I realise that for any speedy as well as more secure and not-flooded with unnecessary spams, you can now reach me at
https://t.me/intellecpoint
or
username : @intellecpoint
I have created a group called Intellectpoint
join by going into the below link
https://t.me/joinchat/OJNKyh1lBOHBXZdSPNdqAQ
You can talk to me on current economic and market trends, simple investing concepts (or maybe even complex), Bursa Malaysia especially, where does Malaysia stands as an example. In the past I have not been able to attend to questions or may be too slow as I was inundated with jobs as well as engagements. I hope through telegram, I am able to speed that up.
I am not an expert user on telegram, but will work on my knowledge.
Do share with others as well.
Do join!
Sunday, May 17, 2020
Wednesday, May 13, 2020
Not surprising that Yee Lee is doing a quick takeover exercise
Wilmar which part of its business is selling cooking oil in China, just announced a good result considering the huge impact from COVID-19 in China. This is what it reads for Wilmar which sells flour, cooking oil in China largely.
"Being a producer of essential products for both food and non-food categories, the Group’s operations were not significantly impacted by the various stages of lockdowns globally. Demand for the Group’s consumer products grew amidst the COVID-19 pandemic as household consumption increased due to the implementation of movement restriction measures globally. Sales volume for consumer products grew by 34.8% to 2.9 million MT in 1Q2020, mainly from increased demand for the Group’s consumer staples such as rice, flour and cooking oil."
Back here in Malaysia, Yee Lee which just announced a takeover offer after a failed in 2019, this time offering at a lower price of RM2.06.
One of Yee Lee's larger business is cooking oil under the brand "Helang". At the first time of offering, its offered price was deemed "not fair but reasonable" - which is common for Malaysian companies in Bursa nowadays.
"Being a producer of essential products for both food and non-food categories, the Group’s operations were not significantly impacted by the various stages of lockdowns globally. Demand for the Group’s consumer products grew amidst the COVID-19 pandemic as household consumption increased due to the implementation of movement restriction measures globally. Sales volume for consumer products grew by 34.8% to 2.9 million MT in 1Q2020, mainly from increased demand for the Group’s consumer staples such as rice, flour and cooking oil."
Back here in Malaysia, Yee Lee which just announced a takeover offer after a failed in 2019, this time offering at a lower price of RM2.06.
One of Yee Lee's larger business is cooking oil under the brand "Helang". At the first time of offering, its offered price was deemed "not fair but reasonable" - which is common for Malaysian companies in Bursa nowadays.
Wednesday, May 6, 2020
We are just too optimistic
For much of the COVID-19 period between February to now (May 4), we have been largely tracking the S&P500. This rebound is good for the market given the sharp drop that many stock markets have experienced especially in March 2020.
We can call that free market competition at a time when many countries are looking inward - and globalization is dwindling.
Why is then our KLCI trending similarly to the US. One has to bear in mind, within S&P500, the top 5 companies (Apple, Amazon, Microsoft, Alphabet, Facebook), their future looks good given the current situation. They will be better off now and in the latter part when things are back to normal. We are not.
 |
| Comparison between S&P 500 and KLCI (3 months between 5 February to 4 May) |
I however think, we are just too optimistic. US is pumping USD3 trillion into their economy with Federal Reserve acting as the biggest bailout machine. EU and Japan will take similar actions. However, here in South East Asia, we can't just print money like what they do. Anything that we need from in terms of booster in the economy is just like picking up the crumbs from whatever is left out from the economic stimulus that are provided by these superpowers. US will come out the fastest as they have the luxury of having its currency as the reserve currency, China will be the dark horse, while the developing economies will be left hungry.
If anything, post COVID-19, let's look at what we can buy from the stock market. Retail will be dominated by Lazada and Shopee, both China's supported companies. Food and goods delivery would be controlled by foreign companies as well. Anything digital would be largely controlled by foreign companies. What do we have? Perhaps we have a small little company that does e-government services aka MYEG in the digital space. That's all.
We of course have our export industries but they are not as competitive as Vietnam anymore and we are largely dependent on foreign companies whom may not be interested at Malaysia as much as before. We in fact should not be dependent on them as much as we are not able to compete in terms of price. We should not compete in this area. Technically, many of the countries are catching up.
Let's pull out the companies in Malaysia that we think can be one which we can be proud of regionally. Even at one point of time, the government probably felt that Axiata is best being managed by the regional Telenor (Digi).
If anything this COVID-19 will expose our weakness economically - although the Ministry of Health had done a wonderful job. The economic revival is left to a group of people whom had just been in office for 2 months. Do we expect miracle?
They will have the standard statement. Let's go digital - Industry 4.0, go for FDIs. The local retailers whom many of them have yet to reach maturity, would probably fall by the wayside. The poor support that is given to our industries comprising many of small and medium sized is bad so much so many would suffer and may not be around. Those spaces would be filled by the new entrants and in the name of FDIs, we would be happy to open up to these guys to take over the economic spaces.
Why is then our KLCI trending similarly to the US. One has to bear in mind, within S&P500, the top 5 companies (Apple, Amazon, Microsoft, Alphabet, Facebook), their future looks good given the current situation. They will be better off now and in the latter part when things are back to normal. We are not.
Tuesday, May 5, 2020
Sold almost all Airasia - Why
I have sold almost all (16700 @ RM0.81) of Airasia par 200 units on 23 April 2020. Well, the rationale is almost similar to Warren Buffett's idea of selling all his holdings but it is different. Let me put the reasons.
For Berkshire Hathaway, he basically owned the Big 4 airlines - United, Delta, Southwest, American Airlines. When he bought the airlines I believe, it was due to the industry was facing reduced or managed competition, and the number of seats was much more controlled. One notice that Berkshire did not own a particular company but instead owned the Big 4. There was a reason to this, he did not want to make a picking on a company but rather made an industry call. COVID-19 pandemic however, changed that landscape much due to unforeseen oversupply even after the lockdown is over. The government of US was in fact putting $25 billion to support its airline industry during this trying times.
How the airline industry is going to change? The way people travel is going to be different and there are various thoughts - such as foregoing the middle seats for a single aisle, more sanitation and control etc. These are going to reduce the revenue for the airline companies but instead increased their costs. Nowhere in the world would be dissimilar when comes to this issue.
Malaysia or our region which includes China and India's situation is somewhat different although there are much similarities. These airlines be it Singapore Airlines, Thai Airways, MAS, Airasia, Lion Air - they are operating off different bases and registered as airlines businesses operating off a specific country. We know that Singapore government gave a rescue package of around $13 billion to SIA. Emirates and Qatar Airways which are representing much richer countries would have done the same - if not already done. We hear of Australia - at the moment - would allow Richard Branson's Virgin Australia to go under although airline industry plays a pivotal role in providing strength for the business and tourism industry - which is unforeseen in my opinion. I think China, would the same in rescuing its airlines as they are pretty much state-owned anyway.
What about Airasia? Well, the only thing we have heard is that the government may consider the amalgamation of Airasia-MAS and maybe including the much affected AAX. I however think that it is going to be very hard - depending on how hard Airasia or MAS are being hit. MAS would have been hit harder as it was not in any situation to survive, unless Khazanah continues to pump in cash. One must notice that at this moment, Khazanah would also be needed to perform its call of duty to support government's financial need.
Airasia was being lucky that it sold more than 110 planes over the last 2 years. It was holding cash as it managed to secure more than RM11 billion of sale. We also have gotten some of the cash in the form of dividends (about RM1.35 per share) from that results, and I have heard of analysts mentioning that the cash situation would have been better if it was not distributed. Well, let's put it that some of the cash may have remained in the hands of the largest shareholders and when in need, there would possibly be a cash call exercise. So I think, Airasia would be saved despite it being a private company.
Why would I then sell Airasia? First of all, it is probably the hardest hit industry and no one can predict the outcome. No matter how our modelling is done, it is hard to predict. Let's say the worst case scenario - what if no vaccine is found even after 2 years? People may not be able to fly inter-country for months or quarters. I still think at this moment the fittest will survive and given the balance sheet of Airasia, it is the fitter one. HOWEVER, where Airasia is operating from i.e. Malaysia, Thailand, Philippines, Indonesia - these countries are not the fit ones.
These countries would have enough trouble supporting their economies whatever the outcome may be from COVID-19 and they would not have the financial power to support their airlines. Malaysia is hit by the virus, political uncertainties, oil. Thailand is hit as well and it is probably thrashed by the automotive industry situation.
Post COVID-19, the ones with the balance sheet will survive and prosper. The same is onto a particular company - and the similar situation would be for countries.
What I am afraid is - the SIAs, Scoot, Qatar, Emirates would be outrunning the air space. There would be oversupply of seats for a while. The situation is people would be still hungry to travel but not for the shorter term. I know I have heard of behavior will change but I think certain behavior like wanting to travel will stay, but the bigger thing I fear is that the poorer countries may not be able to support their own industries and airline industry needs support no matter what the outcome would be in future.
For Berkshire Hathaway, he basically owned the Big 4 airlines - United, Delta, Southwest, American Airlines. When he bought the airlines I believe, it was due to the industry was facing reduced or managed competition, and the number of seats was much more controlled. One notice that Berkshire did not own a particular company but instead owned the Big 4. There was a reason to this, he did not want to make a picking on a company but rather made an industry call. COVID-19 pandemic however, changed that landscape much due to unforeseen oversupply even after the lockdown is over. The government of US was in fact putting $25 billion to support its airline industry during this trying times.
How the airline industry is going to change? The way people travel is going to be different and there are various thoughts - such as foregoing the middle seats for a single aisle, more sanitation and control etc. These are going to reduce the revenue for the airline companies but instead increased their costs. Nowhere in the world would be dissimilar when comes to this issue.
Malaysia or our region which includes China and India's situation is somewhat different although there are much similarities. These airlines be it Singapore Airlines, Thai Airways, MAS, Airasia, Lion Air - they are operating off different bases and registered as airlines businesses operating off a specific country. We know that Singapore government gave a rescue package of around $13 billion to SIA. Emirates and Qatar Airways which are representing much richer countries would have done the same - if not already done. We hear of Australia - at the moment - would allow Richard Branson's Virgin Australia to go under although airline industry plays a pivotal role in providing strength for the business and tourism industry - which is unforeseen in my opinion. I think China, would the same in rescuing its airlines as they are pretty much state-owned anyway.
What about Airasia? Well, the only thing we have heard is that the government may consider the amalgamation of Airasia-MAS and maybe including the much affected AAX. I however think that it is going to be very hard - depending on how hard Airasia or MAS are being hit. MAS would have been hit harder as it was not in any situation to survive, unless Khazanah continues to pump in cash. One must notice that at this moment, Khazanah would also be needed to perform its call of duty to support government's financial need.
Airasia was being lucky that it sold more than 110 planes over the last 2 years. It was holding cash as it managed to secure more than RM11 billion of sale. We also have gotten some of the cash in the form of dividends (about RM1.35 per share) from that results, and I have heard of analysts mentioning that the cash situation would have been better if it was not distributed. Well, let's put it that some of the cash may have remained in the hands of the largest shareholders and when in need, there would possibly be a cash call exercise. So I think, Airasia would be saved despite it being a private company.
Why would I then sell Airasia? First of all, it is probably the hardest hit industry and no one can predict the outcome. No matter how our modelling is done, it is hard to predict. Let's say the worst case scenario - what if no vaccine is found even after 2 years? People may not be able to fly inter-country for months or quarters. I still think at this moment the fittest will survive and given the balance sheet of Airasia, it is the fitter one. HOWEVER, where Airasia is operating from i.e. Malaysia, Thailand, Philippines, Indonesia - these countries are not the fit ones.
These countries would have enough trouble supporting their economies whatever the outcome may be from COVID-19 and they would not have the financial power to support their airlines. Malaysia is hit by the virus, political uncertainties, oil. Thailand is hit as well and it is probably thrashed by the automotive industry situation.
Post COVID-19, the ones with the balance sheet will survive and prosper. The same is onto a particular company - and the similar situation would be for countries.
What I am afraid is - the SIAs, Scoot, Qatar, Emirates would be outrunning the air space. There would be oversupply of seats for a while. The situation is people would be still hungry to travel but not for the shorter term. I know I have heard of behavior will change but I think certain behavior like wanting to travel will stay, but the bigger thing I fear is that the poorer countries may not be able to support their own industries and airline industry needs support no matter what the outcome would be in future.
Sunday, April 26, 2020
The Malaysian stock market does not look bright
COVID-19 really takes many by surprise. It is very different from other economic downturn. This downturn is global and it impacts basically every major country especially the very large developed countries. No country it seems would be spared and the largest of economy currently are busy fighting the virus. When this fight is partially or fully over, only then the economic activities would be fully restored. The problem with this time is, we do not know when. It is feared that by the time we reopen our economic activities fully, many companies would not have the ability to survive.
Although this crisis feels like it had happened over a long period, in actual fact the real effect has only been felt for less than 3 months - since February when it really started in China. In most economies and stock markets especially the recent ones, there were most often hope and people traditionally had thought that it would have recovered. This crisis will recover but it may take a long time for that to reach its full economic activities let alone growth. The fact of the matter is that this is just the beginning of a long war.
To compare, one should not compare 2021 or 2020 against its immediate previous year. It should not be year on year although it is good to get an indication of growth. The base year for any of this should be 2019.
For 2020, it is a given that the world is to face a recession, and we may even get to a depression if the crisis persist for a longer period. For economy to return, many countries are using debt. Companies that are hugely affected will need rescue and government will use the debt that they issue to fund those rescue - if it is of any major assistance. The ability for any government to issue debt would depend on each country's capacity.
US government is talking of up to $4 trillion in terms of additional budget. For Japan, it is in excess of $1 trillion. Malaysia? we do not have much fiscal ability. By my count, after the several stimulus that have been announced, Malaysian government is possibly raising additional RM35 billion at the moment. I believe that amount will touch RM50 billion, but we do not have much tools to raise further funds through debt.
Why?
The world's government are now raising debts. Basically every country. To pick up those, they need someone to buy. In US, they would have it easier to do that as US Dollar is the world's currency. Many countries, business companies would want to hold Dollar as a reserve. To do that, they are going to pick up the government bonds. Europe's EU will have some ability of the same. So is Japan. What about Malaysia? We will have challenges to raise bonds unless we offer attractive terms. What are those terms - good rates but would anyone be buying our bonds if the rates are attractive but the currencies may deteriorate?
So what does our government do? We grapple for our own funds to pick up those - organizations such as EPF, KWAP, Petronas, PNB. Many of these GLCs and statutory bodies would be needed to pick up a substantial portion of the country's bond issuance. However...
Once they pick up these instruments, they would forgo the other - which would be - they would be selling stocks and other assets. (Stocks is the most liquid though) In the case of EPF, it may look at selling its overseas stocks and patch them back into our MGS. They will be needed to defend our market as well.
Now do we know why despite the challenges faced by companies, EPF does not move an inch (except for the 7% contribution option given to employees) on requiring employers to reduce their contribution. This is because that net inflow of around RM3 billion a month into EPF is a necessary instrument to defend the country's trouble.
What should investors in Malaysia do then. Given the uncertain and tight monetary situation, one should wait. For the first time, one should hold safe assets - it may not be cash but some defensive companies or assets - really defensive ones.
Although this crisis feels like it had happened over a long period, in actual fact the real effect has only been felt for less than 3 months - since February when it really started in China. In most economies and stock markets especially the recent ones, there were most often hope and people traditionally had thought that it would have recovered. This crisis will recover but it may take a long time for that to reach its full economic activities let alone growth. The fact of the matter is that this is just the beginning of a long war.
To compare, one should not compare 2021 or 2020 against its immediate previous year. It should not be year on year although it is good to get an indication of growth. The base year for any of this should be 2019.
For 2020, it is a given that the world is to face a recession, and we may even get to a depression if the crisis persist for a longer period. For economy to return, many countries are using debt. Companies that are hugely affected will need rescue and government will use the debt that they issue to fund those rescue - if it is of any major assistance. The ability for any government to issue debt would depend on each country's capacity.
US government is talking of up to $4 trillion in terms of additional budget. For Japan, it is in excess of $1 trillion. Malaysia? we do not have much fiscal ability. By my count, after the several stimulus that have been announced, Malaysian government is possibly raising additional RM35 billion at the moment. I believe that amount will touch RM50 billion, but we do not have much tools to raise further funds through debt.
Why?
The world's government are now raising debts. Basically every country. To pick up those, they need someone to buy. In US, they would have it easier to do that as US Dollar is the world's currency. Many countries, business companies would want to hold Dollar as a reserve. To do that, they are going to pick up the government bonds. Europe's EU will have some ability of the same. So is Japan. What about Malaysia? We will have challenges to raise bonds unless we offer attractive terms. What are those terms - good rates but would anyone be buying our bonds if the rates are attractive but the currencies may deteriorate?
So what does our government do? We grapple for our own funds to pick up those - organizations such as EPF, KWAP, Petronas, PNB. Many of these GLCs and statutory bodies would be needed to pick up a substantial portion of the country's bond issuance. However...
Once they pick up these instruments, they would forgo the other - which would be - they would be selling stocks and other assets. (Stocks is the most liquid though) In the case of EPF, it may look at selling its overseas stocks and patch them back into our MGS. They will be needed to defend our market as well.
Now do we know why despite the challenges faced by companies, EPF does not move an inch (except for the 7% contribution option given to employees) on requiring employers to reduce their contribution. This is because that net inflow of around RM3 billion a month into EPF is a necessary instrument to defend the country's trouble.
What should investors in Malaysia do then. Given the uncertain and tight monetary situation, one should wait. For the first time, one should hold safe assets - it may not be cash but some defensive companies or assets - really defensive ones.
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