Friday, March 30, 2012

SC takes action

Fraud, Fraudulent accounting, misleading statements, criminal breach of trust, and wrongful manipulation of shares can never be completely wiped out in any country.
Malaysia has its fair share of these mischievous activities. Click here to read more.

Wednesday, March 21, 2012

Lifting the seedlings to promote growth (拨苗助长)

Once upon a time, there was an inexperienced farmer in ancient China who was always impatient. Whenever he did anything he wanted to see result quickly.

One day he planted some rice seedings in his paddy field. He was very eager to see them grow. Day after day he would go to his paddy field to watch how the seedings were doing. Of course there was nothing discernible. He became impetuous. "Why not I do something to promote their growth," he said to himself.

Thinking it was a good idea to lift the seedings a little bit so that they looked taller, he went into the field and lifted all the seedings an inch higher.

He thought he was smart to have done that. He went home happily and bragged to his family about what he had done, little realizing that he had just devastated all the seedings.

The Chinese idiom to this action is called: 拨苗助长.

The stock market is designed to transfer money from the impatient to the patient. So don't become overly impatient or enthusiastic about growing your portfolio and do something as stupid as what the stupid farmer had done.

Monday, March 19, 2012

Mergers & Acquisitions

Mergers And Acquisitions: Understanding Takeovers
June 13, 2010 | Filed Under » Fundamental Analysis , Investing Basics , Investor Relations , Stocks , Venture Capital
Terms like "dawn raid", "poison pill", and "shark repellent" might seem like they belong in James Bond movies, but there's nothing fictional about them - they are part of the world of mergers and acquisitions (M&A). Owning stock in a company means you are part owner, and as we see more and more sector-wide consolidation, mergers and acquisitions are the resultant proceedings. So it is important to know what these terms mean for your holdings.

Mergers, acquisitions and takeovers have been a part of the business world for centuries. In today's dynamic economic environment, companies are often faced with decisions concerning these actions - after all, the job of management is to maximize shareholder value. Through mergers and acquisitions, a company can (at least in theory) develop a competitive advantage and ultimately increase shareholder value.

There are several ways that two or more companies can combine their efforts. They can partner on a project, mutually agree to join forces and merge, or one company can outright acquire another company, taking over all its operations, including its holdings and debt, and sometimes replacing management with their own representatives. It’s this last case of dramatic unfriendly takeovers that is the source of much of M&A’s colorful vocabulary.

Hostile Takeover
This is an unfriendly takeover attempt by a company or raider that is strongly resisted by the management and the board of directors of the target firm. These types of takeovers are usually bad news, affecting employee morale at the targeted firm, which can quickly turn to animosity against the acquiring firm. Grumblings like, “Did you hear they are axing a few dozen people in our finance department…” can be heard by the water cooler. While there are examples of hostile takeovers working, they are generally tougher to pull off than a friendly merger.

Dawn Raid
This is a corporate action more common in the United Kingdom; however it has also occurred in the Unites States. During a dawn raid, a firm or investor aims to buy a substantial holding in the takeover-target company’s equity by instructing brokers to buy the shares as soon as the stock markets open. By getting the brokers to conduct the buying of shares in the target company (the “victim”), the acquirer (the “predator”) masks its identity and thus its intent.

The acquirer then builds up a substantial stake in its target at the current stock market price. Because this is done early in the morning, the target firm usually doesn't get informed about the purchases until it is too late, and the acquirer now has controlling interest. In the U.K., there are now restrictions on this practice.

Saturday Night Special
A Saturday night special is a sudden attempt by one company to take over another by making a public tender offer. The name comes from the fact that these maneuvers used to be done over the weekends. This too has been restricted by the Williams Act in the U.S., whereby acquisitions of 5% or more of equity must be disclosed to the Securities Exchange Commission.

Takeovers are announced practically everyday, but announcing them doesn't necessarily mean everything will go ahead as planned. In many cases the target company does not want to be taken over. What does this mean for investors? Everything! There are many strategies that management can use during M&A activity, and almost all of these strategies are aimed at affecting the value of the target's stock in some way. Let's take a look at some more popular ways that companies can protect themselves from a predator. These are all types of what is referred to as "shark repellent".

Golden Parachute
A golden parachute measure discourages an unwanted takeover by offering lucrative benefits to the current top executives, who may lose their job if their company is taken over by another firm. Benefits written into the executives’ contracts include items such as stock options, bonuses, liberal severance pay and so on. Golden parachutes can be worth millions of dollars and can cost the acquiring firm a lot of money and therefore act as a strong deterrent to proceeding with their takeover bid.

A spin-off of the term "blackmail", greenmail occurs when a large block of stock is held by an unfriendly company or raider, who then forces the target company to repurchase the stock at a substantial premium to destroy any takeover attempt. This is also known as a "bon voyage bonus" or a "goodbye kiss".

Macaroni Defense
This is a tactic by which the target company issues a large number of bonds that come with the guarantee that they will be redeemed at a higher price if the company is taken over. Why is it called macaroni defense? Because if a company is in danger, the redemption price of the bonds expands, kind of like macaroni in a pot! This is a highly useful tactic, but the target company must be careful it doesn't issue so much debt that it cannot make the interest payments.

Takeover-target companies can also use leveraged recapitalization to make themselves less attractive to the bidding firm.

People Pill
Here, management threatens that in the event of a takeover, the management team will resign at the same time en masse. This is especially useful if they are a good management team; losing them could seriously harm the company and make the bidder think twice. On the other hand, hostile takeovers often result in the management being fired anyway, so the effectiveness of a people pill defense really depends on the situation.

Poison Pill
With this strategy, the target company aims at making its own stock less attractive to the acquirer. There are two types of poison pills. The 'flip-in' poison pill allows existing shareholders (except the bidding company) to buy more shares at a discount. This type of poison pill is usually written into the company’s shareholder-rights plan. (To learn more about these and other shareholders’ rights, see Knowing Your Rights as a Shareholder.) The goal of the flip-in poison pill is to dilute the shares held by the bidder and make the takeover bid more difficult and expensive.

The 'flip-over' poison pill allows stockholders to buy the acquirer's shares at a discounted price in the event of a merger. If investors fail to take part in the poison pill by purchasing stock at the discounted price, the outstanding shares will not be diluted enough to ward off a takeover.

An extreme version of the poison pill is the "suicide pill" whereby the takeover-target company may take action that may lead to its ultimate destruction.

With the sandbag tactic the target company stalls with the hope that another, more favorable company (like “a white knight”) will make a takeover attempt. If management sandbags too long, however, they may be getting distracted from their responsibilities of running the company.

White Knight
A white knight is a company (the “good guy”) that gallops in to make a friendly takeover offer to a target company that is facing a hostile takeover from another party (a “black knight”). The white knight offers the target firm a way out with a friendly takeover. (To learn more about white, gray, yellow and black knights, see Bloodletting and Knights: A Medieval Guide to Investing.)

The next time you read a news release that says that your company is using a poison pill to ward off a takeover attempt, you’ll now know what it means. More importantly, you'll know that you have the opportunity to purchase more shares at a cheap price. M&A has an entire vocabulary of its own, expressed through some of the rather creative strategies employed in the process, such as the ones we've touched on above. Hopefully by reading this article you are at least a bit wiser in the wacky world of M&A terminology. By understanding what is happening to your holdings during a takeover or attempted takeover, you may one day even save money.

For more on the basics of mergers and acquisitions, please check out this entire tutorial devoted to the subject: The Basics of Mergers and Acquisitions.

by Investopedia Staff believes that individuals can excel at managing their financial affairs. As such, we strive to provide free educational content and tools to empower individual investors, including thousands of original and objective articles and tutorials on a wide variety of financial topics.

Tuesday, March 13, 2012

Pahang Killer

EPF Takes Profits

The Star Online > Business
Tuesday March 13, 2012
EPF goes on selling spree

It disposes of RM441mil worth of shares on March 7


PETALING JAYA: The Employees Provident Fund (EPF) sold a whopping RM441.09mil worth of Malaysia-listed equities on March 7 alone, in line with its trend of active disposals over the last two weeks.

Bursa Malaysia filings showed that on March 7, the EPF along with its portfolio managers dumped a total 83.68 million shares on the open market, substantially more than the 7.4 million shares it had acquired the same day.

The number of shares disposed of represents almost half the total volume traded that day, which stood at 173.14 million shares.

Fund managers reckon that the fund was merely taking profit but its aggressive selling had dragged the FBM KLCI down from its all-time high last week.

The FBM KLCI ended 10.47 points lower at 1,574.83 that day from 1,594.74 on Monday.

“It seems that the portfolio managers under EPF are taking a breather after the market climbed to near all-time highs.

“The number is substantial, and definitely the index would be down from the disposal. Filings next week will show whether the fund has continued with its selling spree this week,” said a fund manager.

Under the Companies Act 1965, substantial shareholders need only notify the listed company of the shareholding transaction within seven days.

Among the biggest disposals on March 7 were 11.43 million shares in Telekom Malaysia Bhd, 10.72 million shares in Axiata Group Bhd, and 10.23 million shares in YTL Corp Bhd.

EPF's divestment of shares has been going on for the last two weeks.

Most notably, between Feb 28 and March 1, it had disposed of about 30.3 millions shares in Maybank.

It had also early this month sold 10.7 million shares in UMW Holdings Bhd, 8.5 million shares in CIMB Group, 6.5 million shares in Telekom Bhd, six million shares in DiGi.Com Bhd, 3.7 million shares in IJM Corp Bhd, and 3.2 million shares in IOI Corp Bhd.

Meanwhile, EPF chief executive officer Tan Sri Azlan Zainol is reported to have said that the EPF had not distorted the market.

“It is all unintentional. We transact over three million shares at any one time; of course the market would be distorted,” he said.

In another development, the EPF is expected to start distributing portions of the Rubber Research Institute of Malaysia land in Sungai Buloh by June.

It is leading the development of the proposed prime township development via Kwasa Land Sdn Bhd, a wholly-owned subsidiary of the EPF.

Thursday, March 08, 2012

Bullish bets on palm oil

By Ooi Tee Ching

OIL palm planters are smiling again this year as price forecast gurus at the Palm and Lauric Oils Outlook Conference (POC) 2012 placed bullish bets on crude palm oil (CPO) prices.

Hamburg-based ISTA Mielke GmbH executive director Thomas Mielke highlighted that for the first time in history, drought has impacted soy bean output in the United States and Latin America at the same time.

"We're likely to see global soy bean output plunge by 20 million tonnes this year," he said.

Mielke, who is also editor of Oil World journal, said "poor weather is also hurting rapeseed yields in Ukraine and the European Union".

He then said Malaysia's palm oil production could touch 19.3 million tonnes this year compared with 18.9 million tonnes in 2011. As for Indonesia, he foresees output to expand to 25.5 million tonnes.

"I still think these rise in palm oil output will not be enough to offset shortage in soya and rape oils."

He stressed that the oil palm industry must continue its focus on yield improvement as a way to overcome limitations of arable land and water so as to retain world market leadership.

Mielke, a well-respected and authoritative vegetable oil analyst, once again, at this POC series rejected calls by green activists for a moratorium on oil palm plantings and encourage adoption of genetically modified technology.

"In order to satisfy the daily oils and fats need of an increasing global growing population, we need to plant more genetically-modified oil crops that are drought tolerant and disease resistant," he urged the 2,000-odd participants at the POC 2012.

He repeated his message to oil palm planters not to be misled by green activists' lobby to limit expansion of oil palm plantations as the world continues to face shortage of edible oils.

The conference, which traditionally focused on price forecasts for palm and coconut oils, had in the last few years, taken a more holistic approach.

Mielke then concluded that palm oil prices is likely to average at around RM3,500 per tonne this year.

LMC International Ltd chairman Dr James Fry was next to take to the stage. He said 2011 was a year of wonder for planters, which saw excellent prices and close to ideal output conditions.

He reiterated his long-held view that palm oil prices would continue to be highly influenced by petroleum prices.

Yesterday, Brent crude oil rose above US$122 (RM366) a barrel after China said it would boost energy imports this year, while concerns persist over supply risks and Iran's nuclear programme despite the country's offer for talks with major powers.

High petroleum prices translates to more demand for biofuel.

This, in turn, means better demand for CPO. On top of this, there is already strong demand for CPO in emerging markets like China and India as their big population consumes more food.

Fry forecasts the CPO price could rise as high as RM3,310 and fall as low as RM2,590 a tonne if Brent crude oil were to settle to a "realistic level" of US$86 a barrel.

"If, however, Brent crude were to go on hovering at current US$125 a barrel, CPO is likely to trade between RM3,140 and RM3,360 a tonne," he said.

Since October 2011, the Indonesian government has widened the export tax gap between CPO and refined products drastically to boost refining capacity and downstream activities. As a result, CPO and crude palm kernel oil became cheaper for downstream producers there.

Fry noted that Malaysian refiners were starting to concede global palm oil market share to Indonesia. This is pushing more palm oil stocks to Malaysia.

As a stop-gap measure, the Malaysian government has allowed duty-free CPO exports amounting to 3.6 million tonnes this year.

At the industry's leading global conference yesterday, London-based Godrej International director Dorab Mistry said CPO prices, now trading around RM3,200 a tonne, can hit RM4,000 in three months due to the threat of war and geo-political tensions in Iran, specifically at the Gulf of Hormuz.

"I'm assuming that Brent crude oil will go on trading at between US$100 and US$120 a barrel but with the threat of geo-political uncertainty in Middle East and North Africa, vegetable oils prices could climb to higher levels," he said at the POC 2012 here yesterday.

Given the high energy prices, tight palm oil stocks and rising demand, the CPO price is due to reach a new high in the next quarter.

"It is conceivable that CPO prices may test RM4,000 a tonne by June," he said.

He reckons that 2012 is a year of two halves, of which palm oil prices remains bullish on tight supply in the first half. As for the latter part of the year, Dorab said early signs of emerging drought could slash palm oil output.

Monday, March 05, 2012

From Waste to Wealth

From waste to wealth or from trash to cash, both are as good as having the best of two worlds.

Oil palm biomass ( OPB) is formerly burned if not left to rot. This is bad for the environment. Thanks to innovation and technology, OPB has become a valuable asset to the oil palm plantations. No longer is it a concern or something that has to be disposed off with much expenditure.

Nowadays, the product is much sought after as it is capable of being turned into animal feeds, fertilizer, wood products, biofuel, ethanol, biochemical and many other useful goods.

Malaysian oil palm plantations now have zero burning. Everything about the oil palm trees is useful in more ways than one.

Oil palm stocks have been on the rise since the plantation index minor bottom of 6625 formed on 3.10.11. At the time of writing this post, it stands at 8676. The uptrend is likely to continue.