Thursday, 30 December 2010

New Deposit Insurance Limit At RM250,000

Effectively today (31st December 2010), the deposit insurance limit will be increased to RM250,000 per depositor per bank, announced Perbadanan Insurans Deposit Malaysia (PIDM).

Below is the summary of the said announcement:-
  • The new PIDM Bill 2010 has been passed in Parliament.
  • The limit of RM250,000 will protect 99% of retail depositors in full.
  • Under the new Bill, foreign currency depositors will now enjoy deposit insurance protection.
  • The enhanced financial consumer protection package also includes the expansion of PIDM's mandate to include the administration of the Takaful and Insurance Benefits Protection System (TIPS).
  • Licensed insurance companies and registered Takaful operators will automatically become member institutions of PIDM.
  • PIDM was given the powers to intervene in or resolve troubled insurer members and ensure prompt payments to claimants.
PIDM is Malaysia Government agency, mandated by Parliament, to protect depositors against the loss of their funds in the event of a member bank failure. Member banks comprise all commercial and Islamic banks, including locally incorporated foreign banks, in Malaysia.

Source: www.pidm.gov.my

Tuesday, 28 December 2010

The Electrifying TENAGA (Nuclear, USD, Tariff)

Tenaga Nasional Bhd (TNB), the national power producer of Malaysia, would embark on nuclear power in the next few years. Given the sensitivity of such issue, Malaysia government has again hinted that there are plans to construct nuclear power plants in the country to fulfill boost up the electricity capacity.
Example of Nuclear Power Plant

According to theStar recently, Energy, Green Technology and Water Minister Datuk Seri Peter Chin said Malaysia plans to build two nuclear power plants with a capacity of 1,000 megawatts (MW) each and commencement of operations in 2021-2022. This is part of the country's overall long-term plan to balance its electricity generation mix.

The two nuclear plants would represent 9% of peninsular Malaysia's existing power generation capacity of 21,817 MW. This is necessary for the country given that the peninsula's power reserve margin will drop from 44% currently to below 20% by 2016 while the 1,600MW Bakun undersea cable project has been discontinued.

While nuclear power is a long-term catalyst, there is short and medium-term positive news for Tenaga.


Short-term:
Generally, weakening of USD would improve the balance sheet of Tenaga as most of its debt are denominated in USD. With USD falling from 3.14 to 3.09 for the past two weeks against RM, Tenaga stands to gain from lower financing cost/interest incurred.

Medium-term:
With the escalating coal prices which put pressure on the bottom line of Tenaga, government has agreed to grant Tenaga to hike electricity tariff very soon. Speculations are rife up saying the hike could materialized as early as 1st January 2011, and the percentage was up to 40%.

Although Finance Malaysia expecting a tariff hike in second quarter next year, it should not be more than 20%. This is a very cost-sensitive issue given the upcoming general election said to be after Chinese New Year.

Sunday, 26 December 2010

What's Ahead in 2011?

2010 was not all bad, by any stretch.

Probably the best news of all was that problems that have been swept under the rug(s) for generations have now surfaced and are regular conversation topics. It is now quite apparent that the Western economies' love affair with entitlements may be coming to an end. They now know, as they should have known earlier, that there is simply no way these entitlements are affordable. That discussion is now front and center. That's good.

Public employees are finally coming under scrutiny as virtually every one of the 50 states in the United States faces bankruptcy under the weight of the benefits that have been promised to these public employees. Teachers, for one, have long been showered with guaranteed job security and extremely generous pension and health care benefits. All of these public employee benefits are now in play. Unions are in the middle of this because almost all of union organizing successes in recent years has been in the public employee sector. Unions are not really a factor of any significance in the private sector, since everywhere they have had a major presence, the companies have gone bust.

This is all good news, because failure to notice the impending disaster of entitlements and public employee largesse was moving the US and its 50 states into certain bankruptcy. Now, there is truly some hope. No solutions, but hope.

Other good news is that President Obama seems, at long last, to have awoken to the fact that his economic policies are a serious impediment to economic recovery. The tax agreement forged between the President and Senate Republicans was a foolish package, but better than the alternatives. For the first time since January, 2009, there was some recognition in that compromise that business matters. Finally!

So, there is hope that 2011 will be a better year than 2010. There will be continual reminders as 2011 unfolds that virtually every Western European nation will eventually default, in some manner, on their public debt and that several states in the United States are headed in the same direction. But, bankruptcy can be therapeutic; bailouts are never therapeutic.

Thursday, 23 December 2010

Petronas Carigali will be the Largest IPO ever?

Petronas Caragali Sdn Bhd, the exploration unit of Petroliam Nasional Bhd (Petronas), may be listed on Bursa Malaysia next year and it is expected to attract a large number of foreign funds.

"The mother of all initial public offerings (IPO) next year will be Petronas Carigali. We need companies like this to make Bursa attractive," said MIDF Amanah Investment Bank Bhd senior vice president and head of research, Zulkifli Hamzah.



Petronas officials could not be reached for comment. Zulkifli said analysts have been told by Bursa officials of a possible IPO for Petronas Carigali.

OSK Research head Chris Eng said Petronas Carigali should be the largest IPO ever in Malaysia, with a potential market value of close to RM150 billion.

This would eclipse current leader Malayan Banking Bhd, with a market value of RM62 billion as at yesterday.

PETRONAS E&P Business Quick Facts

  • Malaysia’s hydrocarbon reserves stand at 20.18 billion barrels of oil equivalent (boe) with an average production of 1.66 million boe per day.
  • PETRONAS’ total hydrocarbon reserves stand at 27.02 billion boe with an average production of 1.80 million boe per day.
  • International reserves in Africa, Southeast Asia, the Middle East and Central Asia stand at 6.84 billion boe, comprising nearly a quarter of PETRONAS’ total reserves
  • PETRONAS achieved a Reserves Replacement Ratio of 1.1 times in Malaysia and 4.1 times internationally, comparable with the industry average.
  • Malaysia's first deepwater field, Kikeh, employing the first Truss Spar floating production unit outside the Gulf of Mexico came onstream in August 2007. The project achieved world-class performance with only five years elapsing between discovery and production.

Brighter outlook for Glove Sector?

Yesterday, Adventa (Malaysia's 5th largest glove manufacturer) surprisingly reported 4Q10 net profit of RM11.8 million, up 50.8% year-on-year. According to RHB research, the results were above expectations, mainly because of of a deferred tax write back of RM5.6 million. Excluding the differed tax write back, FY10 net profit would have been RM30.2 million.


Advent's range of products
However, profit before tax was lower due to a time lag as only about 70%-80% of the higher costs incurred as a result of rising latex prices and the weakening of the USD against MYR were passed on to customers --- OSK research.

To sweetened the announcement, Adventa also declared a final tax-exempt dividend of 7 sen, which translates into a net payout of 30% and net yield of 3.6%.

Indicating a revival of Glove counters?
As all of the glove counters are in the red this year, experiencing a whopping 30%-40% drops, Adventa's result sure will catch the eyes of investors again. But, Finance Malaysia cautions about it, because Adventa's business model is a little bit different from the other glove manufacturer. Adventa was in a niche position as a manufacturer of surgical gloves, in which the demand is more resilient. Even if Adventa raised the price of its products, it was unlikely to dampened the demand of gloves.


Finance Malaysia do not think that yesterday's result from Adventa is a turn-around indication for other glove manufacturers. And, if the current scenario such as higher latex prices and weakening USD persists, all the glove makers will continue to suffer of margin squeeze.

Due to different assumptions and calculations, OSK raised Adventa's fair value to RM3.80, while RHB lowered their fair value to RM2.21.

Wednesday, 22 December 2010

Top 3 Commodity Picks for 2011

Forget about supply and demand issue of commodity, everyone knows the main mover now is Emerging Market, especially China. As long as US economy not yet recovered, China was expected to continue its great appetite to consume commodities globally. Not for its consumptions, but mainly because of China's currency management.


China, already the largest creditor of US by holding USD which was slipping with a series of quantitative easing programs, would definitely forced China to diversify its holding elsewhere. However, China would hand-picking according to its own local demand. As such, Finance Malaysia forecasts those commodities which were used heavily in construction, infrastructure, production will continue to perform in 2011.


 
Top pick #1: Palladium
One in four goods manufactured today either contain platinum group metals or the platinum group metals play a major role during their manufacturing process. Palladium was used in many electronics including computers, mobile phones, multi-layer ceramic capacitors, LCD televisions.

Top pick #2: Silver
Being a precious metal, silver is used to make ornaments, jewelry, high-value tableware, and  currency coins. Today, silver metal is also used in electrical contacts and conductors.

Top pick #3: Copper
About 98% of all copper is used as the metal, taking advantage of distinctive physical properties - being malleable and ductile, a good conductor of both heat and electricity, and being resistant to corrosion. It is widely used in piping for water supplies, refrigeration and air conditioning.


Tuesday, 21 December 2010

Super BIG Xmas gift for KNM

After a long suffering period, KNM investors can be very joyous coming this Christmas celebration with another good news announced today. In a statement after trading hours, KNM announced that its wholly owned subsidiary, KNM Process Systems Sdn Bhd (KNMPS), had landed a RM2.19 billion job in the United Kingdom.
The contract is for the engineering, procurement, construction and commissioning of works towards the development of an 80MWe gross capacity energy from biomass and waste recycling centre project known as EnergyPark Peterborough. Duration of the contract is about 4 years.

KNM drive into Renewable and Clean Energy Sector...
This mark another important milestone for KNM to venture into renewable energy sector, which is so popular in this energy-hunting world. This came as a surprise to investor because KNM had never been in that sector, and even surprising us was the multi-billion value contract.

Illustration of EnergyPark taken from Peterborough Community Website
The project was said expected to contribute positively to KNM's earnings for the financial years ending 31st December 2011, 2012, 2013 and 2014. At the same time, KNM order book rose accordingly, which could keep KNM busy for next few years.

Second contract this month
To recap, KNM (through KNMPS also) secured a RM680 million contract early this month in Uzbekistan for the supply of technical documentation, equipment and services for the development of gas condensate fields, which is for a 2 years duration.

KNM closed at RM2.69 today.
OSK and RHB are setting a fair value at RM2.96 and RM3.09 respectively now.
What would be the reviewed price after today?

Merry Christmas, KNM !!!

Sunday, 19 December 2010

English Premier League from Maxis?

Recently, TM and Maxis concluded a 10-year agreement for TM to provide High Speed Broadband (HSBB) Access Services to Maxis. According to RHB research, Maxis with the agreement, can instantly roll out fixed home services to a potential pool of higher ARPU customers with last mile access via TM’s HSBB network to 700k premises, and up to 1.3m premises by end-2012.

Currently, Maxis’ fixed home services is limited to Bandar Utama, Sierramas, Bangsar and Sri Hartamas via its own fibre-to-the-home (FTTH) network. And, as Finance Malaysia know, Maxis is targeting to launch its service in the newly popular township of Puchong.

Maxis's secret weapon - Content
All in one, Maxis plans to roll out are IPTV, VoIP, video-on-demand (VoD) and high speed Internet. In fact, TM itself already offers some form of IPTV and VoD bundled in together with its core service of high speed Internet in its UniFi packages. Hence, content is indeed a very important element for Maxis to stand out. It is very likely that Maxis will leverage off its sister company, Astro especially for the Astro's exclusive rights of English Premier League.

A Win-Win situation 
For Maxis, it can save on its capex by riding on TM's HSBB network, without the need to build its own fibre network which could cost billions of ringgit. For TM, it could benefits from more wholesale revenue arising from a higher utilisation rate of its HSBB network.

Saturday, 18 December 2010

Understanding Exchange Traded Fund (ETF)

What is an Exchange-Traded Fund (ETF)?
An ETF is an open-ended investment fund listed and traded on a stock exchange, which aims to track the performance of an index and to provide access to a wide variety of markets and asset classes. By holding a basket of individual securities, an ETF allows an investor to expose to many companies or fixed income securities with one single trade.


Benefits of Investing in ETFs...
  • Prices are available throughout the day (according to trading time of Bursa Malaysia)
  • Flexibility and Liquidity, due to combination of trading on an exchange and the continuous offering of units
  • Transparent portfolio. Investors will know exactly what stocks they are investing in
  • Diversification
  • Lower management costs as compared to mutual funds
How is the pricing of an ETF done?
The market price of units in the ETF is subject to supply and demand. Although Net Asset Value (NAV) of the ETF will approximate the trading value of the underlying securities held plus any undistributed income, the trading price of units may differ from NAV per unit of ETF. Anyway, arbitrage will help to keep the traded price of an ETF in line with its underlying value.

Why invest in ETF?
  • Generally, an ETF uses indexing, or called "passive management"
  • An ETF trades like shares, but offers diversification and exposure similar to an index unit trust fund
  • It offers market level performance as it aims to match the performance of a specific index, net of fund expenses
  • It also has lower management fees and operating expenses
  • Stock selection and weightage is totally based on the index selected 
What are the differences between ETF and Unit Trust Fund?
Source: www.financemalaysia.blogspot.com

Thursday, 16 December 2010

2010 Top 10 Malaysian Companies

Wall Street Journal (WSJ) recently announced the result of Asia 200 survey, which ranked the top 10 companies of selected countries according to financial reputation, corporate reputation, quality, vision, and innovation. Want to know the winners of Malaysia?

Wall Street Journal: "For the second year in a row, Public Bank Bhd ranked 1st overall among Malaysian companies. The bank's profit rose 20% to RM 2.2 billion on a 12% rise in revenue during the first nine months of the year.

Customer deposits grew at an annualized rate of 12.2%. Public Bank, Malaysia's 3rd largest lender by assets behind Malayan Banking Bhd (Maybank) and CIMB Group Holdings Bhd (CIMB), also ramped up its Tier 1 capital ratio while touting a dramatically lower impaired-loans ratio at 1.2%, versus 3.4% for the industry overall."

Source: Wall Street Journal
Meanwhile, CIMB Group this year makes a new showing on the Asia 200 list, with a #7 spot. The group helm under Dato' Sri Nazir Razak, spearhead CIMB as a regional universal bank, setting its foot in Malaysia, Singapore, Indonesia, Thailand, Hong Kong, China, UK, USA, Brunei, Myanmar, Vietnam, Bahrain and Cambodia.

Surprisingly, Malaysia Airlines (MAS) was being ranked as #9 on the list, while AirAsia - the stiff rival - are not included. Anyway, MAS did turnaround recently after suffering from huge losses few years back. A police report against Tan Sri Tajuddin Ramli (former executive chairman) was lodged by MAS in 2002 for allegedly causing the national carrier to suffer losses in excess of RM 8 billion.

Ananda Krishnan's Maxis and Astro earned their place at 4th and 10th respectively. After re-listing of Maxis 2009, the billionaire took Astro, Measat and Tanjong private this year.

Source: Wall Street Journal

Wednesday, 15 December 2010

Cypark Resources Bhd – Our Environmental Friend

Cypark International is an integrated landscape and environmental services group that provides design and build services, build services and landscape maintenance. Cypark is also a supplier of plant materials, granites, and landscaping and architectural lighting. Cypark currently operates through its own offices and network offices in Qatar, UAE, Saudi Arabia, Thailand, China and Singapore.

Philip Capital Management (PCM):


About CyparkCypark is the only locally listed environmental technology & engineering specialist. It was established in 2004 and was listed on the Main Board of Bursa Malaysia on 15 October 2010. Its principal activities involve landfill closure and upgrades, construction of waste transfer stations and operating and maintenance of waste facilities (O&M) (see Picture 1). 

Unlike Alam Flora, Cypark is NOT involved in rubbish collection; its business actually starts from the construction and operation of transfer stations. Transfer stations are centrepoints where the rubbish trucks dump the rubbish. From the transfer stations, Cypark then sends the rubbish to the landfill sites. Cypark is also involved in landfill closure and upgrades which require a leachate treatment plant to discharge the leachate, a dirty toxic liquid composed from rubbish.
 




No strong competitorsAs Cypark is the only listed rubbish solutions provider in Malaysia and has good reputation on work done on Taman Beringin site, this will well keep them in good running for similar projects going forward. As per the Cypark prospectus, the key competitors of Cypark are UEM Enviro, KUB-Berjaya and Alam Flora. All these top tier players including Cypark take up 30% of the solid waste and landfill management services market share in Malaysia, whilst the rest are serviced by smaller fragmented players. We believe Cypark, being a Bumiputera company stands a good position to win more waste management jobs going forward given the plentiful landfill closure and upgrades available. Moreover, its competitors are not strong in landfill business.

112 unsanitary landfills throughout MalaysiaAccording to the management and news reports, there are approximately 112 unsanitary landfills or simply called dump sites throughout Malaysia waiting to be closed and rehabilitated, some of which to be upgraded to sanitary landfills. Consequently, the government has recently in its 10th Malaysia Plan unveiled a total approved budget of RM 1.5 bn for waste management spending. Out of the 112 unsanitary landfills, 16 are currently being closed and upgraded by Cypark, which indicates that Cypark has the experience and is in good stead to secure more of the landfill closure and upgrade contracts.

Federalisation of wasteSince the enactment of Waste Management Act in 2007, waste management had been taken over by the Federal Government (Federal) from respective states. This is an important change whereby all awards of projects will be given by the Federal and there will be less confusion over whom to deal with in terms of the administrative side of waste management projects. This facilitates Cypark's project tendering and collection of revenue from Federal. More importantly, federalisation of waste means funding is not a major issue.


Monday, 13 December 2010

Revised EPF approved funds effective 1 Sept 2010

Effective 1 September 2010, there are 223 unit trust funds approved under the EPF Members Investment Scheme (EPF-MIS). The list of EPF approved funds is updated upon conducting the fund evaluation exercise based on EPF-MIS fund evaluation methodology (FEM).


Under the FEM, funds must meet the set standard criteria, including:-
  1. At least 3-years track records
  2. Have investment mandate of not exceeding 30% in overseas assets
  3. Consistency in return performance among peers/ with benchmark
How frequent will it be reviewed?
By using an international research house rating data as input in the assessment and evaluation of funds, the exercise will be conducted once a year. 

Suspended Funds?
Funds that underperformed their peers will be suspended, until they are qualified to be reinstated. Suspended funds are not allowed to received new investment under the EPF-MIS, yet investments made by investors prior to the suspension are nevertheless allowed to remain in the funds.

Suspended Funds are loss-making funds?
Not necessary. FEM is just a measure of relative performance, as suspended funds may still generate strong profits, but not as high as their peers.

Please click "EPF approved funds" for the list of 223 funds.

Related links:-

Saturday, 11 December 2010

Reconciling Tax Cuts with Long Term Debt Issues

Hail to the Wall Street Journal! In one short paragraph the Journal has summed up the heart of the US debt problem and why keeping all of the Bush tax cuts in force make sense as well. In today's Journal and I quote:

"While in a hopey-changey mood, let's note for his (Obama's) benefit that the real fiscal problem today is not the immediate deficit, which does not call for radical action. The real problem is a system of health-care and retirement finance that deters us from saving and budgeting for our own needs while at the same time piling up disencetivizing taxes on those who work and whom we expect to pay for us in old age. Fix this and the government is solvent again."

Wow! The WSJ nailed it. .

3 wrong perceptions on Malaysia's Properties

In Malaysia, property investment is gaining momentum since last year. And, the property sector seems unstoppable with record breaking sales. New launches are fully taken up within few hours. Speculators are becoming greedier than ever. Calming down, figuring out, is it so attractive after all? Let's have a look at the 3 big wrong perceptions


Wrong perception #1: 
Malaysia's properties still attractive?

No doubt, many analysts and researchers comment that the local market price is still low if comparing to regional markets, such as Singapore and Hong Kong. This was wrong because we cannot simply compare with islands, where land is limited. We cannot simply compare with China, where billions of people chasing for limited supply of houses.

Wrong perception #2: 
KL Developers are going high-end?

Yup… KL developers are focusing at launching those high-end residential units. But, do not come into conclusion just that. First, we must look into the locations of these new launches, especially those at golden triangle. Locations play a vital role of setting the price of properties. Second, the cost of acquiring a particular land, and the cost of constructing sure will add to the price where buyers have to bear. Third, I noticed that many super high-end units are located on hills top. Difficulties to get the relevant approvals and moving machines up there was included into the selling price of course. Though, I can't deny there are developers trying to mark-up the price, as buyers think that the costlier the better.

The Pearl @ KLCC
Wrong perception #3: 
Malaysians household debt is high because of house loan?

Generally, house loan could easily be our biggest "earning-eater". House installments eat into our monthly salary. While there is good debt and bad debt, I categorized property as good and car loan as bad debt. Malaysians high household debt is caused by the high car price, which is not worth to have if comparing with a house. And, my previous article "Proton loves Perodua to avoid extinction?" highlighted the problems of local car industry which directly affecting our daily lives.

Friday, 10 December 2010

Two cents for Government’s Talent Retaining Program

First, congratulates Talent Corp for continuing trying to achieve the objectives of bringing back Malaysian or foreign talent back home. Indeed, this was a very tough task, as Malaysians already implant the thinking inside. Every year, our "bright stars" migrate to other countries searching for their dream jobs.

Cartoon In: Economist, August 11, 2005.
Why it happens?
  • It was started when those bright graduates being in love with the countries they studied. Many of them pursue their degree in US, UK, and Australia. And, after they graduate, they became in love with these countries, and tend to get a job there, stay there, and forget here.
  • Highly specialized jobs are unavailable to these professional locally, such as doctors, engineer, scientists, new technology innovators… If you're hand phone innovator, would you join Apple or Nokia abroad or remain here?
  • Professional tends to feel proud by doing something that they can showcase their skills or capabilities. This is another reason for them to venture aboard, because Malaysia is not a niche nation for something unique. Example, fashion in France, soccer in UK, technology in US. No wonder Datuk Jimmy Choo, yet another proud Malaysian, found his success in UK.
Picture from www.frederatorblogs.com
How to prevent brain drain?

  • Improving our Universities to be on par with US, UK and Australia, so that Malaysians need not chase for overseas educations
  • Improving our living standard and lifestyle, especially in KL, to make our graduates proud of
  • Move up the value chain of businesses
  • Move towards high income nation (we're on the right track)
  • Identified our very own niche or selling point, and plan to develop it until recognized globally

Wednesday, 8 December 2010

KNM – Good & Bad

Recently, KNM is coming back to the limelight in Bursa Malaysia. After the 4 to 1 share consolidation exercise, KNM is inching up since securing a contract worth RM680 million in Uzbekistan. Then, KNM held a briefing with research outfits indicating that the company was on the road to recovery after a hiatus one-and-a half year.

Good facts:
  • Order book had grown to RM2.4 billion
  • Tender book grown to RM16 billion
  • Better capacity utilization
  • Re-surging of crude oil price which touches USD90 per barrel now
  • Malaysia government's intention to spur oil & gas sector
  • Listing of Petronas' subsidiaries enhancing the viability of local listed companies
  • Impending projects roll-out by Petronas soon
  • Planning to tap into nuclear industry in Africa
IR. LEE SWEE ENG
Executive Chairman / Chief Executive Officer
Bad facts:
  • Foreseeable losses in its operations in Brazil, Canada and Indonesia
  • High debt levels with RM1 billion borrowings, against net cash balance of RM300 million
  • Future cash flows constraint would jeopardize the company credit rating
Would BUY Calls from ECM, OSK, HwangDBS, and RHB gave you some confidence?

A Beginning

The compromise between the President and Mitch McConnell on taxes represents a new beginning for the President and, perhaps, for the country. The compromise will definitely help the economy. The economy needs it.

There are still problems, especially on the unemployment front. Employees are still too expensive, laden down by government-imposed mandates and implied litigation liabilities for businesses. But capital expansion should pick up dramatically in 2011.

It's not perfect, but this deal is definitely an improvement over the policies of the past two years.

The looming debt problems are still there -- both for the US and for Europe. Hopefully, the idea of "workouts" and "defaults" will soon take the place of "bailouts." The debt problems have no easy fix.

New Fund: AmConstant Multi Maturity

AmConstant Multi Maturity is a close-ended bond fund that seeks to provide regular income from 3 investment portfolios comprising of local and/or foreign bonds. These investment portfolios will mature respectively on the 3rd, 4th, and 5th anniversary of the commencement date and scheduled Capital Repayment(s) will be made to the unitholders following the respective anniversary.

 
The fund intends to invest a minimum of 95% in a multitude of local and/or foreign bonds carrying a minimum "A" rating by RAM or MARC equivalent to "BBB" by S&P or Moody.

As this is a close ended bond fund, the fund adopts a buy and hold strategy whereby bonds purchased will be held until its respective maturity. At the maturity of these bonds, issuers of bonds held by the fund will be obligated to pay the face value provided there is no occurrence of credit default by issuer.

A downgrade in credit rating may result in additional credit risk assumed by the fund. The manager may choose to liquidate the bond prior to its maturity, if it is of an opinion for the benefit of the fund. By doing so, the manager may be subjecting the fund to a risk of capital loss, hence affecting the value of scheduled capital repayments.

AmConstant Multi Maturity is suitable for investors seeking:
  • An investment that provides capital repayment on the 3rd, 4th and 5th anniversary
  • An investment that targets to distribute regular income
  • Potentially higher returns than fixed deposits
  • To participate in a scheme that provides lower risk than equities 



Tuesday, 7 December 2010

Proton loves Perodua to avoid extinction?

There has been a longstanding issue which has to be solved in Malaysia automobile industry – demise of Proton. The national car manufacturer had before storming the local car industry with its popular models such as Wira and Waja. While Proton was unbeatable during that time, Perodua (national 2nd car manufacturer) had approached Proton for a merger, but was turned down.




Now, the whole table turned the opposite direction, with Proton begging for a merger with Perodua. Why Proton so desperate right now?

  1. Proton was over-taken as the #1 in Malaysia
  2. Proton is running with an half-empty plant
  3. Proton must address its problem as soon as possible
Why Perodua then?

In fact, Proton had identified two main areas where they have to improve on – technology and scale. To address it, Proton chose the technology path because it was the national icon, and only technology expertise could transform the company for the long-run independently.

First, Proton approaches Volkswagen, then General Motors, then Volkswagen again. But, all was failed because of the integrity of Malaysia as Proton was the icon, as the foreign partners reportedly keen to be the ultimate decision-maker.


So, scale was the last path for Proton. With the poor sales volume and unpopular new models in this highly competitive market, Proton had a difficult way to go the extra miles without an angel. Meanwhile, Perodua with popular models like Myvi and Elza, facing the needs to expand its plant to cope with the demands. As such, Proton which has the excess capacity in its Tanjung Malim plant could perfectly address Perodua's good problem.


Moreover, Proton can clinch back their #1 the fastest way by merging with Perodua, thus eliminate their main competitor. Perodua also has the more advance technology expertise since they collaborate with Daihatsu, a Toyota-controlled manufacturer, which explains why the quality and performance is better than Proton's.


The above gave Proton reasons to launch a "forced marriage" with Perodua. Malaysians would have to continue subsidizing the profit of Proton and paying more for non-national cars for the survival of Proton. We had had enough all these years. Let's give Malaysians lower car prices and forget the prized Proton.


We are happy for having Perodua, not Proton. The forced marriage would not make babies (bear fruits), and Malaysians will continue suffers with expensive, yet poor quality cars. Think about our babies (next generation), instead of Proton's.


Finance Malaysia was being told that Myvi is faster than other cars…

Sunday, 5 December 2010

Credit Card Insurance, worth it?

I believe almost every credit card users had been offered a new type of insurance - credit card insurance.

What is credit card insurance?

  • it insured you of the outstanding amount owed in your credit card
  • it covers death and disablement of credit card holders
  • it charges card holders an insurance premium annually normally

And, in my case, it offers me a better plan which only charge me if there is any outstanding credit card loan. If you're a prompt paymaster, this is definitely the better option for you. If you agreed on the deal, all you need is to answer 'YES' through the phone. Then, they will issue a contract notes and mail to your home address.

Ya... Pretty easy and convenient though.

But, is it worth to have such insurance?

Finance Malaysia opine that it is not worth, and its a waste of money because of the following points:-
  • Credit card supposed is for our ease of making purchases, especially for those 0% installment deals.
  • Those who opts credit card loans would have been due to financial constrain.
  • By charging extra premium on top of the loan amount will UP the outstanding loan amount, thus, the monthly repayment.

Friday, 3 December 2010

Broad-Ban in Malaysia?

Forget about the old fixed line internet connections anymore. We have the on-the-go broadband services, which provide almost unlimited boundaries for internet lover to surf anytime anywhere. However, you may not know a very unpleasant scenario is happening in Malaysia (at least I found out now).


Although I comment about TM's monopoly status in fixed line internet connection previously, I still prefer Streamyx for its unlimited surfing, lower monthly charges, and stable connectivity. Most importantly, more than one people can online at the same time, without extra fees. Whereas, broadband cannot.




Don't know #1

Recently, I moved to a new area, and hopes to subscribe for Streamyx (fixed line internet service provided by TM). However, I was shock to found out that I cannot subscribe for Streamyx, because my area was under Maxis territory. Wow… Sounds like I am living in the battle-field, where Maxis won the game!!!


The reason given was that my area's telephone line is bought over by Maxis, and Streamyx needs the telephone line to connect. Since this was the only fixed line internet service you can find in Malaysia, and again thanks to TM's monopoly status, I have no choice, but to look for broadband service.


Don't know #2

Then, I subscribe for a broadband service, but, the connection is slow (running at below 100kbps during peak hours). Can you imagine how slow 100kbps is? It's like opening a single website until you felt asleep. So, I went to another service provider to en-quire  theirs. Thanks for his honesty, he told me that if you are staying near the mountain, and in an apartment unit above 5 storey, you can't expect to get a good connection.


Conclusions… Broad-Ban

Are we living in a business friendly society, in the expense of public's freedom of choice? 
First, Maxis is wrong by conquering certain areas, which undermine the choice of citizen there. 
Second, why TM agreed to let go some of its assets?


Finance Malaysia thinks that Rakyat should be given to freedom to choose for their preferred service. Business owners should cares about the difficulties faced by Rakyat. And, government should monitor the latest development which could affect the welfare of Rakyat. Internet services are very important our daily lives now. Oh my dear Malaysians.


*The telecommunication company is expanding its territory now. Would your area be the next battle-field?

Thursday, 2 December 2010

E&O is the next take-over target?

The recent spate of mergers have been dominating the trading sentiment of local market, with IJM-MRCB, UEM Land-Sunrise, and Sunway-SunCity. Investors are wondering whether there is any mergers activities else, and the million-dollar question is "Who is the Next".

 Main factors of taking private...
  1. Undemanding valuation
  2. Strong branding
  3. A well-run and profitable company
Quayside (Seafront Resort Condominium) of E&O property development
 After screening through the list of property counters, E&O could potentially emerged as the next company of being privatized. The main reason being E&O's is trading at a huge discount to its revised net asset value (RNAV) of RM2.72* per share.


Other than that, E&O has a very good brand name in the premium market, having some prime land-bank in strategic locations (especially in Penang). Couple with its strong marketing acumen, this company fit nicely into the take-over picture currently.

Spicing it up, speculations to privatized E&O has emerged in one of the news portal few months ago, saying that the major shareholder of E&O would made an offer for the rest of the remaining shares he did not hold.

Wednesday, 1 December 2010

Bursa Malaysia to take on ASEAN

Yesterday, news portal reported that Bursa Malaysia (BM) together with Singapore Stock Exchange (SGX) and Stock Exchange of Thailand (SET) are set to join the Asean Exchange Linkage which will go live by the 2nd half of 2011.


In addition to the linkage, the exchanges would also promote leading Asean public companies under the brand of "Asean Star". The cross-border offering of collective investment scheme would kicks-in after that.

Migration of local investors?
In fact, many local investors are already trading overseas shares, especially Singapore and Hong Kong markets. For them, this made no significant difference, except that the new cross-border trading will reduce the lagging time, thus, boosting the participation and matching rate. If the overhead costs of trading is reduced accordingly, investors will be more reluctant to trade. Anyway, investors can diversify more effectively to regional markets soon.

Brokers do not "broke" anymore?
Local brokers are expecting a revival of the industry, last seen in the 90s. Reportedly, all local stock broking firms would be given the green light to link with the new platform. But, brokers would need to monitor regional markets too, with more than few thousands counters!!!


What is the impact to Bursa Malaysia?
Of course, Bursa Malaysia could benefit from the cross-border trading with increase revenue generated, up-lifting the profile of local market, making it more attractive and vibrant. However, I scared local investors would in turn, shunning the local market in favor of regional markets.

Weathering the storm together...
After all, we will stick together more closely, and shoulder the good and bad times together. This is because, investors are becoming more regional, and a fall in one market would most likely going to trigger a fall in another market.

Tuesday, 30 November 2010

And Now for the States

State governments are drowning for two reasons: 1) obligations to public employees; 2) the state share of medicare and medicaid spending. Most states are now beginning to confront the public employee problem by reigning in the some of the worst abuses of overly lavish pay and benefits (teachers top the list, by the way).

Only Republican Governor Bob McDonnell of Virginia has opted to pour on more lavish benefits for public employees and leave the taxpayer to pick up the tab, but he is an outlier. Governor Christie of New Jersey has led the charge to begin to curb the enormous pay and benefits of public employees. Other Governors, Democratic and Republican, are following Christie's lead. Even President Obama has entered the fray by freezing public employee pay for two years in a symbolic gesture toward sanity.

But, there is much to be done. California's off-balance sheet pension liabilities are estimated to exceed $ 1.5 Trillion (those numbers are not in the budget, which now $ 25 billion out of balance). So life should get interesting in California. A similar pattern exists in New York and time is no longer on their side.

Again, much like Europe, look for debt defaults and workouts by state governments as they struggle to undo the poor policies of the forty years.

Europe and All That

First Greece, then Ireland. Now all eyes turn to Portugal, Spain, and Italy. Little noticed is that neither and France and Germany are likely to survive some type of default on their own sovereign debt. A combination of bad economics, a bad economy, and the tide of demographics will sink both France and Germany in time.

The idea that you can paper over the problems in the PIIGS (the new name for Portugal, Ireland, Italy, Greece and Spain) is ludicrous. Much of the PIIGS sovereign debt is held in German and French banks. Merkel and Sarcozy think no one knows this, I suppose.

But, in fact, the world markets know everything. Just watch bond yields on European sovereign debt. The are beginning the slow, inevitable surge toward infinity. (You reach infinity when the bonds are completely worthless.

Europe has no real shot other than defaulting and the sooner the better. Ireland will probably be the first. They will renounce their guarantee of bank bondholders and that will begin a tide of defaults and partial defaults (and workouts) that will begin to crush the holders of sovereign debt. That is as it should be. Those who make bad investments should suffer the consequences.

Anxious eyes watch California, New York, New Jersey, Illinois and host of small American cities that will default, at least partially, on their debt within the next 24 to 36 months. The idea of a federal bailout died on November 2nd. All appropriations, according to the US Constitution, must originate in the House of Representatives. Good luck with that. There will be no bailouts for the profligate states. That is as it should be. Those who make bad investments should suffer the consequences.

You can't repeal the laws of economics by pretending to backstop folks who make bad decisions. That just leads to more bad decisions.

Real economic recovery and growth cannot begin until the wave of defaults begins.

New Incentives Plan for Oil and Gas‏


The government has endorsed a new plan of tax incentives proposed by Petronas which will be incorporated in the Petroleum Income Tax Act, Prime Minister said today.

“By lowering risks and increasing the rewards for investment, this initiative will potentially lead to additional petroleum-generated revenue of more than RM50 billion for Malaysia over the next 20 years” he said when announcing 9 new developments and Entry Point Projects of the Economic Transformation Program.


Najib said there would be a notional trade-off of about RM8 billion in the form of revenue foregone from investment tax allowances, reduced tax and the export duty waiver for marginal fields.

The 5 new incentives are:-
  1. Investment tax allowance of capital expenditure.
  2. Reducing tax rate from 38% to 25% for marginal oil field development
  3. Accelerated capital allowance of up to 5 years from 10 years.
  4. Qualifying exploration expenditure transfer between non-contiguous petroleum agreements with the same partnership or sole proprietor
  5. Waiver of export duty on oil produced and exported from marginal field development
Source: Bernama

Finance Malaysia (FM):-
"This is definitely a good perks for the oil & gas sector. The main objective here is to encourage deep water exploration, which is capital intensive and requiring more technical know-how."

"MHB which was listed recently could be the main beneficiary, judging by its expertise and available resources and technical in this field."

"Following the listing of MHB and Petronas Chemical Group, any good news announced would definitely excite the market. FM believe this is just one of the good news prior to the next general election, reportedly early next year".

Sunday, 28 November 2010

QSR shares is "flying", because KFC is "frying"?

Yet, another lesson could be learned in Bursa Malaysia last week. In the midst of series of corporate activities happening, how could you left out QSR Brands Bhd and its jewel KFC Holdings (M) Bhd (QSR holds 50.6% of KFCH)?

Below is the important date and announcements made:-
19th Nov : QSR received a take-over proposal, but in preliminary stage (closing at RM5.76)
20th Nov : Halim Saad was said proposed to take-over QSR at RM5.60 per share only
21th Nov : QSR shares dive 6.4% to RM5.39
25th Nov : US private equity fund Carlyle Group make an RM6.20 offer for QSR shares

For me, there are some very strange things happening, especially on the timing of announcements.
  1. Halim's real announcement was made on Saturday (20th Nov) on Bursa Malaysia website. Saturday?
  2. Halim's offer price is lower than the previous closing price.
  3. Another offer came few days later, which commands a much higher premium.
QSR's recent share price movements
What does this reflect?
Would someone trying to "goreng" the shares of QSR and KFC?

If I know about the Carlyle's offer one week before, I would try to bought QSR shares. However, the shares is too high already. How?

I would try to "cause" the share price come down, so that, I could accumulate the shares at a cheaper price. Lastly, just wait until Carlyle's good news. By then, I would have making a 15% profits on my investment in  merely 5 days.

The question is: "Did Halim know about the soon to be announced Carlyle's offer?"