Investor Central

Starhub appoints Tan Tong Hai as COO

2009-01-07T11:16:00.002+08:00

Starhub has appointed Tan Tong Hai as its COO.

Tan, was previously president and CEO of Singapore Computer Systems from 2005 till recently. Before that, he was president and CEO of Pacific Internet. He has over 20 years of experience in the regional IT, Internet and e-commerce industries.

The COO position had been vacant for over two years since StarHub's previous COO, Yong Lum Sung, quit in 2006.

Tan’s appointment comes just after M1’s CEO Neil Montefiore quit. The 55-year-old leaves M1 after 12 years. M1 is currently looking for a new CEO.

Analysts surveyed by Reuters have on average an OUTPERFORM call on Starhub with a price target of S$2.50 compared to its last traded price of S$1.92.

After the collapse comes inflation: Ray Barros

2008-11-25T01:05:00.006+08:00

Watching the US government invest US$20 bln in Citigroup shares and guarantee a further US$306 bln in loans may save the day for now. But the scenario feels rather eerie (continues below video)...

...when you consider that this money, along with the US$700 bln already pledged to help the banks, plus another US$25 bln if the car companies get their desired hand-out, will need to be soaked up again.

Meaning: this trillion dollars in money which the US government has shaken out of its sleeve will, at some point, find its way back into the pockets of consumers.

And when it does, argues Ray Barros, inflation will be the next big thing to worry about.

In other words, we'll drown tomorrow in the waters which we are using today to dowse the flames.

Not that the US government has much choice. It's a little like standing in a wobbly aluminium dingy: The boat has rocked too far the left, but overcompensating will rock it too far on the right. It'll take a while before it steadies. If we don't all fall out, first.

I recorded this interview with Ray Barros a few weeks ago, but his words still hold true today. Perhaps more so.

I welcome your comments.

PS: Ray Barros will be in town December 6 at Singapore Expo Convention & Exhibition Center.

FJ Benjamin - yet another weak quarter

2008-11-11T18:14:00.002+08:00

FJ Benjamin says the weakening macroeconomic outlook means it will have a challenging financial year. Its profitability will be affected by fluctuations in foreign exchange. In the meantime, it will try to control costs and improve its cash flow.

The retailer’s Q1 2009 revenue rose 3% to S$84 mln. The retailer said the marginal increase was due to the global economic woes and weakening consumer sentiment.

Net profit dropped 73% to S$1.1 mln. This was mainly due to unrealised non-cash foreign exchange losses of S$1.4 mln, compared with a gain of S$800,000 in Q1 2008.

It generated S$14.3 mln in cash from operations compared to the S$1.2 mln.

Analysts surveyed by Reuters have on average a HOLD call on the stock with a price target of S$0.27, compared to its last traded price of S$0.19.

~ Jin San’s take ~
FJ Benjamin has reported yet another weak quarter. At least it didn’t suffer a net loss this quarter like it did in Q4 2008. Things don’t look positive for the retailer as the weaker consuming spending in the region will negatively affect its earnings for this year. This is more than a bit worrying, as it has been in negative free cash flow position for the past two FY (even though it's positive for its latest quarter.

Like the rest of the market, FJ Benjamin's stock has taken a beating and its P/E now stands at 7.71 and its P/B is at 0.82.

As always, please see your licensed financial advisor before making any investment decisions.

SMRT - Bumps ahead

2008-10-31T19:01:00.001+08:00

SMRT says the operating environment is expected to be difficult for the next 12 months. It thinks its taxi operations will remain challenging. Also, its bus operations are expected to sustain operating losses for FY2009 because of high diesel prices, and being affected would be affected by the government implementing the more stringent quality of service standards.

But for the next quarter, the transport operator says it expects higher revenue from its train and bus operations as compared to Q2 due mainly to ridership growth.

It also expects to complete the acquisition of a 49% stake in Shenzhen Zona Transportation Group Co. Ltd by Q4 2009.

It declared an interim dividend of 1.75 cents.

Q2 revenue rose 15% to S$227 mln as more people took SMRT trains and buses, it received higher rental and advertising revenue, and it sold more diesel to taxi hirers.

Net profit rose 8% to S$42.6 mln due mainly to higher operating profits partially offset by higher income tax expenses.

It generated S$20.7 mln in cash from operations compared to the S$22.1 mln the previous year.

Analysts surveyed by Reuters have on average an OUTPERFORM call on the stock with a price target of S$2.00, compared to its last traded price of S$1.54.

~ Jin San’s take ~
SMRT says it is expected to finish acquiring 49% of Shenzhen Zona Transportation Group Co. Ltd by Q4 2009. This could be an important event in SMRT’s history. SMRT says Shenzhen Zona is profitable and has high growth potential.

Like the other SGX-listed company, Midas Holdings, which is supplying the demand from China’s infrastructure sector, SMRT can hedge against its exposure to the Singapore transportation market by doing well in China.

After all, Singapore is too small and competitive.

As always, please see your licensed financial advisor before making any investment decisions.

Qian Hu - negative free cash flow?

2008-10-20T20:39:00.002+08:00

Qian Hu released its Q3 2008 results today.

It expects its revenue and profit to continue to increase in Q4 2008. The increased revenue should come from its ornamental fish operations, improvement in its accessories export business, coupled with the positive contributions from its overseas operations in Malaysia, Thailand and China.

Q3 revenue rose 4% to S$23.6 mln as sales of its ornamental fish increased and it exported more accessories. Its plastics business also registered an increase in revenue, although the increase in the price of raw materials eroded its profit margin. Its net profit went up 21% to S$1.5 mln.

It generated S$3.2 mln in cash from operations compared to the S$2.8 mln it gained the previous year.

Analysts surveyed by Reuters have on average a HOLD call on the stock with a price target of S$0.13, compared to its last traded price of S$0.10.

~ Jin San’s take ~
Qian Hu is ranked number 1 on the Business Times Corporate Transparency Index, and with good reason - its reports are usually detailed and give explanations for its actions. But starting in FY2007, its free cash flow turned negative and this trend is apparent in its Q3 report as well.

According to its cash flow statement, it gained S$2.23 in cash from operations, but it spent S$1.1 mln on property, plant and equipment, and another S$1.8 mln on brooder stocks. Put together, the capital expenditure comes up to S$2.9 mln, more than what its cash from operations can cover.

Although this is more a sign of a company with ambition that believes in investing in itself, and the margin is not that wide, investors might want to take note of this.

As always, please see your licensed financial advisor before making any investment decisions.

BH Global Marine - to be undone by the BDI?

2008-10-16T20:29:00.001+08:00

BH Global Marine says it is cautiously optimistic of its business prospects in the current year and expects the demand for its products and services to remain stable. It also expects consolidation within the industry as credit tightening by banks will adversely affect the smaller competitors.

Q3 turnover went down 6% to S$22.7 mln as it sold less marine electrical equipment. But Q3 2007 in comparison was an exceptional quarter as BH Global Marine pushed forward some projects from Q4 2007.

Its overall gross profit margin increased from 38% in Q3 2007 to 41% in Q3 2008. This was mainly due to the weaker US dollar in Q3 2008. Net profit rose 3% to S$5.1 mln.

It generated S$6.7 mln in cash from operations compared to the S$5.3 mln it burnt the previous year. It could have been higher if not for the rise in inventory costs to S$3.2 mln from S$1.8 mln the previous year.

This stock is not covered by Reuters. It was last traded at S$0.16.

~ Jin San’s take ~
Although BH Global Marine says it expects demand for its products to continue, the global downturn is taking its toll on the shipping industry. The Baltic Dry Index plunged 10.7% cent on the day, to 1,615 pts on 15 October, its lowest level since February 2003. With the slowdown in shipping activity, we wonder if BH Global Marine will still see a constant level of demand for its products.

As always, please see your licensed financial advisor before making any investment decisions.

SGX - Signs MOU with Bahrain Stock Exchange

2008-10-14T18:58:00.000+08:00

SGX has signed an MOU with Bahrain Stock Exchange to foster a closer relationship and develop channels of information exchange between the two markets.

The Bahrain Stock Exchange officially started operating in June 1989. Its financial instruments listed include ordinary and preferred shares, bonds/Islamic Sukuk, and mutual funds. The exchange is regulated by The Central Bank of Bahrain.

There are 52 companies listed on the exchange, 42 mutual funds, and 14 bonds/Islamic Sukuk traded on the exchange. Its market cap is about US$30 bln.

The exchange’s trading session is from 9.30 a.m. to 12:30 noon, including a pre-opening period of 15 minutes starting from 9:15 a.m. Clearing and settlement of transactions is made within two working days (T+2).

Analysts surveyed by Reuters have on average a HOLD call on the stock with a price target of S$7.55, compared to its last traded price of S$5.85.

~ Jin San’s take ~
From setting up a representative office in Beijing to holding a roadshow in Europe, SGX has been very keen to attract more foreign listings in Singapore. This MOU with the Bahrain Stock Exchange can be seen as a stepping stone to SGX’s exposure to investors and companies in a region that is less affected by the global financial crisis.

According to Kuwait’s Global Investment House, the Bahrain Stock Exchange still offers the best value in the Gulf Cooperation Council (GCC). Despite the global financial crisis causing a decline in the gulf markets, Global said Bahrain’s economy has been posting healthy double digit growth rates in the past five years.

But in Singapore, where we’re currently in a recession, SGX cannot escape the extremely bearish market. And with its stock priced at S$5.85 (it was trading above S$15 this time last year), it is set to tumble further. Its current P/E of 13 is still a bit expensive for a value investor. Well, till the next bull run, then.

As always, please see your licensed financial advisor before making any investment decisions.

Nearly-bankrupt FerroChina appoints financial advisors

2008-10-10T17:50:00.003+08:00

FerroChina has appointed Ernst & Young Solutions LLP as its financial adviser to its restructuring.

The steel-maker said yesterday it was unable to pay RMB 706 mln in working capital and loans due to the economic crisis. It has also temporarily stopped its manufacturing activities and suspended its shares from trading.

Analysts surveyed by Reuters have on average a HOLD call on the stock with a price target of RMB 4.06, compared to its last traded price of S$0.55.

~ Jin San’s take ~
Analysts have predictably downgraded FerroChina’s stock. OCBC Investment Research has suspended coverage on FerroChina and DBS-Vickers has a SELL call at a price target of S$0.545.

There is little investors can do – they cannot sell their stocks as trading has been suspended. They can only hope that management’s talks with lenders and potential investors turn out well.

As always, please see your licensed financial advisor before making any investment decisions.

Thakral - Kartar Singh opposes removal as director

2008-10-07T18:43:00.001+08:00

Kartar Singh, chairman of Thakral, has written a letter to shareholders to oppose the resolution by the two Hong Leong subsidiaries to remove him as director of Thakral Corp.

Venture Delta Ltd and Grace Star, the two subsidiaries of Hong Leong Asia, claim they are concerned about the age of Kartar Singh as he is 74 years old and whether he is able to continue with his role as executive director and chairman. According to Section 153 of the Companies Act, the retirement age for company directors is 70.

Kartar Singh replied in a letter to shareholders that he is able to continue on. He points to his experience of having been through many boom and bust cycles.

Singh believes the group’s consumer electronics business can be profitable again, but the return on capital from the distribution business alone is not sufficient and may not be justifiable.

He believes there are new opportunities in Pan Asian property – the majority of the board had voted to change Thakral’s core business in May. He ended his letter by assuring the shareholders that he has the energy, drive and will to continue as director and chairman of Thakral.

Thakral’s Extraordinary General Meeting will be held on 15 October and shareholders will decide whether Kartar Singh Thakral will stay on the board.

This stock is not covered by Reuters. It was last traded at S$0.04.

~ Jin San’s take ~
Hong Leong had attempted a takeover of Thakral in 2006, but it fell through. With this attempt to remove Kartar Singh from the board, it is most likely seeking to appoint an insider, or a few insiders, in Thakral’s board to speed up the turnaround of the ailing business.

In the event Singh leaves, it is not certain whether the other two members of the Thakral family will stay on as well.

On Hong Leong’s end, its company culture is not very predisposed to revealing its intentions clearly. We are looking to 15 October to provide an ending to this rather dramatic event.

As always, please see your licensed financial advisor before making any investment decisions.

Datapulse - it’s gonna be tough

2008-09-05T21:45:00.001+08:00

Datapulse, which prints CDs for companies, warns that life will be tough due to keen competition and high raw material costs. But it says its strong balance sheet, experienced management team and close relationships with its customers will help it through.

It declared a final dividend of 2 cents.

FY2008 revenue rose 5% to S$73.3 mln, which Datapulse attributed to improved demand and new product launches by customers during Q1 2008.

But higher operating expenses caused net profit to drop 11% to S$13.3 mln.

It generated S$20.3 mln in cash from operations compared to the S$22.8 mln it generated the previous year.

This stock was last traded at S$0.16.

Datapulse has managed to keep its cash flow in the black over the past few years.

But one thing this company has to keep a keen eye on is the future of optical storage.

With thumbdrives and flash memory becoming cheaper and more popular, more companies might prefer to use them to disseminate information or as corporate gifts.

Just think about it - loading a thumbdrive with information is much faster than the stamping and duplication process for CDs and DVDs. Plus, most portable laptops nowadays come without a CD drive but with more than one USB port.

The Internet is also helping to make the CD and DVD obsolete – why bother bringing a CD or DVD around if you can plug into the Internet and retrieve the information from a website?

Ex-Microsoft chief Bill Gates even went as far as to not take any sides in the battle between HD-DVD and Blu-ray, as he believes that DVDs will be made extinct by the advent of digital distribution systems. He calls optical storage “simply the last physical format we'll ever have," and predicts the Internet to rule over all physical media formats.

Although the day when the DVD and CD become obsolete is still far away, Datapulse had better start preparing itself for it.

As always, please see your licensed financial advisor before making any investment decisions.

See Hup Seng Ltd – See No Evil?

2008-09-03T20:46:00.002+08:00

The board of See Hup Seng announced that it has unanimously decided not to fire its CEO for the insider trading he engaged in when he was a consultant at the company in 2006.

It had announced on Monday that Yap Sew, its current CEO, was fined S$50,000 by the MAS.

A bit of background here: In 2006, Yap bought 900,000 See Hup Seng shares after knowing that the company had bought Speedo Corrosion Control Pte Ltd. He was a consultant at See Hup Seng at that time and had profited from the price-sensitive information.

This matter was referred to MAS by SGX-ST and MAS carried out civil penalty investigations.

MAS then carried out a civil penalty enforcement action against Yap.

The board of See Hup Seng gave a few reasons why it won’t fire Yap:

Firstly, it said the insider trading incident took place in 2006 when Yap Sew was not a director or employee of the company.

Note: Yap engaged in insider trading on 25 July 2006; he was made CEO on 5 August 2006.

Secondly, it said Yap has been successful in implementing key business strategies which helped turn the loss-making company to being profitable.

Thirdly, Yap is working on several projects to help the company grow further.

Yap Sew should be lucky that he was let off with just a civil penalty, which carries no criminal record, got to keep his job, and enjoys such support from his board.

But credit should go to him for turning See Hup Seng from six years of losses to being profitable in 2006. Its net profit more than tripled to S$13.6 mln from FY2006 to FY2007 on the back of a huge increase in revenue.

But will the board’s decision raise shareholder confidence in the company?

It is very possible that the man on the street with a few lots of See Hup Seng shares might now feel less assured of the company’s corporate governance policies.

After all, value investors want to sleep easy at night and not worry about whether the CEO will place personal gains above ethics.

It is even worse when the board seems to see Yap as a messiah for turning round the company and voted unanimously to not fire him.

In fact, for a company that specialises in preventing corrosion, See Hup Seng has allowed the rot to settle at the top.

As always, please see your licensed financial advisor before making any investment decisions.

Koda - caught a cold

2008-08-27T19:45:00.003+08:00

Koda released its FY2008 results today. And it performed as it had warned its shareholders it would – badly.

But it did say it will be financially sound and profitable in FY2009.

The furniture company declared a final dividend of 0.5 Singapore cents. This adds to its interim dividend of 0.5 Singapore cents, making its total dividend payout for the year 1 Singapore cent per share.

Koda had said in July that its revenue, profit margin and net profit will be lower for FY2008.

It announced today its FY2008 revenue dropped 8.5% to US$54.9 mln while net profit decreased 42% to US$4.2 mln. Koda blamed weaker orders from the US and EU, and higher overall costs for its bad showing.

It managed to maintain a positive cash flow, though – it gained US$3.1 mln in cash from operations compared to the US$5.9 mln it generated the previous year. It has US$5.1 mln in free cash flow.

Analysts surveyed by Reuters have on average an OUTPERFORM call on the stock with a price target of S$0.5175, compared to its last traded price of S$0.18.

On 20 June, Koda announced that Blackhorse Asset Management sold off a small stake in Koda – it reduced its holdings from 11.95% to 11.92%. Blackhorse kept selling off more in the next few weeks. As of the last announcement on 7 August, Blackhorse owned 10.86% of Koda.

On the other end, on 16 July, the Koh siblings James Koh, Koh Jyh Eng and Koh Shwu Lee raised their stakes in Koda. MD James Koh raised his stake from 18.43% to 18.69%, Koh Jyh Eng who is executive director of sales and marketing raised his from 9.32% to 9.45%, and Koh Shwu Lee, who is director of finance and administration, raised her holding from 9.14% to 9.21%.

The move by the directors seems like an attempt to soften the impact of the lack of confidence shown by Blackhorse.

Based on its FY2008 earnings, it has a P/E of 3.83 and a P/B of 0.63. During its breakout last year, Koda’s stock price managed to hit S$1 in April. It is currently in the doldrums, trading at S$0.18.

As always, please see your licensed financial advisor before making any investment decisions.

On the Ground in the United States

2008-05-29T16:38:00.001+08:00

Today we are on the ground in the United States. The topic on deck: Is the US a nation of borrowers?

Consumer confidence is at an all time low in the U.S.
More than 2,000 people are declaring bankruptcy daily
Thousands upon thousands of jobs have been lost in recent months due to the sub-prime crises…

I am starting to wonder, what were the behaviors that got us into such a mess?

I think we can beak it down into a few root causes:
First, Greed and a “buy now as opposed to save and buy later” mentality
Second, Poor financial education and a lack of financial sophistication
And finally, consumer traps and the wide availability of credit with “sub-prime” terms

We want it all, we want it now. We want it bigger, better, flashier… and chances are, we are going to charge it. The consumer mentality in the United States has been shifting in the past few centuries.

From movies, to music, magazines, and books, popular culture is increasingly more focused on the pursuit of not life, liberty, and happiness, but diamonds, designer clothes, and the newest BMW.

They are pumping out the message that we deserve everything and anything, and the worst part is we are buying it, literally.

This point was truly driven home while I was working part-time at a US retail company, Victoria’s Secret. Like many clothing stores today, Victoria’s Secret offers store credit cards. The card comes with a hefty 24% interest rate, only disclosed in the fine print of a brochure handed out after the customer signs up.

One day a woman came in to sign up for the VS card (all it takes is a driver’s license and a debit or credit card). She had just obtained her first credit card from a questionable company. She was approved for the card (it is almost impossible to get denied) and was awarded a $500 limit. She proceeded to spend the limit almost to the dollar and then walked out. She took the bus home.

Regardless of financial stability it is incredibly easy to obtain credit in the United States. In fact, we are practically drowning in credit card offers the minute we turn 18 and it doesn’t ever seem to stop. And while many people seem to fall into the “credit trap” those who are perhaps the most vulnerable are the nation’s working poor.

According to a BusinessWeek article “Wages for the working poor have been stagnant for three decades. Meanwhile, their spending has consistently and significantly exceeded their income since the mid-1980s. They are making up the difference by borrowing more. From 1989 through 2004, the total amount owed by households earning $30,000 or less a year has grown 247%, to $691 billion, according to the most recent Federal Reserve data available.”

This has all been made possible through wide spread high interest, high fee financing, or subprime lending in other words.

Driving down the block in my hometown of Cleveland, Ohio (which has consistently been ranked as one of the poorest big cities in the US throughout the past decade) the messages along the road seem to repeat themselves.

“No Credit, No Problem”
“Financing for All”
“Rent to Own”
“Quick Cash”

Pay Day loan services, check cashing companies, rental services, used car dealerships all encourage low-income consumers to live beyond their means as they reap the benefits. In addition, the people they are targeting are frequently un-educated and easily susceptible to scams…. Something they are all too willing to take advantage of.

You might be wondering “Why on earth would these companies be targeting people low-income, low-revenue individuals who might never be able to repay?”

The truth is that it is a major, fast expanding business. In fact, these “alternative financial services” businesses generate more than US$250 billion a year.

Major US financial companies have caught wind and joined in. HSBC Finance, Sallie Mae, Wells Fargo, US Bancorp, Bank of America, and Merrill Lynch & Co all have either their own version of “alternative financing” services or are funding companies that do.

So, with all the constant “buy, buy, buy” messages, the wide availability of credit and credit with “subprime” rates, it is no surprise that the US is in the situation it is.

Only time will tell if behaviors and regulations will adapt to rid the county of this “affluenza” and spending craze.

Algorithmic trading on the SGX: less clarity, more volatility

2008-05-20T21:10:00.004+08:00

I'm never one to say things have to stay the same when new technology comes along. Resisting change is generally futile. That's particularly the case if new revenue streams can be earnt. But the Singapore Exchange's announcement of a partnership with SingTel to cut the processing time of trades to less than a millisecond from the current, oh-so-slow 4 milliseconds deserves further investigation. As always, whenever the exchange makes changes, there are winners and losers. In this case it appears the exchange is the winner, traders might be winners if they play their cards right, and investors are losers.

The point of the cut in the time it takes to consummate a trade from miniscule to even more miniscule is to allow traders to employ algorithmic programs. It's also called automated trading or program trading. It's when computers take over the job of brokers. There are some excellent articles around on this subject, such as this one from BusinessWeek a few years ago. The area of automated trading is an industry unto itself. There is even a magazine and a podcast on the subject.

Suffice to say, algorithmic trading will create:

1. Greater secrecy. It'll be harder to find out who's moving large positions because this will be done incrementally, and
2. Greater volatility. A third of all EU and US stock trades in 2006 were driven by automatic programs, according to this article on Wikipedia. That is, driven not by fundamentals but by technical trading.

It'll "enhance SGX's market liquidity and depth" alright. But I can't see how either of them will be good for investors. Recall, investors are those poor souls who buy stocks for what they're actually for: Dividend payouts and capital appreciation. There is already enough noise around to distract us from this. The last thing we need is to be tossed around by ever growing storms of volatility, and a decreased understanding of who is buying or selling what.

As I said, I am loath to critique new technology on the basis of resistance to change. It just means that investors will have to keep getting smarter. And not just investors. As Futures & Options Week points out, the increase in automated trading "presents a challenge to clearing operations" because lightning fast trades require lightning fast clearing. Let's hope the SGX is also geared up for that.

Mark Laudi, who fears the Singapore Exchange will become evermore Singapore's third casino.

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Journalists and companies – complicity exposed

2008-05-16T16:06:00.001+08:00

Now that the quarterly earnings season is drawing to a close you'll see many journalists head to the gym. Why? Because attending one or more earnings briefings a day can really start to impact your waistline, what with all that food that is served. My critique is not of the companies (for a change), but journalists. My old colleagues won't like me for saying this, but the fact is that journalists are fed so well at press conferences that I cannot see how investors can possibly expect to see unbiased, indepth coverage of the companies that are reported on.

I really wonder whether Singaporean investors realise just what a bunch of lazy freeloaders reporters are. Already much of Singapore business journalism is nothing more than an exercise in rewriting press releases (without also reading the statutory announcement). It's the only exercise they get. The news Singapore investors consume is written by people who spend hours at press briefings in hotel ballrooms, consuming wonderful food and beverages which, inevitably, are paid for by shareholders.

The problem started with the fact that companies whose headquarters are not located within a ten minute taxi ride of the Toa Payoh/MacRitchie Reservoir area struggle to get media attention (because a trip out to Jurong and Tuas, or Changi Business Park is oh, so far away). To address this issue, they resort to renting out a function room in an inner-city hotel and serve up a big meal.

What disgusts me is not just that companies do this in the hope that they get more, and more favourable editorial coverage. What disgusts me is that they succeed with this tactic. Journalists lap this sort of thing up and complain audibly when companies don't put on a spread. To think that in other markets journalists refuse the offer of a glass of water from their hosts at press conferences, lest it be seen as interference with the editorial process!

I accept that things are done differently in Asia, and that much more effort goes into welcoming visitors, making them comfortable, offering refreshments and so on. But when it comes to corporate governance and competing in a globalised world, these customs should not apply to journalists under the special circumstances of an earnings briefing.

I have raised this point with David Gerald, the President of the Securities Investors Association (Singapore), who routinely encourages shareholders not to attend Annual General Meetings just for the food. My point is: journalists should not attend press briefings just for the food, then return to the newsroom to rewrite the press release without also reading the statutory announcement.

For as long as companies put on lavish lunches and dinners for reporters, readers and viewers of the financial media cannot possibly expect to be well served.

Mark Laudi, who attended the Banyan Tree earnings briefing at the Fullerton Hotel on Thursday. Yes, he also ate a plate of food so as not to offend his hosts. But he would have been just as happy if no food was served.

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No news is bad news, and silence is not golden

2008-05-15T17:35:00.003+08:00

Sometimes, disclosing what hasn't happened is as important as disclosing what has. And in this regard the Singapore Exchange is spot on (see end of this blog) when it praises companies which have provided updates on the impact of the earthquake in China on their businesses even though little or nothing happened to them. If only all companies did this on other occasions, too.

Talk to any 5-year-old and they'll tell you that not admitting to doing something wrong is not the same as lying. Conveniently forgetting to mention what hasn't happened is not the same as denying that they did something wrong, they say.

Fortunately, most SGX-listed companies are not run by 5-year-olds. Why is it, then, that the SGX had to "contact listed companies with known Sichuan operations" to establish whether the quake affected them.

Just as people visiting China would have phoned home to tell friends and relatives they're alright, SGX-listed companies with China connections should take the initiative to "phone home" to their part owners (that is, investors who bought their stock on the SGX) - even if they have nothing to say other than everything is okay.

So, we concur entirely with the SGX when it "encourages listed companies to continue heightened vigilance on disclosure" for the rest of the year, and the next fifty years (words and emphasis added).

This clearly should apply to all companies, but particularly those whose operations are in countries that are not easily accessible, where Singapore investors can go easily and see for themselves.

So, congratulations to those companies which have made announcements sofar in the last two days:

Anwell Technologies
China Eratat Sports
China New Town Development
Wilmar International
Sapphire Corp
China Dairy
China Zaino
Asia Water Technology

(Add your company name by making a comment, if you also did the right thing but are not listed here)

And special mentions to

CapitaLand
Radiance Electronics
Sino-Environment Tech
Sihuan Pharma

for contributing funds to the relief effort.

Mark Laudi, who wonders when Singapore companies with operations in Burma – such as DBS, UOB, OCBC, Keppel Corp, CNA Group and Shangri-La – will say something about whether the cyclone in Myanmar impacted their operations there.

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SGX Encourages Listed Companies to Continue Heightened Vigilance on Disclosure 15 May

SGX would like to extend our heartfelt sympathies and condolences to the people and families affected by the earthquake in China.

We have contacted listed companies with known Sichuan operations and been informed that most of them are unaffected by the quake. We also note that several listed companies have updated investors on the impact of the China earthquake on their businesses via SGXNET.

Listed companies are aware of their responsibility to make timely and accurate disclosure of material information. We encourage them to continue their heightened vigilance with regard to disclosure of material developments. In this connection, foreign listed companies can tap on their Singapore directors in the discharge of their disclosure responsibilities.

2008-05-14T18:06:00.001+08:00

SingTel: Borrowing to pay higher dividend

Shareholders will not be complaining that they can continue to milk the cash cow SingTel for dividends. Particularly during the uncertain and directionless market, when capital gains are no longer a sure thing, good dividend payers are very welcome. But a look through the Cashflow statement indicates that despite the billion dollar revenues and cashflows, SingTel could only afford to raise its dividend because it borrowed more money.

It's not rocket science:

The business generated S$5.45 bln in cash (Net Cash inflow from operating activities).

SingTel invested S$2.75 bln in associate companies, plant and equipment.

It also paid out dividends during the year of S$3,435.4 bln, compared to S$1.92 bln last year. The difference: S$1.515 bln.

How did it pay for this increase, even as it repaid loans worth S$3.75 bln?

Well, it borrowed S$4.93 bln in fresh funds, which means on balance it took out new loans worth S$1.67 bln.

Next question: is there necessarily anything wrong with borrowing to pay dividends?

Probably not. It's not uncommon, in other countries, too.

The reason companies do it is to maintain confidence in their shares. There's little that scares people away more, particularly during the uncertain and directionless markets I already mentioned, than a cut in the dividend.

But shareholders would be wise to pay attention to the cashflow statement to ensure that dividends aren't artificially propped up by loans even as sales are falling and the business is failing. That doesn't seem to be the case with SingTel, which generated sales worth more than S$14.8 bln! But few if any other companies can boast of similar revenue profiles.

Cash is king.

Mark Laudi, who doesn't own any SingTel shares, but sometimes wishes he did.

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Press Releases <> Significant Announcements

2008-05-13T18:44:00.002+08:00

It has long been a bugbear of mine that some PR companies stretch significant announcements of their clients over three days to try to get some media coverage. But another issue that yanks our collective chain is their use of the SGX Significant Announcements website as their corporate press release dissemination channel. Creative Technology stands out as one of the main 'offenders'.

Today's announcement is a case in point. If the announcement title 'Creative Introduces the Vado Pocket Video Cam - Capture Life - See it, Shoot it, Share it - All in an Instant' doesn't already give it away, the absence of any forecast on the impact on earnings - not even the obligatory but completely useless "this announcement is not likely to impact earnings this year" - is sure to make you see this press release for what it is.

We don't have anything personal against Creative's Corporate Communications Manager Jenny Wong, nor Yap Meng Lee from August Consulting, whose names grace the documents. In a way, I sympathise with Creative because of the tough ride they've been through. Wong and agency haven't exactly had a lot of good news to announce over the last year or five. But the SGX significant announcements page just isn't the place if the announcement is not significant.

Plus it's not like these postings have their desired effect. A scan over the last three months worth of announcements show that out of the nine announcements in that time, four were product press releases (the others were meaningful announcements about the sale and leaseback of their building, financial results and a tie-up with InnoMedia). A check on Google shows none of these four were picked up by the press.

This is where the Investor Relations Professionals Association (Singapore) – set up with the blessing of the SGX – can have an influence. If it wants to do something really useful, it would ask the SGX to split the current corporate announcements page into two: one for the really meaningful stuff which serious investors need to make investment decisions, and another for all the rest. This would include glossy PowerPoint presentations, press releases and so on, which are not permitted to say anything more than the statutory announcement anyway (and usually say a whole lot less). I suspect the IRPAS would not agitate for such a change, given that the Association's Board of Directors is made up entirely of investor relations people (or in any event corporate types who stand to benefit from putting a message out there), not the audience of investors and analysts who are at the receiving end of their output.

For the sake of clarity and an informed (not clouded) market, let's get rid of the PR stuff and cut to the real game on the SGX announcements page.

Mark Laudi

Microsoft vs Yahoo - Microsoft will win

2008-05-06T19:28:00.000+08:00

What a clever game Steve Ballmer is playing with Yahoo! Walking away from his bid for Yahoo was the best move he could have made. In the process, Ballmer is revealing himself a student of Sun Tzu's Bing Fa. My personal prediction is Microsoft will win in its bid, and probably for not much more than the bid he just ended. The reason is simple: Yahoo needs Microsoft more than Microsoft needs Yahoo.

Google is the dominant player in the online search game. Maybe not in every country. Yahoo is still very strong in China, while Google is not. But clearly Yahoo has a fight on its hands for dominance of online advertising. Note how Yahoo sought a white knight in the face of Microsoft's bid. Ironically, Yahoo approached its main competitor Google. Google, which was already warning it was going to fight a Microsoft-Yahoo tie-up on the grounds it would be uncompetitive, offered to share its search technology with Yahoo.

End result:

• Google became stronger by showing its dominance in the search game. It can't make a move on Yahoo because that will never get past the competition authorities. But by sharing its search technology it already smacks of a merger by stealth.
• Yahoo revealed its weakness by scampering for a saviour. Now that Microsoft launched a bid, the company is in play. Everytime the stockprice falls, people will say Microsoft will make another bid for it. It won't end until its taken over.
• Microsoft certainly didn't want to see a Yahoo-Google tie-up, and it was a good enough pretext for Ballmer to walk away from it. But come on, is he really now no longer interested in Yahoo? Microsoft is still the one with multi-billion dollar cashflows. Having shown his hand, Ballmer is committed to winning the game, or forever be reflecting on 'the one that got away'.

But don't forget shareholders. At the end of the day, it's their call. And right now, I would rather be Steve Ballmer than Jerry Yang. Yang has to explain to Yahoo shareholders why he said no to Microsoft's offer, which valued the company at substantially more than the market did.

My call: Microsoft will wait for a while to see what happens next. Yahoo's stockprice will fall further. Yahoo only has two choices: play ball with the arch-competitor Google, or Microsoft. Ballmer will then make another bid. Shareholders, who are unhappy with Yang for not saying yes to the now-defunct first bid, will be glad to accept.

Google may argue against a merger on competitiveness grounds. It knows Microsoft is still on the nose in many countries over its dominance in software. It will want to play on the fears that Microsoft will do to online search what it did to operating systems and office software. But then again, Google is already the Microsoft of the online search game. Regulators may take the other view and think that a little competition to Google will do advertisers more good than harm. Any advertiser, who has seen search terms become more and more expensive on a per-click basis, will testify to that.

But Microsoft will win it. Ballmer reminds me of Rupert Murdoch. Back in 2000, the News Corp chief wanted to get control of the US satellite television network Direct-TV. That was then owned by Hughes Electronics, owned by General Motors. News Corp lost a hostile takeover battle to Echostar. But Echostar's deal didn't go through. In stepped Rupert Murdoch again. He had the last laugh afterall.

The same will happen for Microsoft.

It's funny how these things turn out.

Mark Laudi, who predicts another Microsoft bid will come before the end of 2008.

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Comments on the Russian front

2008-05-05T18:23:00.002+08:00

It's a sad state of affairs indeed when investors coming to Singapore are eyed with suspicion just because of their country of origin. Rather than fall back on stereotypes and generalisations, investors should consider each individual on their merits. So when Mikhail Bolotin reportedly declared his intention to bring airconditioner maker Dunham-Bush to Singapore, after taking the company private on Bursa Malaysia, the first thing everybody seemed to think of was the autocratic Russian administration, the president who replaced himself with a ventriloquist's puppet whose words he steers from the prime minister's seat, and what Newsweek magazine described as a feudal system of government. Folks, it doesn't have to be that way. We should welcome people like Bolotin, who bring their fortunes here.

Just because Bolotin is 157th on the list of Russian billionaires doesn't make him a bad guy. Afterall, even though he is worth 3.9 bln Rubles that only translates into US$140 mln. And getting less by the week.

We should also avoid any finger-pointing, just because Bolotin's Most has a virtual monopoly over the manufacture of tractors in Russia.

And when Russia's online daily newspaper Kommersant reports that "Mikhail Bolotin's successes are directly connected with Vladimir Putin's presidency", we had better consider the facts ourselves before jumping to conclusions. After all, if we were to invite only those Russian businesspeople who achieved their wealth without Mr Putin's help, we'd have a pretty empty list.

I am also certain that if Mr Bolotin wishes to list his tractor concern on the Singapore Exchange in November this year, the Monetary Authority of Singapore would have a pretty good look at it.

Mark Laudi, who has never met Mikhail Bolotin.

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Capitacommercial Trust Stays Execution Of Market Street Carpark

2008-04-29T20:40:00.001+08:00

The manager of CapitaCommercial Trust has deferred a decision on redeveloping Market Street carpark.

CapitaCommercial Trust Management said the decision will be made not earlier than mid-2009.

CapitaCommercial Trust said in January that it was granted an Outline Planning Permission (OPP) was granted by the Urban Redevelopment Authority (URA) for the redevelopment of the property into a Grade A office building.

The CEO of CapitaCommercial Trust Management said it deferred the decision due to the significant size of the project, rising construction costs and the currently volatile financial markets.

If CapitaCommercial Trust had gone ahead with redeveloping the Market Street carpark, it would have been its second time in just two years. Tearing down the place to build a spanking new office building would have meant a waste of S$14 mln.

Mark Laudi has touched on this subject of redeveloping the Market Street Car Park in January:
http://investorcentral.blogspot.com/2008/01/market-street-carpark-wasted-s14-mln.html#links

Analysts surveyed by Reuters have on average an OUTPERFORM call on the stock with a price target of S$2.655, compared to its last traded price of S$2.20.

As always, please see your licensed financial advisor before making any investment decisions.

Darco Water - Will Its Business Be Threatened By The Slingshot?

2008-04-25T16:09:00.001+08:00

Darco Water said yesterday it is confident of posting revenue of at least S$100 mln for FY2008 after securing seven environmental engineering projects valued at about S$25 mln.

The total project orders to be delivered in FY2008 now stand at S$126.00 mln.

Darco’s FY2007 revenue was S$87.6 mln.

The bulk of new orders come from the electronic and semi-conductor sectors, which make up almost 80% of the total orders.

But the two major orders of the bunch include Darco’s two wastewater treatment projects in Taiwan valued at S$12.3 mln and the repeated orders for Phase II of Seagate Malaysia’s facilities in Johor for air management and wastewater treatment systems valued at S$11.5 mln.

In another announcement, Darco said its lawsuit against insurer ECICS over an export credit insurance claim has resulted in the latter paying up. ECICS paid up “a substantial part of the claim” on 17 March for the purpose of compromise only and without any admission of liability, Darco said.

The unpaid claim had dragged down Darco’s FY2007 profit by 95% to S$120,000. It had made a one-time provision of S$4.6 mln relating to sub-contracting works arising from a Taiwan-based company, Hsin II, and was expecting the insurance claim from ECICS to come through.

~Jin San’s take~
Hear ye, hear ye – something has happened and the wastewater treatment industry will not be the same again. This momentous event happened last month, when Dean Kamen appeared on US talk show The Colbert Report and showed for the first time a water purifying machine. The machine, which Kamen (the inventor of the Segway - http://www.segway.com/) calls a Slingshot, can purify anything – ocean water, urine, sewage, you name it.

It looks about the size of a concert speaker, requires no filters, and can operate using an easily-obtained fuel: cow dung. Besides generating 1,000 litres of drinkable water a day, the Slingshot can generate electricity, too. Check out the marvelous invention here:
http://www.youtube.com/watch?v=EmTgVNFaDig

Kamen is trying to reduce the price of making the Slingshot to about US$1,000 to US$2,000. The prototype he showed on The Colbert Report was made for US$100,000, though. Price will be a major stumbling block - The One Laptop Per Child Project (http://laptop.org/), which had a similar humanitarian aim, took a long time to reach an acceptable US$175, which is much higher than its original target price of US$100.

But with more media coverage, the proper connections, critical mass, and further improvements, it will become a possibility for the Slingshot to help the 1.1 bln people in the world who don't have access to clean drinking water, and the 1.6 bln who don't have electricity.

On the other hand, this invention could potentially give wastewater treatment companies like Darco a run for their money. If this quantum leap in technology takes off, it could mean third world villages and small towns cutting out the middlemen to operate wastewater treatment plants and buying a bunch of Slingshots to produce clean water. The 1,000 litres of water a day the Slingshot can generate will hydrate a lot of human beings indeed. If each person drinks 1.5 litres of water in a village, I’m thinking a couple of Slingshots would be enough to serve the average village with a population of say, 1,000.

But we are only talking about the first generation of Slingshots. For sure, there will be variations and technological improvements in the future. Plus, the beauty of this invention is that it does not need anyone to operate it, unlike wastewater treatment plants. Which means cutting out the Operating part of BOT (Build, Operate, Transfer) or DBOT (Design, Build, Operate, Transfer) contracts.

To be fair, the wastewater treatment companies need not feel threatened for now because the plants they build and operate are much bigger and size. Plus, they are getting contracts at municipal and town levels. But I would not be as complacent as to discount the Slingshot as an idea that might not take off. Dean Kamen’s other invention, the Segway, hasn’t really revolutionized the way we travel, either. But he gave the Slingshot its name as a reference to the simple weapon that David used when he faced Goliath. In reality, the Goliath would be the billions of people without drinking water in the world. But this little Slingshot might take down more than just the water problem – it might take out a few water companies along the way.

But as with all technological innovations, we have to wait and see whether it will rise above the shadow of ‘just a prototype’.

As always, please see your licensed financial advisor before making any investment decisions.

SGX Research Incentive Scheme should not be for everybody

2008-04-10T07:51:00.000+08:00

There is no doubt the SGX Research Incentive Scheme has been a success. It's clear from the sheer statistics – which show that 64,000 registered users download broker-generated, company-sponsored research 50,000 times a month – that there is a demand for this type of research. There is also plenty of research which substantiates the long-held belief that research is critical to increase interest and turnover in stocks. My concern is centred purely around the fact that there are some companies who should not be receiving a subsidy for having such research conducted on them.

The SGX Research Incentive Scheme is an admirable and worthwhile attempt to give a helping hand to smaller and mid-sized companies, which usually escape the attention of analysts at broking houses and therefore see low liquidity in their stocks. The problem, it was argued at the time of the launch, is that financial analysts usually write about companies which are already "in play", because that's where the turnover already is, and where the cost of financial analysts can be defrayed by commissions from share trades. By launching the scheme, this cycle of encouraging more trades in stocks which are already heavily traded, while smaller companies are ignored, could be broken.

The Monetary Authority of Singapore also understands the value of the scheme because it provides more information (=a more level playing field) in the market. The MAS subsidised the scheme through the Financial Services Development Fund from the beginning.

Sofar, so good.

The problem, in my view, is that companies which are already receiving a great deal of analysts' coverage are also permitted to take part.

Our research in late 2006 showed the following:
(Unashamed opinion continues below advertisement)

There were six companies which were already covered by more than 10 analysts.

They were:

• SingTel
• UOB
• DBS Group
• ST Engineering
• SembCorp Industries, and
• Jurong Technologies

In addition, there were 22 companies which were covered by at least 4 analysts, including COSCO, SMRT, Hyflux and Noble Group.

My argument is: these companies are already receiving a significant amount of coverage – why are they receiving a state (=taxpayer) subsidy to have even more research conducted on them?

Or, more to the point, let them take part but make them pay a higher price and receive no subsidy at all?

Granted, the sums we're talking about here aren't huge. Twentyeight companies which, in my book, should be ineligible, each receiving S$4,000 in subsidies, totals only S$112,000. But what if these funds were used to pay analysts to cover companies which currently have one or two analysts covering them, or even none?

Mark Laudi, who wishes all analysts contribute all their reports to the SGX Research portal - not just the ones generated through the SGX-MAS Research Incentive Scheme.

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Agflation: new words for a new world

2008-04-09T15:24:00.000+08:00

Even as we're grappling with the spectre of a recession in the United States, prices are rising paradoxically. But not just plain-old inflation, no! The current economic circumstances have given rise to a whole new language, as if to make us feel better, by rationalising the whole barrage of price increases we're seeing.

For example, you may have come across agflation. Google has about 47,200 listings of the word, including Investopedia's matter-of-factly definition:

An increase in the price of food that occurs as a result of increased demand from human consumption and use as an alternative energy resource. While the competitive nature of retail supermarkets allows some of the effects of agflation to be absorbed, the price increases that agflation causes are largely passed on to the end consumer. The term is derived from a combination of the words "agriculture" and "inflation".

It's as though agflation is a real word! (Dictionary.com has no record of it). David Shvartsman acknowledged the word in an almost year-old article for Safe Haven, while expertly correcting the media and economists who have bastardised the word "inflation" to make it fit into their own view of the world.

In any event, we at Investor Central have come up with our own set of words to describe the current state of affairs:

Transflation - the economic rationalist explanation each time the Public Transport Council raises bus and MRT fares.

Meeflation - the "sticker shock" you get by going to People's Park and being offered Hokkien Mee, not in $2/$3/$4 portions, but $4/$5/$6 sizes.

Proflation - the phenomenon by which landlords are inexplicably bestowed the right to triple rents for long-standing tenants, or other people in the property business predict an endless rise in sale prices.

Cabflation - the mathematical relationship between the increase in taxi fares and the lengthening of queues of taxis waiting for passengers.

These inevitably lead us to the most important of all, and unlike "agflation" this one is a real word. Click on the link to read for yourself:

Afflation – the blowing of hot air by Treasury Secretary Henry Paulson and his Wall Street buddies about giving the Fed more power. Does anyone else sense another Patriot Act coming on, this time stomping on civil liberties and rights to privacy in the banking sector?

What -flations are currently weighing on your finances?

Mark Laudi, who did a double-take when he first saw the word agflation and thought the author had meant "stagflation" (rising prices in a weakening economy). Hmm… stagflation: the increasingly panicked rantings of a groom when presented with the dinner bill for his wedding?

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Jade Tech 'designated'. And here's another...

2008-04-08T07:48:00.001+08:00

Congratulations to the Singapore Exchange for designating Jade Technology - meaning, the stock can no longer be sold short. Frankly, it was starting to bore us that each morning at our editorial meeting the top traded stock was… drum-roll please… Jade Tech. But we think there are a couple of other stocks which rank highly in the "eye-rolling" stakes, and qualify for special attention from the SGX, most notably E3 Holdings.

The stock formerly known as ei-Nets has been seeing a lot of volume, with 15 mln shares changing hands last Friday. Trading at 3 cents apiece that does not translate into a lot of money. But their announcement late March that a subscription agreement with Pacific Capital Investment Management Limited has been terminated.

Is it a coincidence that the venerable Dr Anthony Soh, who's also behind Jade Tech, is E3's President, and bought 280 mln shares in E3 Holdings worth almost S$10 mln just a month ago?

I haven't spoken to Dr Soh, and so I am not sure whether there is a relationship between the Jade Tech and the E3 Holdings announcements.

But it seems even if he cashed out this investment he still would fall short of the S$67 mln he needs to pay for the now-cancelled takeover of Jade Tech.

On the face of it it looks like whoever's been shorting Jade Tech is actually shorting Dr Anthony Soh, and is drawing E3 into it in the process.

Clearly, reading the articles and announcements about all the stuff that's gone down over this counter, there is more to it than a bunch of speculators getting hold of the stock. For example, the collapse of Australian stockbroker Opes Prime, and the investigation by the Securities Industry Council into the role played by OCBC Bank.

At the least Dr Soh could take comfort that he still has some money in the kitty, after his dream of taking over Jade Tech went down with Opes Prime.

Mark Laudi, who would like to extend an invitation to Dr Soh to appear on camera on Investor Central for a chat about what's been going on.

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