Thursday, September 30, 2010

TDM secures Kalimantan site for plantation project


TDM Bhd has secured a 25,000-hectare site in Kalimantan for its oil palm plantation project, its chief executive officer Badrul Hisham Mahari said today.

The company currently has planted over 1,000 hectares with oil palm trees on the land, he said.

"We target to plant 3,000 hectares by end of the year and 5,000 hectares for every subsequent year," Badrul Hisham said.

"It takes eight to 10 years to finish the Kalimantan project but when fully completed, it will basically double the size of the company," he said at a press conference here.

The company is currently in negotiations to secure another 15,000 hectares of land to achieve its target to manage 40,000 hectares of oil palm estate in Kalimantan.

TDM is a key player in Malaysia's plantation sector, managing 12 oil palm estates with a total of about 35,000 hectares in Terengganu.

Badrul Hisham said the Kalimantan project will provide a much bigger impact to the company compared to its hospital development project in Indera Mahkota, Kuantan, which is expected to be completed in early 2013.

On the hospital project, he said the company was about to conclude the 150-room modern hospital tender process.

"We will try to expedite the development process so that we can complete the project within our targeted date," Badrul Hisham said, adding that the standard contract period for the project is two years.

TDM has obtained its shareholders' approval on the proposed allotment and issuance of a total of 1.82 million new TDM shares under its employees' shares option scheme (ESOS).

At its extraordinary general meeting (EGM) in Kuala Terengganu yesterday, the shareholders also agreed on the proposed allotment of issuance of a total 305,000 new TDM shares to the chief executive officer under the ESOS.

Two resolutions to issue ESOS to each of the independent directors, however, were withdrawn before polling because the company wanted to be responsive to the opinion of the minority shareholders. -- BERNAMA

Reasons for Holding onto a Security

Reasons for Holding onto a Security

by Warren Buffett

We do not sell holdings just because they have appreciated or because we have held them for a long time. (Of Wall Street maxims the most foolish may be "You can't go broke taking a profit.") We are quite content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory,management is competent and honest, and the marketdoes not overvalue the business.

Wednesday, September 29, 2010

Uranium: How to play it and Why

  • It's something of an afterthought today, but Uranium was a really trendy investment a couple of years ago as crude oil was getting up near $140/barrel.

That was the summer of 2007, and right around then Mike and I were visiting a very large, very successful, very famous New York-based hedge fund that will remain nameless. Trust me, though. You've heard of these guys.

In every trader's office was a gigantic white board. We have a white board in our office too and it's where we sketch out all of our early-stage ideas. So I made a point to pay attention to the stuff on their white boards. It was sort of like being allowed to have a free peek at what goes on inside the mind of geniuses.

On nearly every single white board was "Uranium." Sure, that was then and this is now and a lot has changed since the world was staring down the barrel of peak oil and stratospheric power bills. But investing in nuclear energy was one of their major long-term macro ideas.

If this idea was good enough for one of the best hedge funds in the history of hedge funds, might it be good enough for the rest of us? Our long-term macro thesis is that we are on the doorstep of a decade of hardship and investors are going to have to work a little harder than they did during the last few decades.

Could Uranium and nuclear energy make life a little easier and more profitable for us all?


How nuclear works

Nuclear reactors are pretty cool. You know we like to talk about other things aside from the nuts and bolts of investing so I'll give you a quick, non-technical explanation of how it works. Remember that it is all connected; you never know where knowledge will take you, however insignificant it may seem at first.

Uranium-235 is one of the few elements that can undergo a fancy process called "induced fission." For the non-scientists, "fission" is just a fancy way of saying "division." Anyway, if you put a chunk of Uranium into a reactor and throw some neutrons at it, one of those Uranium-235 atoms will split and in the process release a couple of extra neutrons. Those neutrons will then collide with other U-235 atoms and cause those little atoms to split and release some more neutrons. The chain reaction continues. Every time one of these atoms split, energy gets released. It releases quite a bit of energy too: one little uranium fuel pellet contains the same amount of energy as an entire ton of coal!

If you put these Uranium fuel rods in some water when you throw neutrons at them, the surrounding water will heat up as all this energy is released. When the water heats up it turns into steam. Then we use that rising steam to turn a big turbine which generates electricity the same way a windmill does.

It's actually quite simple.

The good news about Uranium is that it's naturally occurring in the Earth's crust and there's a whole bunch of it out there. According to the OECD, there's enough uranium on the earth to last for at least a century at current consumption rates. It's not the solution to the world's energy demand woes, but it's a part of it.

The future for Uranium

Here's a chart of Uranium prices: (Click to enlarge)

saupload_uranium_jul10.pngYou guys have been hanging around long enough here to see what that chart's all about. It's a bubble!

As you can see, Uranium prices didn't really go anywhere for a long time. A lot of that had to do with the fact that pretty much everybody in the world stopped building nuclear reactors after Three Mile Island and Chernobyl, and so there wasn't any new demand. Politics also played a big role too as politicians weren't sure how to sell the issue of storing the nuclear waste. Keep in mind nuclear power plants don't pollute and there are plenty of ways to safely process the waste. But, whatever. The phrase "nuclear waste" carries certain connotations. Public perception and politics are the biggest hurdles for the industry and its future.

I doubt Homer Simpson has helped either.


But that perception is slowly changing as traditional forms of energy are getting more expensive and demand for electricity continues to rise. The U.S. has indicated that it seems to favor coal since we have so much of it, but nuclear energy will play a role too. It was a big part of Obama's and John McCain's campaigns, but Obama hasn't been as aggressive about pushing nuclear since he got elected. Hmm.

In any case, we're all getting a little more open-minded about the idea again and according to Gallup, support for nuclear power is at an all time high of 62%. That's good, but still nowhere near the support we show for other forms of energy. Ultimately, the only thing that will get the U.S. to really embrace large-scale nuclear development will be higher prices for coal, oil, and natural gas. The U.S. has a pretty good track record of compromising its moral values when it involves lower cost or higher profits.

On a cost-per-megawatt basis, nuclear is cheaper than wind and way cheaper than solar. But it's still more expensive than coal and natural gas, which in this country is suuuper cheap. (C'mon people, get on board with the Pickens Plan!) The Department of Energy just published a fairly comprehensive report about the relative cost of various forms of energy. It's worth a look. Watch these annual reports from the DoE and when you see nuclear becoming a relatively cheaper option I'd expect the U.S. to start to show legitimate excitement for it.

Other countries feel much differently about nuclear energy. France generates about 80% of its electricity from nuclear plants and they have the cleanest air of any industrialized country and the cheapest energy in all of Europe. South Korea is increasing its number of reactors by 50% and will eventually be generating over half of its electricity from nuclear sources. Would you believe that even the United Arab Emirates, the third largest oil exporter in the world, has proposed construction of 11 nuclear power plants? India currently has 6 plants under construction and another 23 on the way. China has a major energy need in the coming decade and nuclear power plants will play a major role over there. Last month, China made a big public announcement that they were going to buy a bunch of yellowcake this year and in the years to come. They're planning to build at least 60 new nuclear reactors in the coming decade and have proposals to build 120 more.

It takes a while to get a new reactor built and fully operational. But that's a lot of additional Uranium that the world is going to need. I think that the expectation of future demand has put in something of a floor in prices over the last couple of years. The bubble euphoria has died out and the market is now starting to look ahead towards the future with some sense of rationality. Prices make sense again.

On the supply side there was about 50,000 tons of uranium mined last year around the world. All of that uranium already had demand from the current marketplace, from existing nuclear reactors. To put China's plan into perspective, they alone may be demanding an additional 20,000 tons/year of uranium by the end of the decade. That new supply is going to have to come from somewhere or the price of the existing supply will need to increase to clear the market. It's simple economics, and quite beneficial if you're in the business of mining uranium.

That's a good way to execute our investment thesis too, from the supply side.

How to play it

This is a long-term investment. Uranium is for investors who are looking out a decade or two and want to add some interesting, alternative investments to their portfolio. A lot can happen between now and then. You can't just put on the trade and hop through the wormhole with profits waiting for you on the other side.

Anyway, the easiest and most direct way to do it is through the stock of a company that mines it.

Cameco (CCJ) is the first to look at. They're the biggest. They're a Canadian company which scores them points right off the bat. Canada has a better base currency and a government much less prone to monkeying around with the private sector. The regulation up there is not as onerous and inefficient as it is in this country, nor does it carry the same degree of political correctness, which matters with something like nuclear energy.

China has a contract with Cameco to buy a bunch of uranium over the next 10 years. There really aren't that many companies in the world as engaged in mining Uranium, so barring any meltdowns in China (and I mean that literally) the demand will be there for Cameco's product.

Cameco has an excellent balance sheet, too. They've got about $1.5 billion in cash, about $5 billion of Uranium reserves, and less than $1 billion of debt. They generate good free cash flow and their 34% profit margin is outstanding relative to their peers. If I'm going to make an investment in a company for the next decade or so, that's the kind of corporate foundation I'd like them to have.

It trades over 20 times next year's earnings. So the stock is a little pricey. But at least there's some firmness in the foundation. There are far too many stocks out there that trade at high multiples based only the promise of an idea, with neither sales nor a balance sheet to back that up.

Generally speaking, I'm a fan of the perspective that the ubiquitous Dennis Gartman is always promoting. He wants to own stuff that hurts if you drop it on your foot, stuff like gold, copper, steel and coal. He also likes the stock of companies that dig this stuff up out of the ground and sell it to countries that need it. Cameco is squarely in that category.

Paladin Energy is another to take a look at (PALAF.PK). They're based in Australia and they have a couple of mines working in Africa as well. They're a much smaller miner -- only about $115 million of revenue last year -- though they seem to be on the rise, developing new mines. They're not a bad bet if you want a little more spice.


Olympic Dam Uranium Mine

BHP Billiton (BHP) owns the world's largest Uranium deposit, Olympic Dam in South Australia. But Uranium is a relatively small portion of all the stuff BHP Billiton mines. If you want a bigger, broader, more diversified mining company then check 'em out. Their stock is somewhat expensive as well, trading a little over 20 times next year's earnings on the back of a simply phenomenal decade. The next 10 years aren't going to resemble their last, but relative to the rest of the market, you can do a whole lot worse than a company like BHP. They produce all the stuff that the developing world needs and they're a direct play on resource-driven global growth. Even we market bears need a little bit of that in our portfolio.

I also just noticed a nice interview over at Seeking Alpha that covers a bunch of other different uranium-related companies. Most of the names are small, but the article is a great supplement to this one.

From the demand side

You can also buy the stock of a power company that operates the plants. Exelon (EXC) is probably the best and certainly the biggest of breed. Over 90% of their power plants are nuclear and they operate the largest fleet in the nation and third largest in the world. It's a pure play on the energy generation side, a way to take advantage of rising U.S. demand for nuclear power should that someday happen.

These guys get me a little more excited, if only because they're a little more boring. I told you I was an odd bird. Exelon trades at only 10 times next year's earnings, but hey, they're a utility. Growing revenues isn't exactly their gig, but that could happen if the U.S. gets more serious about nuclear plants. They pay a 5% dividend which is very cool. And they only have about $11 billion of long term debt against $25 billion worth of power plants and another $25 billion of cash, receivables, and other assets. Their operating margins are also fantastic, underscoring the efficiency of nuclear power in general and their plants in particular.

It's interesting to see that trait on both sides of the uranium coin. Remember what we all learned in our college Econ classes? Firms with higher margins have better pricing power. That's really important in the world of commodities -- it's profitable for shareholders when demand is strong, and should demand weaken there's already a built-in cushion to absorb some of the slack.

Electricite de France (ECIFF.PK) operates the biggest fleet of reactors in the world and they've been doing it for a long time. Despite their $75 billion market cap, their stock only trades on the Pink Sheets in the U.S. If your broker offers global trading and the ability to buy stuff on the French exchange (Euronext) you might be better off doing it that way. Be aware of the currency risk, too. Your stock will be denominated in Euros!

If you'd rather not deal with that hassle, another option is the Market Vectors Nuclear Energy ETF (NLR). Electricite de France is the single biggest position in that fund and Exelon is number two. Plus, you get exposure to a basket of other energy companies and uranium miners. This fund was launched almost exactly at the peak of the Uranium bubble, which probably shouldn't come as a surprise. It was a sign of the times. The ETF hasn't performed very well since then, which also is not a surprise since Uranium prices have collapsed. But now that prices have stabilized there is potential on path from here forward.

PKN and NUCL are other exchange traded funds you can buy to get a basket of nuclear names, but these funds are quite a bit smaller than NLR.

As with any stock, these companies will fluctuate with the market. My guess, though, is that these are much better bets to outperform the market over the next decade than a lot of other companies out there.

A final caveat

Ultimately, I'm of the belief that the best way to play alternative energy is through traditional energy companies. All these wind, solar, and nuclear companies may be great investments some day, but there doesn't exist a world in which alternative energy does well and traditional energy does not do well. That's a tricky concept, so I'll repeat it a different way: a wind energy company is only a good investment if the price of coal or crude oil gets very high. Should that happen, then a coal miner or traditional oil & gas company has also been a very good investment. I think that traditional energy is a lower risk way to play alternative energy.

But when it comes to alternative energy, Uranium is clearly the way to go. The margins are much better than wind or solar, and it's a much more practical way to generate electricity (on a cost-per-megawatt basis). I know Greenpeace still hates nuclear, but surely they have to understand that wind and solar can't come anywhere close to satisfying the world's energy needs, and certainly not at the price it would cost to do so. Nuclear energy is an interesting middle ground, a blend of practical efficiency and less environmental impact than coal or gas.

Odds are this kind of thing will probably be a pretty boring investment. There are a few risks -- both general economic risks and uranium-specific risks -- to consider, and make sure you consider them and size the trade appropriately. In aggregate, it boils down to an investment with:

  1. limited downside
  2. quantifiable and stable upside
  3. the chance for substantial appreciation if the cards fall a certain way

Most of the stocks in this sector are trading at relatively low levels, having been forsaken by investors for flashier opportunities. I don't think that's such a bad thing, though. I like out-of-favor investments where you buy a little bit and stash it away. I think the odds are high that the U.S. gets really excited about nuclear energy and Uranium again at some point in the coming decade. I haven't a clue when that could happen. But when it does these companies will get exciting again and the market will reward them with higher multiples.

We're still in the first inning of a brand new game for nuclear energy.

(The above article is by Jeffrey Dow Jones of Draco Capital Management. Blog: The Draconian)

Monday, September 27, 2010

Wisdom and foolishness — Lim Mun Fah

July 14, 2010

JULY 14 — Singapore has a rather complicated unique historical relations with our country, and the unpredictable but tolerable relations have often changed to accommodate the contemporary situation.

During the era of Tunku Abdul Rahman, just like a newly-wed couple, the two countries were originally passionately in love. Unfortunately, the happiness was short-lived, with the marriage turning sour and ending in a divorce.

During the eras of Tun Abdul Razak and Tun Hussein Onn, each country lived its own life, minding its own affairs, with little interactions. The bilateral relations increasingly became lukewarm.

During Tun Dr Mahathir Mohamad’s era, there were many controversies over issues like water supply, railways, crooked bridge, territory and the Singapore Central Provident Fund (CPF). The two countries were literally involved in a dog-and-cat fight, even to the extent of going to the courts.

When Tun Abdullah Ahmad Badawi was the prime minister, he was eager to pick the low-hanging fruits. However, he faced great internal resistance and caused the improvement for the cross-strait relations seemed to be limited only to the diplomatic level with little progress.

When Datuk Seri Najib Razak took over as Malaysia’s chief executive, the two countries have begun a new romance.

They have reached an agreement on the relocation of the Tanjong Pagar railway station which has been delayed for 20 years. The agreement has brought hopes that several historical issues would be resolved.

Najib had visited Singapore several times to show his goodwill and, at the same time, promote his New Economic Model (NEM).

In the area of economy, Najib seems to be very ambitious and very eager to achieve some fast results. But, many plans are yet to be implemented.

Najib obviously has to face both internal and external pressures in his decision-making of several major plans, including the 1 Malaysia concept, the NEM, and the 10th Malaysia Plan (10MP). These plans and programmes will be costly if they miss the opportune time to be implemented.

Nowadays, the international competition has become more and more intense and the world no longer allows us to tightly embrace protectionism.

In fact, the more privileges and self-protections in economy, the more extreme conservative views will be spread and the more foreign investors will be scared away. It may even lead to the outflow of domestic funds to other more liberal and open markets.

When tycoon Tan Sri Robert Kuok Hock Nien, one of the five advisers of the Iskandar Development Region Authority (IDRA), abandoned his title of the “Sugar King of Malaysia” to acquire Sydney-based CSR Ltd’s sugar business for RM4.73 billion and develop some 200,000 hectares of sugar cane plantation in Indonesia, shouldn’t we take a good look as to why?

When the Genting Group’s funds were taken into Singapore to build the republic’s first casino, shouldn’t we ask why?

Why did the IDRA, which was custom-made for Singaporean investors, fail to bring the desired results?

Najib, apparently worried about some reckless and rash local politicians making some foolhardy remarks, has reminded Umno leaders not to express views that are inconsistent with the government stand and undermines his efforts in attracting Singaporean investors to invest in Iskandar Malaysia.

“It was the age of wisdom, it was the age of foolishness... we were all going direct to Heaven, we were all going direct the other way — in short...” Aren’t these famous words of Charles Dickens written 150 years ago still very inspiring today? —

* This is the personal opinion of the writer or the publication. The Malaysian Insider does not endorse the view unless specified.

Saturday, September 25, 2010

The Fool Makes An Excellent Point

Morgan Housel
September 17, 2010

I couldn't for the life of me track down the actual quote, but Peter Lynch once said something along the lines of, "The biggest mistake an investor can make is buying the right company at the wrong price. Because then the company does well, but the stock goes nowhere."

How right he was! Most investors have lost money over the past few years. But what really caused these losses? Was it a deterioration of companies and their earnings power, or just a reevaluation bymarkets? There's a major difference between the two.

Consider these five companies, all of which have doubled (or nearly doubled) earnings in the past four to six years while their stocks went nowhere.

1. Microsoft (Nasdaq: MSFT)
In 2004, Microsoft earned $0.75 a share. Over the past year, it pulled down $2.10 per share. That's 18.7% earnings growth per year. Extraordinary. Yet Microsoft shares trade lower today than they did for all of 2004. Dividends provided some return, but shareholders have essentially been handed a donut for a company that's blown the lights out on earnings.

2. Google (Nasdaq: GOOG)
Google shares have gone precisely nowhere since late 2006. The company, however, has been on a tear. Revenue has more than doubled since 2006. Ditto for earnings per share, which have jumped from $9.94 to $23.03. That's 23% annual earnings growth, for which investors were rewarded with bupkis.

3. Wal-Mart (NYSE: WMT)
Wal-Mart's business has famously done well during the recession as consumers flock toward frugalism. Earnings per share have nearly doubled since 2004, from $2.03 to $3.91. Yet during this same period, shares have flatlined.

4. Johnson & Johnson (NYSE: JNJ)
In 2005, J&J earned $2.74 per share. Over the past year, it nearly doubled that, to $4.84 per share. The company also almost doubled its dividend payout during this period. Its shares? They trade lower today than they did for most of 2005.

5. WellPoint (NYSE: WLP)
WellPoint is the strongest example of this group. In 2006, the company earned $4.82 per share. Over the past 12 months, it's made $11.23 per share. Yet during this four-year period, the company's shares have fallen 28%. Incredible.

I made a point here of staying within a four-to-six-year timeframe. Stretching this exercise out to 10 years brings you back to dot-com bubble territory, where examples of companies growing earnings while their stocks pooped out becomes the norm.

Why does this happen? There are three explanations for why a company's earnings can explode while its stock languishes:

  1. The current valuation is too low.
  2. The starting valuation was too high.
  3. Future growth prospects have suddenly taken a nosedive.

The recent period of dismal returns probably owes somewhat to all three factors. But the first two -- the valuation issues -- deserve the lion's share of your attention.

At a conference I recently attended, value investor Vitaliy Katsenelson made a great point: History shows that the single most important statistic in determining market returns is not GDP growth, interest rates, or even earnings growth. It's starting valuations. Start with high valuations, and future returns will be poor, even if companies and the economy boom. Start with low valuations, and future returns can be great, even if companies simply trod along. That's the point Lynch was making as well.

So where are we now? It's not hard to make the case that current valuations for these companies -- and most large caps, for that matter -- are indeed low. Microsoft, for example, trades at about eighttimes earnings after backing out its cash hoard. Johnson & Johnson's dividend yield is 3.5% -- far higher than 10-year Treasuries -- and it's grown that dividend payout by more than 12% per year for the past 30 years. Wal-Mart trades at 12 times forward earnings, despite having the most powerful retail moat known to mankind. There's no way to describe these numbers as anything other than outrageous. They're simple reflections of investors extrapolating previous poor results into the indefinite future.

There are two important parts to successful investing: finding the right company, and finding the right price. In any market, singling out good companies isn't terribly difficult. They're usually well-hyped. But finding the right price can be painfully elusive. Thankfully, the pool of good companies selling at good prices today is about as deep as it's been at any time during the past decade.

For past 10 years, strong companies provided abysmal stock performances. Over the next ten, I have a feeling that mediocre companies will start providing strong stock returns. These things move in cycles.

Sunday, September 19, 2010

Signals of Concern

It pays to pay attention to signals. Dark cloud signifies rain; smoke signifies fire.

Thirst means your body needs more water. Discomfort means there is irritation.

Below are some signals that have great implications for stocks:

1) Negative Cash Flow: When money outflow is more than money inflow, the company is in trouble

2) High Debt to Equity Ratio: Above 0.5 is a concern

3) Interest Coverage Ratio: Below 1 means that the company is not able to meet all of its debt obligations

4) Share price keeps drifting lower. This probably means distribution by some major shareholders

5) Profit Warnings: When a company warns that its profit won't be good, take it seriously.

6) Insiders selling heavily means trouble ahead, while their heavy buying means the opposite

7) Resignation of key personals need scrutinization (can be bad or good)

8) SEC Investigation: an ill omen

9) Litigation: Whether the company is suing somebody or somebody is suing the company is not a good sign

10) Right Issues: When the company ask you for money, be skeptical about it.

Saturday, September 18, 2010

Be Smart From The Start

Beginner Investing

Featured Blogs: Wise Investing

I’m ready to start investing. What's the first step?

by Jane Bryant Quinn

Don’t go near a broker or commissioned planner if you’ve just come into a lot of money (an inheritance, an insurance settlement, a lump sum retirement payout) and don’t know what to do with it.

Clients with loose cash and weak convictions are fresh meat, ready for roasting. A self-interested planner may urge you to buy high-commission investments that serve his or her objectives better than yours.

Because you don’t know much about investing, you won’t know what’s going on. Before you set foot in the office of a stockbroker, insurance agent, or financial planner, learn the basics yourself. Sock your money into bank certificates of deposit or a money market fund, then study up. Read books. Work out your priorities. Take all the time you need to understand the tried-and-true principles of successful investing. Six months, one year, the wait doesn’t matter. During that time, your money will quietly earn interest with no risk of loss and no risk of slipping into bad hands. The only expert that a novice can safely visit is a certified public accountant, for tax advice. That is, provided that the accountant doesn’t sell financial products.

When you’re ready to launch, try investing yourself, a little in this mutual fund, a little in that one. Give it a year, see how it feels, and then invest some more. Don’t worry about “missing the market.” There’s a new market every day. Once you’ve had some experience, you might discover you like it and keep going. Or you might decide that you want professional advice.


Excerpted fromMaking the Most of Your Money Nowby Jane Bryant Quinn

Copyright 1991, 1997, 2009, by Berrybrook Publishing, Inc. Reprinted by permission of Simon & Schuster, Inc

Buy the Book

Friday, September 17, 2010

The Highest So Far

RM2 firm creates land deal history

By Vasantha Ganesan

Urusharta Cemerlang (KL) pays RM210 million, or RM7,209.80 per sq ft, to a company controlled by Singapore's property tycoon Kwek Leng Beng for a vacant land in Jalan Bukit Bintang, Kuala Lumpur
A RM2 company is the buyer of the country's most expensive piece of land.

On Wednesday, Millennium & Copthorne Hotels plc (M&C), a company controlled by Singapore's property tycoon Kwek Leng Beng, sold 29,127 sq ft of vacant land in Jalan Bukit Bintang, Kuala Lumpur, to Urusharta Cemerlang (KL) Sdn Bhd for RM210 million, or RM7,209.80 per sq ft.

The previous record in a reported land sale was RM2,588 per sq ft for Wisma Angkasa Raya in Jalan Ampang in 2008.

A search at the Companies Commission of Malaysia revealed that Urusharta Cemerlang (KL) is owned by Tan Sri Zainol Mahmood and Shazni Sulaiman. The two have been its directors since 2006.

Zainol is the chairman of Urusharta Cemerlang Sdn Bhd and Pavilion Kuala Lumpur Sdn Bhd. Urusharta Cemerlang owns the Pavilion Kuala Lumpur shopping mall, which is also located in the Bukit Bintang area.

Urusharta Cemerlang is 51 per cent owned by Urusharta Cemerlang Development Sdn Bhd and 49 per cent by the Qatar Investment Authority(QIA).

Not much is known about Shazni.

In the financial year ended December 31 2009, Urusharta Cemerlang (KL), which is described as a dormant company, had current liabilities of RM5,010 and posted a net loss of RM1,305.

Real estate agents are describing the latest deal as "dizzying heights" and reckon that it could take many more years to surpass the figure.

But observers are wondering how and who will finance the acquisition given that the buyer is a RM2 company.

They also questioned whether QIA will later participate in the deal and what will be built on the land - an extended retail mall or luxury residences.

A mall would make sense given the land's proximity to Pavilion. However, at such a price, there is no doubt it could take more than the usual eight to 10 years to see a return on investment should a shopping complex be built.

It might recoup the investment faster if it built and sold high-end residences. After all, the land had been initially slated for the RM500 million Millennium Residences project.

In a statement issued in Kuala Lumpur on Wednesday, M&C said a 10 per cent deposit had been paid to its wholly-owned unit, CDL Hotels (Malaysia) Sdn Bhd, which owns the land.

The deal confirms a Business Times report early last month that a land deal was being negotiated by CDL Hotels which could fetch a record price of over RM3,000 per sq ft.

The latest deal is nearly three times the price paid per acre in several private sales of nearby land, and the highest ever in the country's history.

"This transaction has obviously set a new benchmark in the local property market. I view the transaction as a special transaction as it is a special purchaser - an adjoining property owner who probably places more value on the asset than others," said a real estate agent, who declined to be named.

It is understood that the YTL group, which owns the nearby Starhill Gallery, Lot 10 Shopping Centre and JW Marriott Hotel, had also been eyeing the land.

The deal is expected to be completed no later than the second quarter of 2012.

M&C's carrying value of the land was RM42.8 million. Based on this, the sale is expected to result in a pre-tax profit of RM164.1 million after taking into account transaction costs.

Thursday, September 16, 2010

Intelligent Investing Best Way To Riches

Human nature seldom changes. When it comes to investment, value buying is still the best strategy. Fundamentals & values really matter eventually.

All bubbles are bound to burst. What is a bubble? Everything has a fair value. When the price of a stock exceeds its fair value, a bubble is formed. As the price moves higher and higher, the bubble becomes bigger and bigger. At the height of any bull market, someone will say, this time it's different. In reality, it will not be different. All bull markets will end in a speculative binge. When newbies enter the market in droves, when IPOs become more and more popular, and when people are throwing cautious to the wind, becoming more and more greedy, you may rest assure that the bubble is about to burst.

The FBM KLCI closed at 1, 472.95 yesterday. Is there a bubble? Yes, I believe there is a bubble. Blue chips are trading at high PE. Prices are moving ahead of growth.

Is the bubble going to burst anytime soon? I don't think so. A meaningful correction is the likely scenario as the above-mentioned characteristics at the top of a bull market is not seen yet. When rubbish shares have also moved up to a high level, then I think, is the best time to sell everything. For now, buying better-class 2nd liners is the best option.

The gap between the blue chips and the 2nd liners have grown wider. This reflects that foreigners are buying into the market. Foreign fund managers are only interested in liquid big-capped blue-chip stocks. Foreign buyings can push up the index fast, but when they leave, it can plummet just as fast.

The stock market is always governed by hope, greed and fear. Hope is what keeps an investor or trader holding on to a failing stock. Greed causes you to buy late in a bullish run. It also causes you to hold onto a stock that has become overvalued. As for fear, there is fear of missing out an excellent opportunity, fear of not protecting a profit, and fear of losing everything. Fear can cause you into joining a panic sale and taking small profits.

Emotions play a great part in the stock market. We have to understand these emotions and control them, otherwise other people will control us.

Do not buy anything you do not understand. If you buy on a hot tip without understanding the fundamentals, a little outside noise can derail you from your track and causes you to sell out with a loss on an investment that is profitable.

Always do a due diligence before you buy. If you are not convinced that the company is solid, if you are not convinced that the company has growth and that it has much potentials to become a great company in the future, simply avoid it.

We do things for a reason or a combination of reasons, The next time you are about to buy a stock, write down all the reasons for buying it. Be it a whispered tip from your remiser, friends or a bullish article in the papers, just write them down. You will be amazed to read them some time later. You will then know how smart or foolish you have been.

There is no short cut to riches. If you want to be a savvy investor and be fully independent financially in your golden years, intelligent investing is an excellent way.

Cheers and happy investing!

Wednesday, September 15, 2010

Why Investors Stick With Failing Stocks

Why Investors Stick With Failing Stocks

by Brian Bloch
For many investors, nothing is stronger than the stubbornness that emerges when making a new decision means admitting that an earlier one was a mistake. Such an admission comes at a high psychological cost in terms of self-image. As a result, many people avoid disappointment and regret by clinging to the wrong decision.

Of course, this only makes things worse financially, but the investor gets to delude himself that the disaster is not really so bad or will come right over time. Such behavior is referred to as "negative perseverance" or "regret avoidance", and is also likened to "effort justification". Whatever the name, this behavior needs to be avoided.

The concept of cognitive dissonance will be familiar to those who have studied marketing. Buyers often rationalize that they bought the right product after all, even when, deep down, they know it was a mistake. For instance, a buyer may seriously regret buying a manual car, but kid himself that it was great idea because of the lower gas bill.

The field of investment is particularly prone to this kind of mind game. (To learn more, check out our Behavioral Finance Tutorial.)

Why Do People Behave This Way?
Basically, the investor unwittingly has a greater fear of admitting to himself and perhaps to others, that he made a mistake, than of the consequences of keeping a bad investment. This very dysfunctional form of behavior, caused largely by pride or stubbornness, leads either to total passivity or to selling too late.

Individuals strive for harmony and consistency, hence the notion "if I just leave it alone, it’ll be ok". The problem is that when investments go wrong, particularly horribly wrong, radical and above all rapid action is generally essential. Taking losses or a major portfolio restructuring often causes the mental conflict of cognitive dissonance. This is a singularly unpleasant state of mind and can be resolved very unsatisfactorily, by collecting arguments to justify the original mistake that has now manifested itself in the form of big losses. (For more, see Words From The Wise On Active Management.)

With respect to investment, this means, for instance, clinging to an all-equity portfolio which is in the process of plummeting, rather than selling out in order to minimize losses and putting the money into something else that is likely to go up right now. Or at least, something that is likely to rise a lot sooner than the bear market turning bullish.

The Nature of Cognitive Dissonance
On the buyer side, what makes the process particularly problematic in the investment field, is that there is a lot one can regret. You can fret and sweat over losses caused by taking excessive risk, or lost opportunities caused by not buying a great asset in time. You can also torture yourself about selling too late or not buying enough, or listening to your advisor or friends, or indeed not listening to them. In short, you can be sorry about so many things in so many ways.

On the selling side, people who do not treat their customers well still generally want to believe that they are honest. But at the same time, they want to make the sale. So they solve the contradiction with self delusion along the lines of "I have no choice, I will lose my job if I don’t make the sales quota" or "if he agrees to it, it's his decision and his problem". Or "it’s a perfectly standard portfolio", even when it is totally unsuitable for the investor in question and/or the timing is inappropriate.

In extreme cases, the Bernie Madoffs of this world get accused of suppressing their emotions and ethics altogether. Indeed, this is how many intrinsically honest people cope with dishonest environments. (Learn more in How To Avoid Falling Prey To The Next Madoff Scam.)

Preventing Cognitive Dissonance
A sensible, diversified portfolio is a great way to prevent this problem. If you do not have too much or too little of anything, the odds are you will feel all right about your investments. Of course, if you take big gamble and it pays off, you will feel wonderful, but if it goes sour on you, there will be a lot of misery and rationalizing, which is just not worth it for most people. Balance, prudence and a good mix is the only sensible approach for the average investor. And as always, shop around and inform yourself fully before you buy. Do not rely more on other people than you have to. (For more on this topic, see Diversification: Protecting Portfolios From Mass Destruction.)

Be sure that you understand what you are doing and why. No self-delusion up front will help prevent the "need" for it later on. Never try to fool yourself or anyone else. We all make mistakes and the only thing to do is get them right. The worst thing you can do is pursue a lost cause, to continue flogging the proverbial dead horse. It is important to take a step back and consider the whole process objectively.

On the selling side, the same basic principles apply. Resist the temptation to sell things that should not be sold. It may be a good idea to offer a fee-only service, which yields no commission at all. Your customers will be grateful and there will be no nasty comebacks and complaints. Everyone will sleep better, the world will be a better place and over time, this will surely pay off financially as well. (For more, see Paying Your Investment Advisor – Fees Or Commissions?)

by Brian Bloch

Brian Bloch started his career as a business academic and moved into management journalism in the late '90s. His experiences as an investor with the financial industry led him into the personal finance area a few years ago, and he finds this line of work particularly rewarding and fascinating. As part of his personal finance work, Brian assists investors who have claims against brokers or firms. See his homepage at

Saturday, September 11, 2010

10 facts about China

10 Facts About China You Won't Believe (But You Should)

Friday, September 10, 2010

2010 should be an excellent year for planters

Asia to stay hungry for palm oil

By Ooi Tee Ching

ASIA’S robust economic growth and hunger for vegetable oils will continue to drive demand for palm oil and keep prices buoyant at around RM2,600 per tonne.

In an interview with Business Times, Malaysian Palm Oil Council chief executive officer Tan Sri Yusof Basiron said Asia is expected to consume more palm oil, particularly countries with a high population such as China and India.
South Korea for example has started to buy more from Malaysia in a big way, thanks to a free trade agreement (FTA) that led to tax-free palm oil shipments.

Following are excerpts from the interview:

QUESTION: Last year, crude palm oil prices averaged at RM2,250 per tonne. In the first eight months of this year, it averaged higher at around RM2,500 per tonne. Where do you see palm oil prices heading for the rest of the year? Why?
This year, global vegetable oils supply had been rather tight.

Malaysia’s palm oil production until July 2010 has only seen a slight 0.7 per cent increment, due to the El Nino effect at the end of last year. Latest data from Indonesia show palm oil output may fall 10-15 per cent from last year's volume.

While the US foresees huge soyabean crop coming into the market from mid October, rape seed oil supply is badly affected by dry spell in Europe, Canada and China. According to Oil World, this year’s rape seed output is likely to fall 5 per cent to 56.9 million tonnes.

With less vegetable oils supply in the global market, stock-usage ratio (SUR) will go down. The lower the SUR, the more bullish the prospects for vegetable oil prices.

We must remember that petroleum prices also has an influence on palm oil pricing. Continued robust economic growth in India and China, and higher usage of vegetable oils in Europe and South America’s energy markets will keep palm oil prices buoyant. Assuming petroleum hovers at US$80 per barrel (RM248), we see palm oil trading in the RM2,500 to RM2,700 range.

Q: Malaysia started exporting palm oil to China in 1985. Since then, shipments have continued to grow. Is the trend likely to continue this year, from palm oil exports to China of 4 million tonnes in 2009?

As the largest vegetable oil consumer in the world, China’s palm oil usage makes up 15 per cent of global consumption. Palm oil is the second most consumed there, after soyaoil.

This year, China has started to import more soyabeans instead of soyaoil. This is because the Chinese government wants more crushing activities domestically and more soyameal to feed its pig, cattle, dairy and poultry farms.

According to Oil World, China’s January-July 2010 oilseed imports went up 12 per cent to 32.15 million tonnes. On the contrary, imports of oils and fats fell 9 per cent to 5.38 million tonnes.

Although we see this situation prevailing, we’re not too worried. China has a big appetite for palm oil. According to Oil World, palm oil shipment from Malaysia, in the first seven months of this year, surged 17.2 per cent to 2.34 million tonnes.

This was due partly to Indonesia raising tax on palm oil to as high as 4.5 per cent. In August, it was lowered to 3 per cent but raised to 6 per cent, this month.

As a result of Indonesia’s tax regime, Malaysia’s palm oil shipment to China expanded. Judging from this trend, we’re hopeful of achieving 5 per cent growth to 4.2 million tonnes this year.

Q: Malaysia’s FTA with Pakistan, which came into effect January 2008, has expanded palm oil shipments. Will Pakistan’s demand from Malaysia exceed 2 million tonnes this year?

Last year, we achieved a record high of 1.76 million tonnes in palm oil exports to Pakistan. Apart from the FTA, Malaysia’s investments in Port Qasim’s bulking and refinery facilities have helped secure steady demand.

The recent unfortunate flooding catastrophe in Pakistan have, somehow, compounded the need to balance its oils and fats requirement.
In the first seven months of this year, Malaysia exported 1.2 million tonnes of palm oil to Pakistan, up 11 per cent from 1.08 million tonnes a year ago.
I believe we can achieve the 2 million-tonne export target, this year.

Q: After a 10-year decline, India bought more palm oil from Malaysia last year, surpassing the 1.35 million tonne level. From January-July of this year, however, the pace slowed dow. Do you expect to see palm oil exports to India exceed the 1 million-tonne level?

India is now the world’s largest vegetable oils importer. There’s tremendous potential for higher imports considering its relatively low per capita consumption of just 14 kg. Palm oil already make up 75-80 per cent of its import basket.
Last year, India’s 1 million tonne-import from Malaysia was exceptional. Poor domestic crush margins, rapid consumption growth and a stronger Indian rupee against US dollars fueled the surge in imports.

To date, India has bought around 700,000 tonnes of Malaysian palm oil. I’m optimistic that exports will, once again, exceed the 1 million-tonne level.

Q: South Korea is buying more palm oil from Malaysia. Any changes in vegetable oil tax regime brought on by bilateral trade agreements?

South Korea’s oils and fats consumption grew at 2.6 per cent in the past 10 years. Going forward, it will have to rely on imports as it is not able to grow enough oil crops for its own use.

Apart from conventional usage in the food and oleochemical industries, South Korea’s biodiesel sector has started to use palm oil as feedstock since 2007. With higher blending ratio of 2.0 per cent this year from 1.5 per cent in 2009, South Korea needs to import 100,000 tonnes more.

In 2007, South Korea signed a FTA with the Association of Southeast Asian Nations, resulting in tax-free palm oil shipments from 2009.