Genting: Much more left to be desired

The story of a man who hailed from China, came to Malaysia during his teens, built a business empire which is valued at almost RM40 billion today may not turn out to be that nice a story for investors as yet. That same man who almost went bankrupt building a dream castle on top of a nice little hill was doing most things right during his days. His gaming, oil, properties, plantations and many other ventures turned out to be the right call. Maybe it is luck, perhaps it is perseverance - whenever there is a call for certain business decisions, shareholders believed in the call from that man who did not finish schooling but just pure business sense, belief and experience to call from. But, investors continued to believe in this man.

Note: Yes, we may not realise it but it takes a whole lot effort to bring people up to a hill to gamble despite the license, especially the early days!

Now, that man has passed and after transferring his businesses to the second and third generations a decade ago, there are several calls made by his children and grandchildren that let us want to have the same believe, but could we? First, there was this "boo boo" of building one of the largest fleet of cruise liners in the world which caused them to lose billions until today. Then came other project such as the gaming business in UK where until today and after 5 years they could not justify the viability of the purchase to investors.

To top off with that, the humble man's son (who is now the Chairman) pays himself RM113 million last year to top the CEO's remuneration ranking far wide from any other CEOs in Malaysia. That figure was exactly 4% Genting's total profit attributable to shareholders. Is that justified?

Yes, he has done one big right decision which is the gaming business in Singapore but that story is going stale. Why is that?

Just read the below first quarter 2012 announcement:

"The (Genting) Group registered total revenue of RM4,421.1 million compared with RM4,889.2 million in the previous year’s corresponding quarter (“1Q2011”), a decrease of 10%. Lower revenue was recorded from all the business segments except for the Property Division. The Group’s profit before tax decreased by 23% to RM1,456.9 million compared with RM1,890.6 million in 1Q2011."

Why am I saying that Genting's performance is appalling. Against its only other competitor in Singapore, it could not better that competitor. Compare Sands performance (announced below) against Genting, what to you managed to decipher? Sands' performance up, Genting's performance down. In a land of duopoly, how is that happening? This is on top of Sands was at its most bruised period after the US crisis. Imagine when the other large gaming companies managed to pull out of their doldrums especially when Las Vegas manages to find its footing, how will Genting compete, I wonder? Remember, casino business is global, not local especially in the era of vast international travelling.

Sands first quarter 2012 performance
"Las Vegas Sands experienced a strong performance from its domestic resorts and in Singapore, where casino revenue increased 51 percent to $701.3 million in the quarter. The Marina Bay Sands there averaged 98 percent occupancy at $341 a night, the company said."

If Genting cannot better Sands in Asia, I am wondering how is it going to better many more competitors in US (New York and Miami to be exact) where it is venturing billions into right now? Yes, it is trying to pull itself into becoming a behemoth in the gaming business globally. But their many failures more recently, are pulling sceptics on how well they can compete.
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Then, I am reading another story of the third generation of Genting (supposedly to be the potential next in line). Let me point you to one story of him buying into Catcha Media. (Look at where Catcha is now!) Shareholders, how are you to entrust your money on this new gen of Genting if they can't get decisions right by buying into a "so-so" small media company? Or is this new gen more interested in allowing a run on the Catcha stock as that was what happened during his purchase?

TMS: Insider movement went without being reported

While looking at the the insider report for TMS, I noticed something amiss. There were transactions by substantial shareholders during the period between 6 May 2011 and 30 April 2012 not reported.

Look at the 3 names - Baron Capitals Partners Sdn Bhd, REC Capital Sdn Bhd and Sahaal Power and Projects (Malaysia) Sdn Bhd in which each of them owned more than 5% of TMS shares. Hence, they are considered to be substantial shareholders. As at 30 April 2012, these 3 companies do not hold shares in TMS anymore.

I am reproducing the list of Substantial Shareholdings announced by TMS over the last 12 months in 4 pages.

No report of disposal by the 3 companies mentioned above

Note that these may not be the fault of the company secretary or directors of TMS as they may not know of the trade. The onus to report this actually relies on the shareholders and I think these shareholders probably do not bother as they have other bigger problems (check Linear). The only thing I can say is that TMS was in a mess as they could not identify who their shareholders were at one point of time.
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Rules under Securities Industry 1995

ii)	Who are deemed to be a substantial shareholder? A person can be a substantial shareholder of any public company, whether listed on an exchange or not. A substantial shareholder is a person: who has an interest of 5% or more of the aggregate (total) voting shares in a company; who is deemed to have an interest in a share where a body corporate has an interest in a share and a body corporate is, or its directors are accustomed or under obligations whether formally or informally to act in accordance with the directions, instructions or wishes of that person to that share.
iii)	What is the timeframe given for a person who becomes a substantial shareholder to notify the SC? A person must notify the SC within 7 days of becoming a substantial shareholder (acquiring 5% or more of the aggregate voting shares in a company).

TMS: Anyone interested?

While looking at TMS's Top 30 shareholders, noticed something interesting. It basically may not have a controlling shareholder anymore. The Top 30 shareholding consists of only 27.77% of the total shareholding. The largest shareholder holds 13.04% of the company and their shares are pledged, hence they may be looking to sell eventually. Second largest shareholder owns less than 1% of the company. Basically all the major shareholders have sold out.

Top 30 Shareholding of TMS as at 30 April 2012

Compared to the shareholding as at 6 May 2011, it is a complete change from that list. In 2011, the Top 30 consisted 77.76% of the total shareholding. See below:

What basically happened is during the run up, which was mentioned in my previous article most major shareholders sold out. Ironically, after several rounds of fund raising, the company now has RM30 million cash although it rarely registers profit. What happened is not known, but the latest announcement shows that it is trying to do a takeover of Viewnet - an IT retail company through issuance of new shares. With the takeover of Viewnet, the latter shareholders could be in control of the RM30 million.

Hence, what we are to witness is a company with net cash but no real controlling party. There can be a possibility that we will witness anyone (besides the Viewnet's shareholders) with some RM4 - 5 million cash may be interested as the company has the RM30 million Moolah. It is now trading at RM0.075, which is almost 1x its cash holding.

Hmmm..wondering whether is it that simple?

Smartag: How did this company get listed?

I have nothing much to say over the quality of recent IPOs except that some of them are quite awful. Well Smartag Solution's IPO was not so recent. It was listed on 18 April 2011, a year ago. Let me highlight its revenue numbers after its listing.

The full year account as at 30 Sep 2011 vs 2010

The 2 quarters account ending 31 March 2012

Look at the its revenue drop - from RM22.769 million for FY2010 to RM5.9 million FY2011. Ridiculous. Latest half year, it only registered RM1 million revenue. Hence, it is on track to only make 10% of its revenue prior to listing. How unreal!

How did this company pass its sponsor's approval? I do not want to name names, but whoever does the listing better be more careful in future.

Speculators- this is not the company that does the smart tag for PLUS. Please read what it claims to do, which I am still wondering. I can safely say, many traders in Chow Kit get more revenue than this LISTED company.

Amazingly, it is still carrying a market value of more than RM50 million.

Also, an ex-deputy minister is a director in this company! Hmmm...with such listings, how do we create confidence over ACE-listed companies.

Maxis vs Digi: Numbers your friendly analysts don't tell you

Mobile companies in Malaysia are at the stage where they already reached maturity. Based on MCMC's data, Malaysia has almost reached full mobile user penetration. As a result of that, you will see that revenue growth for these companies will either have very slow growth or maybe even negative growth despite the industry being an oligopoly - dominated by Maxis, Celcom and Digi.

Hence, to achieve these, telcos have to balance their expenditures against revenue. What are among the biggest expenditures for mobile companies? Equipment and staffs costs. As for revenue, of course telcos will try to increase its Average Revenue Per User, reducing churn rate while at current times increasing data revenue (mainly 3G).

As I am not able to get information from Celcom yet, let's look at how well the two top telcos managed their costs, how much they expensed their depreciation and amortisation as well as reported their PBT.

Staffs costs are direct costs. We however would like to see whether Digi or Maxis has better management of its staff costs vs revenue.

As for depreciation and amortisation (D&A), a higher D&A would lower down the PBT and Net Profit. Nevertheless, by expensing off the D&A at that reporting year, it would have reduced the total PP&E of the company further, allowing it to potentially report a reduced D&A in the subsequent years. D&A treatment is very much associated with how prudent the companies are. These are also important for us to project or measure the future profits of the company.

Now let's look at Maxis and Digi's numbers:

Maxis revenue is higher by 48.7%, however for 2011 it only managed a 0.78% increase in revenue while Digi's revenue improved at 10.43%. Remember that at this stage it is important to see who manages revenue growth better.

On managing staffs costs, Maxis staffs costs increased by a whopping 14% as against Digi which managed to reduced its costs by 6.45%. Hence from there, we are able to see that for FY2011 revenue earned per RM paid to staffs for Maxis is lower at RM20.13 against RM23.28 for Digi. We can say that Digi from here is able to squeeze more revenue from its staffs.

The notion from here is that, it may not be correct that by paying more we will get more from our staffs. Digi is showing that. It manages its staffs costs better as it has reduced while its revenue shows better improvement.

At the same time for the FY2011 financial year, Digi took an even more conservative accounting stand by depreciating and amortising its non-current assets at RM1.168 billion while Maxis, the bigger telco expending them at a lower total of RM1.149 billion.

Why is the Maxis CEO being paid more than RM10 million for then? He is not doing as well as Digi in terms of growing and managing the company last year. Shouldn't it be that larger and incumbent leader is able to squeeze more out of its staffs than its chasing pack. This is not the case with Maxis. Now, do you know why I am still being positive on Digi?

p.s. by posting this, I am sure not to get any position from Maxis - something that I want to as you can see they pay well.
Also to be fair, Maxis is spending some by moving into the broadband fixed line for homes while Digi has yet to do that.

What could be the reason for YTL selling YTLPower's warrants?

YTL Corporation, the holding company for Yeoh Tiong Lay and family has been selling some 110.9 million warrant B shares of YTL Power over the last 2 months. At the same time, YTL Power's shares has dropped from around RM1.88 to its current price of RM1.57, around 16% drop. During the same period, the warrant, YTL-WB dropped from RM0.65 to RM0.40, a 38% drop. It is quite unusual for shareholders to continue to throw a utility company like YTL Power as usually it is regarded as a defensive stock - unless they are having the feeling that insiders are selling. What could possibly be the reasons for the disposal of the warrants?

YTL Power shares / warrant held directly or indirectly by YTL family

 Based on the above table, YTL's family control of YTL Power is safely at 55%. This is without assuming all the current YTL-WB warrants are exercised. If all the warrants are exercised, their control would have increased to 59%. Why? They are still holding a whopping 84% of the outstanding warrants mostly held via YTL Corporation. To exercise all the warrants (RM1.21 per warrant), it would have to use up RM1.2 billion of YTL Corporation's cash. As at 2011, YTL Corp has RM2.1 billion cash at company level. At the same time, it has RM1.65 billion debt.

Note, the family controls YTL Corp through a 47.92% shareholding.

So what do I see in this?

1. YTL Corporation - the entity that has been selling the Warrants for the last 2 months is not looking at holding that many warrants - that's for sure. This is because it does not see itself injecting so much of YTL Corporation's cash into YTL Power. Over the years, both companies (especially YTL Corp) have been buying back stocks. By doing that, and with the current share holding, they are definitely not worried of their stakes diminishing.
2. At company level, you would have noticed that YTL Corp does not hold that much cash. Its cash is only at net RM500 million. Yes, they would be able to raise more cash from future dividends as the warrant is not due until 2018 but again, they would prefer the minority shareholders to fork out the cash for exercising the warrants rather than them.
3. By selling, YTL Corp can at least maintain or sustain the dividend payment ratio of the group assuming the income will be consistently improving. This will also preserve its cash ratio. By selling the warrants, YTL Corp gains cash whereas by exercising the warrants, YTL Corp will need to put in more cash into YTL Power.
4. The recent MGO for YTL Cement was an all share deal which does not involve cash at all. So, we probably can see that they have tried to use as little cash as possible in their deals.
5. The YTL Cement deal has also caused the Yeoh's family holdings in YTL Corp to reduce from 52.72% to 47.92%. They have 2 ways to increase their holdings back to 50% or more (if its any important) - share buyback or YTL Corp and / or more acquisitions of the shares via the family vihicel. To do that, YTL Corp will need more cash - either by issuing more dividends off the holdings or buying back shares. They can and may do both. I however foresee, YTL Corp to be more active in buying back its shares, as what they are doing currently.
6. Hence, the selling of the warrants does not depict that the family is perceiving its share price to be expensive. It is just an insider action which is more strategic for the family than anything.

Note: If insider is selling / buying (especially in Malaysia), there could be a reason that they want you to know that they are selling or buying. What more for a company such as YTL Power which has been listed for so long. Note that the selling is done by another listed co, YTL Corp - not its private entity.

Hartalega's 4th quarter 2012 results: Signs of things to come...

Hartalega registered a flat profit growth of RM64.5 million for the 4th quarter of FY2012 against RM66.3 million PAT in corresponding period. This is despite a 25% increase in its revenue.

Here are its comments:

The global demand for nitrile gloves continued to grow by 29% for the year 2011 due mainly to switching momentum from natural rubber gloves to nitrile gloves. This has spurred a significant increase in nitrile gloves production capacity by the industry which we are confident would be more than matched by resilient demand dynamics. Furthermore, we do not expect a price war from the second half of 2012, as claimed by certain quarters as global demand growth continues to outpace growth in industry capacity.
  
Comment: What they claimed of no price war (probably referring to claims from Supermax's CEO) is not quite true. If there is no price war, they could have passed the higher costs to its customers. Revenue registered increase of 25%, however profit remained flat. There may not be price war, but margin erosion is definitely faced by the industry.

On the contrary, we had to put some of our customers on allocation for their April 2012 purchase and beyond despite adding two new production lines in plant 5 to meet escalating demand. Based on our experiences, there are no expectations for a price war in the foreseeable future. Rather, the continued expansion in global demand for nitrile rubber gloves would be satisfied by industry capacity increase. This would only generate healthy competition among competitive rubber glove manufacturers.

Comment: Hartalega is leader in nitrile gloves, but as you can see most glove manufacturers are gearing up to produce more nitrile gloves from their new or existing plants. Capacity is definitely increasing, and it is difficult to estimate the increased capacity from the other players. As Hartalega is the largest and leader in nitrile gloves producing, customers shifting from them to other players will take time. I certainly expect the industry to consolidate after this with nitrile gloves making to be key focus to many of these players. Notice the comment from Hartalega is to alleviate shareholders fear of a price war.

We anticipate demand growth for nitrile gloves should be sustainable at 20% annually for the mid term. To meet the increasing export demands of nitrile gloves, our new plant, namely Plant 6, have begun construction in February 2012 with its first production line targeted to commence operations in August 2012. Plant 6 will commission 10 production lines in total and is expected to give at least a 30% boost to our production capacity which translates to a further 3.5 billion pieces per annum. The construction of the 10 production lines in Plant 6 is expected to be fully completed in June 2013.

Comment: If you read reports from the listed gloves manufacturer, all of them are talking of increasing capacities. This may definitely put pressure to price. While there may not be glut but all of the big players are definitely in the race towards larger capacity especially for nitrile gloves manufacturing. Over here, the one with healthiest balance sheet and strongest margin will prevail.

In view of current and anticipated bullish market conditions, we are making concerted efforts to put in place the foundation for long term sustainable growth. On this note, we have already strategized to beef up our human resource training facilities and manpower numbers. We view that the concerted long term planning and efforts should bear fruit due to productivity gains and benefits of economies of scale derived from building capacity and leveraging on in-house technological competence to countervail the potential margin compression arising from greater competition. Faced also with the systemic challenges of weak US Dollar and strong nitrile raw material pricing, we remained resilient and continued to grow our top line and bottom line.

Comment: Hartelega is definitely one of the bigger and better surviving player, but if you read their comment, I feel it is a little bit careless. It is common that in a competitive industry such as rubber gloves, players will move to areas that has large demand. With the demand for nitrile gloves expanding fast, it would be difficult to project the capacity expansion by all the players. These kind of competition is healthy and may allow another round of consolidation among the players. Small ones may not be able to survive or compete.

The Group has achieved the internal target growth for both sales revenue and net profit for the financial year ended 31 March 2012. The Board of Directors is optimistic that the Group will achieve continuous growth and securing better results for the next financial year.

Masterskill CEO's Annual Report Statement - like it for his bluntness

I was reading the statement from the CEO of Masterskill, Edmund Santhara. I for once liked it for his candid remark. Read below:

"2011 was an active albeit challenging year for MEGB. We have had to face many uncertainties and unprecedented setbacks in the face of changing regulatory requirements, government decisions that are consistently inconsistent and the global economic slowdown."

It is easy to offer support when times are good, but our resilience and fortitude are definitely put to the test during these challenging times. However, thanks to the continued support and tenacity of our employees, management and shareholders who are true believers in our mission and vision, the professionalism of our practice in healthcare education is upheld. Despite the unprecedented setbacks, I am pleased to report  sustainable profits, strong cash flow, increased assets and undisrupted expansion plans.

Our focus to be the global leader in nursing and allied health education remains unwavering. I sincerely believe that as long as we stay true to our path, the bumps in the road of success only serve to remind us of the need to stay vigilant, adaptable, focused and driven to emerge stronger after the storm.

A CHALLENGING ENVIRONMENT
Unexpected. Challenging. Adapting. These are a few of the words that come to mind when I review the year that was. Unexpected were the reduction in the PTPTN’s loan scheme, the increase in the minimum entry requirement from 3 credits to 5 credits at the Sijil Pelajaran Malaysia (SPM) level by the Malaysian Nursing Board, and the increase in the ratio for teaching staff to student from the previous 1:30 to 1:20 for science programmes, in line with the Malaysian Qualification Agency (MQA) requirement. The PTPTN factor and the higher entry requirement caused the student enrolment at Masterskill to drop which affected the revenue, whereas the new teacher to student ratio increased the staff cost considerably.

Challenging was when the maximum value of PTPTN loans made available to each eligible diploma student was reduced from RM60,000 to RM45,000. Masterskill’s reaction was to reduce the tuition fees for its  diploma programmes to an average of RM50,000 per eligible student.

Adapting being one of the company’s core values, is what we had to do for the journey ahead of us as we broadened our scope of business and expanded ahead of time. Within the year, Masterskill widened its educational offerings through active collaborations.

Some upsides to 2011: The most notable development was the MoU inked with RMIT University, Australia to form a joint educational entity in Malaysia especially to set up a RMIT branch campus in Malaysia. The MoU holds good prospects, as the establishment of an Australian branch campus in Malaysia will cater for the growing demand, locally and abroad, of prospective students who wish to obtain a prestigious degree from a reputable Australian university. This collaboration is under the business diversification strategy in which Masterskill is the local partner for the foreign universitiy to establish a platform in Malaysia. Through this collaborative effort, a Technical Education and Vocational Training programme will also be explored. The components may include programme offerings, curriculum design & development and training of trainers.

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Here are my comments.

1. If it is using the PTPTN to fund the education loan for 95% of its students and make profit from there, this day will come, sooner or later - just that it happened sooner. He cannot blame the government as through Masterskill and MAHSA, they are causing oversupply of nursing students. What should the government do as it has done? Take a step back and evaluate the situation.
2. If the minimum qualification for intake is being improved from 3 credits to 5 credits are to be blamed and cause of its deterioration, this means that the students they have been taking are of low qualifications? How many students does not have 5 credits nowadays? We do not want nurses who have poor basic qualifications, do we?
3. With those type of students they are taking in, are they expecting the RM60,000 loan to be repaid. It is obvious PTPTN is facing these issues from students who are paying too high fees and not affording the repayment when they finished their courses.
4. Will Masterskill then to be able to get good students with the RMIT JV? They better look for higher quality students (and those that can pay back) if this is the case. Only then it will be a palatable education centre.

My worry is that it is currently blaming the poorer financial performance onto the "hand that feeds" it so far - openly. Bad move.

F&N 1H2012 Results: Worse than expected

Usually first quarter of any year is supposed to be the best quarter for F&N, due to Chinese New Year. Not this time around though. Just look at what they have reported.

Its poor performance has only been cushioned by the 2 factors - capital gain and deferred tax asset from the Islamic food hub in Pulau Indah which totaled to RM110 million (as reported). These 2 items are not recurring item, hence the significance is not going to be that important.

As I would have expected (in fact I underestimated the impact), the two horse race in the soft drink industry has now become a three horse race - and F&N is the underdog. From there together with the impact from the flood in Thailand, revenue dropped 28%. With 28% drop, the operating profit dropped even more by 62%. So what you see is that any drop or increase in profit from this business is not proportioned to the revenue. The higher the revenue, the profit will increase even more in percentage terms, vice versa.

Now F&N is not enjoying that though. The extremely good results for F&N over last few years was probably due to when Coke was building its own distribution (since the announcement of the split), F&N was probably squeezing the last drop it could have gotten from Coke in that 2 years. Hence, what we saw was the good two years of F&N in 2009 until 2011.
So September 2011 was when the party ended.

And guess what, any company that has lost a good business would obviously be looking for other opportunities - desperately quick. F&N as a result is looking at the dairy business to expand on. By going bigger into that area of business, it is obviously attacking into other competitors that are protecting their turf. From there, you would noticed that the dairy business now will have price competition as well - to the consumers advantage - hence lower margin for the players.

In fact F&N is attacking on all fronts - properties included (through Seksyen 13 land where the old plant is situated). Do you however have that feeling that property is a little bit overpriced at the moment? And if you are interested in a property company, buy a pure property player! F&N is more of a food company.

For this space, Nestle is a better bet despite being expensive as well.

Is YTL Power running out of ideas?

Buying into YTL Power feels like playing into the game of monopoly. Playing monopoly, you will want to own all the utilities and railroads. YTL Power owns a multitude of utilities businesses except for railroads. Well, YTL, the group does have rail ambitions in connecting Singapore and Malaysia with high-speed train besides partly owning ERL.

Although YTL Power has RM7.5 billion cash in its books, it should not be considered cash rich. Why?

Just look at the 4 segments of businesses under YTL Power:

• Power generation - mainly under YTL Power Corporation in Malaysia, Jawa Power in Indonesia and a 33.5% stake in Electranet, a 200 years concession in Australia.
• Water Utilities - under Wessex Water which it purchased from Enron.
  
• Multi Utilities business under Power Seraya which YTL Power bought from Temasek in 2009. Power Seraya is involved in wholesaling, retailing and also into trading of fuel oil;
• Telecommunication - under the 60% owned YTL Communications which operates the YES wimax business.

Problem of venturing into these businesses is that they are capex heavy. A lot of times, the businesses require heavy initial investments. You can see that all the above businesses require heavy reinvestments one way or another. Its Malaysian IPP concession will end in 2015. So is the Wessex Water's concession - by 2014 (see below note on the water concession). Ending of the concessions may not mean the end of the business, but it probably signals the end of its monopolistic benefits.

YTL Power's multitude of revenue and profit contribution

 
You would expect YTL to be buying assets in times like this due to opportunities arises from crisis. Look at the opportunity it took when buying Wessex Water from Enron in 2002. The purchase of Power Seraya in 2009 for SGD3.8 billion and its venture into the punitive Wimax business in Malaysia however probably halted YTL Power's continuous big M&A ambitions as those ventures probably drained out the group's liquidity. Although the group may have some RM7.5 billion in cash, it is also heavily geared with RM13 billion debt.

If you look at the above segmental information, it has a decent 20% contribution from the power generation business where substantially is contributed from the generous Malaysian IPP concession. YTL Power however cannot rely on that much longer as the concession is ending in 2015. Whether it is to be continued, I am sure the pricing would not be as generous as the current rates and terms it enjoys. With that, YTL Power has to build its cash position. As a result, we continuously see it lowering its dividends as per below chart.

In telecommunication, I expect the "YES" business will not carry YTL Power anywhere as the business it is trying to build on is very very tough with much bigger competitors. Although they did try to introduce a different business model, I do not see much can be done with having that different model. A communication highway is a communication highway. Whoever wins will be from those that can either own both the downstream and upstream business (TM) or those that have scale (TM, Axiata, Maxis, Digi). I do not see YES having that scale. On top of that, with LTE coming on stream, WIMAX does not carry any advantage anymore for YTL as a wireless broadband player.
 

YTL Power's 5 years performance - notice the reducing dividend per share which shows that the company is shoring up its liquid assets to compete in anticipation of ending concessions and tougher competition

On the other hand, if you look at the businesses that YTL Power already owns, its Wessex Water and Power Seraya are the more efficient utilities players. With those, it may not look at expansion via acquisitions but more so into project bidding, pitching on being a more efficient player with know-how and technologies.

Would you however bet on it?

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Note: On Wessex Water

 Water Act 1989 (England and Wales)

In 1989, the Regional Water Authorities were sold by issuing shares on the stock market, with special discounts being offered to the public to ensure political success. Under the Water Act 1989, the newly-floated water-and-sewerage companies (WaSCs) became owners of the entire water infrastructure and properties of the RWAs. The Act gave them 25-year concessions for sanitation and water supply, protected against any possibility of competition. The concessions covered the whole of England and Wales, with the exception that 25% of the population continued to have their water (but not sewerage) supplied by the existing small private companies, now known as water-only companies or WoCs.

Concessions may be terminated by the government,but only by giving 25 years’ notice (extended from 10 years in 2002).

No more share swap for MAS-Airasia. What comes out of it?

The share swap deal is a deal only a merchant banker can create. It has no meaning, as the deal was created to create fees. So was it created, as CIMB has strong links to the government. After 9 months, the deal fell through. Instead of the share swap, both companies will form a JV company to buy aircraft, parts, oil and all other things in the name of economies of scale and saving some grace.

Now what does that mean after the 9 months?

1. Airasia has gotten the Sydney route that it wanted all these while;
2. Probably, after studying MAS books in detail, Tony and gang felt that it would be better off that they take their hands off from MAS's mess. MAS needs to raise additional equity funds. By shying away, Tune is better off not participating into it;
3. QPR (partly owned by Tony Fernandez) had acquired a new sponsor in the name of MAS - that they were looking for;
4. MAS gets messier and now we know how difficult it is to run MAS with the labor union etc;
5. The JV will not work - and if it works will probably benefits Airasia more.

So after the 9 months, what do we see? A result of poor planning for MAS survival as all the parties involved are only looking at what they can gain from MAS not how to save MAS, as always. I hope now CIMB is not thinking of merging MAS with Malaysia Airport Berhad as the income the latter gets does attract that thinking! It is probably the only way, financially and of course both CIMB and government can arm twist MAB to do that.