BCA Feature Stories - Week of May 26, 2006
BCA Feature Stories - Week of May 26, 2006
[05-26-2006] Copper Prices Set To Come Off The Boil
[05-25-2006] How To Hedge Emerging Markets Exposure
[05-24-2006] Extend Duration and Sell Inflation Protection
[05-23-2006] Asian Currencies: Rally Due For A Pause
[05-19-2006] Capital Market Correction Nearing An End
Stockwatch- 3 parties interested in G&W's Oakwell stake
Highlights of Lianhe Zaobao today 23 May 2006:
1. G&W confirms market talk that there are interested parties in G&W's stake in Oakwell Engineering, however, it says that there are no agreement reached so far.
2. G&W owns 28% of Oakwell Engineering.
3. There are 3 potential buyers, including one local listed company and overseas companies.
4. G&W is interested to divest its stake in Oakwell Engineering at above market price, and the sales price is likely not lower than $10 mil.
For full article, read
http://www.zaobao.com/cj/cj060523_519.html"市场传出说有第三者有意收购青白集团(G & W Group)旗下的挂牌公司固惠工程(Oakwell Engineering)，针对这点，青白集团受询时证实目前正在就此事进行谈判，不过仍未达成任何协议"
Stockwatch: G&W Group featured in The Edge Singapore, still trading below net cash
Key highlights of The Edge Singapore article:
1. MD and CEO, Koh Tiak Chye, was conferred the title of Honorary Citizen of Shenyang in 1997, in recognition of his efforts to promote the city as an investment destination to Singapore companies
2. In 2004, Koh was appointed the regional representative of the Liaoning/Shenyang Steering Committee Member of Network China, a trade promotion unit of International Enterprise Singapore
3. In 2004, G&W launched its maiden property development project in Shenyang, called Sentosa Garden, reminiscent of the company's Singapore roots. The 940 apartment units catering to low- to middle-income buyers were sold very quickily, mostly in 2004
4. To further burnish its reputation as a property developer, G&W has set up a management company to maintain Sentosa Garden, with funding from conservancy fees payable by unit owners
5. Meanwhile, G&W is gunning for a far more ambitious project- the development of "Singapore town" in a prime area in Shenyang. Changbai New Town, covering a land area of one sq km with a gross floor area of one million sq m.
6. G&W has signed an agreement with district government to develop the land as well as to resettle about 3,000 individuals from the area. There are no fees payable under the agreement, but the resettlement costs will count towards the cost of land-use rights.
7. As approvals are yet to be secured from the provincial and central governments, which could be granted this year, it is too early to announce the land cost and potential gross development value.
8. The project will be subject to a tender exercise later, but Koh believes they has the edge. Koh is quite confident of getting the project as they have been working closely with the government planner for the township and have engaged the former chief planner of Singapore's Urban Redevelopment Authority
9. Koh expects the township will be developed in six phases over nine years.
10. Koh's plans for the township also include the establishment of higher-level education centres by Singapore institutions. G&W has set up an overseas education centre in Shenyang, in partnership with Ngee Ann Polytechnic. The centre is targeting an intake of 200 in September for its first programme on logistic management. It hopes to boost its enrolment number to 1,200 students by the third year.
11. G&W is actively seeking a joint-venture partner for the project.
12. Koh expects G&W to take up half of the equity stake in each phase of the project, with the balance to be held by its existing local partner and the new partner. The new partner has to be a Singaporean investor, given the project's "Singapore town" billing.
13. Last year, Koh Brothers and G&W set up a JV firm called Construction Consortium, which boasts an order book of $842 million, was done in anticipation of further consolidation in the construction industry; over time, the company could go on to acquire other construction-related companies and take on other shareholders, but no plans to list the company in the near future
14. Last year, G&W sold half its stake in sesdaq-listed Oakwell Engineering to Draka Group, a cable manufacturer listed in Amsterdam, for $8.9 mil. G&W is looking to sell its remaining stake in Oakwell, which is worth $9 mil at its current market price of 5.5 cts per share.
15. G&W is proposing to change its name to "Brothers (Holding) Ltd". The new name reflects the "kinship" he has developed with the people of Shenyang over the years, and at the same time, the name also bears a reference to the Koh brothers.
16. Koh is unfazed about a slowdown in China's already inflated property market. Koh believes that Chinese tend to buy a house first, before acquiring other assets; despite price increase, they will want to buy their houses first.
17. G&W is working on another property project (15% stake) further south in the Zhonglu district of Changzhou in Jiangsu province. The project was introduced by Super Coffeemix, a Singapore-listed maker of instant coffee that counts Sam Goi and Oei Hong Leong among its major shareholders. Details are still being hammering out. Beside Super Coffeemix, the other investors include Goi and two other Singaporeans.
18. At 22 cts, G&W is trading at a seemingly high 29 times 2005 earnings. But that is less than half the company's net assets value per share of 52.5cts, and a 16% discount to the company's net cash holding of 26.3cts per share.
Some thoughts on Singapore first listed Business Trust- Pacific Shipping Trust
If anyone of you follows Singapore Shipping Corporation Ltd listed in Singapore Exchange, you will know that the boss Ow Choo Kiat sold all its container ships and make Singapore Shipping a very cash rich company, it looks like a smart thing to cash out as it is probably at the peak or very close to the peak Now a while after cashing out, we have samudera issuing profit warning and NOL's profit on the decline and people start to talk more clearly abt the down cycle.......
Probably the best time to invest in container shipping assets opportunistically will be to watch Ow Choo Kiat, if he ever gets back into container ships (he has mentioned he will be focussing on car-carriers, but if he ever decides to buy container ships, we will know there are money to be made)
This may not be the best time to invest in container shipping assets, but PST may be suitable for some (but make sure you know what you are getting into and not focus too much on the yield)
I will not subscribe to it as I think there will be better time to buy into PST for the following reason:
a. I do not think that 4% over US$ risk free rate is adequate
b. shipping cycle is clearly not on PST side, even though 8 years of charter already fixed
c. IPO priced above NAV of US$0.43
d. Container ships is not exactly a good store of value in the current environment as supply is theoretically unlimited since ships are movable and shipyard will keep churning out ships (unlike real estate, which is a better store of value as there is a limit to the supply and immovable)
Also I would like to make an distinction between Government Link companies, like Capitaland & Keppel Land and those owner-managed companies like UOL & Citydev
Even though launching REITs will surely improve the share price of UOL or CityDev, they are not willing to do so, as the owner do not care abt their share price but more on the value they will get for their properties on REITing them, this is as opposed to manager-managed companies, whose incentives may include options and performance shares and bonus somewhat indirectly linked to share price, profit on sales, etc
In my view, no right and wrong, but companies like UOL & CityDev will be more willing to REIT their properties asset closer to the peak of the property cycle
To a certain extent it is a zero sum gain, the investors of UOL and CityDev's REITs if they ever do a REIT will not have much of an upcycle to ride
It may or may not be an coincidence that PIL, a privately-owned company, took this step of list PST at this juncture
Some additional useful information on PST, wonder if 4% management fee is the typical fees in overseas shipping trust, I also wonder how 4% is arrived at for the service of the trustee-manager, which manages a business trust that bareboats out all its container ships:
Certain Fees
The following is a summary of certain fees payable by PST in connection with the establishment and on-going management and operation of PST:
Payable by PST Amount payable
(a) Trustee-Manager’s trustee fee 0.02% per annum of the value of the Trust Property subject to a minimum fee of US$10,000 in each calendar quarter.
(b) Trustee-Manager’s Management Fees 4.0% per annum of the Charter Income in the relevant calendar year. The Trustee-Manager may elect to receive the fees in cash or Units or a combination of cash and Units (as it may in its sole discretion determine), subject to the Trust Deed.
(c) Any other substantial fee or charge (i.e. 0.1% or more of PST’s asset value)
(i) Acquisition fee (payable to the Trustee-Manager) 1.0% of the acquisition price of the vessel acquired directly or indirectly through one or more special purpose vehicles, pro-rated if applicable to the proportion of PST’s interest. The Trustee-Manager may elect to receive the fees in cash or Units or a combination of cash and Units (as it may in its sole discretion determine), subject to the Trust Deed. No acquisition fee is payable for the acquisition of the Vessels.
(ii) Disposal fee (payable to the Trustee-Manager) 0.5% of the sale price of the vessel disposed, pro-rated if applicable to the proportion of PST’s interest.
Not sure if the management fee payable is high or not, but for full year 2007, charter income is US$34.5mil, mgmt fee at 4% will be abt US$1.4mil for a trustee-manager, which currently directly employs 4 full-time employees
Also notesworthy is one of the many risk factors:It is more difficult to remove a trustee-manager of a registered business trust than a director of a public company
The BTA requires the removal of a trustee-manager of a registered business trust to be by way of a resolution approved by not less than three-fourth of the voting rights of all the unitholders of the registered business trust present and voting. In comparison, the Companies Act requires the removal of a director of a public company to be by way of an ordinary resolution approved by more than 50.0% of the voting rights of all the shareholders of the company present and voting.
As the Sponsor will hold more than 30.0% of the Units upon Listing, it may be difficult for the Trustee-Manager (being a wholly-owned subsidiary of the Sponsor) to be removed.
The case of buying Bursa Malaysia, read Salvatore Dali's blog
check out
http://malaysiafinance.blogspot.com/sneak preview of Salvatore Dali's blog: "I cannot tell you how many times I have wanted to make this stock as a Top Buy for 2006 but the share price just runs and runs. I have never read ONE report calling this stock a buy, but I have read many credible research reports calling this stock a Strong Sell or Avoid. Currently, Standard & Poor's has the stock as a rare "Strong Sell". I don't think I can wait anymore. I was thinking that the overall global equity pullback for the last two days may see a more decent entry price... but NO. Funny thing is, I have attacked this company many times in my blogs. Want a scathing report, read my blog on 10 March 2006 on this company. For an even more scathing critique, take a peek at the 16 February 2006 blog.... lol. Then you will understand better my liking for the stock."
BCA Feature Stories - Week of May 19, 2006
Feature Stories - Week of May 19, 2006
[05-19-2006] Capital Market Correction Nearing An End
[05-18-2006] U.S. Equity Sector Strategy: Favor Non-Cyclicals
[05-17-2006] Commodity Prices: Following Natural Gas Prices Up, And Down?
[05-16-2006] Signs That Global Growth Momentum Is Peaking
[05-15-2006] (Part I) Gold: Mania Phase
For details, click on the link to BCA Research on the right.
Marc Faber: Poor Mr. Bernanke can't win!
Marc Faber latest writeup.......Poor Mr. Bernanke can't win!
Check it out
http://www.ameinfo.com/86026.html
Marc Faber says sharp correction in all asset markets probable
From the latest May 2006 The Gloom, Boom & Doom Report:
"However, with the exception of the stock and property markets of Taiwan, Malaysia , and Thailand, there are practically no assets markets that don't evoke in my mind the characteristics of "too much money chasing too few assets", "overtrading', and "a larger and larger group of people seeking to become rich without a real understanding of the process involved". Moreover, if we look at credit growth in the US and at Foreign Official Reserve growth, it would seem that global liquidity , while still expanding at - by historical standards - relatively high rates, has been decelerating.
Therefore, a sharp correction in all asset markets, à la the Middle East since the end of last year, should be considered very probably."
"Finally, it is my belief that in future investors will have to become used to using "real" returns and not nominal returns. Under a monetary regime - the Fed - which has no option but to print money, all assets could rise in value in nominal terms, but some will obviously depreciate against "sound money" whose supply cannot be increased at liberty."
BCA Feature Stories - Week of May 12, 2006
Feature Stories - Week of May 12, 2006
[05-12-2006] U.S. Consumer Slowdown On Its Way
[05-11-2006] Critical Juncture For Global Bond Yields
[05-10-2006] Asian Equities: Currency Strength Not Biting Yet
[05-09-2006] China: Still No Landing
[05-08-2006] Asia-Pacific Real Estate: Laggard Poised To Outperform Key highlight: Looking forward, fundamentals suggest that Asianproperty markets are set to deliver solid gains in the years to come,outperforming those in the Anglo-Saxon world.
For details, click on the link to BCA Research on the right.
Oil sector braces for hurricane season
Just read the above captioned articlehttp://www.marketwatch.com/News/Story/Story.aspx?guid=%7B15F98987%2DA344%2D46FF%2D9E39%2D63A456DF95D1%7D&source=blq%2Fyhoo&dist=yhoo&siteid=yhoo"HOUSTON (MarketWatch) -- Even as coastal residents from Louisiana to Alabama were rebuilding lives and homes shattered by the deadliest U.S. hurricane season on record, one of the nation's top forecasters warned Friday that 2006 is shaping up to be another brisk year of storms."
Take a peek of this article, if there are any truth in it, it does not bode well for the market as oil price is likely to spike as per last year especially if Texas, which was spared last year get hit this year. Texas is home to 26 refineries that account for a fourth of the nation's refining capacity."Speaking to a room packed with energy executives in Houston, AccuWeather's Joe Bastardi predicted that one tropical storm and five hurricanes -- at least three at Category 3 or worse -- will slam into the nation's shores between now and late November, the unofficial end of the season.
Bastardi, the weather service's chief hurricane tracker, accurately predicted last August that New Orleans would bear the brunt of Hurricane Katrina as it grew to a top-level Category 5 storm. Katrina, and later Hurricane Rita, spared most of the refineries along the low-lying Texas coastline. Texas is home to 26 refineries that account for a fourth of the nation's refining capacity.
But that could change this year, with warmer water temperatures and atmospheric conditions resembling those found during previous major storms in the region raising the likelihood of a direct strike. "
Latest weekly update from BCA Research
Feature Stories - Week of May 5, 2006
[05-05-2006] Energy Producers: Lack Of Production Growth Is A Double-Edged Sword
[05- 04-2006] Be Wary Of Materials Stocks
[05-03-2006] Euro Area: Manufacturing Sector Firing On All Cylinders
[05-02-2006] Global Bond Yields: Near A Peak?
[05-01-2006] U.S. Core Inflation: Benign Outlook Remains Intact
For details, click on the link to BCA Research on the right.
3 Interesting Articles on Malaysia (Market)
3 Interesting Articles on Malaysia (Market)
1. Today, Singapore's Straits Times reports that "During his visit to America last week, Malaysian PM Datuk Seri Abdullah Badawi received a welcoming phone call from US President George W. Bush. Bush-Abdullah phone call reflects better ties. Straits Times also reports "Bush may visit Malaysia after he attends November's APEC summit in Hanoi."
2.
http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_3ee51cb0-cb73c03a-1c79dfc0-a301568bBuying momentum accelerated on May 5, with the KLCI reaching a new six-year high on very heavy volume. Investor interest appears to have been buoyed by news that Tenaga Nasional Bhd may get its long awaited electricity tariff revision soon, and a sharp overnight drop in crude oil prices.
3.
http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_3d438c30-cb73c03a-1c79dfc0-7eb7588aRinggit at fresh 8-year high, others steady The ringgit scaled an eight-year high on May 5 as foreign investments poured into local equities and short-term deposits on signs the central bank was allowing a faster pace of appreciation for the currency.
The above bodes well for Malaysian stock market.
May 2006 Edition of Market Observations from ContraryInvestor.com
Here's the link for the May 2006 edition of Market Observations from ContraryInvestor.com: http://www.contraryinvestor.com/mo.htm
Would like you to read the extracted paragraph below, stay invested in commodities related assets for the long term:
Before leaving this subject, just a few last thoughts. It's absolutely clear in our minds that large institutional money is not heavily invested in these hard asset classes in a very meaningful manner. For now, the interest in commodity ETF's, the run up in the stocks that represent the hard asset trading exchanges such as CME and ICE, and the growing volume of hard asset derivatives, as you can clearly see above, are showing us that institutional demand for commodity oriented asset classes is growing at the margin, not diminishing. And from our perch there is still a very long way to go before broader institutional demand is sated. Just think back on the continued allocation into tech issues at the institutional level that started in the early to mid 1990's and just how long that took to fully play out over the entire cycle period of the prior decade. Will there be commodity class price corrections ahead? Sure, and some may be more than violent. But at least for now, we'd continue to view these as buying opportunities as we believe the Fed and the central bankers are trapped. They are trapped in a set of circumstances they themselves spawned. Unwilling to allow prior period misallocations of capital (stock and housing bubble) to reconcile themselves, they have implicitly committed to facilitating ever larger amounts of liquidity support to the financial markets and theoretically real economy. But it seems to us that they have worked themselves into a corner now being that the harder they push on the liquidity accelerator, the harder they will have to yet push in the future to offset the real world inflationary costs of commodity prices their hedge, prop desk and momentum trading former friends are now supporting with the very liquidity the Fed and their central banking brethren create in the first place. The veritable Catch-22? As the data above tell us, this liquidity is now squarely finding its way into the commodity complex and that process is accelerating. Can it continue on forever? Of course not. We continue to believe that US consumers will slow ahead, especially given our viewpoint that US household financial well being is inversely correlated with commodity prices, but anticipate that the Fed will ultimately panic and up the liquidity creation ante even further as they have in the past out of fear as consumers slow, again, playing right into the expectant hands of the financial sector who has been conditioned time and again to expect this very response from the FOMC. Who is the best friend of the current commodity bull, who is for now the longer term supporter of this trend, and who in public refuses to acknowledge what is plain for the entire planet to see in terms of forward inflationary pressures? The Fed and the US credit markets. Who else? Until this changes, stay long assets that benefit from inflationary trends, particularly those assets that have not already been significantly levered. Some day the Fed will change tactics. Some day they will realize the speculative financial community has played them for the fool. But we're not there yet. For now, the hedge, prop desk and momentum trading crowd are betraying their liquidity benefactors out of natural self interest as they pile into hard assets and hard asset related investments. We can only believe the Fed and their global central banking brethren are watching this in horror. Paralyzed and reverting to the only trick left in their bag - liquidity facilitation. But after all, the hedge, prop desk and momentum traders are only doing what the Fed has taught them to do for literally years now - put the Fed into a box of being forced to create and facilitate ever larger amounts of liquidity and credit. The financial sector servant of old has now firmly assumed the role of master. You better believe it's different this time.
