Saturday, December 24, 2011

Risk and uncertainty into 2012

The Star Online > Business
Saturday December 24, 2011
Risk and uncertainty into 2012


FOR most investors, 2011 must be an annus horribilis a year of losses for most except the short-sellers.

After a year of losses, you can almost believe anything. According to the Mayan calendar that ends 5,125 years on 21 December 2012, cataclysmic events will occur one year from now. Chinese astrologers believe that the Year of the Water Dragon is a year of fundamental change. If you believe euro-sceptics, the euro will collapse next year and a new order will emerge.

Christmas is a time to slow down for reflection. It is a time to get away from daily Blackberry emails to a world where life seems timeless.

Every year, my wife and I go backpacking somewhere East of Bali. Indonesia is an archipelago of 17,500 islands, exotic cultures and the world's fourth populous country. Here, we travel by local buses, shop in the rural markets, speak only Malay and just wander where our spirits take us.

Indonesia is one country where the Blackberry is still growing in usage, although amongst the more affluent, the iPhone4 is in. Inflation seems to have set in everywhere, but even in remote provinces, hot money has poured into gold and coal mines and building construction is ubitiquous. Indonesia is clearly on the move.

My scenarios for the next year are always defined by what books I bring along to read and reflect on questions I missed this last 12 months.

Why did the financial markets behave so dismally in 2011?

For this, I delved into Benoit Mandelbrot and Richard Hudson's 2008 book on The Misbehaviour of Markets A Fractal View of Risk, Ruin and Reward. The late French mathematician Mandelbrot worked all his life in IBM and invented “fractal geometry”, defined as rough or fragmentary geometric shapes that can evolve into great complexity.

In the late 1960s, Mandelbrot started applying his mathematics to the study of markets. The founder of the widely used Efficient Market Hypothesis, Eugene Fama, was in fact a doctoral student of Mandelbrot.

He argued that stock price movements are unpredictable and follow a random walk. His Hypothesis assumes that prices are independent and are normally distributed, namely, they follow the Bell curve.

In contrast, Mandelbrot, who studied the cotton market, argued that market prices are not independent of each other. Their evolution goes through periods of quiet and then extreme volatility. He felt strongly that power laws (curves with long tails) are more common in nature than “normal” statistical bell curves.

The violent market movements since 2008 suggest that Mandelbrot was more right than mainstream finance theory. The Nobel Laureates that founded the hedge fund LTCM (Long-term Capital Management) never expected market movements of more than four times standard deviation, but the Russian crisis in 1998 moved markets so much that LTCM ran out of liquidity before prices reverted back to normal. The lessons of LTCM were forgotten by market players and regulators alike in the run up to 2008.

How do we use Mandelbrot's insights to look into 2012?

First, markets are far more risky than standard theory teaches us. Second, big gains and losses concentrate into a small period of time. We may be exactly in that window of time when the markets are swinging wildly. No one is certain what is the right direction of the market. Third, prices often leap, rather than move smoothly. We see this in the foreign exchange markets they remain stable for a while, but then adjust dramatically. Fourth, bubbles are inevitable.

The fundamental challenge to central bankers and the public alike is whether there is going to be deflation or inflation.

With advanced-country central bankers printing money at near zero interest rates, many people think that inflation is inevitable. At the same time, inspite of the massive monetary creation, the greater fear is that we are entering into a worldwide depression of slow growth and rising unemployment.

Who is right?

Mandelbrot's work has challenged us to think very differently about time, scale and value. Human beings love to have stability, but nature moves in cycles, some short, some long.

Time has different meaning for different markets. Since companies report results quarterly, management behaviour tends toward short-term responses. The 4-5 year election cycle forces politicians to take short-term policies to gain popularity.

We know that 2012 will be an election year for the US, France, Germany, Hong Kong, Malaysia and perhaps India. We have already seen major transitions in Iraq, North Africa, Myanmar and North Korea. At a time where climate changes are adding to volatility, politics and debt deleveraging has become a heady brew for risks.

Strolling through the markets in Bali, the street chatter is about floods, inflation and traffic jams. Even here, there is a mood, even anticipation, of change.

Mandelbrot's true contribution to our understanding of markets is that intrinsic value is meaningless in a world of ever changing prices.

At the height of a bubble, the astronomical prices transacted bear no relationship to replacement cost. After a tsunami, what was valuable real estate had no buyers. Financial markets operate through arbitrage of different prices that can deviate hugely from the average.

Thus, what we want and value is not what everyone wants, but what we judge to be important at the point of decision. Our value systems are determined by our culture and that is today more determined by mother nature, technology and forces that we do not understand.

The volcanic islands in Indonesia provide rich soils for fertile agriculture, but earthquakes, tsunamis, flood and drought are part of the cycle of nature.

What we know for certain is that 2012 will be a year of major change. As Mandelbrot the scientist said, we can forecast the intensity and path of a hurricane, but we cannot predict how much damage it will do.

We have reached an inflexion point when technology no longer has all the answers to our future.

Crisis has a habit of throwing up new leaders who emerge as heros, whilst others are condemned by history as failures.

Be prepared for both in 2012.

Tan Sri Andrew Sheng is president of the Fung Global Institute.

Thursday, December 22, 2011

Buffett Got Burned on Bank of America

Is Bank of America a Value Trap at below 5.50? In Nov 2006, the stock was being traded at a high of 54.85. It was lasted traded at
5.23. Here's an interesting article by Jeff Reeves:

Buffett Got Burned on Bank of America, and There’s No Bottom in Sight
BAC is a value trap and only fodder for day traders
Dec 20, 2011, 11:35 am EST | By Jeff Reeves, Editor of
Bank of America (NYSE:BAC) is one of the most hated companies in America. Aside from past robo-signings, proposed fees and general shenanigans amid the financial crisis, the company continues to prove all of its critics right with continued missteps and ugly headlines. Its earnings can’t be trusted and its CEO, Brian Moynihan, is completely out of touch.

So it’s no surprise that despite briefly breaking below the $5 mark, nobody came out yesterday and labeled Bank of America stock as a bargain. An intraday low of $4.92 and a close of $4.99 marked the lowest levels for the stock since March 2009 — the bear market bottom that saw stocks rebound with a vengeance.

The S&P was at 676 — now it’s at 1,234. But while the major indices have doubled, Bank of America is just as ugly to investors now as it was during those dark days two-and-a-half years ago.

Very few stocks are at 2009 levels. Some of them deserve to be there — Eastman Kodak (NYSE:EK), for instance, which appears to be doomed for bankruptcy without extraordinary intervention. You simply can’t lose money and have debt that large and expect to stick around.

However, Bank of America is not like Kodak. Aside from a brutal second quarter in 2009 when it took some $20 billion in write-downs, it is nominally profitable. It trades for a paltry 0.25 price-to-book ratio — while Wells Fargo (NYSE:WFC) is at 1.0 and JP Morgan Chase (NYSE:JPM) is at 0.6!

So, BAC shares could be a bargain at $5, right?


Unfortunately, hardly anyone on Wall Street is buying that argument. It’s remarkable how few people came out of the woodwork yesterday and today trumpeting Bank of America’s bargain potential.

In fact, the biggest talking point I’ve noticed is about how Warren Buffett might be taking a bath on his risky play in Bank of America. BofA gave Buffett warrants to buy a whopping 700 million shares of common stock at $7.14 when the Oracle of Omaha plowed $5 billion into preferred shares of BAC stock. Obviously those warrants don’t really matter when shares are almost 30% under that strike price.

By some estimates, Buffett has lost $1.5 billion on the deal since that August buy-in, when shares were around $6. But don’t weep for Warren — his nice 6% dividend on his shares will keep paying him, and BAC stock has moved up from under $5 today and could keep rising.

But the fact that Buffett could ride in on his white horse with the “smart money,” buying Bank of America at $6 only to see shares hit $5 four months later … that’s enough to make every investor think twice.

As result, Bank of America should be seen as an extremely short-term play for only the most aggressive traders … akin to Sprint Nextel (NYSE:S), Sirius XM (NASDAQ:SIRI) or other big-name stocks that are super cheap and super volatile.

As for the buy-and-hold crowd, sit this out for now. Bank of America is the ultimate value trap.

Plenty of folks think Bank of America is getting what it deserves as some kind of karmic payback for its misdeeds. While there might be some cosmic justice here, the reality is that the only true recovery will see banks recover, too.

Here’s hoping Bank of America turns it around — not for shareholders, but because we simply can’t afford to see another financial behemoth go under.

Jeff Reeves is the editor of Write him at, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook. Jeff Reeves holds a position in Alcoa, but no other publicly traded stocks.

Tuesday, December 20, 2011

KSeng Cash Rich & Asset Rich

The bullish run of KSeng on the 14th & 15 Dec 2011 has dismayed many supporters of the stock. After hitting a high of 4.21, the buyers backed off and retreated. What happened? Obviously this question is best answered by the insiders. In my opinion, this retreat is likely to be short-lived.

The company is cash rich and asset rich as well. As at 30.9.2011, it has cash and short-term investment of RM722,422, 000; its total investments in quoted securities at cost = RM188, 271,000, but are now worth RM432,522,000 in market value.
Its land and landed properties in Johor, KL and Singapore are worth very much more than their book value as most of these properties were last valued in 1980.

The present ongoing development in the Iskandar region will greatly enhance the value of KSeng in the forseeable future.

Some key statistics of KSeng as at Sep 30, 2011 are as follows:

Share Capital: RM361,477,000
Par value: RM1
Current Assets: RM1,022,280,000 (Cash & Short-term investment RM720,422)
Total Assets: RM2,043,811,000
Total Liabilities: RM 139,766,000
Short-term borrowings and overdraft: RM39,645,000
NTA: RM4.90 per share

As can be seen from the above figures, KSeng has a very strong balance sheet. This, however, is no guarantee that it share price will move up. So, the best action is to wait until the chart shows some positive signals before you buy again.

If KSeng does not know what to do with its cash, it should return at least some of them to its shareholders.

Wednesday, December 14, 2011

KSeng on track for a Bullish Run

KSeng opened at 3.76 today with 630 lots traded. It commenced trading with a gap in the afternoon at 3.82. From then on the stock was in steady demand throughout the afternoon session. It closed at 3.97 for a gain of 17 sen. The stock appears to have woken up from its slumber. Now that its previous high at 3.86 is breached, the stock is likely to move up stongly. Resistance is seen at 4.20. Hold on to your shares in KSeng for a big new year anypow.

Tuesday, December 13, 2011

Households as clean, sustainable electricity producers

In the mid-1990s, there were only “big” boys in electricity generation such as YTL Corp, Genting Sanyen and Malakoff. They were popularly known as Independent Power producers' or IPPs and were looked upon with envy as it was alleged that they were making big bucks because of relatively high rates they received from TNB.
Fast forward 15 years. Now you and I can also be an IPP (the term “clean and sustainable electricity producer” is preferred) albeit a very much smaller one but with a difference.
Any owner of a link, semi-detached or bungalow house can now be, subject to approval, a small clean and sustainable energy producer by generating green electricity (as opposed to fossil-fuelled electricity by the big IPPs) and distribution licensee (such as TNB) is obliged to purchase it. What all this means is that if you have a solar photovoltaic (PV) generator at home, you can apply to connect this generator to the grid, and get paid for selling the electricity generated to TNB over the next 21 years.
Solar energy is clean, environmentally friendly and has zero emissions. There is no depletion of natural resources and it is one of the fastest growing energy sources in the world.
And yes the rates are very attractive for generating electricity using solar photovoltaic (PV) technology; it is about four times the normal domestic TNB electricity rates (at RM0.40 per kWh). All you have to do is simply to apply and obtain a feed-in approval from the newly-established Sustainable Energy Development Authority Malaysia (Seda Malaysia), sign a renewable energy power purchase agreement (REPPA) with TNB and install the solar PV system on your rooftop.
On the average, the bungalow is able to produce about 1,000 kWh of electricity per month (based on 10kW installed PV capacity). Given this, the owner may earn about RM1,200 per month (based on FiT rate RM1.20 per kWh if the PV system is commissioned by 2012) and recoup his investment within eight to nine years. The earnings may be even higher if the house owner meets other bonus criteria such as installing as a building-integrated PV system. The current cost of 1 kW solar PV system ranges from RM12,000 to RM14,000.
The interesting thing is that for your average household needs, you purchase the electricity from TNB at between RM0.33 to 42.6 per kWh but when you produce the clean electricity, you can sell it at between RM1.20 to RM1.70 per kWh depending on the installed capacity and the qualifying bonus criteria for solar PV.
The longer the sun shines, the more one can “export” electricity to the national grid during daylight hours (when power is urgently needed) and earn income. The downside and risk is that during cloudy days, the income can be reduced significantly when the sun is not shining. If you apply now, you can lock in these premium rates for the next 21 years!
Unlike the huge IPPs which use natural gas or coal as feedstock to generate electricity, the household does not need to pay for any raw material or fuel because sunshine is free. For as long as the sun is shining, the solar PV panels will generate electricity. Another advantage of solar power is that no extra space is required because the panels can be installed on the rooftop. (Suddenly rooftops have income potential. Many factory owners are now contemplating installing solar PV panels on their rooftop to earn extra revenue while others are approaching factory owners to rent them their roofs.)
On Dec 1 2011, Seda Malaysia invited the public including households, small and not-so-big IPPs (maximum size is 30 MW but only 5 MWp rated capacity for solar PV) to apply and book the amount of green electricity they intended to produce to sell it to the distribution licensee. There are fixed quotas for each of the four renewable energy sources namely biomass (including solid waste), biogas (including landfill), small hydro and solar PV. There was overwhelming response to solar PV especially for the non-individuals.
The good news is that bookings are still open for individuals and households intending to install solar PV systems as there is still available capacity for this category. As at Dec 7, Seda reported that the total unfulfilled quota for solar PV is 6,650 kW; 1,650 kW to be commissioned by the first half 2013, 2500 kW each for second half of 2013 and first half of 2014.
Translating these figures into households, it would mean that about 665 bungalow owners can avail themselves to the remaining capacity (assuming their average capacity is 10 kW). If all of the remaining capacity is taken up by semi-detached owners, the number will increase to 1,330 assuming their installed PV capacity is 5 kW. The figure for typical link houses, assuming an installed capacity of 3 kW, is 2,217 households.
The price guarantee for 21 years has been made possible by the Feed-in Tariff (FiT) scheme implemented by Seda Malaysia. This scheme will be financed by the newly-established Renewable Energy (RE) Fund, to which all electricity users (except for those domestic customers consuming less than 300 kWh per month) will be required to contribute an additional 1% of their electricity bill.
House-owners who do not participate in solar PV electricity generation should not begrudge the payment of the additional 1%. Instead they should view it as one of their contributions to a cleaner and healthier environment. This is their social contribution for cleaner air. The public and community must also share in undertaking this heavy responsibility with the Government.

The article above is by Dr Pola Singh who is a board member of the Sustainable Energy Development Authority (Seda), Malaysia. The views expressed are his own. The public can apply for the feed-in approval via and more information can be obtained from Seda's official portal at

Saturday, December 10, 2011

Silver Mining and Exploration Hotspots

November 14, 2011 @ 3:23 pm In Feature Articles,Silver Articles

By Michelle Smith-Exclusive To Silver Investing News [1]


Silver mining is a diverse affair as the metal is extracted around the globe from a long list of countries. But, despite the number of sources, there are three nations which are silver hotspots because their production volumes exceed the others by great lengths and there are no apparent threats that they will be robbed of their top ranking statuses.


Dr. Thomas Chaize, a raw materials specialist, described [3] Mexico and Peru as the two pillars of world silver production. He stated that the countries are to silver what South Africa is to gold [4]and Saudi Arabia is to oil [5].

Of them, Mexico has now become the dominant pillar. The nation's silver production surpassed that of Peru in 2010 according [6] to Sergio Almazan Esqueda, Director of the Mexican Mining Chamber.

Last year's figures [7] credit Mexico with the production of nearly 129 million ounces of silver. In the first half of 2011, Mexico's silver output had reportedly [8] already surpassed 66 million ounces, showing that production has grown and providing support for projections of further growth.

Fresnillo [9] (LSE:FRES [10]) is recognized as a playing a prominent role in the expansion of Mexican silver mining. The company opened the Saucito mine this year, which it now operates in addition to the Fresnillo silver mine, one of the world's largest.

Mexico is considered a location ripe for further growth in silver production. It has an impressive record of attracting foreign investment, especially from Canadian interests. Between 2010 and 2012, over $13 billion in mining investments is expected and a significant portion is projected to be spent on silver mining projects.


Despite being stripped of its heavyweight title, Peru's silver mining sector would have to experience a severe, almost unimaginable, decline for it to lose its silver hotspot status. Last year, the nation produced 116 million ounces of the white metal. From January to August of this year, Peru's production was reported [11] at approximately 71 million ounces.

In conjunction with being a silver-rich nation, Peru is considered a mining friendly nation, with a pro-mining president, Ollanta Humala. The recent declines in silver mining have been blamed on factors such as bureaucracy, labor strikes and community outlashes against miners. The government recognizes the positive contributions of the mining sector and has announced [12] its commitment to cracking down on violent protests.

Declines were also attributed to reductions from Volcan [13], a mining major, which was busy implementing an optimization program. In post-Q1 2011 correspondence, Volcan said [14] the outcome of these efforts, designed to lower costs and boost efficiency, and the company's investments in production growth were good. Volcan said volume reductions were compensated by higher grades and greater recovery. And, the company also claimed the title of the first Peruvian silver producer to exceed output of 20 million ounces.

Despite the difficulties, Peru has seen healthy investments in mining and optimism for the future appears well warranted. The Engineering and Mining Journal says [15], that in addition to the world class operators that have already been attracted to Peru, others are following developments closely. The publication also says that companies continue to harvest the results of the dollars put into exploration.


Feng Jucong, a chief analyst for Beijing Antaike Information Development Company, said [16] China's silver production, including mined, by-product output and recycled material, grew by an average 14.9 percent every year from 1990 to 2009.

By 2010, China was credited with producing over 99 million ounces, making it the world's third largest producer of mined silver. The nation is considered a silver hotspot because in addition to its production growth, its appetite for the white metal has grown so large that China has converted from a net exporter to a net importer of the metal.

Silver is produced in China largely as a by-product of other mining efforts and as they grow silver production is also likely to grow. For example, CPM Group predicts [17] that Jiangxi Copper [18] (SHA:600362 [19]), which produced 14.8 million ounces of refined silver last year, may supply 15.6 million ounces this year, a production rate exceeding 8 of the top 20 silver producing nations.

There are also projects that are expected to come online in the next few years that will boost China's silver production even further. However, given the size China's appetite for silver products ranging from medals to investment bullion, it's unlikely that the nation's production will gain pace with its demand in the near future. CPM Group says China's production could total nearly 105 million ounces in 2011. However, fabrication demand this year is projected to exceed 177 million ounces.

Thursday, December 08, 2011

China Our Biggest Client

Malaysia's biggest palm oil client is China.

During his second official visit to Malaysia in April 2011, China Premier Wen Jiabao promised Prime Minister Datuk Seri Najib Razak that it will continue to buy big quantities of Malaysian palm oil.

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

In the last few years, Shahrir noted that China has started to import more soyabeans instead of soyaoil. This is because the Chinese government wants more crushing activities domestically and more soya meal to feed its pig, cattle, dairy and poultry farms.

"Although we see this situation prevailing, we're not too worried. China has a big appetite for palm oil," he said.

Shahrir was speaking to reporters after the opening of the Palm Oil International Congress (Pipoc 2011) by Plantation Industry and Commodities Minister Tan Sri Bernard Dompok here yesterday.

In the first 10 months of this year, China bought 3.34 million tonnes of palm oil, about 13.5 per cent more than the same period last year.

"Also, India has bought 1.35 million tonnes, 33.6 per cent more from the same 10 months of last year," Shahrir added.

Click here to learn more.

Friday, December 02, 2011

The 10 Commandments of Wealth and Happiness

The article appended below is worth every second of your time reading it. It is by Stacy Johnson of MoneyTalksNews

1. Thou shalt live like you’re going to die tomorrow, but invest like you’re going to live forever.
The ease of making money in stocks, real estate, or other risk-based assets is inversely proportional to your time horizon. In other words, making money over long periods of time is easy – making money overnight is the flip of a coin.
Money is like a tree: Plant it properly, care for it every so often, then wait patiently. Stare at a newly planted tree for 24 hours, and you’ll be convinced it’s not growing. Fixate on your investments the same way, and you could miss out on a game-changer.
The biggest winner in my IRA is Apple stock. I don’t remember exactly when I bought it, but I’m guessing it was in 2002 or 2003. My split adjusted price is around $8/share: As I write this, Apple’s trading at around $300/share, for a gain of 3,800 percent. Had I been listening to CNBC or some other “news” outlet that promotes constant trading, I almost certainly wouldn’t still own it.

Patience is certainly a virtue when it comes to investing. I invested a bunch of money and built my online portfolio when the Dow was hitting generational lows back in spring 2009. I had no idea where the market was going next. I was every bit as scared as the next guy.
But having lived through similar times before – I was a stockbroker during the market crash of 1987 – and since I’m only in my mid-50s, I was confident the economy would rebound sometime before I died. While the stock market has come back quite nicely since then, in many parts of the country, housing prices haven’t. That’s why I’m now looking for real estate investments. Are you?
In short, enjoy your life to the fullest every day – live like you’re going to die tomorrow. But since you’re probably not going to die tomorrow, plant part of your money in quality stocks, real estate or other investments; then hold onto them. Don’t ignore your investments entirely – sometimes fundamental things change that indicate it’s time to move on – but don’t act rashly. Patience pays.

2. Thou shalt listen to thine own voice above all others.
My job as a consumer reporter has included listening to countless sad stories about nice people being separated from their money by people who weren’t so nice. While these stories run the gamut from real estate deals to working at home, they all start the same way: with a promise of something that seems too good to be true.
And they all end the same way: It is. Just last week, I helped someone who was about to lose money by applying for a government grant.
If someone promises they can make you 3,000 percent in the stock market, they’re either a fool for sharing that information or a liar. Why would you send money to either one? When you hear someone promising a simple solution to a complex problem, stop listening to them and start listening to your own inner voice. You know there’s no pill that’s going to make you skinny. You know the government’s not handing out free money for your small business. You know you can’t buy a house for $300. Stop listening to commercials and start listening to yourself.

3. Thou shalt covet bad economic times.
Wealth is realized when the economy is booming, but that’s not when it’s created. Wealth is created when times are bad, unemployment is high, problems are massive, everybody’s freaking out, and there’s nothing but economic misery on the horizon.
Would you rather buy a house for $400,000, or $200,000? Would you rather invest in stocks when the Dow is at 12,000 or 7,000?
Obviously, nobody wants one in 10 Americans to be out of work. But the cyclical nature of our economy all but assures that this will happen periodically. If you’re one of the 90 percent who still has a job, this is the time you’ve been saving for. Stop listening to all the Chicken Littles in the media: The sky isn’t falling. Get busy – put your cash to work and create some wealth.

4. Thou shalt not work.
MSN Money’s Liz Pulliam Weston recently wrote a great story called Pretend You Won the Lottery. She asked her Facebook fans to describe what they would do if they won the lottery. From that article:
Most of the responses had a lot in common. People overwhelmingly wanted to:
Pay off all their debts.
Help their families.
Donate more to charity.
Pursue their passions, including travel.
Note that these goals are largely achievable without winning the lottery. And that was her point: Listing what you’d like to do if money were no object puts you in touch with the way you’d really like to spend your life.
My philosophy takes this concept a step further: When it comes to work, you should try to do something that you regard as so fulfilling that you’d do it even if it didn’t pay anything. In other words, the word “work” implies doing something you have to do, not something you want to do. You should never “work.”
I’ve chosen to spend nearly all of my adult life in warm climates – I lived in Arizona for 10 years and have now lived in Fort Lauderdale for nearly that long. Why? Here’s what I’ve always said: “You already spend a third of your life sleeping. Why spend another third of it freezing your tail off?”
No offense to you Northerners. I realize some people enjoy the cold. The point is that if you’re going to spend a huge part of your life working, don’t fill that time with what makes you the most money. Fill it with what makes you the most fulfilled. I made more money in 1990 managing a branch office for a Wall Street investment firm than I will this year. But I feel a lot less slimy (no offense to stockbrokers) and lot more fulfilled. You can’t put a price tag on that.

5. Thou shalt not create debt.
I’m always getting questions about debt. “Should I borrow for this, that, or the other?” “What’s an acceptable debt level?” “Is there such a thing as good debt?”
There’s way too much analysis and mystery around something that isn’t at all mysterious. Paying interest is nothing more or less than giving someone else your money in exchange for using theirs. Rule of thumb: To have as much money as possible, avoid giving yours to other people.
Don’t ever borrow money because you want something you can’t afford. Borrow money in only two circumstances: when your back is against the wall, or when what you’re buying will increase in value by more than what you’re paying in interest.
Debt also affects you on a level that can’t be defined in dollars. When you owe money, in a very real way you’re a slave to that lender until you pay it back. When you don’t, you’re much more the master of your own destiny.
There are two ways to achieve financial freedom: Have so much money that you can’t possibly spend it all (something exceedingly difficult to do) or don’t owe anybody anything. Granted, since you still have to eat and put a roof over your head, living debt-free doesn’t offer the same level of freedom as having more money than you can possibly spend. But living debt-free isn’t a matter of luck or even hard work. It’s a simple choice, available to everyone.

6. Thou shalt be frugal – but not miserly.
The key to accumulating more savings isn’t to spend less – it’s to spend less without sacrificing your quality of life. If going out to dinner with your significant other is something that you enjoy, not doing it may create a happier bank balance, but an unhappier you – a trade-off that is neither worthwhile nor sustainable. Eating an appetizer at home, then splitting an entree at the restaurant, however, maintains your quality of life and fattens your bank account.
Finding ways to save is important, but avoiding deprivation is just as important. In short, diets suck.
Whether they’re food-related or money-related, if they leave you feeling deprived and unhappy, they’re not going to work. But there’s a difference between food diets and dollar diets: It’s hard to lose weight without depriving yourself of the foods you love, but it’s easy to reduce spending without depriving yourself of the things you love.
Cottage cheese isn’t a suitable substitute for steak, but a used car is a perfectly acceptable substitute for a new one. And the list goes on: watching TV online rather than paying for cable, buying generics when they’re just as good as name brands, using house-swapping to get free lodging, downloading books from the library instead of Amazon… No matter what you love, from physical possessions to travel, there are ways to save without reducing your quality of life.

7. Thou shalt not regard possessions in terms of money, but time.
You go to the mall and spend $150 on clothes. But what you spent isn’t just $150. If you earn $150 a day, you just spent a day of your life.
Almost every resource you have, from physical possessions to money, is renewable. The amount of time you have on this planet, however, is finite. Once used, it can never be replaced. So when you spend money – especially if you earned that money by doing something you had to do instead of what you wanted to do – you’re spending your life.
This doesn’t mean that you should never spend money. If those clothes are all that important to you, by all means, buy them. But if it’s really not going to make you that much happier, don’t. Think of it this way: If you can live on $150 a day, every time you forgo spending $150, you just get one day closer to financial independence.

8. Thou shalt consider opportunity cost.
This is related to the commandment above. Opportunity cost is an accounting term that describes the cost of missing out on alternative uses for that money. For example, when I said above that not spending $150 on clothes puts you $150 closer to independence, that was a gross understatement. Because when you save $150, investing those savings gives you the opportunity to have more savings. If you’re earning 10 percent, $150 invested for 20 years will ultimately make you $1,000 richer. If you can live on $150 a day, ignoring inflation, you can now retire nearly a week sooner, not just a day.
One of the exercises in my most recent book, Life or Debt, is to go around your house and identify things you bought but probably didn’t want or need. A quick way to do this is to find things you haven’t touched in months. These were probably impulse buys. Add up the cost of these things, multiply them by 7, and you’ll arrive at the amount of money you could have had if you’d invested that money at 10 percent for 20 years rather than wasting it.
And when you do this, consider the stuff in your closet, the stuff in your garage, the rooms of your house that you heat and cool but don’t use, the new cars you’ve bought when used would have worked. The truth is that most of us have already blown the opportunity to achieve financial independence much sooner. Maybe now’s the time to stop.

9. Thou shalt not put off till tomorrow what thou can save today.
Shortly after I began my television career in 1988, I went on set with a pack of smokes, a can of soda, and a candy bar. I explained that these things represented the kind of money most of us throw away every day without thinking about it – at the time, about $5. But compound $5 at 10 percent for 30 years, and you’ll end up with about $340,000. That’s why learning to save a few bucks here and there and investing it is so important.
Fortunes are rarely made by investing big bucks, nor are they often made late in life. Wealth most often comes from starting small and early.
In short, there are limited ways to get rich. You can inherit, marry well, build a valuable business, successfully capitalize on exceptional talent, get exceedingly lucky – or spend less than you make and consistently invest your savings over time. Even if you’re on the road to any of the former, why not do the latter?

10. Thou shalt not covet thy neighbor’s stuff.
If this commandment sounds familiar, that’s because it resembles the Biblical 10th commandment:
Thou shalt not covet thy neighbor’s house, thou shalt not covet thy neighbor’s wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbor’s. (Exodus 20:17)
Envy may not be the root of all evil, but it is the root of much wasted money. As I’m fond of saying, you can either look rich or be rich, but you probably won’t live long enough to accomplish both. I’ve lived both ways, and trust me: Being rich is way better than using debt to look rich.
We’ll all admit that when on the verge of making a purchase decision, we’re often thinking of what our friends will say when they see it. Normal human behavior? Sure, but it’s not in your best interest, or theirs. Making your friends feel jealous isn’t nice, and feeling envy for other people’s possessions is silly. Possessions have never made anyone happy, nor will they.
Decide what really makes you happy, then spend – or not – accordingly. When your friends make an impressive addition to their collection of material possessions, be happy for them. One of the stupidest expressions ever coined was: “The one who dies with the most toys wins.” When you’re on your death bed, you won’t be thinking about the things you had – you’ll be thinking about the times you had.

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Source: Money Talks (

Friday, November 25, 2011

TDM Good Yield Good Growth

For the latest quarter ended 30.9.2011, EPS equals 21.88 sen. This is indeed commendable. It is 95% better than the previous corresponding period, and 71% better than the preceding quarter. Review of performance of the group reads as follows:

Plantation Division Our Plantation Division reported a 95% increase in profit before tax for the first nine month ended 30 September 2011 compared to the same period last year mainly due to:
i) Higher production of CPO & PK by 12% and 7% respectively. ii) Higher average CPO & PK prices by 32% and 78% respectively:
Healthcare Division Healthcare Division registered higher revenue and profit before tax by 16% and 15% respectively due to increase in number of patients being treated at our hospitals by 8% .
Food Division (Discontinued operation) Food Division recorded profit of RM2.0 million due to increse in average prices of livebird by 20%.

Based on the prevailing CPO and PK prices, the outlook for financial year ending 31 December 2011 remains favourable. Barring unforeseen circumstances, the Group is expected to continue to record satisfactory performance in the current financial year.

Going forward, the group will become more and more profitable as more and more of its lands in East Kalimantan mature. Besides that, its healthcare business is also doing well. The group is cash-rich and has the potential to take opportunity to grow as and when an opportunity arises.

For the year ended 31.12.2011, its EPS is likely to exceed 71 sen. Based on EPS of 71 sen, and on the basis of being traded at 10 times earnings, the stock is worth RM7.10 per share.

At RM3.45, the forward PE works out to be 4.86 which is undemanding. This means the stock is not overvalued.

Disclaimer: As a result of this article, whether you buy, sell or hold TDM, you do so at your own risk absolutely.

Thursday, November 24, 2011

Tit for Tat

Son: Father, I am in love with 3 girls who are all in love with me. I want to marry one of them. They are all from Kampong Lovers, the town in the neighborhood.

Father: Sorry son, but I have to tell you this. You can't marry any of them because they are your half-sisters.

The son was greatly annoyed by this sudden turn of event. He went to his mother and told her what his father had said. Upon hearing it, the mother smilingly said, "Don't worry son. You can marry any of them; you are not his son."

Tuesday, November 22, 2011

Oil palm sector on alert of bud rot disease threat

Monday, November 21, 2011
Oil palm sector on alert of bud rot disease threat

KUALA LUMPUR: Malaysia’s oil palm industry is on alert for the bud rot disease that has killed millions of trees in South America. The disease is estimated to have wiped out some 50,000ha of oil palm estates in South America, said planters from Colombia, the world’s fifth largest oil palm producer in the world.

Although no cure has yet to be found, Malaysian planters should not panic, said Dr Ahmad Kushairi Din, Malaysian Palm Oil Board (MPOB) deputy director-general.

“We’re taking proactive measures from prevention to control, should there be any contamination. Our stringent quarantine controls have always been in place,” he told Business Times on the sidelines of an international seminar held here last Friday.

Malaysia is the world’s second largest palm oil producer and exports from this industry is forecast to hit RM80 billion this year, its second straight record year. The country will soon be sending a team of agronomists to South America to study the disease.

Kushairi, who is also International Society For Oil Palm Breeders president, explained that the bud rot disease is caused by a microbe called phytophthora palmivora. “Based on our initial study carried out more than 10 years ago, we find that the bud rot disease can spread very quickly because this pathogen is able to swim in the water. It thrives in a very humid and cloudy environment,” he said.

MPOB has also signed a research agreement with Cenipalma, the research institute of the Colombian Palm Oil Growers Association.

Colombia, the oil palm hub in South America, has 350,000ha planted with oil palms. It is the fifth largest oil palm country in the world after Indonesia, Malaysia, Thailand and Nigeria.

Jorge Corredor, a Colombian oil palm smallholder attending the seminar, revealed the bud rot disease had wiped out all 3,200ha of his oil palm estates in just two years.

“We tried sanitation, it didn’t work. Even the replanted Dolly Partons we sourced from Malaysia died. Until today, we have not found the cure,” he said.

Malaysia’s oil palms are affectionately called Dolly Partons by planters because the trees are short and produce very big fruit bunches compared to the original palms brought in from West Africa, a hundred years ago. In the last 50 years, our agronomists have been marrying the Dura and Psifera palms (DXP) to get the Dolly Parton hybrids that bear voluptuous fruit bunches.

Corredor said the bud rot disease is not just in Colombia as it has spread to Panama, Suriname, Brazil and Ecuador. "So many of our mills have closed down and many people have lost their jobs. My country and your country is situated along the tropical belt of the globe, we share the same weather. I'm telling you, this bud rot disease is a serious threat."

"I have nothing to gain from talking about what has happened to the oil palm industry in my country. This is something I would not wish upon planters in other countries. This is potentially a global problem," Corredor said. He thinks that the world could face a shortage of cooking oil if the disease finds it way to Southeast Asia.

Thursday, November 17, 2011

Palm oil may rise to RM4,000/ton: Mistry


Malaysian palm oil may rise to RM4,000 per metric ton by June amid rising demand for the commodity, said Dorab Mistry, director of Godrej International Ltd.

Demand for palm oil and biofuels are “buoyant,” he said in a Bloomberg TV interview in Singapore today.

Palm oil supplies will fall as trees enter a “flat” output cycle, he said. -- Bloomberg

Tuesday, November 15, 2011

Buy When There's Blood In The Streets

by Daniel Myers, CFA, CFP (Contact Author | Biography)
Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that "The time to buy is when there's blood in the streets."

He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. But that's not the whole story. The original quote is believed to be "Buy when there's blood in the streets, even if the blood is your own."

This is contrarian investing at its heart - the strongly-held belief that the worse things seem in the market, the better the opportunities are for profit.

Most people only want winners in their portfolios, but as Warren Buffett warned, "You pay a very high price in the stock market for a cheery consensus." In other words, if everyone agrees with your investment decision, then it's probably not a good one.

Going Against the Crowd
Contrarians, as the name implies, try to do the opposite of the crowd. They get excited when an otherwise good company has a sharp, but undeserved drop in share price. They swim against the current, and assume the market is usually wrong at both its extreme lows and highs. The more prices swing, the more misguided they believe the rest of the market to be. (For more on this, read Finding Profit In Troubled Stocks.)

Bad Times Make for Good Buys
Contrarian investors have historically made their best investments during times of market turmoil. In the crash of 1987, the Dow dropped 22% in one day in the U.S. In the 1973-74 bear market, the market lost 45% in about 22 months. The September 11, 2001, attacks also resulted in a market drop. The list goes on and on, but those are times when contrarians found their best investments.

The 1973-74 bear market gave Warren Buffett the opportunity to purchase a stake in the Washington Post Company (NYSE:WPO) - an investment that has subsequently increased by more than 100-times the purchase price - that's before dividends are included. At the time, Buffett said he was buying shares in the company at a deep discount, as evidenced by the fact that the company could have "… sold the (Post's) assets to any one of 10 buyers for not less than $400 million, probably appreciably more." Meanwhile, the Washington Post Company had only an $80 million market cap at the time. (For more on Buffett's strategy, read Think Like Warren Buffett and What Is Warren Buffett's Investing Style?)

After the September 11 terrorist attacks, the world stopped flying for awhile. Suppose that at this time, you had made an investment in Boeing (NYSE:BA), one of the world's largest builders of commercial aircraft. Boeing's stock didn't bottom until about a year after September 11, but from there, it rose more than four-times in value over the next five years. Clearly, although September 11th soured market sentiment about the airline industry for quite some time, those who did their research and were willing to bet that Boeing would survive were well rewarded.

Also during that time, Marty Whitman, manager of the Third Avenue Value Fund, purchased bonds of K-Mart both before and after it filed for bankruptcy protection in 2002. He only paid about 20 cents on the dollar for the bonds. Even though for awhile it looked like the company would shut its doors for good, Whitman was vindicated when the company emerged from bankruptcy and his bonds were exchanged for stock in the new K-Mart. The shares jumped much higher in the years following the reorganization before being taken over by Sears (Nasdaq:SHLD), with a nice profit for Whitman. Thanks to moves like this, the Third Avenue Value Fund has earned a market-beating 14.3% return since Whitman founded the fund in 1990.

Sir John Templeton ran the Templeton Growth Fund from 1954 to 1992, when he sold it. Each $10,000 invested in the fund's Class A shares in 1954 would have grown to $2 million by 1992, with dividends reinvested, or an annualized return of about 14.5%. Templeton pioneered international investing. He was also a serious contrarian investor, buying into countries and companies when, according to his principle, they hit the "point of maximum pessimism." As an example of this strategy, Templeton bought shares of every public European company at the outset of World War II in 1939, including many that were in bankruptcy. He did this with borrowed money to boot. After four years, he sold the shares for a very large profit. (To learn more about Templeton and other great investors, see the Greatest Investors Tutorial.)

Putting It On the Line
But there are risks to contrarian investing. While the most famous contrarian investors put big money on the line, swam against the current of common opinion and came out on top, they also did some serious research to ensure that the crowd was indeed wrong. So, when a stock takes a nosedive, this doesn't prompt a contrarian investor to put in an immediate buy order, but to find out what has driven the stock down, and whether the drop in price is justified.

While each of these successful contrarian investors has his own strategy for valuing potential investments, they all have the one strategy in common - they let the market bring the deals to them, rather than chasing after them.

by Daniel Myers, CFA, CFP (Contact Author | Biography)

Daniel Myers has earned the CFA designation, the CFP certification and has managed money for investors since 1998. Read more about him at his company's website, King Capital Management, LLC.

Monday, November 14, 2011

More Singaporeans crossing over for cheaper medical treatment

Sunday November 13, 2011

SINGAPORE: When Goh Chai Gek wanted to deliver her baby boy, she decided it would be cheaper to head across the Causeway.

The total cost of her caesarean section delivery was about RM8,190, including three nights.

It would typically have come up to about S$5,840 (RM14,333) in a hospital here, meaning she enjoyed savings of about 40%.

“I could also claim the amount from Medisave,” said the 30-year-old accountant.

Lured by savings of up to 50%, growing numbers of Singaporeans and PRs are travelling to Malaysia for medical treatment. It comes after the Singapore Government relaxed rules in March last year to allow Medisave to be used to pay for hospitalisation and day surgery treatment in 12 hospitals there.

Those crossing the Causeway for hospital treatment will soon have more choice, when a S$2bil (RM4.9bil) medical hub a joint project between billionaire Singa-pore investor Peter Lim and the Johor royal family opens in 2015.

Before the liberalisation, Medisave could be used only in Singapore, or for emergency treatment overseas.

Health Management International (HMI) and Parkway Pantai Group are currently the only two healthcare groups here accredited to refer patients to Malaysia.

An HMI spokesman said yesterday that 120 patients had used Medisave overseas for their medical treatments to date.

HMI has two hospitals in Malaysia the Regency Specialist Hospital in Johor Baru and Mahkota Medical Centre in Malacca.

Most of the cases are obstetrics and gynaecology. Cardiology, colorectal surgery, ophthalmology and orthopaedic surgery are other commonly sought treatments. - The Straits Times / Asia News Network

Wednesday, November 09, 2011

KL-Singapore high-speed rail project on track

By Sharen Kaur and Zuraimi Abdullah

It is believed that up-and-coming rail tycoon Tan Sri Ravindran Menon has teamed up with UEM Group to vie for the project.

Kuala Lumpur: The high-speed rail system linking Kuala Lumpur and Singapore could take shape by next year, with three groups leading the early race to win the multi-billion ringgit job, people familiar with the plan said.

The Land Public Transport Commission (SPAD) is expected to start a feasibility study on the project early next year.

The commission had already completed a pre-feasibility study, SPAD chief development officer Azmi Abdul Aziz told Business Times.

SPAD will undertake a feasibility study next, which should take six to 12 months to complete, Azmi added.

If feasible, the project is estimated to cost as much as RM12 billion, with the interested parties offering either European or Chinese technologies.

It is believed that up-and-coming rail tycoon Tan Sri Ravindran Menon has teamed up with UEM Group to vie for the project.

Ravindran controls Skypark Terminal, which recently received an offer from the government to undertake a RM1.5 billion rail project.

The project is to connect the Keretapi Tanah Melayu Bhd (KTMB) station in Subang Jaya, Selangor, to the Skypark Terminal at the Sultan Abdul Aziz Shah Airport.

Business Times understands that the Ravindran-UEM venture made a presentation to the government early this year, specifically on the more than 300km high speed rail line.

Sources said they planned to lay railway lines parallel to the North-South Expressway from Kuala Lumpur, Seremban and Malacca to Johor Baru, before connecting to Singapore.

Others said to be in the running for the job are China Infraglobe Consortium-Global Rail Sdn Bhd and YTL Corp Bhd.

China Infraglobe-Global Rail consortium last made a submission for the job in 2009.

To date, it has yet to make a revised proposal to the government, a company official said.

YTL group managing director Tan Sri Francis Yeoh Sock Ping, who is in New York, declined to comment when asked if the company had made a fresh submission.

YTL, operator of the KLIA Express, first mooted the idea to build a high-speed rail in the late 1990s and again in 2006.

The project was put on hold in April 2008 due to high cost, which was estimated at RM8 billion.

In the middle of 2009, YTL expressed hope that the government would relook at the proposal.

It said it would build the rail line on the coastline of Peninsular Malaysia, rather than that mooted in an earlier proposal of building on the existing track.

Last year, the government said it would revive the project.

It was highligted as a high impact project in the government's Economic Transformation Programme roadmap in a bid to increase economic activities.

Yesterday, the government reiterated that it may go ahead with the project.

Transport Minister Datuk Seri Kong Cho Ha said it would wait for feedback from its Singaporean counterparts as the track would go into its land.

Germany's Siemens had previously offered its solutions to the project.

It proposed the use of its Velaro trains, which have a top speed of 350kph.

Friday, November 04, 2011

Rising tide of China investments in Malaysia

By Bilqis Bahari

Kuala Lumpur: Cash-rich Chinese are splurging their money on Malaysian assets and equities in recent weeks.
The move comes just after Malaysia witnessed a wave of Japanese companies buying up local assets.

During the past couple of months, Japanese investors bought some RM4.48 billion worth of Malaysian assets.

Among the notable acquisitions from them were the purchase of CI Holdings Bhd's Permanis Sdn Bhd for RM820 million, Motor Trader and Autocar Asean magazines for RM109.7 million, Khazanah Nasional Bhd's 30 per cent stake in Integrated Healthcare Holdings Bhd for RM3.3 billion and HPI Resources Bhd for RM258 million.

Now the new trend seems to be originating from China and to a lesser extent, Taiwan.

"Investors from China accumulated a lot of cash in the last couple of years and they are looking for a place to put their cash to work," said Pong Teng Siew, Jupiter Securities head of research.

Indeed, Malaysia has seen many Chinese investors, be it from mainland China, Hong Kong or Taiwan, aggressively investing in local stocks, properties and projects.

"Some people think that it is because these investors are worried that the booming China market will fall, and that is why they are moving their funds to other markets, including Malaysia," an industry observer said.

Chinese companies invested some RM3.1 billion in recent period. They include investments made by Wenzhou Foreign Trade and Economic Cooperation Bureau in the East Coast Economic Region (ECER)'s special zone in Kuantan, Zhuoda Real Estate Group in an Iskandar Malaysia project, as well as a Chinese firm, which partnered Mah Sing Group Bhd in the Icon Residence Mont' Kiara project, to name a few.

On Bursa Malaysia, Chinese investors purchased shares in several listed companies. They include Hong Kong-based Christian Kwok-Leun Yau Heilesen, who today controls some 24 per cent of GPRO Technologies Bhd.

Heilesen also bought a combined 19.9 per cent shares in DVM with Raymond Yip Wai Man in August this year. However, he sold his stake in less than three weeks.

This month, two Chinese nationals - Xu Sheng and Jiang Chuan Yi - have emerged as substantial shareholders in Envair Holdings Bhd, controlling some 13.5 per cent of the company.

They each bought eight million shares in Envair at between 27.3 sen a share and 35 sen apiece.

In August, Fong Shu Cheong, a Chinese national in Hong Kong, became a subtantial shareholder of Cybertowers Bhd by buying 12.11 million shares, or 12.11 per cent, of the company last Friday.

Analysts said Chinese firms or businessmen investing in Malaysia is not unusual since it is only natural for them to forge links with foreign businesses.

"The primary motivation for them to invest in other countries is to establish linkages with overseas businesses. They could tap into the market by importing or exporting their products or our products," Pong said.

Edmund Tham, head of research at Mercury Securities, said the reason for the Chinese to invest depends on the value of the business or investment.

He added that as long as Malaysian businesses relate to their core business and there is value in the investment, they will come to Malaysia.

"The question of why Malaysia (being a preferred destination) depends on the business opportunity whether it is suitable for their business, if there is high risk for them and if the returns are good.

"They evaluate this on a case-to-case basis. Therefore, they don't just invest only in Malaysia, but other countries as well," Tham added.

With the influx of funds from Japan and China buying into Malaysian assets, properties in Malaysia will appreciate and continue to appreciate.
Investors should pay attention to property counters now.

Thursday, November 03, 2011

Investors leave Singapore office empty-handed


SINGAPORE: Retail investors in Singapore trying to salvage their doomed investments from the local MF Global office were left frustrated and empty-handed yesterday after they were told their trading positions were closed and their funds were frozen.

Dozens of worried local investors lined up at the MF Global office throughout the day seeking to recoup their money, but all they received was a form to complete after being told no money would be disbursed until liquidators wound down the bankrupt US brokerage.

"Of course I'm afraid I may not get back anything, that is why I am here," said Andre Chia, a 32-year-old pilot. "I'm waiting for the liquidation, MAS (Monetary Authority of Singapore), maybe I'll end up at the Speakers' Corner," he added, referring to the only place in Singapore where protesters can gather without a permit.

In the wake of the collapse of Lehman Brothers in 2008, hundred of Singaporeans gathered at Speakers' Corner to protest their losses from mini-bonds linked to the failed US bank.

Liquidators from KPMG have assured MF Global customers in Singapore that they are working to ensure all money in client accounts is returned to them.

However, several investors vented their anger that they were closed out of trading positions at a loss, with no option to wait for the market to turn. "I feel uneasy, I don't know how much I will lose. If I have to cut losses, I have to know how much I will lose," said 57-year-old John Wong, who had invested around S$8,000 (RM19,680) with the brokerage.

Around 20 investors went to the office yesterday afternoon, while local media reported that at least 60 people converged on the premises that morning. - Reuters

Dealing with a foreign broker firm you are not familiar with can be disastrous.
Luckily for Malaysians, MF Global has not been in Malaysia.

Sunday, October 30, 2011

It's the Management that makes the difference

Do you know why companies have different destiny? While some are able to grow and prosper, others have failed miserably. Logic tells us that it's the management that makes the difference.

The CEO is the most important person in a company. If this person is competent and has integrity, the company is bound to grow. Competency without integrity is disastrous. You may see the money, but it does not go to you. Of what use is cash if you can't get your hands on them.

In the stock market, everything is not what it appears to be. You have to be very careful. Misleading statements, fraud accounting, manipulation, such as "pump and dump" or "short and distort" are common traits. Although the SEC is here to see law and order, it can never do enough to protect the laymen from being cheated. Take care to note the names of those CEOs in failed companies. This will go a long way to save you from getting involved with people who have no integrity. I am not saying that every CEO in failed companies is bad. But it's better to mix with people who succeed rather than those who fail.
Get close to black ink, and you will be black; get close to gems, and you will shine.

You must upgrade yourself all the time just to stay in play. Time and again, you may feel that you have become proficient only to realize later that once again you are at the wrong end of the bargain.

The world is forever changing. You need to stay focus on your job and stay well informed on what is happening locally and abroad as well.

The present flooding in Thailand, the worst in the last 50 years, is causing great havoc to the country. Malaysia needs to be careful. Obviously, climatic change is one of the factors. Malaysia should find out the causes and take preemptive steps to prevent such flooding if possible.

Fire and water have no emotion. They can really punish you when they are the masters at their fury.

Sunday, October 09, 2011

How To Effectively Investigate A Stock

Thanks to the internet, there is an information overload when it comes to investigating stocks. Simply type in a ticker symbol in any search box, and within seconds you have dozens of articles and related links on that particular stock. Properly navigating through the haystack of information and determining how to use it can be daunting and intimidating, and while there are no shortcuts to properly evaluating a stock, investors can eliminate a lot of unnecessary or repetitive effort by knowing how to effectively investigate a company.

TUTORIAL: Investing 101 For Beginner Investors

Basics First: What is a Stock?
As elementary as it sounds, many investors know what a share of stock is, but often ignore what it means. Stock is an equity claim on the business. Specifically, owning stock is defined as having a residual claim on the business. A stock investor's claim on a company is residual by debt holders and preferred stock holders.

Balance Sheet
Because of this residual claim, the very first place investors should go when investigating a stock is the balance sheet. The balance sheet is one of three principal financial statements of any company, with the other two being the income statement and the statement of cash flows. The balance sheet gives a snapshot of the company's financial position at a specific moment in time. As such, it is more important than the income statement. (For more information, see 5 Tips For Reading A Balance Sheet.)

Often, investors first examine the income statement in order to determine profitability. Profits are extremely valuable, but the balance sheet shows you how healthy a company is. A profitable unhealthy company is a disaster that many investors fail to consider. A quality balance sheet protects a company when times get bad. Consider the various recessions in the U.S. in the past 50 years; most of the companies that failed to make it through had a balance sheet problem.

When looking at the balance sheet, you want to examine the indebtedness of a company. Evaluate the debt in relation to total assets and equity value. Consider the quality of the company's assets. How do current assets stack up against current liabilities? How much cash is on the balance sheet in relation to debt? How much goodwill or other intangible assets are on the balance sheet? Under tough operating environments, goodwill and intangibles are usually worth very little for most companies.

Once a balance sheet has been examined, it can be connected with the other financial statements. Look at the interest expense line item on the income statement and compare it to the company's earnings before interest and taxes. Is the company comfortably making its interest payments?

Once you get a handle on the financials, investigate management. An effective way to do this is by reading a company's annual proxy statement (DEF 14A), which can be found on the company's website or at the Securities and Exchange Commission website. A proxy statement will show you insider ownership levels and management pay, two good metrics for evaluating management. (For related reading, see SEC Filings: Forms You Need to Know.)

Investigate Industry
If you are still comfortable with the company, it's time to investigate the industry. One quick way to do this is to compare numbers between competitors. Some great numbers to investigate:

1. Operating Margins
Does one company have significantly higher or lower margins than the others? Is this a long-term occurrence or a one-time benefit?

2. Debt to Equity Levels
Is the industry characterized by high or low levels of debt? How does the company stack up?

3. Capital Expenditures
Found on the cash flow statements. Is the industry capital intensive? If so, this could be a problem during weak environments.

4. Competition
Is there a lot of competition? Coca-Cola only competes with a couple of companies. Teen retailer Abercrombie and Fitch has lots of competition. A great deal of competition can make it difficult for a company to consistently earn profits, as these businesses have to compete on price.

Detective Work
Once you have done all the above, the detailed detective work begins. Now you should go back and read the company's financial releases and get a feel for the how the company is looking at growing and creating value for the business. Examine the company's additional SEC Filing, including 13D filings which show if other major investors are taking stakes in the company.

If the particular company you are looking at has operations in your area, go visit them. Some of the best analysis on a company is not found in documents, but visible through the day to day operations.

In the end, this investigative work will give you your unbiased insight into the company. As a result, you are far more likely to make better investment decisions based on quality data and analysis. (For related reading, also take a look at Blending Technical And Fundamental Analysis.)

by Sham Gad (Contact Author | Biography)

** This article and more are available at - Your Source for Investing Education **

Monday, October 03, 2011

Thumbs up for home-grown RFID system


THE impending deployment of a radio frequency identification (RFID) tag system by the Royal Malaysian Customs at all its checkpoints nationwide to facilitate trade and security is a potential plus for Malaysia in giving peace of mind to investors.

Prior to the soft launch in Penang last week by its developer Smartag Solutions Sdn Bhd, the RFID-based security and trade facilitation system has been given the thumbs up by local and foreign logistics players that participated in a three-month trial-run, which ended in August.

The project, which is set to be financed by newly-listed Smartag Solutions, is one of 12 initiatives under the government's Economic Transformation Programme.

From Saturday and over the span of two years, the home-grown RFID system will be implemented in stages at more than 200 customs checkpoints and 600 high-value bonded warehouses nationwide.

Some of participants of the project, which essentially allows users to secure their containers (whether by air, land or sea) with RFID seals and track their movements electronically while entering, leaving or moving within the country, were DHL, TNT, Federal Express, Western Digital and Priority Cargo.

For these companies, whose reputation is built on speed, reliability and just-in-time delivery, the introduction of the RFID system is most welcome since it has the potential to increase customs clearance efficiency, along with paperless clearance and processes.

RFID is a generic term for technologies using radio waves to identify people or objects and has been available since the World War Two when the British army used it to recognise, among other things, friendly aircraft.

It is not every day that a logistics giant like TNT Express Worldwide NV comes forward and lends it endorsement to the Malaysian Customs for introducing this project.

The pilot run of the project was a collaboration between the Royal Malaysian Customs, industry users and Smartag, with facilitation by the Performance Management and Delivery Unit.

The company's regional network manager (Asia Road Network), Dinesh Kanapathy, said at the soft launch that his company had accrued a time-reduction savings of at least 50 per cent for customs clearance when participating in the trial run.

Other global names have also endorsed the RFID tag, as it has been proven to work in favour of safe logistics.

Penang investors remember only too well the international embarrassment caused to the country in 2006 by a RM50 million computer chip heist at the Batu Maung Free Commercial Zone, near the Penang International Airport.

The world's biggest chipmaker Intel Corp - whose investment presence in Penang spans close to four decades - said it was a victim of the microchip robbery, which left everyone in the state spooked over the lack of security measures in the movement of high-value goods.

By making available to investors, both local and foreign, the option of a cost-effective resource to save time, reduce labour requirements and afford better visibility of moving goods and services, Malaysia can only improve its position as a preferred site for doing business.

Depending on how successful efforts by Smartag Solutions are in convincing importers, exporters and their suppliers on the value of adopting RFID-based security systems, the field is wide open in Malaysia and elsewhere for other sectors - such as the judiciary and healthcare industry - to adopt this system of profiling, tracking and communicating.

Thursday, September 29, 2011

New Rules New Confidence

Effective from next year, companies listed in Bursa will have to be more transparent. Because of new rules, they have to reveal more.

In their quarterly reports, they will have to give a detailed analysis of their businesses, and inform investors how the current world scenario will affect the present and future development of their companies.

More revelation means less possibility for the management to cook their books. Corruption, cheating and fraud will also be made more difficult.

If the new rules are effectively implemented, Bursa Malaysia will get a much-needed boost. This means that not only foreigners will like it but local investors will like it as well.

Transparency and integrity are essential traits for any stock exchange to flourish. Stringent rules to curb fraud and misleading statements when introduced without fear or favor will result in Bursa getting more investment, be it local or foreign.

The public love a level-playing field. Bursa will do well to ensure they have one.

Tuesday, September 27, 2011

Smartag Potential of a Ten-Bagger

Mention any ACE counter, and you'll probably get a repulsive response. This is to be expected because most if not all, the ACE counters at Bursa have been performing poorly even before the recent downturn. Nonetheless, there is one stock in this category that has caught my fancy. It's Smartag.

The company has just successfully completed its pilot trial with the Royal Malaysian Customs. The article appended below is a must-read if you believe that RFID is the right technology of the present and the future:

Smartag Solutions and Customs completed successful pilot trial
- -
Security and Trade Facilitation using Radio Frequency Identification (“RFID”) deployed in Royal Malaysian Customs’ Checkpoints nationwide

Pilot commercial trial was successfully conducted from 1 June till 31 August 2011, achieve cost saving to the industry, and increase efficiency of Customs process by 9 times.

Pulau Pinang, Malaysia: 26 September 2011 – Total RFID solutions provider Smartag Solutions Berhad (“Smartag”, the “Group”, “智能电子标签解决方案有限公司”) together with Royal Malaysian Customs (Jabatan Kastam Diraja Malaysia or “JKDM” or “Customs”) announced the successful completion of the trial run of the RFID-based Security and Trade Facilitation System at Royal Malaysian Customs Checkpoints in the country.

Speaking at a press conference during the soft launch of the Security and Trade Facilitation System (or the “System”) at the Second Air Cargo Complex Penang, Smartag announced that JKDM jointly with Smartag have successfully completed the trial run of the Security and Trade Facilitation System and have obtained positive results and feedback from the industry users.

Under the trial, the users will be able to use the RFID seal to secure their containers when entering, leaving, and moving within the country. With the usage of the System, the users will be able to automatically identify the containers’ movement electronically via the RFID seal to the RFID readers that are set up by Smartag at the various Customs checkpoints across the country.

During the trial run, participants were able to achieve 50% reduction on time taken for customs clearance, and have obtained cost savings from the usage of the system. During the trial run, JKDM is able to increase its efficiency by 9 times as compared to using the manual process. At the same time, the system deployed is able to solve “hanging” K8 forms.

According to the Chairman of the Air Freight Association of Malaysia, Mr. Walter Culas “The industry welcomes the usage of the system as we value speed, efficiency, and time. The system demonstrated its potential to increase customs clearance's efficiency, and paperless clearance and processes. The industry is fully supportive of the project, and the nationwide implementation."

“Based on our internal cost and benefit analysis has shown that the trial demonstrated that TNT will be able to have at least 50% reduction of time taken for customs clearance and all these benefits will create multiplier effect to the economy in the country", according to Mr. Dinesh K. the Regional Network Manager Asia Road Network for TNT Express Worldwide N. V.
“PEMANDU is pleased that the Security and Trade RFID Facilitation System will be used commercially at Royal Malaysia Customs checkpoints throughout the country. This is a clear indication that the ETP is being implemented, since its launch in October 2010,” said Dr. Fadhlullah Suhaimi Abdul Malek, Director Communications, Content and Infrastructure NKEA and Business Services NKEA.

This project was one of the 12 initiatives announced by YAB Dato’ Sri Najib Tun Razak at the fifth Economic Transformation Programme Update in April. Amongst other objectives, the implementation of the project is targeted at improving the efficiency of container clearance using paperless RFID approach, enabling automatic detection of compromised or tampered containers, and facilitating faster and more transparent trade.

About Smartag Solutions Berhad (ACE: 0169)
Smartag Solutions Berhad (Smartag) is a track and trace solution provider that utilizes Radio Frequency Identification (RFID) and other wireless technologies to enable users to have visibility, transparency and security. For more information on Smartag, go to
Smartag was lasted traded at 26 sen per share. At this price, the stock is an excellent bet. I have this intuitive feel that this stock has the potential to be a ten-bagger over time.

As usual, please remember, that whatever action you take, you do so at your own risk absolutely.

Friday, September 23, 2011

Gold, silver and other commodities tumbled

The Associated Press, On Thursday September 22, 2011, 4:37 pm EDT
NEW YORK (AP) -- Gold, silver and other commodities tumbled amid a global sell-off in financial markets.

Gold fell $66.40, or 3.7 percent, to finish at $1,741.70 an ounce on Thursday. Silver, a precious metal that has wider demand for industrial production, plummeted $3.89, or 9.6 percent, to $36.58.

Analysts said that much of the selling was driven by margin calls for hedge funds and other big investors. "We're seeing hedge funds that have to raise cash, and to do that they have to sell what has been working for them so far this year," said Ryan Detrick, senior technical strategist at Schaffer's Investment Research.

Analysts also said that silver had a harder fall because about half of its demand comes from industrial uses. "If the economy contracts at all, there's going to be a lot of excess silver that's sitting in the supply chain," said Phil Streible, senior market strategist at MF Global.

Gold is up about 22 percent for the year. Silver is 16 percent higher than at the start of the year.

Copper, a metal that closely tracks the economic cycle, fell 27.6 cents, or 7.3 percent, to $3.4885. It is down 23 percent for the year.

Oil, wheat and other raw materials fell significantly because of increased fears that a recession would cut demand. Benchmark crude fell $5.41, or 6.3 percent, to $80.51. It was the biggest drop for oil since Aug. 8, when it fell 6.4 percent after Standard and Poor's downgraded the credit rating of the U.S. Oil has dropped 29 percent since April as global growth has slowed.

Wheat contracts fell 33 cents, or 5 percent, to $6.3375 a bushel. Corn lost 35.75 cents, or 5.2 percent, to end at $6.50. Sugar dropped 1.1 cents, or 4.3 percent, to 24.81 cents. And soybeans fell 37.5 cents, or 2.8 percent, to finish at $12.83.

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Saturday, September 10, 2011

The Trading Doctor - Master Yourself Master the Markets

We come nearest to the great when we are in great humility... Rabindranath Tagore

Traders and investors alike—we are all guilty.

We have all committed the cardinal sin of exhibiting arrogance towards the markets. We must never ever think that we know more than the markets or that we can predict or that the markets care what we think. The markets do not even know who we are—let alone what we think.

If we approach the markets with pride, we will be punished swiftly and without compassion. The markets have no compassion. They want our dramas, our overconfidence, our rat-brained thinking and our money. They will gladly take our needs to suffer, be accepted, be loved, be hated or be punished--- and fulfill them without mercy and with often brutal consequences. The result is a shattered emotional and financial landscape of wealth distribution where the few take from the many. Read more.

Thursday, September 08, 2011

Tuesday, September 06, 2011

Current estimated 1-to-16 ratio will narrow

M'sia's Iskandar plan may aid S'pore housing market 12 AUGUST 2011 , BY CHANNEL NEWS ASIA

Malaysia's ambitious Iskandar development in southern Johor may have a spin-off effect that would eventually aid Singapore's crowded housing market.

It may even help cool prices, as foreign investment meets increased demand for services and homes.

A plan for seamless connectivity from Johor Baru, Malaysia, to Woodlands in Singapore by 2018, is an attractive allure for investors.

Funds are pouring in, in the hope the development will yield economic benefit.

Singapore has invested some US$153 million (RM 463 million) into the services, education and health sector of the Iskandar Malaysia development, and analysts say further down the line, this will have a positive impact on the Singapore economy.

CIMB Research economist Song Seng Wun said: "If we do have at our doorstep an increased pool of qualified knowledge based labour force, we may be able to tap on that pool, bring them to Singapore and add to Singapore's productivity growth prospect, going forward.

"So if those two investments in those two areas were to work out over the near term, I think it could lead to more significant investment from the Singapore side.

"So I think while the outlook is positive, there are still perhaps many hurdles along the way before we can say we are going to get a significant upgrade with regard to property being moved to a higher plain in Johor.

"That could mean the pressure on property in Singapore could be alleviated because there is certainly now a much more viable option in Johor as a result of the improved communication, logistic network, the whole landscape as an alternative for Singaporeans to base themselves in Johor either for home or for business."

Singapore has already implemented measures to cool booming property prices, and the government may get some help in calming the market, now that the Iskandar project is open for investment.

Credit Suisse analyst Tan Ting Min said Malaysia will benefit from stronger investments from Singapore while Singapore could operate out of Iskandar, which has good infrastructure, and relatively cheaper land and labour.

"Hence, we expect the land price arbitrage to narrow from the current estimated 1-to-16 ratio.

"How quickly this land price arbitrage narrows depends very much on how quickly Singaporeans adopt the idea of moving their manufacturing bases to Johor," Tan added.

"I think we are realistically talking about something that is still in the works, perhaps a decade or more before we can really talk about Johor as a real hinterland," Mr Song said.

KPMG corporate finance partner Vishal Sharma said: "I think in terms of the land price arbitrage I expect you would see the Iskandar land prices going up.

"I don't particularly envisage Singapore land prices... coming down so the arbitrage will narrow but I don't think that it is ever going to go away. But yes, I expect that the arbitrage is going to narrow."

Thursday, September 01, 2011

Why only palm oil?

By Zaidi Isham IsmailPublished: 2011/08/31

THE next time you go to the shopping mart to buy a food item, take a look at the ingredients label.

Chances are it will say the generic term vegetable oil rather than soyabean, rapeseed or palm oil.

Labelling of vegetable oils in the US, Europe and Malaysia has been accepted as the industry norm due to health reasons.

However in other parts of the world, such as Australia and New Zealand, the vegetable oils labelling is not carried as there are no laws requiring food manufacturers to do so.

Since 2009 however, some of Australia's lawmakers have been taking steps to change all that. They want to ask food manfucturers to specify the vegetable oil content, especially palm oil.

This has riled up Malaysia, which sees the move as unfair and discriminatory and can be seen as a non-tariff barrier on palm oil.

Plantation Industries and Commodities Minister Tan Sri Bernard Dompok said it is okay to label palm oil on food products but Australia must compel other vegetable oils to do the same.

The playing field must be fair.

"Why just palm oil? What about the other oils? if you just single out palm oil, people will be asking, what's wrong with this product? We want to put things right from the start. Palm oil poses no danger to health at all."

Isn't it good to label palm oil? The oil is already known for its health benefits. So what is there to fear?

No problem, if the labelling is based on health grounds.

But Malaysia sees the whole labelling issue as a front by the non-governmental organisations to weed out which food manufacturers use palm oil and which do not.

Once it is able to identify the company which uses palm oil, it will launch an attack on the food company to stop its imports, like what they did to Cadbury and Kit Kat.

Their campaigns were so intense that both companies have stopped using palm oil.

NGOs will also link palm oil to forest degradation and the destruction of orang utan habitats.

It is because of this, Dompok led a 10-day trade mission last July to woo Australian parliamentarians not to support the initiative.

The Australian Parliament is due to convene this September to debate the "The Truth in Labelling - Palm Oil Bill", passed last month by the senate and is now on its way to the house of representatives.

The Bill is spearheaded by the independent senator Nick Xenophon and has received strong support from the Greens, the World Wildlife Fund, Zoos Victoria and Greenpeace as well as crucial backing in the senate from the coalition.

Dompok said the Malaysian Government will continue to negotiate with Australia's lawmakers by sending envoys in the coming months to talk them out of it.

Dompok said the Bill threatens the livelihood of 570,000 smallholders in plantations and a further 290,000 in downstream industries.

Out of the four million hectares of oil palm estates in Malaysia, 40 per cent is handled by smallholders.

"The industry has helped a lot of our people to come out of poverty. We have almost reached the point where we can't go much further with palm oil plantations," said Dompok.

He said Malaysia, which has national parks and world heritage sites, is very conscious of its need to preserve its own forests, which cover 55.7 per cent of its total area, well above the 50 per cent it guaranteed to retain at the 1992 Rio de Janeiro Earth Summit.

Besides arguments by NGOs that it destroys the habitat of Malaysia's 11,000 orangutans are baseless as the primate can only be found in Southeast Sabah and Southern Sarawak, which has been gazetted as forest sanctuary and are far from oil palm estates.

There are no orang utans in Peninsular Malaysia.

Malaysia's land used for agriculture, including for palm oil, is governed by strict laws and must be registered and licensed by the Malaysian Palm Oil Board.

"The move to label and and penalise palm oil has the potential to reverberate globally," said Dompok.

He said the labelling will also be cumbersome to Australia's food makers which can cost up to A$60,000 (RM186,000) just to label palm oil on a single food item.

Dompok said the government is deeply disappointed that the Liberal, National and Greens parties and Senator Xenophon have chosen to put politics ahead of the mutually advantageous relationship between Malaysia and Australia.

"This legislation undermines the spirit of our co-operation, especially now when our two countries have forged an asylum seeker deal."

All is not lost for Malaysia however. Should the Bill be passed, Malaysia can take up the battle at the World Trade Organisation where Malaysia can present its case against Australia's discriminatory move on palm oil.

Malaysian Palm Oil Council chief executive officer Tan Sri Dr Yusof Basiron said Malaysia has to fight all the way as NGOs are using Australia and New Zealand as their testing ground to see whether the Bill can be passed.

"Should it be passed, the NGOs know that if they can do it in Australia, it can also be done in the US and Europe," said Yusof.

Wednesday, August 31, 2011

Good money for good governance

By Adeline Paul Raj
Published: 2011/08/31
Kuala Lumpur: Institutional investors are keen on companies with good corporate governance (CG) and are willing to pay top dollar to invest in them but sadly, few fit the criterion in Malaysia, says Aberdeen Asset Management, one of the country's top investment firms.

"We care about things like GCG because a company with sound governance policies will outperform over the longer term. We don't mind paying a premium for CG because we know there'll be a board that will always be watching our backs," said Abdul Jalil Rasheed, its head of equities, who helps manage US$2.5 billion (RM7.5 billion) of assets at the firm.

He said CG is a key criterion for Aberdeen when analysing companies to invest in.

"If it fails our CG test, we won't invest in the company," he remarked.

Jalil, who has been with Aberdeen for eight years, said the firm visits at least 100 companies a year in each key country in its quest to find undervalued stocks with good fundamentals to invest in.

"It's not as easy as you'd think," he shared. "We're long-term, fundamental, bottom-up investors ... so investing in the right company is key."

In Malaysia, Aberdeen's major investments include AEON Co (M) Bhd (15 per cent stake), Public Bank Bhd (5 per cent), CIMB Group Holdings Bhd (5 per cent), British American Tobacco Malaysia Bhd (5 per cent), Guinness Anchor Bhd (about 7 per cent) and Pos Malaysia Bhd (6 per cent).

Aberdeen has some RM11 billion invested in 29 companies here, Jalil said.

At a recent accounting-related conference held here, he shared his views on what institutional investors like Aberdeeen want to see in companies, especially on the matter of CG.

"We ask if a company will still be in the same business in 20 years' time. And if it's got a good track record, is it run fairly for all shareholders, and are they transparent? How independent are the board of directors?

"What we want are directors that are knowledgeable of the industry. We want experienced and really independent people. There are some companies out there where the independent directors are former employees of the company - it's not wrong, but it's not right in the spirit of corporate governance," he remarked.

Jalil noted that boards play a key role in setting the CG tone for the company, and so directors shouldn't be sitting on boards for too long as investors would then find it difficult to see them as being truly independent.

"Changing board members is a good thing ... it brings a rejuvenation of the board. Younger board members would bring in new perspective," he voiced.

Another problem commonly seen by investors is companies providing sparse information in their quarterly financial reports.

"They should at least have a performance commentary on how the company has done in the past quarter. We see similar words being used in almost every quarter," he lamented.

Jalil said institutional inves-tors like Aberdeen would also like to see a more transparent voting process at shareholder meetings, like a poll voting system.

He noted that Singapore has made it mandatory to vote by poll and have the results audited by an independent auditor. "I hope this is something we can move to," he said.

Jalil said it would also be good for independent directors to be given a few minutes to explain the operations of the company to shareholders at annual general meetings. "We have seen this in Thailand, and to a certain extent in Singapore.

"In Malaysia, they are rather quiet ... it would be nice if they were given a bit of airtime," he suggested.

Jalil opined that in Malaysia, companies do the bare minimum when it comes to CG. "It's more about form than substance, a mere box-ticking exercise, and I think that's wrong. If you want to adopt CG, you've got to do it in the right spirit," he said.

Friday, August 26, 2011

TM commits to returning excess cash, sees jump in UniFi take-up

Tags: First half results | Telekom Malaysia Bhd | Zamzamzairani Mohd Isa
Written by Cindy Yeap   
Thursday, 25 August 2011 13:55

KUALA LUMPUR: Telekom Malaysia Bhd (TM) announced an average interim dividend with its 1HFY11 earnings release yesterday, but group CEO Datuk Zamzamzairani Mohd Isa promised the company will return any excess cash it has after assessing its needs.

“It’s expensive to keep extra cash. We’ve always said we would return any extra,” Zamzamzairani told The Edge Financial Daily on the sidelines of its earnings briefing. “Active capital management will continue,” he told reporters earlier.

Expectations TM would make a special payout rose after the company fattened its coffers by some RM468.3 million (about 13 sen per share) last month with proceeds from the sale of its remaining stake in Axiata Group Bhd.

TM’s cash pile stood at RM2.7 billion as at June 30, 2011, down from RM3.5 billion at end-2010, having just made a RM1.04 billion (29 sen per share) capital distribution in May. 

That was on top of the 26.1 sen per share dividend (13 sen interim and 13.1 sen final) paid for FY10. In FY09, TM made a 98 sen per share capital repayment, on top of 23 sen in regular dividends (10 sen interim and 13 sen final)

Analysts are forecasting dividend per share to be between 20 sen and 49 sen for FY11, averaging at 26.5 sen per share. TM has a policy of distributing at least RM700 million cash back to shareholders a year, or up to 90% of its normalised profits, whichever is higher.

TM announced an interim dividend of 9.8 sen per share yesterday, which represents a RM350.6 million payout. This was after saying earnings for 1HFY11 ended June 30 fell 18.5% to RM311.7 million from RM382.4 million in 1HFY10, even as revenue rose 2.5% to RM4.38 billion over the same period, shored up by higher revenue from Internet, multimedia and data services.

Take-up of the UniFi service has exceeded TM's expectations.
The reduced bottom line is primarily due to higher operating costs and lower foreign exchange gains on translation of foreign currency borrowings, which fell to only RM49.5 million in the current period against RM180.5 million in the same period last year. 

Net profit of RM137 million in 2QFY11 was smaller than the RM174.7 million booked in 1QFY11, but 4.2% above the RM131.5 million booked in 2QFY10.
Excluding non-operational items like translation gains, 2Q earnings would have increased by 20.8% year-on-year and be up by 10.4% quarter-on-quarter, TM said.

“Overall, we’re very pleased with the performance, which shows continued operational improvement,” Zamzamzairani said, adding that strong demand for its UniFi high-speed broadband (HSBB) service “has exceeded expectations and the momentum we saw at the beginning of the year”.

UniFi’s subscriber base jumped from 63,541 in 1Q11 to 109,019 in 2Q11 on the back of 904,000 premises passed. As at Aug 18, TM has installed UniFi to more than 142,000 customers on the back of more than 973,000 premises passed covering 76 exchange areas with 46 IPTV channels. “This shows a ramping up of the take-up rate from 12% as at June 30 to 14% to date, exceeding our initial expectations of 8% to 10% take-up for the first two years, Zamzamzairani said.

TM is on-track with its plan to cover 1.1 million premises by end-2011 and 1.3 million premises by end-2012, it said.  

While capital expenditure to revenue ratio improved from 18.8% to 17.1% in 1HFY11, with total capex falling from RM804 million in 1HFY10 to RM749 million in 1HFY11, group CFO Datuk Bazlan Osman said capex on HSBB is likely to be higher in 2HFY11. “Overall capex was about RM1.6 billion last year. This year’s capex will be about the same, if not slightly higher,” he said.

Foreseeing a challenging outlook ahead, Zamzamzairani said TM will continue to spend where necessary while keeping a tight watch on costs. “We hope the momentum of revenue growth we are seeing will continue,” he said.

Based on its headline KPI guidance for FY11, TM is expecting 2.5% revenue growth this year against 2.1% in FY10, with momentum picking up further to 3.5% to 4.5% in FY13. Guidance on earnings before interest, tax, depreciation and amortisation (Ebitda) margins, however, is at 32% for FY11 against 33.1% in FY10, before rising to the “mid-30s” in FY13. 

TM rose eight sen or 1.95% to RM4.18 yesterday, after trading between RM4.11 and RM4.18.

At press time, it had nine brokers calling it a “buy” against 13 “holds” and seven “sells”. Target prices range between KAF Seagroatt & Campbell’s RM3.23 and CIMB Research’s RM4.92.

This article appeared in The Edge Financial Daily, August 25, 2011.