


2.  Network effect

There are two types of networks - radial and interactive.

Radial networks are less effective and robust.

By providing the service that increases the value of the company as the number of users expand and aggregate demand is increased between parties scattered at different places.

As soon as the number of nodes and connections is increased the network becomes hard to replicate thus becoming a strong moat.


3.  Cost Advantages

Process:  By inventing a cheaper way to deliver a product that cannot be replicated quickly.

Scale:  Spread fixed costs over a large base.  Relative size matters more than absolute size.

Niche:  Establish minimum efficient scale.



Role of Management

Management plays an important role in moats.

Managerial skills are inversely proportional to the quality of business.

Good managers look for ways to widen the companies moat.

Bad managers invest capital outside company's moat.



http://investingjournal.io/investing/economic-moats-pay-dorsey/

Advantages of Moats. Moats matter a lot as it adds to the intrinsic value of the company.

Advantages of Moats

Moats can buffer the mistakes of management and save the business from complete disaster because the business was strong and robust (e.g. Microsoft and New Coke).

Local differences can create moats.

Foreign companies are not allowed to own banks thus allowing Canadian banks to be more profitable.

Minimum efficient scale is more common as big companies may not invest in small businesses thus giving complete ground to the small companies.

Cultural preferences matter a lot since the things famous in one country might not do well in another country (e.g. food products), thus allowing these businesses to build moats around them.


Moats matter a lot as it adds to the intrinsic value of the company.

A firm which can compound cash flow for many years has more worth than the firm which cannot.

Companies with no moats, capital comes down fast, as compared to the companies with greater moats.

The value of an economic moat is also largely dependent on reinvestment opportunities.

The ability to reinvest a lot of cash at high incremental ROIC would make it a very valuable moat.

If a firm has little ability to reinvest it would add a little to the intrinsic value of the moat.

Moats are not limited only to big companies.

Moats are beneficial in creating stability and building confidence.


Role of Management

Management plays an important role in moats.

Managerial skills are inversely proportional to the quality of business.

If the business is good, an average management would also do fine.

For bad business, a good manager is required.

Good managers look for ways to widen the companies moat.

Bad managers invest capital outside company's moat.

There are exceptions where a good manager can do good in bad businesses.

http://investingjournal.io/investing/economic-moats-pay-dorsey/

Warren Buffett & Charlie Munger - 2016 Berkshire Hathaway Shareholder Meeting Highlights

Warren Buffett: Game Changers

Warren Buffett: The Teacher

Scientex matches products with markets to boost sales

September 27, 2016, Tuesday


KUCHING:

Industrial and Consumer Packaging Products

Scientex Bhd (Scientex) has started to make in-roads into new markets for both its industrial and consumer packaging products based on different marketing strategies adopted for specific markets to boost sales demand.

“The group continues to emphasise on quality products and to this end, the ongoing upgrading of facilities and commissioning of new machinery in its Rawang, Pulau Indah, Ipoh and Melaka plants,” the group said in releasing its results yesterday.

“Further, to remain competitive in the global market place and as part of its on-going efforts to boost (profit) margins, the group has taken pro-active steps to enhance its operational efficiency through its continuous efforts to reduce cost and wastages.”

Additionally, the group’s brand new castpolypropylene (CPP) plant is slowly building up its production capacity to meet the demands of its customers whilst the group’s brand new state-of-the-art multi-million biaxially oriented polypropylene (BOPP) film manufacturing plant at Pulau Indah has started testing and commissioning works since July 2016 with full commissioning and commercial operation slated by the second half of the year.

“The group is confident that given the strategies put in place, demand from both local and overseas for its industrial and consumer packaging products is expected to be positive for the coming financial year as it offers quality products with a wider and diversified product portfolio to its expanded global customer base,” Scientex said.



Property Division

Moreover for the property division, Scientex believed the group’s performance for the quarter ended July 2016 was focused primarily on affordable homes in Pasir Gudang, Senai and Kulai projects in Johor where demand remained resilient and robust.

For the quarter ended July 2016, Scientex noted the group was on track and launched its latest Pulai land development which was successfully acquired in early 2016.

“The phenomenal demand for its initial two maiden launches under this development has given a strong boost to the group and plans are underway to tap the huge demand for such affordable homes within the vicinity of this region.

“One of its main attraction is the construction of a new link road by the group that has improved connectivity and accessibility to Gelang Patah, Johor. The upcoming completion of the proposed Kangkar Pulai Interchange to the SecondLink has also boosted the viability and location of this development,” the company observed.

Apart from that, the group also seek to address rising constructional costs by incorporating innovative designs, blending with the environment and tapping operational efficiencies to reduce costs and wastage.

Scientex said its township development projects were all well designed to optimise the use of land space through efficient land usage, density and systematic execution of works to boost operational margins and reduce financing costs through better cash flow management and timing of its launches.

The company noted the group is making preparations for the launch of its two pieces of lands in Ipoh of which vacant possession for its Klebang land has been taken over recently and poised to be launched in the first or second quarter of the coming financial year.

The Meru land acquisition is expected to be completed in September with a maiden launch to be held thereafter, further boosting the sales of the group from these new projects over the medium and longer term.

The group foresees the affordable housing segment will continue to play a pivotal role in contributing to the group’s top and bottomline for the coming financial year.


http://www.theborneopost.com/2016/09/27/scientex-matches-products-with-markets-to-boost-sales/

Scientex’s 4QFY16 earnings up 11 per cent to RM54.14 million, revenue grows to RM561 mln

September 27, 2016, Tuesday


KUCHING: Scientex Bhd’s (Scientex) earnings for the fourth quarter of 2016 (4QFY16) ended July 2016 gained by 11 per cent year-on-year (y-o-y) to RM54.14 million from RM48.91 million recorded in 4QFY15 ended July 2015.

The company in a filing to Bursa Malaysia yesterday said 4QFY16 revenue grew by 24 per cent y-o-y to RM561.06 million from RM452.49 million in 4QFY15.

Scientex noted the improved revenue for 4QFY16 was attributed to higher sales from its property division.

The company in its accounts notes said property revenue recorded in 4QFY16 was RM188.4 million as compared with RM132.6 million in the preceding year corresponding quarter, an increase of 42.1 per cent.

The increase in revenue for the property division was contributed by the steady construction progress and new sales achieved from projects in Johor and Melaka.

However, Scientex noted profit from the division’s operations was lower at RM58.2 million as compared to RM61.5 million in the preceding year corresponding quarter due to product mix for the new project launches in Pasir Gudang, Johor.

Additionally, Scientex shared that its manufacturing revenue increased by 16.5 per cent y-o-y for 4QFY16 to RM372.7 million as compared with RM319.9 million generated in 4QFY15.

The company explained that the increase was attributed to higher contribution from the consumer packaging products as well as contribution from the newly acquired Scientex Great Wall Ipoh Sdn Bhd.

Earlier, on August 5, 2015, Scientex announced that its wholly-owned subsidiary Scientex Packaging Film Sdn Bhd (SPFSB) had entered into a share purchase agreement with Mondi Consumer Packaging International GmbH to acquire Scientex Great Wall (Ipoh) Sdn Bhd for RM58 million with the transaction completed on August 11.

However, Scientex said its operational profit from the manufacturing segment decreased to RM15.9 million from RM24.8 million due to lower product profit margins.

For the full financial year 2016 (FY16) ended July 2016, Scientex said revenue rose by 22 per cent y-o-y to RM2.2 billion while net profit jumped by 52 per cent y-o-y to RM240.87 million.

Scientex noted that the improved profit was attributed to better sales achieved for both the property and manufacturing

http://www.theborneopost.com/2016/09/27/scientexs-4qfy16-earnings-up-11-per-cent-to-rm54-14-million-revenue-grows-to-rm561-mln/

Mixed feedback on Genting Malaysia selling stake in HK branch

October 5, 2016, Wednesday


KUCHING: Genting Malaysia Bhd (Genting Malaysia) latest move in disposing of the group’s entire 16.9 per cent stake in Genting Hong Kong Limited (Genting Hong Kong) has garnered mixed reactions from analysts.

In a filing on Bursa Malaysia, Genting Malaysia announced the group’s disposal of 1.43 billion ordinary shares in Genting Hong Kong, representing 16.87 per cent of the then total issued and paid-up share capital of Genting Hong Kong, for a total cash consideration of US$415 million or the equivalent of approximately RM1.71 billion.

According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), although this is a related party transaction (RPT), it is a positive move as the non-core stake in Genting Hong Kong has not much impact on Genting Malaysia while the disposal proceeds can be better applied for the latter’s expansion program, such as the RM10.38 billion Genting Integrated Tourism Plan (GITP) development.

“In fact, Genting Hong Kong used to be a wildcard and impacted Genting Malaysia badly in which the latter owned more than 20 per cent stake, which qualified for equity accounting.

“However, since Genting Malaysia reduced its stake to below 20 per cent in 2007, the impact from Genting Hong Kong became immaterial,” Kenanga Research said.

While the announcement did not disclose the disposal gain/loss of this divestment, Kenanga Research believed the impact was small given that the Genting group always reported mark-to-market value on their investments in listed companies on a quarterly basis.

However, the research arm made adjustments to its earnings model to reflect this disposal as the proceeds will affect interest income while it has also made upward adjustment on Genting UK and the North America earnings following their strong numbers in the first half of 2016 (1H16).

In all, the research arm upgraded financial year 2016 estimate (FY16E)/FY17E earnings by eight per cent/six per cent.

In contrast, the research arm of Hong Leong Investment Bank Bhd (HLIB Research) was neutral on this disposal as it is a RPT and the disposal price of US$0.29 is at the minimum price allowed under the mandate (in spite at a 8.2 per cent premium to five days volume weighted average market price (VWAMP)) compared to the average purchase cost of US$0.42.

HLIB Research noted that this disposal allows Genting Malaysia to monetise the group’s loss-making investment in Genting Hong Kong which provides minimal income yield (total dividend received RM106 million versus total investment of approximately RM4.12 billion since 1998)!!!!!!!!!!!!.

“The proceeds of RM1.71 billion can be put into better use for its working capital and capex for its expansions, while maintaining net cash position,” the research arm said.

The research arm further noted that having classified the investment as assets held for sale since year 2015 with a carrying value of RM1.74 billion, there will be a one-off accounting gain on disposal of circa RM1.23 billion after the reclassification of reserves (previous year revaluation and foreign exchanges gain/losses).

On another note, HLIB Research said that potential loss of dividend income from Genting Hong Kong is rather negligible given the inconsistency of dividend payment and the quantum.

Dividend received in FY15 was about RM56 million, which was circa 3.8 per cent of the research arm’s FY16 forecasted profit after tax and minority interest (PATAMI).

“This level of yield can be easily recouped from interest bearing deposit or interest savings from the proceeds,” it said.

Forecast-wise, HLIB Research imputed the effect of the disposal into its balance sheet ignoring the one-off gain/loss/reversal arising from the transaction with no change in earnings.

“We opine that growth in 2017 on higher visitors from the amenities under GITP has been largely priced in, impending for more exciting catalysts in 2018.

“Meanwhile, we are still wary on the uncertain overseas operations, the potential risks in execution and the high cost involved,” the research arm said.


http://www.theborneopost.com/2016/10/05/mixed-feedback-on-genting-malaysia-selling-stake-in-hk-branch/