SembCorp Marine battling its way back...
We all remember those steep losses over unauthorized forex transactions that SembCorp Marine suffered not to long ago...almost like important events in history you may remember for some time where you were when you heard the dollar amount of those loses that took just about everyone by surprise (for me, I was in the office).
Fast forward to now, and SembCorp Marine is battling its way back in the latest development in what will probably be a long saga. They announced yesterday that they have summarily dismissed that employee responsible for making unauthorized forex transactions, Mr. Wee Sing Guan, and Sembcorps subsidiary, Jurong Shipyard has logged a complaint against him with the Commercial Affairs Department...
So, movement on the issue has now happened as Sembcorp tries to battle its way back after these steep forex losses. Watch the BlogCast to find out more and leave your comments below on what you think about the whole issue.
Fast forward to now, and SembCorp Marine is battling its way back in the latest development in what will probably be a long saga. They announced yesterday that they have summarily dismissed that employee responsible for making unauthorized forex transactions, Mr. Wee Sing Guan, and Sembcorps subsidiary, Jurong Shipyard has logged a complaint against him with the Commercial Affairs Department...
So, movement on the issue has now happened as Sembcorp tries to battle its way back after these steep forex losses. Watch the BlogCast to find out more and leave your comments below on what you think about the whole issue.
Labels: foreign exchange transactions, SembCorp Marine
Trusts for everything these days, evident by...
First properties, then Ships, Airplanes, now...Water trusts.
That's right, the market got word that Hyflux Water Trust will be making its debut on the Singapore Exchange in the not too distant future. Let me jog your memory to a prior blog entry from October:
http://investorcentral.blogspot.com/search?q=trust+me
Granted I did forget water in the mix there with trains and planes and other forms of trusts, but this is something I find a very interesting concept and offer, and, like I said back in October, I really think it is not going to stop here with just water. Hyflux has been on a tear recently securing a number of projects around the world so I'm not really surprised that they would list a trust. But this trend of "trusts" listing on the exchange I think is something that is going to continue and probably get even more creative just besides ships, property and water.
What do you think about a water trust? Let us know your thoughts and sound off in the comments section below.
Curtis Bergh
That's right, the market got word that Hyflux Water Trust will be making its debut on the Singapore Exchange in the not too distant future. Let me jog your memory to a prior blog entry from October:
http://investorcentral.blogspot.com/search?q=trust+me
Granted I did forget water in the mix there with trains and planes and other forms of trusts, but this is something I find a very interesting concept and offer, and, like I said back in October, I really think it is not going to stop here with just water. Hyflux has been on a tear recently securing a number of projects around the world so I'm not really surprised that they would list a trust. But this trend of "trusts" listing on the exchange I think is something that is going to continue and probably get even more creative just besides ships, property and water.
What do you think about a water trust? Let us know your thoughts and sound off in the comments section below.
Curtis Bergh
Labels: Hyflux, Hyflux Water Trust, IPO
As the dollar keeps going down...
The US dollar, it's been the mainstay of world currencies for years. Commodities are traded in the dollar, even stocks on world markets such as Singapore trade in the US dollar. Countries rich and poor stash greenbacks away in case their own local currency goes down the toilet. Bottom line: it has always been a sense of security and stability as it is the benchmark of world currencies.
But with the decline of the greenback against the Euro, Yen, and Sterling and its weakening position around the world, we have seen companies reevaluate their US dollar traded stocks, and in just the last few days a number of Singaporean listed stocks have taken the plunge and ditched the dollar in favor of trading in the local currency.
Evergro Properties was the first just a few days ago, and yesterday FSL Trust Management came out and said that they will switch to the Singapore dollar as their trading currency for their stock with effect from 30th of November.
As long as the dollar continues to weaken, I think (in my own humble opinion) that this is a trend that will continue. There are only a handful of stocks on the Singapore Exchange that trade in US dollars and two of them within a few days announced a switch to the Singapore dollar. Not surprising given how the greenback is doing.
Don't be surprised if there are more to follow...
Curtis Bergh
But with the decline of the greenback against the Euro, Yen, and Sterling and its weakening position around the world, we have seen companies reevaluate their US dollar traded stocks, and in just the last few days a number of Singaporean listed stocks have taken the plunge and ditched the dollar in favor of trading in the local currency.
Evergro Properties was the first just a few days ago, and yesterday FSL Trust Management came out and said that they will switch to the Singapore dollar as their trading currency for their stock with effect from 30th of November.
As long as the dollar continues to weaken, I think (in my own humble opinion) that this is a trend that will continue. There are only a handful of stocks on the Singapore Exchange that trade in US dollars and two of them within a few days announced a switch to the Singapore dollar. Not surprising given how the greenback is doing.
Don't be surprised if there are more to follow...
Curtis Bergh
Labels: singapore stocks, US Dollar
ASEAN single currency a bad idea
The ASEAN summit in Singapore is closing down and leaders of the grouping have a number of issues to tackle at this years meeting, mainly which is Myanmar, the “problem child” in the group as it has been called.
But putting Myanmar aside, ASEAN is in the process of coming closer together economically and will resemble a European Union style trade bloc in the not to distant future I believe. That’s all fine and great, and I think that will work to the point where you will see greater integration and cohesiveness amongst the grouping, and, benefit all economies rich and poor.
But there have been discussions, rumors, whatever you want to call them, about ASEAN going even further and adopting a single currency similar to the Euro. And while this is just pure speculation at this point, I think if it were to be seriously raised in the meetings that there would be a lot of resistance to it.
But, putting all this aside for the moment, say ASEAN were to move to a single currency similar to the Euro. Some see a lot of similarities between ASEAN and Europe; I see differences – big glaring differences.
First being the economic disparity amongst the landscape of ASEAN countries. When the EU really got going, the economies and per capita levels of individuals of Germany, France, the United Kingdom and other founding countries, were much more “even.” ASEAN nations and citizens of ASEAN play on a completely different level. Having 10 nations convert to a single currency I think would be disastrous…Europe’s integration to the Euro wasn’t necessarily smooth sailing at first, but eventually the underlying strength of their economies did allow things to pick up and now look at where the currency is.
With ASEAN, if a similar event was to happen, I don’t think things would recover like they did in Europe where you’d see the ASEAN currency rebound to the strength like the Euro has vs. the U.S. dollar. Again, that’s just my pure honest opinion and nothing more. A “gut” feeling of mine (and my gut serves me pretty well).
The economies of ASEAN are strong, but not that strong to weather a weak debut. Technically it would be a nightmare as well.
So I don’t seem like I am “ASEAN bashing,” there is one strength I believe a single currency would bring and that would be easier trading for investors and individuals in regional stock markets. Regionally speaking, the markets are moving “closer” together. A single currency would open up access across the board literally for people to put money in just about every major bourse in ASEAN. That could be a plus…but unfortunately I think it is the only advantage of a single currency, and it’s not enough to beat out the disadvantages a single currency would bring.
Maybe 30 years from now, we’ll see this actually become a reality as economies of ASEAN develop, but for now, it’s every currency for itself.
Curtis Bergh
But putting Myanmar aside, ASEAN is in the process of coming closer together economically and will resemble a European Union style trade bloc in the not to distant future I believe. That’s all fine and great, and I think that will work to the point where you will see greater integration and cohesiveness amongst the grouping, and, benefit all economies rich and poor.
But there have been discussions, rumors, whatever you want to call them, about ASEAN going even further and adopting a single currency similar to the Euro. And while this is just pure speculation at this point, I think if it were to be seriously raised in the meetings that there would be a lot of resistance to it.
But, putting all this aside for the moment, say ASEAN were to move to a single currency similar to the Euro. Some see a lot of similarities between ASEAN and Europe; I see differences – big glaring differences.
First being the economic disparity amongst the landscape of ASEAN countries. When the EU really got going, the economies and per capita levels of individuals of Germany, France, the United Kingdom and other founding countries, were much more “even.” ASEAN nations and citizens of ASEAN play on a completely different level. Having 10 nations convert to a single currency I think would be disastrous…Europe’s integration to the Euro wasn’t necessarily smooth sailing at first, but eventually the underlying strength of their economies did allow things to pick up and now look at where the currency is.
With ASEAN, if a similar event was to happen, I don’t think things would recover like they did in Europe where you’d see the ASEAN currency rebound to the strength like the Euro has vs. the U.S. dollar. Again, that’s just my pure honest opinion and nothing more. A “gut” feeling of mine (and my gut serves me pretty well).
The economies of ASEAN are strong, but not that strong to weather a weak debut. Technically it would be a nightmare as well.
So I don’t seem like I am “ASEAN bashing,” there is one strength I believe a single currency would bring and that would be easier trading for investors and individuals in regional stock markets. Regionally speaking, the markets are moving “closer” together. A single currency would open up access across the board literally for people to put money in just about every major bourse in ASEAN. That could be a plus…but unfortunately I think it is the only advantage of a single currency, and it’s not enough to beat out the disadvantages a single currency would bring.
Maybe 30 years from now, we’ll see this actually become a reality as economies of ASEAN develop, but for now, it’s every currency for itself.
Curtis Bergh
Labels: ASEAN, ASEAN Leaders Summit, currency
SGX: Expands Into Philippines - But What For?
The deal the Singapore Exchange signed to take a 20% stake in the Philippine Dealing System Holdings Corp would be interesting, if it wasn't so small, and the derivatives market in the Philippines wasn't so poorly developed. I'm all for the SGX regionalising, but one wonders what the dividends of this deal will be.
The statement by the SGX says:
The wording of the news release is also interesting: "…it has agreed in-principle to accept the offer…" In other words, PDS approached the SGX. Therefore, PDS probably has more to gain from the deal, possibly in terms of the expertise shared by SGX, etc.
The SGX clearly has to keep working to stay relevant, and deals such as this, although small, are an indication that they are doing this. Small companies can grow into bigger companies, as the SGX itself has done.
SGX CEO Hsieh Fu Hua said this morning:
But beyond the small nature of the deal, there is also the question as to who the target market is. The equities market consists of just 240 stocks worth US$93.8 bln – the smallest market in Asia except New Zealand and Colombo. There are many derivatives listed in Singapore covering equities listed in other markets. For Philippine stocks that are worth covering, wouldn't market makers in Singapore have exhausted the possibilities already? Is the domestic Philippine retail market ready for derivatives trading?
Questions which we either have to wait for the SGX – or time – to explain.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
The statement by the SGX says:
PDS operates a fixed-income exchange, depository and foreign exchange settlement platform. This proposed acquisition will provide SGX the opportunity to expand into a new geographical market and collaborate with PDS on derivatives products. SGX and PDS will also explore depository linkages to custodise securities in each other’s markets, on behalf of their account holders. The proposed collaboration will reinforce SGX’s Asian Gateway strategy and position.Perhaps, but it is difficult to see how a 20% stake worth just S$5 mln will do this. The Philippines doesn't rate a mention in the World Federation of Exchanges' most recent tabulation of fixed-income and derivatives turnover. Perhaps PDS isn't a member of the Federation.
The wording of the news release is also interesting: "…it has agreed in-principle to accept the offer…" In other words, PDS approached the SGX. Therefore, PDS probably has more to gain from the deal, possibly in terms of the expertise shared by SGX, etc.
The SGX clearly has to keep working to stay relevant, and deals such as this, although small, are an indication that they are doing this. Small companies can grow into bigger companies, as the SGX itself has done.
SGX CEO Hsieh Fu Hua said this morning:
Our proposed stake in PDS will be more than just a financial investment. It will give both parties the opportunity to collaborate on a wider suite of products in a fast-growing geographical market. SGX and PDS will also explore a depository linkage to custodise securities in each other’s markets on behalf of account holders. This proposed depository linkage fits in with the concept of post-trade alliances being a practical way of collaboration in Asia.He also said:
Einstein was said to have once defined insanity as doing the same thing over and over again but expecting different results each time. If we continue divided as we have been in the past, can we remain relevant in the years to come? This issue is especially pressing for the relatively smaller, disparate exchanges of ASEAN. To achieve a single and more significant marketplace, we propose that multilateral gateways in both trading and clearing be forged amongst the ASEAN exchanges.All these points a certainly valid.
But beyond the small nature of the deal, there is also the question as to who the target market is. The equities market consists of just 240 stocks worth US$93.8 bln – the smallest market in Asia except New Zealand and Colombo. There are many derivatives listed in Singapore covering equities listed in other markets. For Philippine stocks that are worth covering, wouldn't market makers in Singapore have exhausted the possibilities already? Is the domestic Philippine retail market ready for derivatives trading?
Questions which we either have to wait for the SGX – or time – to explain.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Labels: Philippines, Philippines Dealing And Exchange Corp, SGX, Singapore Exchange
ASEAN Summit: Let's See Greater Integration
When ASEAN Leaders meet in Singapore November 18-22, much of the focus in the media will likely be on Burma. This is clearly an important topic, given the events there in recent months. But for the purpose of this blog, I am going to stick to our regular theme: stock markets. ASEAN's markets vary greatly. Quite aside from the obvious differences in size (Singapore is the biggest, worth US$538.3 bln, The Philippines' the smallest, worth US$93.8 bln) and make-up of sectors, there are greatly varying levels of retail and foreign investor participation, not to mention regulations governing disclosure. In our view, ASEAN needs to make headway on greater standardisation, if not integration.
Looking at the growth and focus on China's equities markets, efforts to build up ASEAN as an investment destination need to be stepped up. The Chinese markets have grown tremendously. The value of the Shanghai market in September is US$2.62 trillion, up 431.1% compared to September last year. This makes it the second largest market in Asia behind Tokyo (US$4.57 trln) and even ahead of Hong Kong (US$2.58 trln). Shenzhen is worth US$755 bln, and while it's significantly smaller it is up 347.8% to surpass even Taiwan (source: World Federation of Exchanges).
Clearly, a lot of the money boosting the mainland markets are funds from domestic investors, which are growing rapidly. But the global importance of the Chinese economy is undeniable. Accessing the Chinese economy through mainland companies listed in Hong Kong, Singapore, Nasdaq and London is becoming fashionable. ASEAN needs to stand up and be counted as an investment destination of choice.
Here is our wishlist for the ASEAN Leaders Summit, in relation to the markets:
1. Greater standardisation. The markets don't have to merge – just be more like each other. Individually, the markets are like small fish. If they all "swam in the same direction" like a school of fish, they would still be small fish individually, but look large and impressive.
Areas for standardisation would certainly include corporate disclosure regulations, but also more bread-and-butter issues such as taxation, settlement arrangements, fees, and so on.
ASEAN needs to get this step right first.
2. Greater number of products tracking ASEAN markets. FTSE previously came up with a set, but you don't hear much about them. ABN AMRO launched Zero Certs recently, but these track only the less accessible markets individually.
3. Greater joint promotion. Once all the individual markets are heading towards a common goal, they need to make a concerted effort abroad to market themselves.
There is some value to the argument that ASEAN members should make progress at their own pace – meaning, faster, more nimble members should not be held back by those which make progress more slowly. But by learning from the faster markets, here is an area where the slower markets can be brought up to speed quicker, and one which should be implemented for everyone's benefit.
Mark Laudi
Looking at the growth and focus on China's equities markets, efforts to build up ASEAN as an investment destination need to be stepped up. The Chinese markets have grown tremendously. The value of the Shanghai market in September is US$2.62 trillion, up 431.1% compared to September last year. This makes it the second largest market in Asia behind Tokyo (US$4.57 trln) and even ahead of Hong Kong (US$2.58 trln). Shenzhen is worth US$755 bln, and while it's significantly smaller it is up 347.8% to surpass even Taiwan (source: World Federation of Exchanges).
Clearly, a lot of the money boosting the mainland markets are funds from domestic investors, which are growing rapidly. But the global importance of the Chinese economy is undeniable. Accessing the Chinese economy through mainland companies listed in Hong Kong, Singapore, Nasdaq and London is becoming fashionable. ASEAN needs to stand up and be counted as an investment destination of choice.
Here is our wishlist for the ASEAN Leaders Summit, in relation to the markets:
1. Greater standardisation. The markets don't have to merge – just be more like each other. Individually, the markets are like small fish. If they all "swam in the same direction" like a school of fish, they would still be small fish individually, but look large and impressive.
Areas for standardisation would certainly include corporate disclosure regulations, but also more bread-and-butter issues such as taxation, settlement arrangements, fees, and so on.
ASEAN needs to get this step right first.
2. Greater number of products tracking ASEAN markets. FTSE previously came up with a set, but you don't hear much about them. ABN AMRO launched Zero Certs recently, but these track only the less accessible markets individually.
3. Greater joint promotion. Once all the individual markets are heading towards a common goal, they need to make a concerted effort abroad to market themselves.
There is some value to the argument that ASEAN members should make progress at their own pace – meaning, faster, more nimble members should not be held back by those which make progress more slowly. But by learning from the faster markets, here is an area where the slower markets can be brought up to speed quicker, and one which should be implemented for everyone's benefit.
Mark Laudi
Labels: ASEAN Leaders Summit, stockmarkets, World Federation of Exchanges
Fraser & Neave: Where was Mr Lee?
We share Chow Penn Nee's and the Business Times' disappointment with Lee Hsien Yang's absence at the earnings briefing of Fraser & Neave Tuesday night. Given all the corporate issues at this company – such as the sudden departure of CEO Dr Han Cheng Fong, and the apparent dissing of takeover suitor Heineken – it would certainly have been a good idea for Mr Lee to be present to field questions and shed some light on these issues.
The attention F&N has received in the last month has not been positive. Lingering questions remain about why the respected Dr Han left so suddenly. The company certainly made numerous disclosures about his departure, but they added up only to explain why he did notleave, not why he did leave. The company was at pains to say it was not due to personality conflicts, after the arrival of former SingTel chief Lee as Chairman was speculated as one possible reason. We have previously commented on the absence of an explanation which fully satisfies us.
Then there was the issue of a possible takeover by Heineken, which the company successfully defended (although, as we said previously, we don't really know why averting creating shareholder value through being taken over could necessarily be deemed a positive). Perhaps Dr Han supported considering a bid from Heineken when the other Directors did not.
(Blog continues below poll.)
The company has argued it has satisfied continuous disclosure obligations. As for why Lee Hsien Yang was not present at Tuesday's press briefing, the Business Times reports:
While leads us onto the next issue. Conrad Raj should certainly have contacted F&N for comment about his piece F&N's CEO hunt halted as Hsien Yang rethinks strategy on November 12, which F&N obviously took great exception to. We don't know whether he did contact the company or not. We haven't asked him, and so we only have F&N's tersely worded rebuttal to go on. But given the company's combative stance towards the media over the last month it's perhaps no surprise that it hasn't won many friends in the media.
We maintain our view that not just following the letter of continuous disclosure obligations, but being seen to be doing everything it can, would have been much better to rebuild trust with investors.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
The attention F&N has received in the last month has not been positive. Lingering questions remain about why the respected Dr Han left so suddenly. The company certainly made numerous disclosures about his departure, but they added up only to explain why he did notleave, not why he did leave. The company was at pains to say it was not due to personality conflicts, after the arrival of former SingTel chief Lee as Chairman was speculated as one possible reason. We have previously commented on the absence of an explanation which fully satisfies us.
Then there was the issue of a possible takeover by Heineken, which the company successfully defended (although, as we said previously, we don't really know why averting creating shareholder value through being taken over could necessarily be deemed a positive). Perhaps Dr Han supported considering a bid from Heineken when the other Directors did not.
(Blog continues below poll.)
The company has argued it has satisfied continuous disclosure obligations. As for why Lee Hsien Yang was not present at Tuesday's press briefing, the Business Times reports:
It was a news conference many journalists were looking forward to. They expected Lee Hsien Yang to face the media for the first time as Fraser & Neave's chairman at the group's full-year financial results announcement yesterday.That may be so if this was a "routine" earnings announcement. But given all that has transpired within the last month we are incredulous that Mr Lee – so open while at SingTel, winning awards for transparency – did not use the opportunity to clear things up. Being quoted about the earnings in the press release hardly consoles us, given that those quotes were probably written by the Corporate Communications department anyway. We weren't at the briefing yesterday, but it sure would have been nice to get a more comprehensive explanation as to his absence. The lack of such an explanation opens the door to speculation that perhaps Mr Lee was told not to come. While Mr Anthony Cheong is probably very well qualified to field questions at the press briefing, given that he is a director of the company, it is rather unusual for a Company Secretary to lead such a briefing. Not least, because the company is still without a CEO. It would have been natural for the Chairman to step in. He may be non-executive, but he is also a consultant to the firm.
But Mr Lee was a no-show, and director and group company secretary Anthony Cheong fielded the questions.
Mr Lee was not required to attend the news conference, Mr Cheong said. 'Mr Lee is a non-executive chairman, so he need not be here.'
While leads us onto the next issue. Conrad Raj should certainly have contacted F&N for comment about his piece F&N's CEO hunt halted as Hsien Yang rethinks strategy on November 12, which F&N obviously took great exception to. We don't know whether he did contact the company or not. We haven't asked him, and so we only have F&N's tersely worded rebuttal to go on. But given the company's combative stance towards the media over the last month it's perhaps no surprise that it hasn't won many friends in the media.
We maintain our view that not just following the letter of continuous disclosure obligations, but being seen to be doing everything it can, would have been much better to rebuild trust with investors.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Labels: Anthony Cheong, Fraser, Han Cheng Fong, Lee Hsien Yang, Neave
How bad is BAD?
Amidst the earnings season and the likely increase in companies having share placements, how literally should investors take the company's word for it?
Earnings seasons comes once in three months --- for some, once in six months. Companies will then have to declare its revenue, profit numbers, cashflow, dividends and a few other pointers. It is the company's responsibility to inform shareholders about the liquidity of the company for that period.
They have a certain dateline and the information would have to be posted up on the Singapore Exchange, the one and only stock exchange moderator in Singapore. Companies who fail to meet the dateline would have to request and make a public announcement to post its earnings on another date.
But what really irks me is when companies keep postponing the date to release its earnings.
The companies of course, do have to state its reason for doing so. For example, like when new purchases took place and the numbers have not been added/audited into the earnings' statement, or that the latter date is a better reflection of the companies' performance.
Generally, investors do not really care! What they want is honesty from the companies where they put their money into, regardless if the numbers are good or bad. Be it the additional figures are added now or later, it would still be added anyway. The only difference would be the quarter in which that information is being added in.
Investors want to see the comparison between this quarter and the same time in the previous year, and some bluntness here might actually boost investors' confidence and belief in the company.
Share placement exercise is another pointer. While it does not happen all the time, I feel it is still worth pointing out and take note of such happenings.
Companies do share placement exercise to get more cash for the cash company. Essentially what it means is that the company is issuing more shares for more money. Of course, they will announce how much it expects to get and what it is going to use it for.
However there are times where companies, after it gets its proceeds from the share placement, it announces that instead of using it to invest in whatever they initially said the money is going for, it will be using the money for another thing.
An example is Alantac Technology where in August this year, after getting money from the proceeds, it says that it will 're-allocate' about S$5.0 mln to buy equipment in place of expanding its facilities. So investors who initially put in their money in hopes of facilitating the companies' expansion, are sort of 'being cheated' as it would in the end be used for another purpose.
These are just some examples. So really, how literally should investors take companies' word for it?
Comments? Bring it on!
Nurwidya Abdul
Earnings seasons comes once in three months --- for some, once in six months. Companies will then have to declare its revenue, profit numbers, cashflow, dividends and a few other pointers. It is the company's responsibility to inform shareholders about the liquidity of the company for that period.
They have a certain dateline and the information would have to be posted up on the Singapore Exchange, the one and only stock exchange moderator in Singapore. Companies who fail to meet the dateline would have to request and make a public announcement to post its earnings on another date.
But what really irks me is when companies keep postponing the date to release its earnings.
The companies of course, do have to state its reason for doing so. For example, like when new purchases took place and the numbers have not been added/audited into the earnings' statement, or that the latter date is a better reflection of the companies' performance.
Generally, investors do not really care! What they want is honesty from the companies where they put their money into, regardless if the numbers are good or bad. Be it the additional figures are added now or later, it would still be added anyway. The only difference would be the quarter in which that information is being added in.
Investors want to see the comparison between this quarter and the same time in the previous year, and some bluntness here might actually boost investors' confidence and belief in the company.
Share placement exercise is another pointer. While it does not happen all the time, I feel it is still worth pointing out and take note of such happenings.
Companies do share placement exercise to get more cash for the cash company. Essentially what it means is that the company is issuing more shares for more money. Of course, they will announce how much it expects to get and what it is going to use it for.
However there are times where companies, after it gets its proceeds from the share placement, it announces that instead of using it to invest in whatever they initially said the money is going for, it will be using the money for another thing.
An example is Alantac Technology where in August this year, after getting money from the proceeds, it says that it will 're-allocate' about S$5.0 mln to buy equipment in place of expanding its facilities. So investors who initially put in their money in hopes of facilitating the companies' expansion, are sort of 'being cheated' as it would in the end be used for another purpose.
These are just some examples. So really, how literally should investors take companies' word for it?
Comments? Bring it on!
Nurwidya Abdul
Labels: Alantac Technology, earnings season, nvestor Central, share placement, Singapore Exchange
Banks: Home Market Should Be Priority
Investors were generally thankful recent sub-prime loan related losses among Singapore banks weren't higher. At a time when US banks consistently announced billions and billions of dollars worth of exposure, and the CEOs of Merrill Lynch and Citigroup resigned, Singapore banks were generally unscathed. But at a time when Singapore's economy is booming and yet many legitimate local businesses still can't get loans, one has to ask why in the world Singapore banks would have any exposure to sub-prime loans at all! Our argument is: DBS, UOB and OCBC should focus on loaning money to Singapore businesses, rather than throwing money at Collateralised Debt Obligations (CDOs).
The earnings statements from the banks tell the story:
DBS reported third quarter enterprise loans of S$22.5 bln, up around 10% from the year earlier. But corporate and investment banking rose to S$45.6 bln, from S$32.7 bln. This is more than double the enterpise amount. DBS's CDOs were S$2.36 bln. None of them were in default, it says, but it took an S$85 mln charge for sub-prime concerns.
"A huge sigh of relief", is how CIMB's Kenneth Ng characterised DBS' earnings in a report dated October 29.
Similar story at OCBC, which had S$270 mln in exposures to the subprime issue, and it took a provision of S$221 mln in case these turned bad.
These exposures certainly aren't large, and the banks are sufficiently prudent to disclose their exposures (although – as we blogged previously – it took DBS two tries to get it right). But it does make you wonder why the banks even have such exposures.
As mentioned, the same earnings announcements documented how strong loan growth had been. Wouldn't it make more sense to lend money to Singaporean SMEs, which continually complain about how difficult it is to get a loan from a bank, than to be "investing" (read, gambling) on subprime Collateralised Debt Obligations. After all, what are sub-prime CDOs, than a funky financial product invented by investment bankers to make money out of Americans who should never have been granted a home loan in the first place.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Should Singapore banks have ever invested in US subprime loans?
Tell us...
Yes, they need to diversify their risks across a broad spectrum of assets, including subprime CDOs
No, they should not have invested in subprime loans.
No, they should have put that money towards Singapore SMEs instead
The earnings statements from the banks tell the story:
DBS reported third quarter enterprise loans of S$22.5 bln, up around 10% from the year earlier. But corporate and investment banking rose to S$45.6 bln, from S$32.7 bln. This is more than double the enterpise amount. DBS's CDOs were S$2.36 bln. None of them were in default, it says, but it took an S$85 mln charge for sub-prime concerns.
"A huge sigh of relief", is how CIMB's Kenneth Ng characterised DBS' earnings in a report dated October 29.
Similar story at OCBC, which had S$270 mln in exposures to the subprime issue, and it took a provision of S$221 mln in case these turned bad.
These exposures certainly aren't large, and the banks are sufficiently prudent to disclose their exposures (although – as we blogged previously – it took DBS two tries to get it right). But it does make you wonder why the banks even have such exposures.
As mentioned, the same earnings announcements documented how strong loan growth had been. Wouldn't it make more sense to lend money to Singaporean SMEs, which continually complain about how difficult it is to get a loan from a bank, than to be "investing" (read, gambling) on subprime Collateralised Debt Obligations. After all, what are sub-prime CDOs, than a funky financial product invented by investment bankers to make money out of Americans who should never have been granted a home loan in the first place.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Should Singapore banks have ever invested in US subprime loans?
Tell us...
Yes, they need to diversify their risks across a broad spectrum of assets, including subprime CDOs
No, they should not have invested in subprime loans.
No, they should have put that money towards Singapore SMEs instead
Labels: DBS, OCBC, Singapore, subprime, UOB
When will Bonvests Divest Burger King?
I don't remember the last time Bonvests didn’t say, "The Food & Beverage Division will continue to face challenging market conditions" in its quarterly earnings report. Third quarter earnings announced Wednesday are no different. It still earns considerable revenue from it, but is losing money on it. This naturally leads to the question: why is Bonvests persevering with it, and should it in fact sell it? We think it should.
Bonvests has been the authorised franchisee of Burger King stores in Singapore in 1982. It has 46 stores. It has also operated Orange Julius stores since 1999 and Dairy Queen stores since 2001. Their most prominent outlets are at the corner of Orchard Road and Scotts Road, where they sit alongside each other. Burger King is certainly a globally-known brand and no doubt a source of pride for Bonvests. But companies have to be ruthless and ask themselves whether underperforming or struggling businesses could be improved, or sold. Such is the investment philosophy of General Electric, which has shown repeatedly that falling in love with any business division doesn't work. Is Bonvests in love with the Burger King brand?
(Story continues below poll.)
Judging by the prominence of its bus ads, Burger King is doing well. It has considerable license to tell people how good its food tastes, without having to sell apples in its stores or conduct high-profile lab tests on the fat content of its menu items, like McDonald's. But the fact is, if the business is not making money, why persevere?
Here are the facts (taken from their earnings announcement Wednesday):
1. Revenue –9.1% to S$66.9 mln
2. Net profit +21% to S$11.1 mln
3. Cash generated from operations: S$17.2 mln, down slightly from S$18.1 mln
Of the S$67 mln in revenue, only S$15.6 mln came from its food and beverage division, up less than 2%. By contrast, its Hotel business had 16% growth in sales to S$25.1 mln.
The S$11 mln in net profit could have actually been higher by S$95,000 if it didn't have the food and beverage division. Its Hotel and Property Development divisions were responsible for almost all of it.
Bonvests' earnings from property development may be patchy, due to the nature of this industry. For example, in Q3 last year it booked several million dollars worth of revenue in The Trumps development, which it didn't have this year (The Trumps was fully sold in the first half of 2007). In the absence of any enlightening commentary from the company, or analyst reports, here is our view:
1. Bonvests should divest its Burger King franchise, if contractual obligations permit
2. The proceeds from the sale of the franchise could be put towards more property developments, or something entirely different altogether.
3. In the absence of new businesses to invest in, Bonvests could pay out a special dividend, like the 15 cents paid last year on top of the steady 4.5 cent a share dividend
What do you think?
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Bonvests has been the authorised franchisee of Burger King stores in Singapore in 1982. It has 46 stores. It has also operated Orange Julius stores since 1999 and Dairy Queen stores since 2001. Their most prominent outlets are at the corner of Orchard Road and Scotts Road, where they sit alongside each other. Burger King is certainly a globally-known brand and no doubt a source of pride for Bonvests. But companies have to be ruthless and ask themselves whether underperforming or struggling businesses could be improved, or sold. Such is the investment philosophy of General Electric, which has shown repeatedly that falling in love with any business division doesn't work. Is Bonvests in love with the Burger King brand?
(Story continues below poll.)
Judging by the prominence of its bus ads, Burger King is doing well. It has considerable license to tell people how good its food tastes, without having to sell apples in its stores or conduct high-profile lab tests on the fat content of its menu items, like McDonald's. But the fact is, if the business is not making money, why persevere?
Here are the facts (taken from their earnings announcement Wednesday):
1. Revenue –9.1% to S$66.9 mln
2. Net profit +21% to S$11.1 mln
3. Cash generated from operations: S$17.2 mln, down slightly from S$18.1 mln
Of the S$67 mln in revenue, only S$15.6 mln came from its food and beverage division, up less than 2%. By contrast, its Hotel business had 16% growth in sales to S$25.1 mln.
The S$11 mln in net profit could have actually been higher by S$95,000 if it didn't have the food and beverage division. Its Hotel and Property Development divisions were responsible for almost all of it.
Bonvests' earnings from property development may be patchy, due to the nature of this industry. For example, in Q3 last year it booked several million dollars worth of revenue in The Trumps development, which it didn't have this year (The Trumps was fully sold in the first half of 2007). In the absence of any enlightening commentary from the company, or analyst reports, here is our view:
1. Bonvests should divest its Burger King franchise, if contractual obligations permit
2. The proceeds from the sale of the franchise could be put towards more property developments, or something entirely different altogether.
3. In the absence of new businesses to invest in, Bonvests could pay out a special dividend, like the 15 cents paid last year on top of the steady 4.5 cent a share dividend
What do you think?
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Labels: Bonvests, Burger King, Dairy Queen, Orange Julius
SingTel: Focus On What's Really Important
When SingTel announces its earnings Wednesday morning, much of the focus will be on its regional associates. These are companies which SingTel bought into, but which it in most cases does not own fully. The subscriber numbers these associates report are certainly impressive, but they are by no means the only things SingTel shareholders ought to be interested in. There are two other major points which rarely get a hearing at the earnings briefing.
According to numbers announced today, SingTel's proportionate subscriber base stands at 56.87 million. The aggregate number, which assumes SingTel counts each and every subscriber, even though it doesn't fully own its various associates, is almost 158 mln. This certainly sounds impressive. But how much are these subscribers actually spending on their monthly phone bills? This is of particular importance, given that 19 out of 20 new subscribers added during the second quarter are pre-paid customers, who top up their SIM card when they run low on credits. It may surprise you, but the majority of phone users in Singapore are pre-paid users. These users tend to spend a lot less than if you are a post-paid subscriber (meaning, you receive a monthly bill). The Average Revenue Per User (ARPU) is critical not just to understand how many subscribers SingTel has, but how much money SingTel actually gets from them. The answer is: not very much.
The second critical point about SingTel's earnings is 3G take-up. The statement with the subscriber numbers was telling: "868,000 subscribers had been provisioned with 3G services…". A very strange way to phrase it, but a very accurate one: provisioned means, subscribers have access to 3G services. It does not mean they actually used them. This is also important, given that these services were supposed to pick up from falling voice revenue. We'll probably get to see some numbers which point to the percentage of data revenue, but little said about what will drive 3G service usage in the future other than some general statements about the fact that the marketing department is still looking for the killer app.
All this is not to say that subscriber numbers aren't important. But I'd rather SingTel have one-tenth the subscriber numbers (and therefore lower costs) who spend 10 times as much (and therefore drive profitability and cashflow). So, finding these points of information that don't make the headline is a more interesting exercise than reading the headline grabbers.
Mark Laudi
Disclosure: Investor Central content can be accessed through the mobile portals of all three telcos. SingTel users can use their WAP browsers to go to http://ideas.singtel.com.sg > News & Finance > Finance > Financial News > Investor Central
According to numbers announced today, SingTel's proportionate subscriber base stands at 56.87 million. The aggregate number, which assumes SingTel counts each and every subscriber, even though it doesn't fully own its various associates, is almost 158 mln. This certainly sounds impressive. But how much are these subscribers actually spending on their monthly phone bills? This is of particular importance, given that 19 out of 20 new subscribers added during the second quarter are pre-paid customers, who top up their SIM card when they run low on credits. It may surprise you, but the majority of phone users in Singapore are pre-paid users. These users tend to spend a lot less than if you are a post-paid subscriber (meaning, you receive a monthly bill). The Average Revenue Per User (ARPU) is critical not just to understand how many subscribers SingTel has, but how much money SingTel actually gets from them. The answer is: not very much.
The second critical point about SingTel's earnings is 3G take-up. The statement with the subscriber numbers was telling: "868,000 subscribers had been provisioned with 3G services…". A very strange way to phrase it, but a very accurate one: provisioned means, subscribers have access to 3G services. It does not mean they actually used them. This is also important, given that these services were supposed to pick up from falling voice revenue. We'll probably get to see some numbers which point to the percentage of data revenue, but little said about what will drive 3G service usage in the future other than some general statements about the fact that the marketing department is still looking for the killer app.
All this is not to say that subscriber numbers aren't important. But I'd rather SingTel have one-tenth the subscriber numbers (and therefore lower costs) who spend 10 times as much (and therefore drive profitability and cashflow). So, finding these points of information that don't make the headline is a more interesting exercise than reading the headline grabbers.
Mark Laudi
Disclosure: Investor Central content can be accessed through the mobile portals of all three telcos. SingTel users can use their WAP browsers to go to http://ideas.singtel.com.sg > News & Finance > Finance > Financial News > Investor Central
Labels: ARPU, Chua Sok Koong, Earnings, postpaid, prepaid, Singapore Telecom, SingTel
Taking the sushi war to its Apex
To outsiders, the "sushi war" in Singapore may seem a little ridiculous considering most Singaporeans are ethnically Chinese. Japanese occupation from 1942 to 1945 can't exactly be described as culture changing. Yet Genki Sushi, Sakae Sushi and others who cater to the large expat Japanese community and everyone else with a penchant for sushi are fighting it out as though eating sushi was a national pastime. Apex-Pal, the Singapore Exchange listed company which owns the Sakae Sushi chain, announced it was adding forty new menu items. Will this really make a difference to its stock price, though?
I have met CEO Douglas Foo, and his commitment to innovation in sushi struck me as almost fanatical. That's intended to be a compliment, although not a stock recommendation. It's quite apparent how much thought goes into everything they do – down to the frog sitting on a gold ingot (can you spot it?) in their logo. This effort is almost always matched by the long queues on weekends, particularly at its Wheelock Place outlet.
Now if only the stockprice could catch up. It has been trading in a tight range for many years (see chart). It receives very little attention from analysts and investors, with average volumes only around 160,000 shares per day (source: Reuters). If it wasn't trading at more than 2.3x book value, one could almost call it a value stock, with a price earnings multiple of 9x and a yield approaching 3%.
I'm not sure how adding "another 40 new items to its already extensive menu, bringing the total number of irresistible delights to 230" will change this, even less that "Sakae Sushi is adjusting its two-tier pricing. Customers will be able to enjoy its premium plate or red plate items such as fresh sashimi and special maki at only $4.99, instead of the usual $6.50."
Price wars have rarely been good for anyone. No wonder the logo at rival Genki Sushi is frowning.
Mark Laudi
I have met CEO Douglas Foo, and his commitment to innovation in sushi struck me as almost fanatical. That's intended to be a compliment, although not a stock recommendation. It's quite apparent how much thought goes into everything they do – down to the frog sitting on a gold ingot (can you spot it?) in their logo. This effort is almost always matched by the long queues on weekends, particularly at its Wheelock Place outlet.
Now if only the stockprice could catch up. It has been trading in a tight range for many years (see chart). It receives very little attention from analysts and investors, with average volumes only around 160,000 shares per day (source: Reuters). If it wasn't trading at more than 2.3x book value, one could almost call it a value stock, with a price earnings multiple of 9x and a yield approaching 3%.
I'm not sure how adding "another 40 new items to its already extensive menu, bringing the total number of irresistible delights to 230" will change this, even less that "Sakae Sushi is adjusting its two-tier pricing. Customers will be able to enjoy its premium plate or red plate items such as fresh sashimi and special maki at only $4.99, instead of the usual $6.50."
Price wars have rarely been good for anyone. No wonder the logo at rival Genki Sushi is frowning.
Mark Laudi
Make Free Cashflow Reporting Mandatory
Investors following earnings season can be forgiven for being bewildered by the numbers companies throw at them. For the uninitiated, reading the Profit & Loss Accounts, the Cashflow Statement and the Balance Sheet is quite a task. The irony is that even accountants admit much of it is based on assumptions and opinions. But while all companies provide a cashflow statement, few companies actually report Free Cashflow. We think it should be mandatory.
Free cashflow (FCF) is the ultimate measure of a company's financial health because it measures how much cash the business is actually generating, after staff and all their bills have been paid and money has been reinvested into the business, in the form of new equipment, and so on. It is the money the company does not know what to do with. It shows how much money the company could potentially pay out to shareholders.
Unfortunately, not many companies report it. StarHub is one of the few. It reported earnings last night, and the number appeared on page 2 of their earnings statement. While investors can work the figure out themselves, it would be better hearing it from the companies themselves.
That's not to dismiss profit altogether. For example, it is still interesting to know that, for example, the revaluation of a property boosted profit. Presumably, this property could be borrowed against, or sold. These would bring physical cash into the company. But the problem is there are many measures of profit (Gross Profit, Profit Before/After Tax, Abnormals, and so on). Which one should investors look at? By contrast, there is only one Free Cashflow number. It cannot be massaged by property revaluations and other abnormal items.
I can understand that some companies – especially those which don't generate any free cashflow – would be reluctant. But hiding poor cash generating ability behind great paper profits doesn't really address the spirit of continuous disclosure obligations, even though it meets the letter of it. Making Free Cashflow part of the mandatory continuous disclosure obligations would ensure that investors understand straight away whether a company is worth investing in or not.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Free cashflow (FCF) is the ultimate measure of a company's financial health because it measures how much cash the business is actually generating, after staff and all their bills have been paid and money has been reinvested into the business, in the form of new equipment, and so on. It is the money the company does not know what to do with. It shows how much money the company could potentially pay out to shareholders.
Unfortunately, not many companies report it. StarHub is one of the few. It reported earnings last night, and the number appeared on page 2 of their earnings statement. While investors can work the figure out themselves, it would be better hearing it from the companies themselves.
That's not to dismiss profit altogether. For example, it is still interesting to know that, for example, the revaluation of a property boosted profit. Presumably, this property could be borrowed against, or sold. These would bring physical cash into the company. But the problem is there are many measures of profit (Gross Profit, Profit Before/After Tax, Abnormals, and so on). Which one should investors look at? By contrast, there is only one Free Cashflow number. It cannot be massaged by property revaluations and other abnormal items.
I can understand that some companies – especially those which don't generate any free cashflow – would be reluctant. But hiding poor cash generating ability behind great paper profits doesn't really address the spirit of continuous disclosure obligations, even though it meets the letter of it. Making Free Cashflow part of the mandatory continuous disclosure obligations would ensure that investors understand straight away whether a company is worth investing in or not.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Labels: Earnings, Free cashflow, net profit, StarHub
Record High Oil Price: Keep Speculators Out!
It's time something was done about the price of oil. It hit another record overnight – US$95 a barrel – and will likely reach US$100 a barrel before long. Everyone is paying more, from individuals fueling up their cars at the petrol station, to companies which need energy to operate their machines. Add taxes, and it's getting prohibitive. My gripe with this is not just that the price is high. Afterall, in a sense it is an affirmation that the economy is strong, and that demand from China will keep demand for Singapore products and services high, too. But my gripe is more targeted at the speculators, which are contributing to its rise. Imagine how much less we'd be paying if it weren't for the speculators. If it means that the speculators need to be weeded out, so be it.
It seems completely ridiculous that we're all paying more because a bunch of 20 or 30-something traders with a laptop and an interet connection are pushing up the price. The impact this has on people, particularly in developing markets not protected by subsidies, is unconscionable. Governments paying subsidies have less money to spend on essential services. All for what?! To fatten the trading account of some traders? Oh, please.
Quantifying the impact is difficult, but the Federal Reserve of St. Louis wrote the price would be US$10 to US$15 a barrel lower if it weren't for the speculators. It quoted acting OPEC Secretary General Maizar Rahman, who may very well be correct in his assessment, although we should keep in mind that he has a vested interest in blaming people other than the cartel's own members for the high prices.
(Story continues below poll).
Still, it would be better for everyone if the price was US$80 to US$85 a barrel, or less. Think of the extra resources at the disposal of governments to build schools, hospitals, etc. Think of the additional disposable income you would have for food, school fees, and so on.
One counter-argument to lower prices might be that it reduces consumption. After all, all that oil that is burnt each day leaves significant traces in our atmosphere. The result: we're breathing in more polluted air, and paying more for the priviledge! But I am yet to see conclusive proof that the high prices have actually dampened consumption.
Another counter-argument could be that the higher the price of oil rises, the greater the impetus to find renewable energy sources. But again, the link is not conclusive.
So my view is, ways need to be found to keep speculators out of the market. We will all be better off for it.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
ArchivesIt seems completely ridiculous that we're all paying more because a bunch of 20 or 30-something traders with a laptop and an interet connection are pushing up the price. The impact this has on people, particularly in developing markets not protected by subsidies, is unconscionable. Governments paying subsidies have less money to spend on essential services. All for what?! To fatten the trading account of some traders? Oh, please.
Quantifying the impact is difficult, but the Federal Reserve of St. Louis wrote the price would be US$10 to US$15 a barrel lower if it weren't for the speculators. It quoted acting OPEC Secretary General Maizar Rahman, who may very well be correct in his assessment, although we should keep in mind that he has a vested interest in blaming people other than the cartel's own members for the high prices.
(Story continues below poll).
Still, it would be better for everyone if the price was US$80 to US$85 a barrel, or less. Think of the extra resources at the disposal of governments to build schools, hospitals, etc. Think of the additional disposable income you would have for food, school fees, and so on.
One counter-argument to lower prices might be that it reduces consumption. After all, all that oil that is burnt each day leaves significant traces in our atmosphere. The result: we're breathing in more polluted air, and paying more for the priviledge! But I am yet to see conclusive proof that the high prices have actually dampened consumption.
Another counter-argument could be that the higher the price of oil rises, the greater the impetus to find renewable energy sources. But again, the link is not conclusive.
So my view is, ways need to be found to keep speculators out of the market. We will all be better off for it.
Mark Laudi
To comment on this blog, visit the Investor Central Blog.
Labels: Alan Greenspan, crude oil prices, OPEC, speculators
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