So it's confirmed AEON buying Carrefour Malaysia

News today, AEON (don't know which yet, but the news is saying AEON Ltd, Japan) is buying Carrefour's Malaysian operations for Euro250 million (almost RM1 billion) lock stock and barrel (which includes the debt). I do not see Carrefour Malaysia having much debt though.

Contrary to some of the analysts reports, I doubt AEON will be operating a hypermart but rather supermart and mall. That's my speculation as AEON is better off operating malls and supermarts being its expertise.

On another note, whether it is AEON Japan buying or it using AEON Malaysia's balance sheet to buy, I see the purchase to be merged up with AEON Malaysia's operations. No sane management would be managing and having a structure which is separate from one another in terms of holding structure.

In fact, AEON Malaysia's balance sheet is strong enough to absorb the operations almost immediately. This is premature, but I am even confident of it not needing to raise additional cash from rights issuance or private placements. But any of these options may be possible as well so as not to burden the balance sheet too much.

If anyone is interested, in the longer term or even shorter term, AEON Credit would benefit from this immediately as compared to AEON Malaysia itself.

I nevertheless sees it as positive for both AEON Malaysia and AEON Credit despite reports that there are overlapping in locations.

AEON Credit would be able to immediately increase its reach while AEON Malaysia (the supermart and mall) tasks would be trickier - i.e. turning around a hypermart. Nevertheless, the move is good for an immediate increase in outlets as well as doubling its reach. The business of supermarket is about reach, size, logistics and strong balance sheet.

My other articles on AEON:

AEON Credit: Perhaps this other AEON is even better

AEON: Using other people's money

AEON buying Carrefour would be positive for AEON Malaysia

Genneva Gold or whatever Gold, where is the Gold craze heading?

I am no expert in Gold. Neither can I comment on the Genneva Gold scandal as I do not know much about it. If I may, I think and would like to claim that it is a scam (but that is being too irresponsible just to say that without knowing much about it.)

The fact of the matter is that anyone who invests into gold must know that it is a commodity which is dictated by supply and demand. I believe that the reason for people to go crazy over the investments into Genneva Gold's pitch is partly due to the craze over gold as investments. The buzzline has been "cash money as a currency has gotten weaker" if we hold on to cash. Possibly true.

Gold has been a good growth story for the last 10 years or less. Before that, it was not much of a story. See below.

1 year trend

Over the last 1 year, Gold's price has not been doing well for investors

5 year trend

5 year trend - its been good as investors rush towards alternative investments as the Fed keeps on printing money

15 year trend - see when the pick up in price started

Prices started to pick up since 2002 - pretty much when most commodities (in fact all) picked up

30 year trend - not much movement between 1982 to 2002

Hence, anyone who believed in Genneva Gold or still believes in just GOLD itself for that matter must know that as in any investments, it can go up as well as down. There must be very good reasons for it to move up even further. Inflation? Too much liquidity in the market? Gold is tangible, so you can touch it? - of course my question is what for? Does it pay you dividends? Does it gives a return besides you needing to find a place to store it?

What convinces a person that it will provide positive returns in future?

AEON Malaysia's statement on purchase of Carrefour in Malaysia

AEON Malaysia made a statement on the rumour of its purchase of Carrefour. Please be guided and see below.

I did mention of my opinion if Carrefour Malaysia is purchased by AEON. For now, as you can see this remain a rumor. If any approach is made, it would probably be between AEON Japan and Carrefour France. I however foresee that if this deal is made fruitful, it may involve AEON Malaysia as there are no reasons for AEON Japan not to do that due to its 51% holdings of AEON Malaysia's listed entity.

It's really hard to envision YTL's 4G to work

Standing on the sideline, Tan Sri Francis Yeoh's statement may be more hopeful than real. He is a businessman where his role is to convince and execute. First convince yourself, then your investors, employees and then only execution. You would not be able to execute if you yourself are not convinced, which is why he has plowed a huge sum of money into the YES network. He believed in it, I should say.

YES has kept harping on its 4G network. What is 4G? I do not have to explain much but to point you to wikipedia. Basically it is an acronym for 4th generation network which is still grey-ish in terms of its qualifying claims - that is which network provider stands to qualify to claim that it has the real 4G deployment. For the sake of this blog-piece, there are 2 standards which are commercially deployed - Mobile WIMAX and LTE. I am not going to go technical here but if you really look at the success of deployment commercially, 3G has been a success. And that success has been partly to do with Iphone and Blackberry's in making them a success and about 1 to 2 years later, Android. I remember at one point of time before Blackberry (was huge) and Iphone, the mobile players were struggling to make 3G a success. They were really struggling, and  turned around, now there are not enough bandwidth. See how fast things have changed. To claim that network providers do have the solution is not true. The devices makers like Apple, Google and RIM are the ones that have the solutions.

3G and 4G

What type of devices where the mobile networks are used often? Smartphones (Iphone, Samsung Galaxy, HTC etc) and Tablets (Ipad, Galaxy, Kindle). Now, the latest version of all these smart devices - the Iphone 5, Samsung Galaxy 3, latest Kindle Fire etc. - all of them support LTE, but none (as I see it) support Mobile WIMAX.

YTL's YES 4G technology is a version which runs under the Mobile WIMAX. Hence, for these devices to run on the YES platform, additional device has to be plugged onto the smartphones or tablets. So far, I have yet to see Apple or Samsung or even Microsoft's Surface came out supporting WIMAX, and that is a problem for WIMAX network providers.

Remember the Sony Betamax vs VHS war! History will repeat. WIMAX will not win. YTL will claim that it is going to be awarded LTE a spectrum. Where are the advantage then when the network is not to your favour (as all the rest are to be given LTE as well) and definitely money is not in YTL's favour.

No network advantage and no cash advantage = NO WIN.

Aeon buying Carrefour Malaysia: If it's real it's positive

Read about Aeon is closing in on Carrefour's Malaysian operations. A quick check - Carrefour is the third largest hypermarket operator in Malaysia with 26 outlets as at 2011. Although Carrefour has some of the best locations in Malaysia, I feel that Carrefour is not as strong an operator as compared to Aeon. I do not think Carrefour manages its hypermart well with the impending tough competition especially from Tesco.

By buying Carrefour's operations, Aeon will immediately double its number of outlets although I have doubts that it will continue operating as a hypermart as I feel that Aeon is better off positioning itself as a supermart. Some of the locations may just be overlapping like the one in Mid Valley. Nevertheless, it is a very good way to increase its reach despite the purchase price being a factor as well.

Although I do not know how many of the outlets Carrefour owns its premises outright, for an immediate expansion the price tag of USD250 million may not seem expensive for Aeon. I am sure Aeon will need to spend quite a bit for renovation as some of Carrefour's outlets seem old and need refurbishing. Aeon's balance sheet nevertheless will be able to absorb that without even having the need for a cash call from shareholders.

I like this deal if it's real. Based on Carrefour's Annual Report, revenue from its Malaysian operations totalled RM1.6 billion last year.

As for the total sales area, Carrefour Malaysia has 173,000 sq mtrs of retail space.