Comments On AirAsia Stock Sale

On Star Business AirAsia may sell as much as 20% more stock to cut debt

• KUALA LUMPUR: AirAsia Bhd, South-East Asia’s largest low-cost airline, said it plans to sell new shares to reduce debt in what would be the Malaysian company’s biggest share sale since listing in 2004.
  
  The Sepang-based company plans to issue as much as 20% more stock, it said in a statement to Malaysia’s stock exchange after the close of trading yesterday.
  
  Chief executive officer Datuk Seri Tony Fernandes said last month the company was considering raising about RM500mil in either a stock sale or rights offer.
  
  AirAsia expects to take delivery of about 24 Airbus SAS planes annually from an order of 175 as the carrier adds routes to India and boosts flights to China.
  
  The company will probably sell the stock in a rights offer to shareholders and use the money to lower its ratio of debt to equity, also known as gearing, Mohshin Aziz, AirAsia’s head of investor relations, said by phone.
  
  AirAsia is “trying to reduce risk, trying to get structures where we can reduce the fluctuation impact of the markets, be it interest rates, forex, fuel if we can, to make the business more stable and predictable in terms of our cost component,” he said, adding that a price had yet to be set for the rights offer.
  
  Based on yesterday’s closing price of RM1.15, the share sale could raise as much as RM546mil. – Bloomberg

-----------------------------

Comments:

Hmmm... rather interesting.

From the Star Business article.. soon they have to take delivery of 24 Airbus.

• AirAsia expects to take delivery of about 24 Airbus SAS planes annually from an order of 175 as the carrier adds routes to India and boosts flights to China.

And posted a couple of days ago. Just How Good Is AirAsia Earnings Performance Since Listing?

• Now let's look at its cash/debts issue.
  
  This is AirAsia's first ever quarterly earnings since listing. Quarterly rpt on consolidated results for the financial period ended 30/9/2004
  
  It had piggy bank cash balances of 78.441 million. Total loans stood at 95.456 million.
  
  Its most recent quarterly earnings. Quarterly rpt on consolidated results for the financial period ended 31/3/2009
  
  Piggy bank cash balances now is at 223.991 million. Total loans stood at 6.934 Billion!!!!!!!

Not in great financial health, yes?

And remember that in the posting AirAsia Again, AirAsia has been doing sale and leaseback of aircrafts.

• Unwinding of fleet ownership is key to near-term profits. AirAsia entered into a sale and leaseback agreement for an A320 in Feb 2009, making a RM33m profit. This follows the RM52m gain in 4Q08 from selling two new A320s. This helped ease AirAsia’s stretched balance sheet with a net gearing at 3.7x as at end-1Q09 (end-4Q08: 4.0x).

And when you add it all up, it makes you wonder, doesn't it?

How come AirAsia is not financing via them bankers?

Why?

And how will this stock sale or rights issue help?

If the article is accurate, the 20% stock sale/rights issue will only raise close to some rm500+/- million.

Not much considering AirAsia's debt is at a whopping 6.94 billion and considering the fact that the debts is going to increase because of AirAsia commitment to buy all these new planes!

And it's also so ironic.

It was just a couple of days ago..

• KUALA LUMPUR (AFP)--Malaysian budget carrier AirAsia Wednesday scrapped administrative charges to boost passenger numbers but said it hasn't been hurt by the downturn that has affected most airlines worldwide.

Consider this.... the administrative charges dropped/scrapped/forgo by AirAsia ... would see them lose some 400 million ringgit. ( see here )

• Chief executive officer Tony Fernandes said the company would lose MYR400 million ($113 million) a year by getting rid of the charges but said he wanted to keep a promise of providing the lowest fares.

Well this is why I find it so ironic. Hope my understand or interpretation is not flawed. :D

The CEO wouldn't mind losing 400 million because he wanted to keep a promise of providing the lowest fares.

It's no problem, yes? If your company can afford to keep the promise, do so by all means. Everyone will be proud of you.

But then... now AirAsia says it wants to do a stock sale to raise some 500 million!

Rather so ironic.

How now my dearest?

Oh Talam

On the Edge Financial Daily yesterday evening.

• Talam’s 1.28b RCPS, 1.53b RCSLS to list on July 1
  
  KUALA LUMPUR: Talam Corp Bhd’s 1.287 billion redeemable convertible preference shares (RCPS) of 20 sen each will be listed and quoted on July 1 under the conmpany's reviswed regularisation plan.
  
  A Bursa Malaysia circular said on June 29 that Talam’s 1.529 billion redeemable convertible secured loan stock (RCSLS) will also be listed on July 1.
  
  They comprise of 89.62 million RCSLS-B; 855.01 million RCSLS-C and 585.01 million RCSLS-D.

On this morning's Edge Financial Daily Talam up in very active trade

• KUALA LUMPUR: Talam Corp shares rose in very active trade on June 30 after it almost completed its debt revamp.
  
  It was up 1.5 sen to 12.5 sen at 9.28am. The KLCI was up 4.75 points to 1,080.59.
  
  Talam’s 1.287 billion redeemable convertible preference shares (RCPS) of 20 sen each will be listed and quoted on July 1.
  
  Its 1.529 billion redeemable convertible secured loan stock (RCSLS) will also be listed on July 1. They comprise of 89.62 million RCSLS-B; 855.01 million RCSLS-C and 585.01 RCSLS-D.
  
  The latest development was Kumpulan Europlus’s proposal to acquire financial instruments of Talam of a total nominal value of RM423.35 million from Abrar Discounts totalling at RM125 million.

Such a not so small debt revamp for Talam!

Hmm... Talam must be good, eh?

How could it not be?

*whistle*

Sepp Blatter Is Such A Hypocrite!!

On Sporting Life: BLATTER UNHAPPY AT SPENDING

• FIFA president Sepp Blatter is still trying to find a way of curbing the Premier League's spending power.
  
  Although the indications are Manchester City will fail in their efforts to lure Samuel Eto'o away from Barcelona, Blatter remains deeply troubled at the migration of talent to England.

What planet is Sepp Blatter from????????????????

The article continues..

• It could be pointed out Real Madrid are the ones who have done the big spending this summer, twice smashing the world transfer fee record, first to buy Kaka, then Cristiano Ronaldo, who will cost an amazing £80million from Manchester United.

Anything to curb the spending from Real Madrid?????

Flashback: FIFA president Blatter welcomes Ronaldo's transfer

• JOHANESBURG, June 12 (Reuters) - FIFA President Sepp Blatter on Friday dismissed concerns over Real Madrid's world record offer for Cristiano Ronaldo, saying it demonstrated the game's enduring popularity.
  
  Blatter has in the past spoken out about the huge sums of money in the game. (LOL! LOL! LOL! Hypocrite!)
  
  But he told a news conference in Johannesburg he saw nothing wrong with the 24-year-old FIFA World Player of the Year's proposed 80 million-pound ($131.2 million) move from Manchester United, which is still to be finalised.
  
  UEFA President Michel Platini said on Thursday the bid for the Portuguese winger was excessive when football was facing severe challenges during a global recession.
  
  Other sports officials also criticised the amount. But Blatter said: "What does 80 million mean when 10 years ago another player with the same name (Ronaldo of Brazil) moved from one club to another for 50 million dollars?.
  
  "It means that there is still a demand to have the stars."
  
  Blatter added: "We are in a very sensitive market, in an economic crisis, but football remains a fantastic product, not just to buy or sell but a product that gives people what they want -- emotions. They want the stars.
  
  "Ten years ago a painting from Picasso's Blue Period was sold by Sothebys in London for over 100 million. And what happened to the painting?
  
  "They hid it somewhere so no-one could take it away. Nobody can see it. But you can see a football player once or twice a week, he is there, he is a star. You might say it is too much, but you have to put it in context of what football in our society is worth and what other things in our society are worth."

End of the day, Blatter is saying it's ok for Real Madrid to spend like crazy. English clubs? No!

LOL!

Raw Deals: Book value or discounted cash flow?

IOI Properties privatisation by IOI Corp.

• Based on Bloomberg’s consensus estimates, the IOI Corp offer was 36% below IOI Prop’s book value of RM3.63 and valued the company 8.9 times its forecast earnings for the year ending June 30, 2009. ( source: Raw deal for IOI Prop’s minority shareholders )

Puncak Niaga on rejecting Selangor Government Offer. (News clip from Dow Jones)

• Puncak Niaga:Selangor Govt Offer For Water Assets Unacceptable
  
  KUALA LUMPUR (Dow Jones)--Puncak Niaga Holdings Bhd. (6807.KU) Monday said last week's revised offer from the Selangor state government to buy its units' water-related assets are not acceptable.
  
  The company said in a stock exchange filing the MYR1.9 billion offer to buy the assets of unit Puncak Niaga (M) Sdn. Bhd. was "unacceptable" due to the valuation method based on the one-time book value of the assets.
  
  "The discounted cash flow ("DCF") method is the more appropriate valuation method for concession companies which is commonly applied in corporate mergers and acquisitions," Puncak said.
  
  The board and shareholders of unit Syarikat Bekalan Air Sealngor Sdn. Bhd., or Syabas, meanwhile were "unable to arrive at a decision" on the state government's MYR3.36 billion offer for its assets because any disposal requires the consent of the federal government as the holder of a golden share in the company.
  
  "To date, Syabas has not received or been informed of any instruction or decision from the Federal Government in respect of the same," it said.

Above table for Business Times article here

Hmmm... interesting eh?

IOI Properties were taken private at 36% below it's book value.

Puncak Niaga is saying one times book value is unacceptable.

Yeah one could easily said that in the privatisation of a listed subsidiary, the holding company would ALWAYS offer the cheapest price possible. For if it wasn't cheap, why would the major shareholders waste their time and effort?

While on Puncak's case, it's a takeover. Hence they would want to seek the best price possible.

Two contrasting differences on how to value a company eh?

One was done on a deeply discounted book value while the other wants the discounted cash flow.

Would it be wrong to see most would want to use the valuation best fit one's needs?

ps: Postings on DCF (Discounted Cash Flow)

• DCF (Discounted Cash Flow) example
• Using the DCF

The China Accident Waiting To Happen To Every One Of Us

Blogged recently on 16th June 2009 Would China Have A Debt Problem?

On the UK Telegraph, Ambrose Evans-Pritchard writes about the potential danger within the Chinese Banks in his editorial, China's banks are an accident waiting to happen to every one of us.

Ambrose highlights the comments made by Professor Pettis ( see Would China Have A Debt Problem? ) and Fitch's grim warning on China.

• China's banks are veering out of control. The half-reformed economy of the People's Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December.
  
  Money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.
  
  Fitch Ratings has been warning for some time that China's lenders are wading into dangerous waters, but its latest report is even grimmer than bears had suspected.
  
  "With much of the world immersed in crisis, China appears to be one of the few countries where the financial system continues to function largely without a glitch, but Fitch is growing increasingly wary," it said.
  
  "Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be willing or able to bear."
  
  Note the phrase "able to bear". Fitch's "macro-prudential risk" indicator for China threatens to jump from category 1 (safe) to category 3 (Iceland, et al). This is a surprise to me but Michael Pettis from Beijing University says China's public debt may be as high as 50pc-70pc of GDP when "correctly counted".
  
  The regime is so hellbent on meeting its growth target of 8pc that it has given banks an implicit guarantee for what Fitch calls a "massive lending spree".
  
  Bank exposure to corporate debt has reached $4,200bn. It is rising at a 30pc rate, even as profits contract at a 35pc rate.
  
  Fitch traces the 2009 bubble to the central bank's decision to cut interest on reserves to 0.72pc. Bankers responded to this "margin squeeze" by ramping up the volume of lending instead. Over half the new debt is short-term. Roll-over risk is rocketing. China's monetary stimulus since November is arguably more extreme than the post-Lehman printing of the US Federal Reserve, though less obvious to the untrained eye.
  
  Under the Taylor Rule, US policy remains tight (for the US). China's policy is loose (for China). New loans doubled in May from a year earlier, almost entirely to companies.
  
  China's Banking Regulatory Commission fired a warning shot last week. "The top priority at the moment is to stop explosive lending. Banks should carefully monitor the process of credit approval and allocation, and make sure that loans flow into the real economy," it said.
  
  Unfortunately, 40pc of the "real economy" consists of exports, mostly to the US and Europe, the consequence of a mercantilist export model that has qcrashed and burned. Chinese exports were down 26pc in May.
  
  World trade may be stabilizing at last after contracting at faster rate than during the early Great Depression. But it will not rebound fast in a world where the US savings rate has risen to a 15-year high of 6.9pc. A trade policy based on the assumption that debtors in the Anglosphere and Europe's Club Med can ruin themselves for ever is absurd.

Ambrose highlights Andy Xie. ( see Andy Xie Calls It Speculative Inventory And NOT Commodity Stockpiling! )

• Andy Xie, a Sino-bear and commentator for Caijing, said Western analysts are in for a rude shock if they think that China's surging demand for raw materials implies genuine recovery.
  
  Commodity speculators have been using cheap credit to play the arbitrage spread between futures and spot on the oil markets. They have even found ways to trade lumber to iron ore by sheer scale of leverage. "They've made everything open to speculation," he said.
  
  Mr Xie thinks the spring recovery is an inventory spike, to be followed a double-dip downturn into next year as stimulus wears off.
  
  Reformers know what must be done to boost consumption. China needs a welfare revolution. But creating a social security net takes time, and right now Beijing is facing a social crisis as 20m jobless workers retreat to the rural hinterland.

And Ambrose also highlights Buy China issue. ( See blog posting Buy Chinese Vs Buy American )

• So the regime is resorting to hazardous methods to keep excess factories humming: issuing a "Buy China" decree: using a plethora of export subsidies; holding down the price of coke, bauxite, zinc and other resources to lower production costs (prompting a complaint from America and Europe); and suppressing the yuan, again.
  
  Protectionism is a risky game for a country that lives off global trade and runs a surplus near 10pc of GDP. Mr Pettis said he fears China is nearing its "Smoot-Hawley moment", repeating the US tariff blunder of 1930 that brought the world crashing down on Washington's head.
  
  Two facts stand out about China's green shoots. While the Shanghai composite index is up 70pc since November, Chinese imports are down 25pc from a year ago. China is still draining real stimulus from the global economy.
  
  If the world's biggest surplus state ($400bn) is too structurally deformed to help offset the demand shock as Western debtors retrench, we are trapped in a long deflation slump.

Are My Comments On iCapital Overdone?

Got this nice set of comments from Bean Chun Toi (Hmmm.. just a 'new' registered blogger. :D ) on an old posting Mieco Chipboard: VIII.

• I am not a fan of TTB but I think the writer's comments are bit overdone.
  
  I guess all fund managers make mistakes in their ivestment choices, some huge and small.
  
  Even W Buffet lost US1 billion in an oil stock last year.
  
  If, we you expect iCapital or TTB to make all the right investment, iCapital shares would have hit the roof at RM10 to RM20, and W Buffet's company shares would also reach sky high like Googgle shares.
  
  I guess all of them are human and will continue to make few poor investment from time to time.
  
  As long as more than 60% of their investment give reasonable returns, they are considered ok.

Hmm.... a bit overdone?

Could you be more precise?

Is it because I HIGHLIGHTED the fact that iCapital made such a huge loss in Axiata?

Here is a fact.

TTB claimed to be one of the top FIVE fund managers in the WORLD! He made that claim. Not me. ( here is the link to Star Biz article Up Close and Personal with Tan Teng Boo )

Just like Warren Buffett, you should realise that as long as TTB runs iCapital as a public listed entity, he and you should realise that iCapital is subject to both criticism and accolades. This is the parts and parcel for being a public listed entity. ( Try uncle Google and search for Buffett's criticism. I am sure you will find so many that you can even write a book or two. )

And have I really criticised TTB to be no good?

All I have done is question his reasoning on why he SOLD Axiata at such a huge lost. Do you know what was his exact reasoning to SELL? Sorry I do not and since iCapital's quarterly earnings did not even show any respect to the investing public by disclosing his reasoning why he sold, I do feel I have the right to address the issue by raising the question why.

Some even say wait until his next AGM or annual report.

LOL!

I find it simply ludicrous.

And in regarding to the comments made on Mieco Chipboard in today's posting, iCapital Is Now Holding A 'Paper' Loss of Over 76.5% In Its Investment In Mieco Chipboard!

Are those not facts I had posted?

Were those not legitimate questions I am raising?

Am I blasting and bashing TTB for no reason?

Are the comments a bit overdone?

If you do think so, then it's your right of opinion. Yes, you are entitled to your opinion. I have no problems, except that I think it's only fair to me that you give proper reasoning why my comments are a bit overdone.

Is it wrong to question why?

Put it this way, you see, TTB claims to be one of the TOP FIVE FUND MANAGERS IN THE WORLD ( here is the link to Star Biz article Up Close and Personal with Tan Teng Boo ), now assuming that I am interested in investing in his funds, what do you think I should do?

1. Don't you think I learn more of the person managing the fund? His integrity would be an issue, yes?

2. Don't you think I should know more of his style of investing?

Point 2. He claims to be a VALUE INVESTOR. Yes? Am I correct? And this is where iCapital's investment in Mieco Chipboard stood out very sorely.

Perhaps I am flawed but as explained in this morning's posting, iCapital Is Now Holding A 'Paper' Loss of Over 76.5% In Its Investment In Mieco Chipboard!, I really could not see the reasoning to justify Mieco as a VALUE INVESTING stock pick. When iCapital.Biz doubled their investment in this stock, Mieco was trading at a PE multiple of 41x (unless my calcutations is flawed as usual). Me? I just cannot comprehend. Sorry.

ps: in the posting iCapital Lost 14 Million In Axiata Without Explaining Why, I made the following remarks in the comments section to blogger Avatar.

• The lact of respect from the fund manger by NOT explaning what has happened with their huge loss in Axiata is utterly shocking.
  
  It is not acceptable at all.
  
  A fund manager is there to manage the investors money. Less the fund manager forgets that it is because of the investors the fund exist. No fund investor means no business.
  
  The investors is their customers.
  
  Person like me, who ask all these questions, could also be a customer.
  
  Hence, it's paramount that the fund manger of this closed fund explains what had happened.
  
  This is business 101.
  
  Which is why I find that it's so unacceptable by not even attempting to explain their reason why they sold Axiata at a huge loss.
  
  Well if they had made an investing mistake, no problem yes?
  
  Everyone makes mistakes.
  
  The very least iCapital can do is OWN up to this mistake and explain to the shareholders of this fund what exactly has happened.

You see, I understand everyone makes mistakes. I make mine all the time but I always try to own up to my mistakes and more importantly, I always attempt to correct my mistake.

So if iCapital made the investing mistakes in stocks like Axiata and Mieco, hey it's no problem isn't it? Just explain it to the investing public. Is this too difficult a thing for TTB to do?

Anyway, if you think my comments are overdone on iCapital on these issues, please do drop me a line. (ps. try not to register a new blogger nick just to reply to me lah. No need for such stuff. :D)

iCapital Is Now Holding A 'Paper' Loss of Over 76.5% In Its Investment In Mieco Chipboard!

Posted in April 2008. A Quick Look At iCapital's Annual Report 2008

Let's look at another interesting VALUE INVESTMENT from iCapital. It's one that I had blogged many times before Mieco Chipboard.

Firstly, from the posting A Quick Look At iCapital's Annual Report 2008

• Or how about Mieco Chipboard?
  
  Why is iCapital a shareholder in this stock?
  
  From the annual report, iCapital's owns some 1,632,100 shares in Mieco worth some 2,103,832. This should works to a cost of 1.28. Mieco last traded 22 sen.
  
  As a shareholder, I would be baffled as why a fund manager who has a reputation to be good, bought a lemon stock like Mieco. The clear decline in Mieco's fundamental was clearly seen by all (see past posting Mieco Chipboard: VII and the links included)
  
  Besides asking why iCapital is holding on to this stock whose fundamental is really weak, ( Mieco's last reported earnings Quarterly rpt on consolidated results for the financial period ended 31/12/2008 - losing money and a mountain of debts!), perhaps the minority shareholder would want to know the funds current investing decision on this stock in the portfolio.
  
  Is iCapital still holding on to the stock? Did iCapital sell the stock? Or is iCapital making an even more terrible mistake by investing more into this stock?
  
  How?
  
  Wouldn't the disclosure of iCapital's stock portfolio helped?

Of course, the critics of mine, would very quickly point out the size of the investment. It's much smaller than iCapital's horror show in Axiata

Now Mieco Chipboard the stock had gone up in value a lot thanks to the current bull stampede. :D

It's now 0.30 sen compared to 0.22 sen when I mentioned it April 2009.

And what's the current 'paper' loss?

Let's see from the above data from iCapital's annual report, it's average cost for its so-called investment in Mieco Chipboard is 1.28.

Which means its paper loss is now 98 sen per share!

Or in terms of percentage, it's some 76.5%!

Oops! Many would argue that its only paper loss. ( Is Paper Loss Not A Loss? :D )

Anyway I have decided to do some simple searching. iCapital was listed near end 2005. So I decided to check out their annual reports.

Now if you open up the following report, 2006 Annual Report, you would see the following.

Hmm.. from the data, it appear that iCapital purchased Mieco Chipboard in the fund's early days.

Sidetrack for a moment.

I had always argue against the quality of Mieco as an investment grade stock for I find it extremely poor. The fundamentals of the business were deteriorating at such an unbelievable rapid pace and the collapse of the fundamentals of Mieco's balance sheet were utterly shocking! See Update On Mieco Chipboard for all the links on this stock.

On February 24, 2006, in the posting Mieco: Part V, I highlighted the recommendations iCapital had made on the stock. Do note they had publicly declared the vested interest on the stock since day one.

• In Mieco: Part II
  
  Hmmm.... and what is even more interesting is the following...
  
  1. At 2.36, a buy for the longer term.
  2. At 1.37, still a buy for the longer term.
  3. At 1.00 (yup Mieco is now trading at 1.00!!), Mieco is still a BUY!!!

Let's forget about everything that I had wrote earlier before.

Now from iCapital's 2006 Annual report, as at 16th June 2006, iCap purchased some 800,000 shares in Mieco worth some 1.063 million. This should works out to an average cost of around 1.33 per share.

Let's look at iCapital's 2007 Annual Report

And from the data, as at 4th June 2007, iCapital had doubled it's investment to 2.1 million.

Now let's DISCOUNT the deteriorating balance sheet in Mieco Chipboard and let's just look from the earnings perspective.

iCapital had purchased Mieco before June 2006.

Mieco's Q4 earnings is reported every February. So I would use February quarterly earnings as a quick and simple reference.

Feb 2006. Quarterly rpt on consolidated results for the financial period ended 31/12/2005

Mieco reported a loss of 8.178 million and from that quarterly earnings note, one can see that Mieco made some 30.488 million.

Now since iCapital declared itself to be a VALUE INVESTOR, could anyone see any justification in it buying this stock? I am sorry but from my flawed understanding, I could not understand at all. Mieco went from a company making money to one making losses.

Feb 2007 Quarterly rpt on consolidated results for the financial period ended 31/12/2006

Ah.. Mieco recovered from its losses. It made some 6.495 million. Buy based on a turnaround strategy? Perhaps there is a justification but let's consider this. Based on an earnings of 6.495 million and a share base of 210 million shares, this would equate to an earnings per share of 3.1 sen.

And from iCapital's 2007 annual report, its average cost is now 1.28. Its previous year's average cost was 1.33 sen. Some would be baffled on the reasoning to DOUBLE its investment in Mieco just to lower its cost per share from 1.33 to 1.28sen. And based on an eps of only 3.1 sen and based on an average price of 1.28, iCapital DOUBLED its investment in Mieco based on a PE multiple of over 41x! I am truly baffled.

Feb 2008. Quarterly rpt on consolidated results for the financial period ended 31/12/2007

Mieco earnings slumped to just 2.311 million. Not a warning sign to SELL?

Feb 2009. Quarterly rpt on consolidated results for the financial period ended 31/12/2008

Mieco lost a massive 22.908 million!!!

In April 2009, the losses were adjusted to a huge 27.593 million! VARIANCE BETWEEN AUDITED AND UNAUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008

• ... there was a deviation of more than 10% between the Group’s audited loss after taxation of RM27.953 million and the unaudited loss after taxation of RM22.908 million for the financial year ended 31 December 2008. The variance was due mainly to additional impairment allowances made following further review of inventories and receivables.

Last month. Quarterly rpt on consolidated results for the financial period ended 31/3/2009

Mieco reported another massive losses! Mieco lost 22.648 million!

And there you have it.

iCapital is now having paper losses of over 76.5% in its investment in Mieco Chipboard!

Yeah.. and again.. some would discount all this by saying this is just a small investment!

Yeah.. and again.. some would say all this does not matter. iCapital is still good.

Ahh... I am not saying iCapital is no good woh. iCapital is one of TOP FIVE FUND MANGERS in the WORLD! How dare I suggest it is no good.

All I am saying is I am puzzled with its investment in Mieco Chipboard.

How could a VALUE INVESTOR which is is one of the TOP FIVE FUND MANAGERS make a justifiable investment in Mieco Chipboard?

Sorry I just don't get it.

iCapital: One Of The Top Five Fund Managers In The World Lost 79% In One Single Investment!

Indulge in me for a moment.

In A Quick Look At iCapital's Annual Report 2008

• Let's have a look at their Annual Report 2008.

Now if we click that link above and open the attached pdf file, near the end of the report, we will see the following.

WOW! It's more mind boggling really.

Cost of their ' so-called value investment' in that one share is 17.883 million. And they sold this investment for a lost. How much did they lose? Just 14 million!!!!! (See iCapital Lost 14 Million In Axiata Without Explaining Why )

Now if my calculator is not faulty, this looks like an investment loss of 79%.

Hmm.. wasn't it just a month ago there was a huge article on Tan Teng Boo?

Found it.

Up Close and Personal with Tan Teng Boo

There was this interesting boasting statement printed that I remember. :p2

• “I’m pretty damn good at what I do. I would say I am one of the top five fund managers in the world. It is a pity that people don’t really recognise that,” says Tan in such a matter-of-fact manner, that it’s almost hard to construe that as boasting.

Hmmm.... and this 'one of the top five fund managers in THE WORLD' has just lost 79% of its investment in one single stock!

Well isn't this just mind bloggling?

Malaysia Can!

iCapital Lost 14 Million In Axiata Without Explaining Why

Posted back in April 2009: iCapial And Their Potential 12 Million Ringgit Paper Losss In Axiata

It's rather strange how that posting came about. Last April I wrote A Quick Look At iCapital's Quarterly Earnings. In it I stated rather 'strongly' against the earnings notes because I felt it was lacking.

• If I am an investor of this fund, surely the Fund Manager of this company should be more transparent in its earnings notes. To tell the reader that the company will continue to seek stocks that are attractively priced is not sufficient. It is so lacking. Surely, it owes to the shareholders of the fund, a much better market view and commentary. Just to say that the stock market is depressed is not up to standard. That's my blunt opinion.

Now that lead to iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings

And then one thing lead to another and I end up with the following postings.

1. A Quick Look At iCapital's Quarterly Earnings,
2. iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings,
3. iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings II
4. iCapital.Biz Lack Of Disclosure In Their Quarterly Earnings III
5. A Quick Look At iCapital's Annual Report 2008

Which ultimately lead me to iCapital's Investment In Axiata and iCapial And Their Potential 12 Million Ringgit Paper Losss In Axiata

The last posting iCapial And Their Potential 12 Million Ringgit Paper Losss In Axiata was written on 15 April 2009.

Now it's 25 June 2009. And if counting is not flawed, it's more than 2 months later.

On today's Edge Financial Edge, iCpaital made the 'shocking' announcement.

ICapital.Biz posts RM11.6m net loss in 4Q

LOL!

How ironic it was that last night I was COMPLAINING about Apollo Food Holdings dabbling in the share market and making peanuts from their playing in the share market. ( see A Look At How Apollo Food Holdings Dabble In The Share Market )

Well it looks like Apollo Food Holdings is an investing genius compared to iCapital! LOL!

Sorry that's rather wicked but there's some truth in it somewhere.

Ok humour aside but this event SHOWED clearly why iCapital needs to be more transparent. As said before the lack of details in their earnings notes was rather shocking.

And iCapital's losses in Axiata... much bigger than anticipated!

Also very ironic that in May 2009 Capital Dynamics Tan Teng Boo Now Claims That Markets Have Bottom Few Months Ago!

• KUALA LUMPUR: ICapital.Biz Bhd posted a net loss of RM11.60 million for the fourth quarter ended May 31, 2009 (4Q09) with negative revenue of RM11.83 million due to loss on disposal of investments of RM14.16 million.
  
  In contrast, it reported a net profit of RM1.70 million on the back of RM3.69 million revenue for the previous corresponding period.
  
  Its poor performance was mainly due to losses from selling shares of Axiata Group Bhd (formerly TM International Bhd) in 4Q, ICapital.Biz said in notes accompanying its financial results yesterday. It sold off all its Axiata shares and invested in Astro All Asia Networks plc instead.
  
  ICapital.Biz’s net asset per share rose to RM1.42 from RM1.37 but its net asset value (NAV) declined by 9% to RM1.77 from RM1.95.
  
  “As the company is a close-end fund, a better indication of its performance would be the movement of its NAV,” said ICapital.Biz.
  
  Basic loss per share stood at 8.29 sen versus basic earnings per share of 1.21 sen in FY08.
  
  No dividend was declared for the quarter.
  
  For the full year, ICapital.Biz’s net profit plunged 84% to RM6.27 million from RM39.08 million. Revenue fell 75% to RM11.41 million from RM45.67 million previously.
  
  Cash and cash equivalents for FY09 halved to RM37.44 million from RM61.23 million.
  
  The company said its prospects were dependent on the performance of the stock markets, particularly where its investments were held.
  
  Although the local stock market had rallied in recent months, it said the rise had lagged that of other markets.
  
  
  This article appeared in The Edge Financial Daily, June 26, 2009.

Anyway, I decided to check out iCapital comments in its earnings notes.

And again, I find it so lacking.

Now the fund has lost a whopping 14 million in Axiata, which was slightly more than expected.

That iCapital did not bother to explain why it sold this innvestment is so shocking!

Comeon.. doesn't it think that the investing public has the right to know why it sold?

Show some respect, yes?

Tell the public why you sold.

And whatever happened to iCapital's so-called long term investing strategy?

And also what took it so long for iCapital to disclose this losses?

Two months is an awful looooong time in the investing world!

If I were an investor, I would be less than pleased!

How?

ps. the least I know on iCapital's commentary on Axiata was the following short note which a kaki posted for me back sometime in July 2008.

• Conclusion and Advice
  
  At RM5.85, TMI is capitalised at RM21.9 bln. For this, what do investors get in return ? Indonesia, Sri Lanka, Bangladesh, and Cambodia present TMI with a total untapped market potential of 280 mln subscribers. In the case of India, the potential is 860 mln subscribers. TMI’s venture in Iran and Pakistan could provide opportunities for TMI to take up interest in some of the cellular operators. The Iranian government’s intention to privatise MCCI could be one of such opportunities. Thus, one can see the potential that TMI is tapping into.
  
  In many aspects, TMI is indeed a truly global company. In all the markets that TMI is in, TMI is competing head-on with the giants of the industry. As shown by the above analysis, most of its operations are competing well. Adding to its high growth assets are two strong cash generating companies, which are Celcom and M1 that will help to finance part of TMI’s cash needs.
  
  In short, i Capital sees the recent plunge in TMI’s share price as not being in line with the group’s increasing attraction. Thus, i Capital revises its rating to a Buy for the longer term for TM International.
  
  Disclosure of interest (required under the Capital Markets & Services Act): The publisher and associates have an interest in TM International.

Tribute To Michael Jackson

RIP.

My favourite song of his... Man In The Mirror.
































I remember his Kuala Lumpur performance. That girl dancing with him on You Are Not Alone! And then Billy Jean! I was there! His dancing were simply superb! Watch the end bit! No one else does it better!

Warren Buffett: Economy Recovery Will Happen But It Hasn't Happen Yet

On an interview with Becky Quick on CNBC Warren Buffett was rather gloomy about the economy. Buffett's gloomy economic predictions

• "There were a lot of excesses to be wrung out and that process is still under way, and it looks to me that it will be under way for quite awhile. In the annual report, I said that the economy would be in shambles this year and probably well beyond, and I think that is true."
  
  Unemployment, said Buffett, will continue to drag the economy down. He told Bloomberg news that unemployment is "very likely to go above 10%." About 9.4% of the population -- about 14.5 million people -- was unemployed in May, the last month for which statistics are available. High unemployment will continue to depress consumer demand for everything from energy to cars and homes, Buffett said.

Here is the transcript of the full interview on CNBC: Warren Buffett's Live Lunch Interview on CNBC

• BECKY: The last time we sat down to talk to you was on May 4, and at that point you told us that you think we're in an economic war right now. How much progress do you think we've made in that war?
  
  BUFFETT: Well, it's been pretty flat. I get figures on 70-odd businesses, a lot of them daily. Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while. There were a lot of excesses to be wrung out and that process is still underway and it looks to me like it will be underway for quite a while. In the (Berkshire Hathaway) annual report, I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true.
  
  BECKY: We hear people on our air all the time who talk about the 'green shoots' that they're seeing. Are you seeing any of those green shoots?
  
  BUFFETT: (Laughs.) I looked. I wasn't seeing anything. I had a cataract operation on my left eye about a month ago and I thought maybe now I'll be able to see green shoots. We're not seeing them. Whether it's retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we've never seen it for a simple thing like electricity. So it hasn't happened yet. It will happen. I want to emphasize that. But it hasn't happened yet.
  
  
  
  
  
  
  

A Look At How Apollo Food Holdings Dabble In The Share Market

October 30th 2008, I wrote Apollo Food's'Investments' In The Share Market

• Today, I came across the following announcement from Apollo Food Holdings. Now I would applaud Apollo Food Holdings for being transparent.
  
  See APOLLO FOOD HOLDINGS BERHAD ("APOLLO" or "the Company") - Dealing in quoted shares (Do click on the excel file attached!!! )
  
  However, let me stress again, I am uneasy with Apollo Food's involvement in the share market.
  
  Excess money should be return to the shareholders and I do not think it's right that this company should be dabbling in the stock market.

Now here's an interesting exercise which I did.

I opened the excel file, did a sort, and calculated the average prices paid.

That was what I got. I added in the today's prices too. Maybank is tricky. For I do not know if Apollo Food subscribed to the rights issues or not. 3.88 is the price it went ex if I am not mistaken and 5.90 is the price today.

Anyhow, it would appear that Apollo is doing rather well ASSUMING if Apollo Food held on to the shares till now.

Let's now look at the quarterly earnings to get a rough idea what Apollo Food did for its portfolio of stocks.

Dec 2008. Quarterly rpt on consolidated results for the financial period ended 31/10/2008

Here's the snapshot of what Apollo Food reported.

It purchased more shares!

And at that moment of time... the shares were DEEPLY under water. :P

March 2009. Quarterly rpt on consolidated results for the financial period ended 31/1/2009

mmm... it purchased some more but Apollo Food sold quite a bit of shares!!!!!!!!!!!!!! Made some small change too. :P

Hehehe... yeah on hindsight NOW.. anyone can easily say bad luck, bad timing! Some might even be more critical and say poor decision!

Now Apollo Food reported its earnings today. It's for the quarter ending 30th April. That's about the start of the big rally in March 2009.

............ !!!!

Apollo sold more and bought more.

And made some small change too!!!

How?

What's the point of all this dabbling in the sharemarket isn't it?

Got excess money.. isn't it just better to return the excess money to the shareholders?

Malaysia Ringgit Undervalued By Some 33.2%

In an article posted on VOX called Equilibrium exchange rates which was highlighted by Professor Michael Pettis on his article Can the RMB be more undervalued today than it was last year?, I saw a very interesting entry, Malaysia.

It states that the Malaysia Ringgit is undervalued by some 33.2%!




How?

Here's A Nice Stock 'Tip' From OSK

Posted earlier: Stock Quiz


Here's the answer: AirAsia!


That's the stock! The one that I like so much. :D


Let's see...

2nd December 2008, on the Edge Financial Daily

• 02-12-2008:- AirAsia suffers record drop on 3Q loss
  by Chan Tien Hin
  
  KUALA LUMPUR: AirAsia Bhd, Southeast Asia’s biggest discount carrier, posted a record decline in Kuala Lumpur trading after reporting its first loss since going public in 2004.
  
  The carrier slid as much as 14 sen, or 12%, to close at 98 sen, the second-worst performance on the benchmark Composite Index. It closed 13.5 sen lower at 97.5 sen with a total of more than 12 million shares traded.
  
  AirAsia lost money on trades held by the bankrupt Lehman Brothers Holdings Inc and on wrong-way bets on oil prices. Chief executive officer Datuk Seri Tony Fernandes also faces slowing travel demand at the airline’s Thailand hub, which has been paralysed by a week-long anti-government protest.
  
  “It’s a sell,” Christopher Eng, an analyst at OSK Research, said in a report yesterday. “We are concerned about its longer-term prospects as its associates continue to bleed and AirAsia reaches saturation point.” .....

Here's the snapshop of the report.

Few days later, 9th December 2008. Note the change of analyst. AirAsia is still a SELL with a target of 67 sen.

Next report is something that I don't understand. I must be flawed as usual but for me it was like a I-dunno-how-what-where-why kind of thingee.

It's now NEUTRAL with a target price of 0.93!!!!

Here's the explanation..


Huh?

I don't really understand. Doesn't reiterate means to say again? Well OSK last call on AirAsia was a SELL with a target price of 67 sen. Suddenly it's a REITERATE NEUTRAL call with a much higher target price of 0.93 sen! Did I miss out a report in between?

Hmmmm.... never mind. I must be flawed.

Then came AirAsia massive losses in February and OSK maintains their call at Neutral with a price target of 0.93 sen.


Three months later, AirAsia announces its next quarterly earnings.


OSK calls AirAsia "Success Of The Low Class Model"!


WOW!


6 months ago in December it was a SELL with a target price of 67 sen.


3 months ago OSK was talking about spring cleaning and being NEUTRAL in the stock with a target price of 0.93 sen.

NOW it's a BUY, BUY, BUY with a target price of 1.75.

On the Edge Financial Daily today, there's yet another article OSK Research reiterates buy call on AirAsia

So good ah?

Everyone now can fly?

How now my dearest MooMooCow?

You want or not?

And you do know very, very well that I cannot guarantee if you can lose money here.

Stock Quiz

On 2nd December 2008, the stock is a SELL.

Target Price 67 sen.

Recently it's given a trading buy call.

Target price 1.75.

--------------

Would you buy the stock?

Answer to be revealed soon.

Just How Good Is AirAsia Earnings Performance Since Listing?

Firstly here is the link to AirAsia last reported quarterly earnings in May. Quarterly rpt on consolidated results for the financial period ended 31/3/2009

Took a snap shot of the Balance Sheet.

Like others, I am puzzled why Deferred Taxes is considered an asset.

Anyway, as per AirAsia own accounts, its accumulated deferred taxes as at 31st March 2009 is at a whopping 935.521 million.

( I had mentioned in my own flawed thinking that if AirAsia had to pay these taxes, then the Malaysia government would have MORE money to spend on fiscal policies and in the long run, such money would be a boost for all MALAYSIANS)

Now as stated in the posting Again On AirAsia's Deferred Tax Iss, according to research reports, AirAsia stands to benefit 18 BILLION in deferred taxes!

Now I would like to do a simple exercise. Let's see how much AirAsia has earned so far.

Today I am doing something different.

I will discount all the losses and profits from AirAsia hedges in forex and oil hedges.

Why you may ask?

Well.. hedging is always going to be part of AirAsia's activities. The boss can say a minute no more oil bet but no matter what AirAsia will still have these hedges in their books. So I am NOT going to treat them as extraordinary items. This would be my flawed thinking for the day. :D

And for simplicity sake, I would just count in all these deferred taxes as gains or losses for the time being.

And for simplicity sake, I just use the unaudited numbers and risk the deviations in audited and unaudited accounts.

So the first quarter of 2009, Quarterly rpt on consolidated results for the financial period ended 31/3/2009 AirAsia said it made 209 million.

Feb 2009 Quarterly rpt on consolidated results for the financial period ended 31/12/2008. AirAsia lost 471.739 million for fiscal 2008

Now it's 2007 accounts is muddled because it changed financial year end. So I will just use its the numbers from the above quarterly earnings. And as you can see AirAsia said it made 697.623 million.

August 2006. Quarterly rpt on consolidated results for the financial period ended 30/6/2006 AirAsia said it made 126.943 million. The previous year it made 111.557 million.

Adding the numbers up: 209 + (-471.739) + 697.623 million + 126.943 + 111.557 million = 673.384 million.

Now remember this 673.384 million consists of all the hedging losses/gains and the deferred tax gains.

Now remember from Airasia latest quarterly earnings, its CURRENT total deferred taxes asset is at 935.521 million!!!!

Well here comes the shocker.....

If we minus the deferred taxes from AirAsia's profits... how much has AirAsia has made since listing?

Try 673.384 million minus 935.521 million = _____________ !!!!!!!

So can anyone tell me just how well is AirAsia doing???

Is it doing very well?????

Now let's look at its cash/debts issue.

This is AirAsia's first ever quarterly earnings since listing. Quarterly rpt on consolidated results for the financial period ended 30/9/2004

It had piggy bank cash balances of 78.441 million. Total loans stood at 95.456 million.

Its most recent quarterly earnings. Quarterly rpt on consolidated results for the financial period ended 31/3/2009

Piggy bank cash balances now is at 223.991 million. Total loans stood at 6.934 Billion!!!!!!!

How?

If I say I am not impressed, do you think I am flawed?

And just how well is AirAsia is doing?

Are you impressed with such a business model?