Tuesday 15 April 2014

What happened to Asia Media

Asia Media is a digital out of home transit media operator. Not quite sure what actually happened but noticed that the screens on Rapid KL buses operated by Asia Media have been staying off for quite some time already. .

The licensing agreement with RapidKL for Asia Media to install, operate and maintain audio visual advertising medium on the buses operated by RapidKL expired about a year ago on 27 April 2013.

No announcement was made by Asia Media whether the licensing agreement was extended, renewed, discontinued, or it is the midst of upgrading to digital terrestrial television broadcasting (DTTB), even though the agreement is crucial to the group's operation and substantial earnings was generated from there.

What happened to Asia Media?

Saturday 12 April 2014

Sugar subsidy cut for health reason

Sugar price in Malaysia had been quite constant until Robert Kuok sold it sugar business in 2009. Since then, sugar price has almost doubled from RM1.45/kg to RM2.84/kg

Government cut sugar subsidy for so-called health reason.

People has to pay more not only for sugar, but beverages as well.

Tan Sri Syed Mokhtar Al-Bukhary's sugar assets:
Gula Padang Terap's net profit had grown to RM44.87m in 2012 from RM8.3m in 2008
CSR's had almost tripled from RM53.42m in 2008 to RM144.33m

Who benefited?

And mind you that our sugar price was 70sen/kg more expensive (at RM2.50/kg before Budget 2014) than international price of RM1.80/kg. (Source). Sugar was around RM2.20 in our neighbours Thailand and Indonesia, still cheaper than sugar in our country.

What went wrong?

Friday 11 April 2014

The Startling Kowloon Walled City

Definitely worth a read, with photos that depicts the life of the residents at the Kowloon Walled City.

The full article here: A rare insight of Kowloon Walled City

Once thought to be the most densely populated place on Earth, with 50,000 people crammed into only a few blocks.

33,000 families and businesses living in more than 300 interconnected high-rise buildings.

All constructed without contributions from a single architect!

It was demolished in 1992.

Wednesday 9 April 2014

Quote: Importance of buying boring but well-run companies

Peter Lynch: If a company with terrific earnings and a strong balance sheet also does dull things, it gives you a lot of time to purchase the stock at a discount

Tuesday 8 April 2014

Should Canone be allowed to vote in Kian Joo takeover offer?

Kianjoo has on 26 November 2013 received an offer from Aspire Insight to acquire the entire business and undertaking including all of the assets and liabilities of Kian Joo for RM3.30 per Kian Joo shares.

Below are some of the questions that led me to suspecting Aspire Insight is a friendly party to the major shareholders of Canone.

1. Canone holds 32.9% in Kian Joo. If Canone is allowed to vote in an EGM to be held to decide on the takeover of Kian Joo by Aspire Insight, the decision from Canone alone is sufficient to turn the proposal off. In this case, Would Chee Khay Leong, who was the executive director of Canone and had been with the group since 1977 "took such a big risk" to quit from Canone top management position, and together with EPF, made an offer to acquire Kian Joo if he had not obtained the blessing from Canone major shareholders?

2. Being the largest shareholder, Canone has major influence in Kian Joo. Would Chee Khay Leong remain as the COO and executive director of Kian Joo if the takeover move is not friendly, or even hostile to canone?

3. The offer price of RM3.30 per Kian Joo are was merely a premium of 2.8% to the closing price immediate before the offer was made. The offer price is also below Public Invest and TA Securities's target prices of RM3.52/share and RM3.90/share for Kian Joo. Given the sound fundamentals of Kian Joo's business and the seemingly unattractive offer price, why should Canone sell Kian Joo at RM3.30/share?

4. Why would the major shareholders of Canone want to consider disposing its stake in Kian Joo, resulting in creation of rivalry to its business?

5. Apart of the knee jerk effect in Canone share price immediate after the announcement of the takeover, the share price of canone has been drifting lower and lower. Is this not a reflection of disappointment over the offer price for Kianjoo, or market's interpretation that the deal is detrimental to the minority shareholders of Canone? If so, why would Canone be supportive of the takeover?

If the acquirer and major shareholders of Canone are friendly party, is that not consider party acting in concert and should be excluded from voting to decide on the disposal of Kian Joo's shares held by Canone?

What would be Bursa/ SC's decision on this? It is not an easy decision for the regulators as they can't come to a conclusion based on the likelihood how Canone will vote in the EGM, but accordingly to the definition of party acting in concert.

Tuesday 1 April 2014

Puzzling moves by the Selangor state government

Put politics aside.

1. On Selangor water restructuring and the offer to SPLASH
fz.com quoted Selangor Menteri Besar who said  Gamuda's MD's concern on the invocation of Section 114 of WSIA to facilitate the Selangor water restructuring  was more due to the fact that it was trying to rake in as much money as possible.... The MB added that "the water restructuring was only based on fair pricing. It is not based on maximum pricing. Don't undermine the logic of the Klang Valley community.

Is the accusation by the Selangor MB valid? I disagree.

SPLASH will only receive RM250.6m if it had accepted the latest offer for the 100% stake in SPLASH. The amount was below 10% of SPLASH's NAV. The previous offer in February 2013, which Gamuda HAD ACCEPTED was close to the NAV of SPLASH. Accepting the latest offer would result in Gamuda suffering a disposal loss of RM920m.

Would any businessman including the MB who was a ex-businessman sells its assets below 10% of its NAV? Of course not but the main point I would like to highlight here is why the INCONSISTENCY? Both offers came from the same state government under the same MB but why the lastest offer was more than a staggering 90% lower than the offer made 1 year ago? Can the state government explain the huge difference in offer price and if the state government is sincere in resolving the water issue, I think explanation by the state government is needed. Who actually undermines the logic of the Klang Valley community?

Also, why the state government signed the MoU to allow Langat 2 to proceed when the state government earlier insisted it was unnecessary to construct Langat 2? Why the U-turn now? The treatment plant would have already completed if green light was given earlier and the current water rationing could have been avoided. With water reserve margin below 1%, growing population in the Klang Valley and hundreds of proposed property development projects being put on hold due to the water issue, the Selangor state government is indeed playing with fire and putting the rakyat's interest after politics.

2. Sanctity of contracts has to be respected
It was reported that the Selangor government has asked Tropicana Corp Bhd to expedite the payment of RM844.2m for a huge tract of land it sold to the latter just before GE13.

It came after Tropicana signed a deal to sell a quarter of the said land to Eco World for RM470.6m cash, to be paid in one lump sum.

Under the agreement signed in April 2013, Tropicana was supposed to pay for the tract of land in instalments over 20 years. It was in the Bursa announcement that the developer is entitled at any time at its ABSOLUTE DISCRETION to accelerate payment of the purchase price by the payment of any or all of the instalments prior to the expiry of the completion period.

The announcement was silent on partial disposal of land to third party. Unless there is a clause provided in the agreement that entitles the state government to demand for expedition in payment, is the demand by the state government not TYRANNIC in a capitalist country? Besides, did the state government led by a MB well known for his business acumen overlook this in the land deal agreement with Tropicana?

3. Free 20cum of water a wrong way to gain popularity
It is a known fact that Malaysians use (waste) a lot more water than the recommended usage. Imagine a country with average annual rainfall of 250cm (versus 10cm a year in Saudi Arabia) is facing water supply disruption issue. This is compounded by high number of car ownership in the country and Malaysians generally wash cars too frequently.

Malaysians use more than 200 litres of water per day, way above Singaporeans (150 litres per day) and Thais (90 litres per day) and the recommended limit of 165 litres per day.

The move by the state government to give first 20cum of free water was seen as a popular move to gain political support. However, this does not help at all in reducing the excessive usage of the water by Malaysians but instead, having an opposite effect of encouraging more wastage of the precious resources since the water is so cheap, or even free to families with low monthly water usage.

Selangorians start to see the problem now as water emergency is just 2 weeks away if dry days continue. Water is not expensive in Malaysia. But how much can the people benefit from the first 20cum of free water that compounded the issue of serious water supply shortage in the state. All in, the disruption to business, inconvenience, hygiene issues and cost to distribute water to affected houses by water tankers probably costs more than the savings from the free water. If you do the math, 1 litre of drinking water/ mineral water is more than 1500 times more expensive than the tab water.

Why the state government implemented the first 20cum of free water when low water reserve margin in the state in not something new?

4. Raw water extraction license
The Selangor state government will not renew the raw water extraction licenses when they become expired end of May 14 and June 14. Why the non-renewal of the licenses? I think the state government owe us an explanation here.

Water is vital to the people and living things.Without the permission to extract raw water, the water players will not be able to treat and distribute water to the people. Where are we going to get water then?

Is this a move intended to "force" the water players to fail to supply water as agreed in their concession agreements and using the "non fulfilment" by the water players as reason (excuse) to take over the operation from the water concessionaires? I hope this is not how the state government works.

Neither BN nor PR impresses me. But several moves by the Selangor state government is indeed very worrying.... Flip-flopping, inconsistency, disrespect of sanctity of contract, heavy politicking, failure to protect the people's interest etc are not doing any good to the people, business and investment communities.