SATS: You can sit by the pool, but you can't swim
The contrast could not be more stark. An incredible increase in passenger numbers at Changi Airport, yet flat revenues at Singapore Airport Terminal Services (SATS).
Changi passenger numbers rose almost 5% in 2007 to 36.7 million people. There is still lots of excess capacity. All three terminals can handle 70 million people per year. But still, 36.7 million is an incredible statistic when you consider our island state has less than five million residents.
By contrast, SATS' numbers were uninspiring. Passengers handled grew 6.4% in the third quarter, yet revenue rose just 1.2% to S$244.5 mln and profit was flat at around S$50 mln.
Clearly, there are pricing and competition issues here. SATS has two competitors, CIAS and Swissport. The other competitors are not publicly listed in Singapore.
The scenario reminds me of the relationship between gold mining companies and the price of gold: to draw the parallel, the price of gold keeps rising but the profits at the gold mining company are not keeping pace because of the inherent risks in companies.
So, what's an investor to do to get in on the high growth at Changi?
Here are my two suggestions:
1. Buy shares in Changi airport. That would be ideal. Except, Changi Airport is not publicly listed. Perhaps it should be.
2. Create a Changi Airport futures contract. Just like trading gold futures for pure, unadulterated exposure to the price of gold without the execution risk of the gold mining company, being able to trade on passenger numbers would be a fabulous financial product.
Separate products for passenger and cargo numbers could be created.
Any takers?
Mark Laudi, who is slightly perturbed that Bangkok and Kuala Lumpur airports all seem to be busier than Changi these days
To comment on this blog, go to Investor Central blog.
Changi passenger numbers rose almost 5% in 2007 to 36.7 million people. There is still lots of excess capacity. All three terminals can handle 70 million people per year. But still, 36.7 million is an incredible statistic when you consider our island state has less than five million residents.
By contrast, SATS' numbers were uninspiring. Passengers handled grew 6.4% in the third quarter, yet revenue rose just 1.2% to S$244.5 mln and profit was flat at around S$50 mln.
Clearly, there are pricing and competition issues here. SATS has two competitors, CIAS and Swissport. The other competitors are not publicly listed in Singapore.
The scenario reminds me of the relationship between gold mining companies and the price of gold: to draw the parallel, the price of gold keeps rising but the profits at the gold mining company are not keeping pace because of the inherent risks in companies.
So, what's an investor to do to get in on the high growth at Changi?
Here are my two suggestions:
1. Buy shares in Changi airport. That would be ideal. Except, Changi Airport is not publicly listed. Perhaps it should be.
2. Create a Changi Airport futures contract. Just like trading gold futures for pure, unadulterated exposure to the price of gold without the execution risk of the gold mining company, being able to trade on passenger numbers would be a fabulous financial product.
Separate products for passenger and cargo numbers could be created.
Any takers?
Mark Laudi, who is slightly perturbed that Bangkok and Kuala Lumpur airports all seem to be busier than Changi these days
To comment on this blog, go to Investor Central blog.
Labels: Changi Airport, CIAS, futures contracts, SATS, Swissport
GIC: Catching the falling ball
The mood was one of apprehension but also opportunity at a private client event for high net worth customers of a major international private bank at a local hotel earlier today. Apprehension, because of the volatility in equities markets and uncertainty about a recession. Opportunity, because these clients are already thinking about where they can buy good quality assets cheaply.
The bank's chief economist and head of equity strategy were on hand to give their prognoses, which was for the US to slip into recession, followed by a rebound later this year. A similar forecast could have been delivered by any number of economists at any number of private banks.
The point is: the big individual investors are slightly anxious about where all this is headed, but they are not letting this cloud their perspective. They are quite happy to ride out the short to mid term volatility, and not because age is on their side. Because in many cases it isn't. They are willing to ride it out because they understand that panicking doesn't help. They know from experience that crises are never complete, there is always a silver lining.
In this context, the conversation turned to the oft-used truism that "no one wants to catch a falling knife". In other words, no one wants to buy stocks which are in freefall, lest they fall some more. The problem with this truism is that it isn't true. Most stocks, unlike knives, bounce. They don't just go down, they go up again, too. So, stocks are more like balls. Sure, you may not want to catch it as it is still falling. But if you buy quality companies, chances are they'll bounce right back, even if you make a short-term loss.
This theory could be applied to the Government of Singapore Investment Corporation (GIC), which bought large stakes in, for example, UBS, for huge sums of money. Was it worried about a falling knife? It could possibly have picked up this stake for less money. But it already saw value, and decided that a short term loss would be worth the long term gain that it stands to make.
That said, GIC possibly had other national interests at heart. I haven't asked GIC about this, but some of the members of the private bank luncheon were fairly convinced that GIC bought the stake not just for the potential financial return on its investment, but also its ability to call the shots at UBS. It has not sought a seat on the board. But it doesn’t need it. Perhaps all it wanted was to secure UBS' commitment to keep Singapore as its regional HQ. You don't need a directorship to get that. If this theory is correct, Singapore will reap a return infinitely higher than the inevitable improvement in UBS' shareprice.
Mark Laudi, who emceed the private client briefing
To comment on this blog, go to the Investor Central blog.
The bank's chief economist and head of equity strategy were on hand to give their prognoses, which was for the US to slip into recession, followed by a rebound later this year. A similar forecast could have been delivered by any number of economists at any number of private banks.
The point is: the big individual investors are slightly anxious about where all this is headed, but they are not letting this cloud their perspective. They are quite happy to ride out the short to mid term volatility, and not because age is on their side. Because in many cases it isn't. They are willing to ride it out because they understand that panicking doesn't help. They know from experience that crises are never complete, there is always a silver lining.
In this context, the conversation turned to the oft-used truism that "no one wants to catch a falling knife". In other words, no one wants to buy stocks which are in freefall, lest they fall some more. The problem with this truism is that it isn't true. Most stocks, unlike knives, bounce. They don't just go down, they go up again, too. So, stocks are more like balls. Sure, you may not want to catch it as it is still falling. But if you buy quality companies, chances are they'll bounce right back, even if you make a short-term loss.
This theory could be applied to the Government of Singapore Investment Corporation (GIC), which bought large stakes in, for example, UBS, for huge sums of money. Was it worried about a falling knife? It could possibly have picked up this stake for less money. But it already saw value, and decided that a short term loss would be worth the long term gain that it stands to make.
That said, GIC possibly had other national interests at heart. I haven't asked GIC about this, but some of the members of the private bank luncheon were fairly convinced that GIC bought the stake not just for the potential financial return on its investment, but also its ability to call the shots at UBS. It has not sought a seat on the board. But it doesn’t need it. Perhaps all it wanted was to secure UBS' commitment to keep Singapore as its regional HQ. You don't need a directorship to get that. If this theory is correct, Singapore will reap a return infinitely higher than the inevitable improvement in UBS' shareprice.
Mark Laudi, who emceed the private client briefing
To comment on this blog, go to the Investor Central blog.
Labels: falling knife, GIC, Government of Singapore Investment Corporation, market declines
Akan datang: Chinese money in the Singapore market
While the plummet – and apparent Fed-induced recovery – are still dominating the headlines, there is an announcement by the Monetary Authority of Singapore which should actually get far more press: Chinese commercial banks will be able to invest their clients' money in Singapore stocks. The huge surplusses in Chinese state and individual accounts are well documented. The government in Beijing has decided on a quota of US$16 bln which can be invested in Hong Kong, the UK and now Singapore. This can only be a positive, and will likely outweigh any concerns about a US recession for the Singapore market.
Here is how the Business Times reported the news this morning:
Granted, there are a lot of unknowns. We don't know when these arragements will start to take effect. We don't know how much money will actually come our way. The Hong Kong and UK capital markets, and soon the US, German and Japanese equities markets, will compete strongly for capital from China. And there is no certainty of knowing which Singapore-listed stocks Chinese commercial banks will actually invest in, even if they decide to put some money here.
But the bottom line is: let's get real about the future. The US recession is not the only story in town. Investors ought to take a balanced view, rather than panic and sell out in the childish frenzy of recent days.
Mark Laudi
Here is how the Business Times reported the news this morning:
Yesterday, the Monetary Authority of Singapore (MAS) said it had agreed on a supervisory cooperation agreement with the China Banking Regulatory Commission (CBRC) to allow Chinese commercial banks to conduct investments for their clients under the Qualified Domestic Institutional Investor (QDII) programme. These investments include those in Singapore stocks and funds authorised or recognised by the MAS.
Granted, there are a lot of unknowns. We don't know when these arragements will start to take effect. We don't know how much money will actually come our way. The Hong Kong and UK capital markets, and soon the US, German and Japanese equities markets, will compete strongly for capital from China. And there is no certainty of knowing which Singapore-listed stocks Chinese commercial banks will actually invest in, even if they decide to put some money here.
But the bottom line is: let's get real about the future. The US recession is not the only story in town. Investors ought to take a balanced view, rather than panic and sell out in the childish frenzy of recent days.
Mark Laudi
Labels: banks, China, market decline, Monetary Authority of Singapore, QDII, Singapore Market
Fed: Subprime Worse Than The Attack On The World Trade Centre
The Federal Reserve's knee-jerk reaction to the problems with mortgagees who aren't repaying their loans, and the fear of recession, indicates it thinks these events are worse for the economy than the attack on the World Trade Centre in New York on September 11, 2001. As the Wall Street Journal points out, the 0.75% decline in its federal funds rate to 3.5% is the single biggest cut since August 1982. This is not only ridiculous, but moves the Fed even further away from the job it's supposed to be doing: keeping a lid on inflation.
The Fed statement says it cut rates "in view of a weakening of the economic outlook and increasing downside risks to growth", and adds that "appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks."
Admirable. If only this was its job. Now, I also used to think that central banks should lower interest rates to boost flagging economies, and I was an ardent critic of the European Central Bank several years ago for doggedly targetting inflation in some EU member states while ignoring the fact that the high interest rates it used as a tool to do this were choking off the economies of other EU member states.
Looking at the Treasurys market, investors had been factoring in a fall in interest rates anyway. But not of this magnitude. Besides, the central bank's job is to keep inflation in check, not to give in to punch-drunk investors whenever the market returns to more reasonable valuations. Does Mr Bernanke give chocolates to his grandchildren each time they ask for it, lest they go hungry before the next meal?
We congratulate Fed governor and Federal Open Markets Committee member William Poole for "voting against" the rate cut because he "did not believe that current conditions justified policy action before the regularly scheduled meeting next week". That's right. The Fed's next scheduled meeting is only than a week away. Like I said: the 0.75% cut is a knee-jerk reaction.
Particularly telling was the comment from Treasury Secretary and Bush appointee Henry Paulson, who is quoted in the same WSJ article as saying "This is very constructive and I think it shows this country and the rest of the world that our central bank is nimble and can move quickly in response to market conditions". With an election in the air, he would say that. One wonders whether Fed Chairman Ben Bernanke and his committee received any phonecalls with "words of encouragement" from the Treasury Secretary.
Perhaps he is hoping a rate cut now will deliver election victory to the Republicans later this year, in the same way a rate hike during last December's election campaign in Australia robbed the Conservative Government of its re-election chances there.
Mark Laudi
The Fed statement says it cut rates "in view of a weakening of the economic outlook and increasing downside risks to growth", and adds that "appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks."
Admirable. If only this was its job. Now, I also used to think that central banks should lower interest rates to boost flagging economies, and I was an ardent critic of the European Central Bank several years ago for doggedly targetting inflation in some EU member states while ignoring the fact that the high interest rates it used as a tool to do this were choking off the economies of other EU member states.
Looking at the Treasurys market, investors had been factoring in a fall in interest rates anyway. But not of this magnitude. Besides, the central bank's job is to keep inflation in check, not to give in to punch-drunk investors whenever the market returns to more reasonable valuations. Does Mr Bernanke give chocolates to his grandchildren each time they ask for it, lest they go hungry before the next meal?
We congratulate Fed governor and Federal Open Markets Committee member William Poole for "voting against" the rate cut because he "did not believe that current conditions justified policy action before the regularly scheduled meeting next week". That's right. The Fed's next scheduled meeting is only than a week away. Like I said: the 0.75% cut is a knee-jerk reaction.
Particularly telling was the comment from Treasury Secretary and Bush appointee Henry Paulson, who is quoted in the same WSJ article as saying "This is very constructive and I think it shows this country and the rest of the world that our central bank is nimble and can move quickly in response to market conditions". With an election in the air, he would say that. One wonders whether Fed Chairman Ben Bernanke and his committee received any phonecalls with "words of encouragement" from the Treasury Secretary.
Perhaps he is hoping a rate cut now will deliver election victory to the Republicans later this year, in the same way a rate hike during last December's election campaign in Australia robbed the Conservative Government of its re-election chances there.
Mark Laudi
Labels: Ben Bernanke, Federal Reserve, interest rate cut, September 11, subprime, William Poole
Hurray! Another decline, and everything's on special
Stop pretending the big falls on the markets is bad news! There is nothing that makes an investor's heart sing more than seeing his favourite stocks becoming affordable and fairly priced again. Too long we have suffered from a market that seemed to just run away for no fundamental reasons. If you missed the boat on the good stocks in March 2003, you would have to wait for a big decline to buy them. That big decline is now underway.
There'll be those who'll accuse me of cheerleading - of talking up the market at a time when everything is heading south. I'm not here to talk anything up or down, nor to give you specific investment advice. But to quote the most famous value investor of them all, Warren Buffett, "when everybody's buying, I'm scared. When everybody's scared, I'm buying". The fact of the matter is that value investors sold out of this market long ago, when valuations started to get way ahead of themselves. Goh Eng Yeow used the following words in this morning's Straits Times: "frenzied, fear-driven bail-out".
He's right, it is a frenzied, fear-driven bail-out. But that's precisely the reason to see light at the end of the tunnel.
Here's another, from my good friend Song Seng Wun from CIMB-GK: "Irrational fear is stalking regional markets. Fundamentally, things haven't changed, and the economy is humming along nicely".
THAT, my friends, should have been the headline in the press!
Instead we got "STI plunges 6% in worst one-day fall since Oct 1987". Sure it's true, and it is certainly no fun if you're fully invested. My argument is, value investing allows you to sleep well at night because you buy when things are cheap – no matter how scared everybody is – and you sell when things are expensive – no matter how jubilant everybody is.
Attention is now turning to where the bottom of these big declines are. Again, I'm not going to give you specific investment advice. But value investors will recognise the bottom when they see fundamentally sound companies trading at fair prices, no matter what the headlines say.
Mark Laudi
There'll be those who'll accuse me of cheerleading - of talking up the market at a time when everything is heading south. I'm not here to talk anything up or down, nor to give you specific investment advice. But to quote the most famous value investor of them all, Warren Buffett, "when everybody's buying, I'm scared. When everybody's scared, I'm buying". The fact of the matter is that value investors sold out of this market long ago, when valuations started to get way ahead of themselves. Goh Eng Yeow used the following words in this morning's Straits Times: "frenzied, fear-driven bail-out".
He's right, it is a frenzied, fear-driven bail-out. But that's precisely the reason to see light at the end of the tunnel.
Here's another, from my good friend Song Seng Wun from CIMB-GK: "Irrational fear is stalking regional markets. Fundamentally, things haven't changed, and the economy is humming along nicely".
THAT, my friends, should have been the headline in the press!
Instead we got "STI plunges 6% in worst one-day fall since Oct 1987". Sure it's true, and it is certainly no fun if you're fully invested. My argument is, value investing allows you to sleep well at night because you buy when things are cheap – no matter how scared everybody is – and you sell when things are expensive – no matter how jubilant everybody is.
Attention is now turning to where the bottom of these big declines are. Again, I'm not going to give you specific investment advice. But value investors will recognise the bottom when they see fundamentally sound companies trading at fair prices, no matter what the headlines say.
Mark Laudi
Labels: CIMB-GK, Goh Eng Yeow, market falls, Song Seng Wun, Straits Times Index
The bus hub: don't penalise public transport companies
Any move to get people out of cars and into public transport ought to be congratulated, for all the stated reasons: less congestion, less pollution, cost savings, and so on. It is unfortunate, however, that it's the shareholders of the public transport companies, meaning SMRT, SBS Transit and, by extension, ComfortDelgro, which will ostensibly carry the can for these initiatives. This is because greater competition for routes among various transport operators, while downward pressure on fares and raised expectations for higher quality service will inevitably be borne by the transport operators themselves.
Clearly, solving transportation bottelnecks is not easy. Otherwise cities such as Bangkok and Manila would have found solutions long ago. Increasing taxi fares has already prompted commuters to switch to public transport to some extent, as can be seen by the queues of taxis (not commuters, as was the case in the past) in the CBD, and the long snarls of taxis now at the airport. Raising acquisition and operating costs of cars has undoubtedly helped Singapore, too, although you wouldn't know it heading down the AYE at 7:45 in the morning. The only way to tackle the public transport issue fully, in my view, is to take away from cars the one thing which prompts people to choose them over public transport in the first place: convenience.
Many years ago, when I hosted the morning drive-time program on 938LIVE (then called NewsRadio 93.8), we posed the talkback question: what will it take for you to take public transport? One caller rang to say he would take the bus or train to work in the morning if he could get a seat. I asked him in reply, what the likelihood of this was? He said, very slim. As a result, he said, he would unlikely ever take the bus or train.
Cars allow people to move freely (traffic jams permitting), without being beholden to specific routes, and at a time of their convenience, without being beholden to timetables. Prevent cars from travelling to certain areas or at certain times, or both, and public transport will be the natural alternative.
Clearly it'll be difficult to give everyone a seat on every bus and train, but here are a few suggestions we can take the incentive away from cars, without hitting shareholders in the three public transport companies:
1. Turn Orchard Road into a pedestrian mall. Take away the convenience of cars and people will have no choice but to go (and they will still go, once all the refurbishments under the government's regeneration program are complete) using public transport. Such as the MRT. Or a single two-directional electric bus service. Or something similar. Make it stretch from Scotts Road to Buyong Road, or even past the Meridien Hotel.
2. Make bus services free in some areas. A government subsidy to allow anyone travelling from the harbour end of Anson Road to the Fullerton Hotel to ride for free will undoubtedly remove the incentive to drive out for lunch. It worked wonders down Adelaide and St. George's Terrace in Perth. In my view it can work in Singapore.
3. More direct routes. To be frank, the whole idea of feeder buses that deliver people to the MRT is a waste of time. Meanwhile, take the 157 any time from Toa Payoh to Boon Lay and you soon realise how good a 90 minute nap on a bus can feel. Again - make the bus routes more convenient than cars.
4. Privacy booths. This is a long shot, but taking the train gives you a lot of time to do work without uninterruption. If only you could use your mobile phone without a dozen other people listening in. How about (glass) booths to allow you to get stuff done in private. They could be chargeable.
There's no shortage of ideas. But central to the theme has to be: penalise car usage, not the bus and train companies.
Mark Laudi
Clearly, solving transportation bottelnecks is not easy. Otherwise cities such as Bangkok and Manila would have found solutions long ago. Increasing taxi fares has already prompted commuters to switch to public transport to some extent, as can be seen by the queues of taxis (not commuters, as was the case in the past) in the CBD, and the long snarls of taxis now at the airport. Raising acquisition and operating costs of cars has undoubtedly helped Singapore, too, although you wouldn't know it heading down the AYE at 7:45 in the morning. The only way to tackle the public transport issue fully, in my view, is to take away from cars the one thing which prompts people to choose them over public transport in the first place: convenience.
Many years ago, when I hosted the morning drive-time program on 938LIVE (then called NewsRadio 93.8), we posed the talkback question: what will it take for you to take public transport? One caller rang to say he would take the bus or train to work in the morning if he could get a seat. I asked him in reply, what the likelihood of this was? He said, very slim. As a result, he said, he would unlikely ever take the bus or train.
Cars allow people to move freely (traffic jams permitting), without being beholden to specific routes, and at a time of their convenience, without being beholden to timetables. Prevent cars from travelling to certain areas or at certain times, or both, and public transport will be the natural alternative.
Clearly it'll be difficult to give everyone a seat on every bus and train, but here are a few suggestions we can take the incentive away from cars, without hitting shareholders in the three public transport companies:
1. Turn Orchard Road into a pedestrian mall. Take away the convenience of cars and people will have no choice but to go (and they will still go, once all the refurbishments under the government's regeneration program are complete) using public transport. Such as the MRT. Or a single two-directional electric bus service. Or something similar. Make it stretch from Scotts Road to Buyong Road, or even past the Meridien Hotel.
2. Make bus services free in some areas. A government subsidy to allow anyone travelling from the harbour end of Anson Road to the Fullerton Hotel to ride for free will undoubtedly remove the incentive to drive out for lunch. It worked wonders down Adelaide and St. George's Terrace in Perth. In my view it can work in Singapore.
3. More direct routes. To be frank, the whole idea of feeder buses that deliver people to the MRT is a waste of time. Meanwhile, take the 157 any time from Toa Payoh to Boon Lay and you soon realise how good a 90 minute nap on a bus can feel. Again - make the bus routes more convenient than cars.
4. Privacy booths. This is a long shot, but taking the train gives you a lot of time to do work without uninterruption. If only you could use your mobile phone without a dozen other people listening in. How about (glass) booths to allow you to get stuff done in private. They could be chargeable.
There's no shortage of ideas. But central to the theme has to be: penalise car usage, not the bus and train companies.
Mark Laudi
Labels: comfortdelgro, public transport, SBS Transit, smrt
ATIC@Bangkok: A Real Eye-Opener
Attending the Asia Trader & Investor Convention (ATIC) in Bangkok over the weekend proved remarkable for two reasons. First, you learnt retail investors in Singapore face many of the same issues as those in Thailand. And second, if you think Singaporean retail investors are always the last to know where corporate governance (=can we trust 'em?) and disclosure is concerned, spare a thought for your counterparts in Thailand who are not just facing incredible uncertainty due to the way business is done in Thailand, but due to the way politics is done as well. In my view, Singaporean investors have valid grievances about a variety of issues, but they pale by comparison to those faced by Thai retail investors.
Thailand is often referred to as the land of smiles. Meeting retail investors at NextVIEW's ATIC event showed this is certainly true. Everyone was extremely courteous. But after my talk on the 5 Keys To Profitable Investing, which you can also watch in summarised form on our website, a number of members of the audience approached me bemoaning the lack of corporate governance. They made all manner of claims about insider trading, stockprice manipulation, company owners dumping unsuccessful companies onto retail investors by glossing them up in a prospectus and listing them on the market, and so on. None offered concrete proof, of course, but their concerns sounded very similar to the claims I often hear Singapore retail investors make.
Beyond that, politics seemingly plays a much bigger but less clear role in Thailand than in Singapore. While I don't profess to be an expert on the subject, my previous visits and interviews there when I was a presenter at CNBC revealed that behind all those smiles were hidden agendas, corruption and the same manoevering as you would expect anywhere else. Except worse. The political game is played very differently in Thailand. I would warmly recommend The Nation or The Bangkok Post newspapers for further reading on how the PPP - a party formed out of the ashes of Thaksin Shinawatra's Thai Rak Thai - has seemingly won government, much to the chagrin of the metropolitan-based Thais who voted Democrat, and the military which ousted Thai Rak Thai in a coup two Septembers ago. Long story short: the political agendas of companies are not obvious to the observer, and the national interest may not always be at the top of the list of priorities when executives receive a visit or phonecall from any of the political heavies.
At least in Singapore, the role government plays in the affairs of companies - if any at all - is fairly clear: furthering the national interest, even if it is at the expense of the community at large, or individual shareholders and customers (as the slogan goes, "Nation above community, community above self"). Retail investors may complain that it is not a level playing field. But at least we know what game is being played.
Mark Laudi
Thailand is often referred to as the land of smiles. Meeting retail investors at NextVIEW's ATIC event showed this is certainly true. Everyone was extremely courteous. But after my talk on the 5 Keys To Profitable Investing, which you can also watch in summarised form on our website, a number of members of the audience approached me bemoaning the lack of corporate governance. They made all manner of claims about insider trading, stockprice manipulation, company owners dumping unsuccessful companies onto retail investors by glossing them up in a prospectus and listing them on the market, and so on. None offered concrete proof, of course, but their concerns sounded very similar to the claims I often hear Singapore retail investors make.
Beyond that, politics seemingly plays a much bigger but less clear role in Thailand than in Singapore. While I don't profess to be an expert on the subject, my previous visits and interviews there when I was a presenter at CNBC revealed that behind all those smiles were hidden agendas, corruption and the same manoevering as you would expect anywhere else. Except worse. The political game is played very differently in Thailand. I would warmly recommend The Nation or The Bangkok Post newspapers for further reading on how the PPP - a party formed out of the ashes of Thaksin Shinawatra's Thai Rak Thai - has seemingly won government, much to the chagrin of the metropolitan-based Thais who voted Democrat, and the military which ousted Thai Rak Thai in a coup two Septembers ago. Long story short: the political agendas of companies are not obvious to the observer, and the national interest may not always be at the top of the list of priorities when executives receive a visit or phonecall from any of the political heavies.
At least in Singapore, the role government plays in the affairs of companies - if any at all - is fairly clear: furthering the national interest, even if it is at the expense of the community at large, or individual shareholders and customers (as the slogan goes, "Nation above community, community above self"). Retail investors may complain that it is not a level playing field. But at least we know what game is being played.
Mark Laudi
Labels: Asia Trader Investor Convention, ATIC, Bangkok, NextVIEW, Thailand
FTSE Index data: Just display it!
Stockbrokers have resisted displaying live FTSE ST Indices on their screens because of the charges that they are charged for the data. They argue they don't want to pay extra, even though they won't be charged for the first year (they secured the first-year-free concession after earlier protests). But FTSE says it costs money to compile the indices on a daily basis. Our view is that the whole debate is rather childish and the losers, once again, are retail investors.
Stockbrokers have gone through a rough ride in recent years. First the deregulation of commissions brought prices down to S$25 per online trade, S$40 per broker-assisted trade over the phone, or alternatively 0.275% or 0.28% for large trades. Previously, they got paid much more. We saw a significant round of consolidation in 1999 and 2000, which brought about, among others, the combination of Vickers Ballas and DBS to form DBS Vickers, KayHian and UOB to form UOB KayHian, and so on. For brokers who've already seen their commissions drop, any additional cost is borne by them, and not passed on to clients. They absorb extra costs because of the competition in the market, and because retail investors are generally unwilling to pay.
The irony is, the brokers are behaving just the same. Even as they complain that they have no pricing power, that retail investors generally are cheapskates who complain about "high" brokerage commissions and demand that "everything also must be free", they are asking FTSE and the SGX to do the same.
It would be much better for everyone - including retail investors - to comprehend the value of data and information. Without these, no one would be doing any trades. Data and information are not luxury add-ons. They are crucial to the whole trading process. It's like refusing to fuel up your car to spite the oil companies and high oil prices. But your car won't go anywhere!
My understanding is ShareInvestor.com has a separate data charge for its subscribers, much like airlines have a fuel surcharge separate to the price of airline tickets. Perhaps the brokers should consider this? After all, currently they look like the bad boys in this dispute. If they provided the service but passed on the cost - in a year from now, when the charges kick in - they pass the responsibility of the costs to the SGX. By then, retail investors will be so used to seeing the indices, they won't be able to do without them and this whole issue becomes mute.
Mark Laudi - who favours the FTSE ST All Share Index as the new benchmark
To comment on this blog, go to the Investor Central blog
Stockbrokers have gone through a rough ride in recent years. First the deregulation of commissions brought prices down to S$25 per online trade, S$40 per broker-assisted trade over the phone, or alternatively 0.275% or 0.28% for large trades. Previously, they got paid much more. We saw a significant round of consolidation in 1999 and 2000, which brought about, among others, the combination of Vickers Ballas and DBS to form DBS Vickers, KayHian and UOB to form UOB KayHian, and so on. For brokers who've already seen their commissions drop, any additional cost is borne by them, and not passed on to clients. They absorb extra costs because of the competition in the market, and because retail investors are generally unwilling to pay.
The irony is, the brokers are behaving just the same. Even as they complain that they have no pricing power, that retail investors generally are cheapskates who complain about "high" brokerage commissions and demand that "everything also must be free", they are asking FTSE and the SGX to do the same.
It would be much better for everyone - including retail investors - to comprehend the value of data and information. Without these, no one would be doing any trades. Data and information are not luxury add-ons. They are crucial to the whole trading process. It's like refusing to fuel up your car to spite the oil companies and high oil prices. But your car won't go anywhere!
My understanding is ShareInvestor.com has a separate data charge for its subscribers, much like airlines have a fuel surcharge separate to the price of airline tickets. Perhaps the brokers should consider this? After all, currently they look like the bad boys in this dispute. If they provided the service but passed on the cost - in a year from now, when the charges kick in - they pass the responsibility of the costs to the SGX. By then, retail investors will be so used to seeing the indices, they won't be able to do without them and this whole issue becomes mute.
Mark Laudi - who favours the FTSE ST All Share Index as the new benchmark
To comment on this blog, go to the Investor Central blog
Labels: DBS Vickers, FTSE ST, retail investors, SGX, ShareInvestor.com, Singapore Exchange, UOB KayHian
Market Street carpark: the wasted S$14 mln
It's stunning that plans by CapitaCommercial Trust to redevelop the Market Street carpark - for the second time in just two years - isn't drawing more questions from shareholders. Having spent millions just a year ago to spruce it up, they are now planning to tear it down and build an A-grade office complex on it. While the motivation itself is raising questions of analysts, the question we're asking is why no one is jumping up and down about the apparent waste of money.
On November 7, 2006, CCT announced with much fanfare the reopening of the Market Street Convenience Hub. It had spent S$14 mln over the previous 12 months to refurbish and reposition (read=tell people it's no longer a carpark) what had been an eyesore in the middle of the glass-and-steel financial district at Raffles Place. A job well-done, I thought. Now we hear CCT is planning to spend up to S$1.5 bln building a 240 metre, 850,000 square foot office tower on it.
I support the idea in principle. The Market Street Convenience Hub, or whatever fancy marketing term they have given it, looks a lot better than before the refurbishment, and the restaurant which faces Equity Plaza, Rogues, is streets ahead of the grimy hawker centres that used to be in its place. Plus, I believe carparks should be underground, not above ground. Leave the good views to people, not cars, particularly in the Central Business District. Further, the statement by CapitaCommercial Trust is in line with the well thought-out plan we've come to expect from the CapitaLand group. And I concede that S$14 mln probably isn't a lot of money in the context of the S$1.5 bln CCT is looking to spend on the redevelopment. CapitaCommercial also disclosed in its third quarter announcement that it earnt S$3.8 mln in profit from the car park, which reduces the wasted $14 mln to a wasted S$10.2 mln. But still.
But the analysts have already turned cautious, with Reuters last Friday quoting Citigroup ("hold", target price S$2.39) and JP Morgan ("underweight", target price S$2.21) as having cooled on CCT because they are cautious about office space beyond 2010. So, that alone begs the question about the merits of more office space being built now.
And here's the interesting part: the decision to refurbish the carpark was made under the stewardship of David Tan, who resigned as CEO effective September 15, 2007. His replacement, Lynette Leong took up the reigns September 21. It's hard to believe Mr Tan wasn't involved in some form of approach to the Urban Redevelopment Authority, upon whose blessing the announcement last Thursday was made. Further, neither Mr Tan nor Ms Leong are likely to act alone. Knowing CapitaLand as I do, it's always a team decision – a strength of the group.
But where's the explanation? Where's the, sorry-but-it's-now-or-never line which would at least acknowledge that S$14 mln of shareholders' funds is going down the toilet? The question is also not being asked by the mainstream media. The recent refurbishment gets no mention in Arthur Sim's Business Times report or Esther Fung and Ng Jing Yng's Today paper report on the announcement, let alone in CCT's announcement.
And finally, spare a thought for the poor motorists who are already subject to daylight robbery in terms of parking fees in the CBD. CCT says it has no plans to redevelop the Golden Shoe carpark. Thankfully, the Singapore Land Authority owns the hawker centre in the carpark there which would complicate redevelopment. But you can bet your bottom dollar that as soon as a deal is worked out there will be an announcement. In landscarce Singapore it's not great to have carparks above ground. But the drivers will pay for it in the end.
Mark Laudi, who takes the train every morning
To comment on this blog, go to the Investor Central Blog
On November 7, 2006, CCT announced with much fanfare the reopening of the Market Street Convenience Hub. It had spent S$14 mln over the previous 12 months to refurbish and reposition (read=tell people it's no longer a carpark) what had been an eyesore in the middle of the glass-and-steel financial district at Raffles Place. A job well-done, I thought. Now we hear CCT is planning to spend up to S$1.5 bln building a 240 metre, 850,000 square foot office tower on it.
I support the idea in principle. The Market Street Convenience Hub, or whatever fancy marketing term they have given it, looks a lot better than before the refurbishment, and the restaurant which faces Equity Plaza, Rogues, is streets ahead of the grimy hawker centres that used to be in its place. Plus, I believe carparks should be underground, not above ground. Leave the good views to people, not cars, particularly in the Central Business District. Further, the statement by CapitaCommercial Trust is in line with the well thought-out plan we've come to expect from the CapitaLand group. And I concede that S$14 mln probably isn't a lot of money in the context of the S$1.5 bln CCT is looking to spend on the redevelopment. CapitaCommercial also disclosed in its third quarter announcement that it earnt S$3.8 mln in profit from the car park, which reduces the wasted $14 mln to a wasted S$10.2 mln. But still.
But the analysts have already turned cautious, with Reuters last Friday quoting Citigroup ("hold", target price S$2.39) and JP Morgan ("underweight", target price S$2.21) as having cooled on CCT because they are cautious about office space beyond 2010. So, that alone begs the question about the merits of more office space being built now.
And here's the interesting part: the decision to refurbish the carpark was made under the stewardship of David Tan, who resigned as CEO effective September 15, 2007. His replacement, Lynette Leong took up the reigns September 21. It's hard to believe Mr Tan wasn't involved in some form of approach to the Urban Redevelopment Authority, upon whose blessing the announcement last Thursday was made. Further, neither Mr Tan nor Ms Leong are likely to act alone. Knowing CapitaLand as I do, it's always a team decision – a strength of the group.
But where's the explanation? Where's the, sorry-but-it's-now-or-never line which would at least acknowledge that S$14 mln of shareholders' funds is going down the toilet? The question is also not being asked by the mainstream media. The recent refurbishment gets no mention in Arthur Sim's Business Times report or Esther Fung and Ng Jing Yng's Today paper report on the announcement, let alone in CCT's announcement.
And finally, spare a thought for the poor motorists who are already subject to daylight robbery in terms of parking fees in the CBD. CCT says it has no plans to redevelop the Golden Shoe carpark. Thankfully, the Singapore Land Authority owns the hawker centre in the carpark there which would complicate redevelopment. But you can bet your bottom dollar that as soon as a deal is worked out there will be an announcement. In landscarce Singapore it's not great to have carparks above ground. But the drivers will pay for it in the end.
Mark Laudi, who takes the train every morning
To comment on this blog, go to the Investor Central Blog
Labels: CapitaCommercial Trust, CapitaLand, carpark, Market Street
Value Investing: Winners Of 2007
For those who need reminding, 2007 was a pretty topsy turvy year for the Singapore stock market. But it underscores our belief again in the virtues of value investing. While the Straits Times Index gyrated in a rocky thousand point range (see chart), some unloved stocks came to the fore and outperformed, proving that the buy-low, sell-high strategy may take time but does come good for some stocks.
LC Development.
The stock did very little in the first six months of 2007, but rocketed 150% between mid-June and mid-July – on no news! It announced the acquisition of a shell company in Hong Kong, Richful Properties, for HK$1. But that was all.
In late April it was trading on a price-to-book ratio of 0.86x and was paying a dividend of about 2%. At a price-earnings multiple of 22.6x it wasn't exactly cheap, compared to the rest of the market. But thanks to the big rush into property developers, it rose to a P/E of 43.6x, a P/B of 1.5x and a yield of just 1.4%.
Meiban.
June and July were also the months things took off for Meiban. It appointed Yvette Lim as CFO on the 18th of that month. Credit Agricole bought 3.76 mln shares on July 11, giving it a deemed stake of 5.4%.
And CEO Goh Tiong Yong bought 500,000 shares in the company. In late April, it was trading on a price-book ratio of 0.92x, a price-earnings of 11.3x and a yield of 3.3%. Fast forward to today, and it is up to a price-book of 1.8x, a price-earnings multiple of 10.7x (it's actually fallen) and a yield of 1.7%.
These two examples show that some value stocks, which bump around doing nothing for months, do take off when they are re-discovered.
As you would expect with value stocks, not all of them gained so strongly during 2007 and maintained those gains.
Kian Ann Engineering is a noteable example. When we first looked at it it was trading at S$0.28, with a price-book ratio of 0.85x and a price-earnings multiple of 9.9x. It was also paying a dividend of around 3%.
By the end of the year, the stock had almost doubled – but given back most of those gains by year end. It is now trading at a P/E ratio of 8x and a yield of 4.2% but at 1.12x book value it is no longer classified a value stock.
Bottom line: value investing sometimes remains a waiting game. That is, waiting for underpriced companies to perform better, and waiting for the market to uncover hidden value. But given the alternative of hit-and-miss trading, value investing is a far less nerve-wracking experience. Good value is always recognised in the end.
Mark Laudi
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LC Development.
The stock did very little in the first six months of 2007, but rocketed 150% between mid-June and mid-July – on no news! It announced the acquisition of a shell company in Hong Kong, Richful Properties, for HK$1. But that was all.
In late April it was trading on a price-to-book ratio of 0.86x and was paying a dividend of about 2%. At a price-earnings multiple of 22.6x it wasn't exactly cheap, compared to the rest of the market. But thanks to the big rush into property developers, it rose to a P/E of 43.6x, a P/B of 1.5x and a yield of just 1.4%.Meiban.
June and July were also the months things took off for Meiban. It appointed Yvette Lim as CFO on the 18th of that month. Credit Agricole bought 3.76 mln shares on July 11, giving it a deemed stake of 5.4%.
And CEO Goh Tiong Yong bought 500,000 shares in the company. In late April, it was trading on a price-book ratio of 0.92x, a price-earnings of 11.3x and a yield of 3.3%. Fast forward to today, and it is up to a price-book of 1.8x, a price-earnings multiple of 10.7x (it's actually fallen) and a yield of 1.7%.These two examples show that some value stocks, which bump around doing nothing for months, do take off when they are re-discovered.
As you would expect with value stocks, not all of them gained so strongly during 2007 and maintained those gains.
Kian Ann Engineering is a noteable example. When we first looked at it it was trading at S$0.28, with a price-book ratio of 0.85x and a price-earnings multiple of 9.9x. It was also paying a dividend of around 3%.
By the end of the year, the stock had almost doubled – but given back most of those gains by year end. It is now trading at a P/E ratio of 8x and a yield of 4.2% but at 1.12x book value it is no longer classified a value stock.Bottom line: value investing sometimes remains a waiting game. That is, waiting for underpriced companies to perform better, and waiting for the market to uncover hidden value. But given the alternative of hit-and-miss trading, value investing is a far less nerve-wracking experience. Good value is always recognised in the end.
Mark Laudi
Labels: Kian Ann Engineering, LC Development, Meiban, Value investing
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