Tuesday, September 29, 2009
Maxis Relisting – The Race for the Pathetic Limited Shares
Excitement returns once again, at least to the employees of Maxis Communications Berhad who enjoyed their fortunes via ESOS not many moons ago. Will their big boss Ananda Krishnan be generous enough to distribute some pink forms to them, again? It may or may not happen because the situation is quite unique now. The whole re-listing of Maxis is still sketchy especially to the employees. The whole plan is still at draft level and until the official IPO prospectus is out Maxis together with the guaranteed underwriter, CIMB Group (CEO Nazir Razak – brother of PM Najib Razak) with Credit Suisse and Goldman Sachs, can still go back to the drawing board for amendments.
The re-listing is of course for real. As a matter of fact the moment PM Najib Razak announced he was persuading Maxis to relist again (after privatization on June, 2007) in the Kuala Lumpur Stock Exchange in his effort to lure foreign investors’ hot money into the country, you know the decision (to relist) had been made many weeks earlier. The only concern is definitely the timing for the listing considering many are still cautious about the global economy especially in the United States. And do I need to tell you again the main problem of the U.S.’s economy currently? If the IPO of Maxis proceeds as planned, it would definitely be the biggest IPO ever.
Unlike seven years ago (2002) when the company needs the money to expand the busines Maxis’s re-entry this time is due to different reason(s). Maxis actually do not need to re-list again considering it is enjoying a very healthy of cash-flow. Its revenue recorded RM6.95 billion, RM7.68 billion and RM8.44 billion for the financial year ending 31 December 2006, 2007 and 2008 respectively. The net profit registered was RM2.10 billion, RM1.98 billion and RM2.40 billion for the same period. Net earnings per share were at 28.1 sen, 26.4 sen and 32.0 sen from 2006 to 2008. Unless you’ve freaking good reasons (or excuses) to take your company through the process of listing again, one cannot imagine why such a company would want to tap the public funds.
While the company only disclosed its domestic financial figures to the Securities Commission pre-listing hence hinting the operations and growth prospect in India (via Aircel) and Indonesia (PT Natrindo) are excluded, at least for the time being, you’ll be facing another grey area should Maxis decided to inject these overseas operation into Maxis Communications Berhad later. Who can forget the hundreds of millions in losses from the Astro’s Indonesia venture? However traditionally blue-chip stock such as Maxis is almost guaranteed to command premium post-IPO thus there’s still money to be made. The question instead is whether you as a retail investor will be able to gain exposure to the stock pre-IPO due to limitation in retail portion.
There’ll be no new share issued but 30% of the IPO shares will be from the current stakeholders. Post-IPO, Maxis Communications Berhad will hold 70% stake in Maxis Berhad while the remaining 30% goes to retail and institutional investors. The bad news – retailers will get only 2.33% (174.795 million shares) and institutional investors get the lion 27.67% (2.075 billion shares) portion. The worse news – if you’re not privileged Maxis customers, dealers, directors and whatnot you’re cannibalizing each other in the retail segment because the allocation is actually 1.50% (112.5 million shares) of the 2.25 billions shares to be floated in the stock exchange. The worst news – the segregation of 1% (75 million shares) and 0.5% (37.5 million shares) for bumiputra and non-bumiputra respectively means you’re into “gladiator games” fighting the wild animals (institutional investors and privileged retailers) and your fellow comrades (average Joes from bumiputra or non-bumiputra).
The argument that associates retail investors with “dumping risk” group actually does not hold water. They don’t cry and jump from 18th floor because they got burnt for no apparent reason. The fact is retail investors are more emotional attached to their stocks than anybody so it was the institutional investors who will never think twice about dumping their stocks the moment the technical indicators said so. In the contrary retailers will keep their stocks (they never learn, do they?) under their pillow even during market crashes. Most of the retailers are expert in buying but not in selling *grin*.
Another fact that you may need to know about Maxis is this company is a different animal now compared to seven years ago. The market is already saturated with very little room for growth regardless whether in the postpaid, prepaid or wireless broadband segment. In fact the monthly ARPU of postpaid is in declining mode (from RM140.2 in 2006 to RM112.3 in 2008) whereas the prepaid and wireless are not growing at all (have I told you Maxis’s wireless broadband sucks big time?). Maxis’s latest sexy offering is of course the exclusive partnership with Apple Inc.’s (Nasdaq: AAPL, stock) iPhone via 3G. Seriously without iPhone 3G which is gaining momentum (hope they can slash the freaking high price) the IPO story is less attractive.
So, how much is Ananda Krishnan asking from the 30% public offering? The price is still very sketchy with fluctuations ranging from RM3.60 to RM6.20 a share. Some analysts predicted RM5.40 per share justifying the Maxis brand may commands 18-multiples (compared to DIGI.com’s 16-multiples) of financial-year-2009’s 30 sen EPS (earnings per share) hence raising RM40.5 billion to Ananda Krishnan and his shareholders. However I would think such valuation is too high considering the current telco market scenario but then with retailers fighting tooth and nail for the freaking pathetic limited 2.33% shares allocated, the risk of under-subscription is almost none. Furthermore the promise of dividend payout of 75% of earnings is sufficient to attract investors.
We’re still not sure the main reason tycoon Ananda Krishnan decided to re-list his crown jewel. Maybe he was asked to perform national service in exchange for some attractive propositions. Maybe he needs to unload and the RM40.5 bilion (based on IPO price of RM5.40) is a lot of money for him to re-allocate elsewhere. Maybe he couldn’t find any other oversea markets attractive enough to unlock his Maxis due to current economy climate. Maybe the counter-offer from Najib’s administration was too attractive to reject. Maybe he’s more confident with Najib’s administration since his close buddy former PM Mahathir is behind the scene advising Najib. Heck, for all you know maybe he knows something about Maxis potential that it would be stupid not to unload now *grin*.
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Stumble it!
Tuesday, September 22, 2009
Malaysia F-1, Made-in-Malaysia or Made-for-Cronies?
Remember how Janet Jackson’s right breast was exposed during the halftime show at the Super Bowl - more than five years ago? Some 72,000 fans in Reliant Stadium and more than 100 million watching around the world got more than what they expected to see when Justin Timberlake who was singing “I’ll get you naked by the end of this song” when he ripped off Janet’s top, exposing her bare breast – the nipple covered by a metal “solar”medallion. Of course Justin claimed it was an accident and blamed it on “wardrobe malfunction”. But if you were to talk to anyone back then, nobody would believe it was “unintentional” but rather part of a stunt simply because it’s quite unusual for anyone to put a star on the breast for personal or private viewing *grin*.
Now that the ruling government’s most hated blogger RPK has exposed copies of 18-page memorandum submitted by Finance Ministry to the cabinet seeking endorsement for RM4.6 billion government loan to cover the cost over-run of the PKFZ project, Najib’s administration cannot deny anymore that it didn’t know anything about the scandal and hope to sacrifice former Transport Minister Chan Kong Choy and a few more small fishes – if that was the intention in the first place. The immediate reaction from Najib to punish those who leaked the Cabinet documents (under the name of Official Secreat Act, OSA) was sufficient to confirm that the government knew about the scandal since day one. Unlike Janet Jackson’s NippleGate, there’s no twinkle-twinkle little star to cover Najib’s administration breast.
The ruling government tried to block RPK’s Malaysia-Today website but they knew better than anyone that it was a fruitless effort. Hence Najib’s cousin, Home Minister Hishammuddin changed the strategy and is tracking the identity of the “insider” who passed the documents to RPK. Now you know why Tiong King Sing wasn’t disturb a bit with Ong Tee Kiat’s action to expose the PKFZ scandal. Tiong knew nobody will be prosecuted because the stake was too high. If he were to be brought down, he’ll make sure he’ll bring along Transport Ministers, Finance Ministers and many of Najib’s administration top officials to become his cell-mates *grin*. Although this is a golden opportunity for Najib to prove to the voters that he’s a greater leader than Mahathir in fighting corruption, he couldn’t afford to shake the already sinking ship he’s commanding. Thus he would try his very best to cover or divert the attention from the PKFZ scandal.
Najib’s only silver bullet now is to perform exceptionally in the economy sector. He knew voters especially the Chinese voters were throwing their votes behind his advisor, former PM Mahathir, despite the dictatorship and numerous scandals because Mahathir did well in driving the country’s economy. Besides economy agendas, he also needs to do branding so that people can remember him for something he did. The mention of Mahathir and you’ll immediately think of Proton, KLCC, Cyberjaya, Putrajaya and others. Thus, Najib needs an icon associate with him. Nope, he can’t glorify the Scorpene submarine because that would bring back the bad memory of Altantuya. Neither can he imitate his predecessor Abdullah Badawi in “Corridoring”. So far he has not find anything as gigantic as KLCC or Corridors but he’s learning fast and still accepting ideas.
His recent idea for Malaysia to have its own 1Malaysia F1 team in Formula One next year was indeed a very brave (and risky) and raised many eyebrows. Leveraging on Proton-owned Lotus-powered racing team the initiative would be better than sending a space tourist into space if the team could give giants like Ferrari and McLaren-Mercedes a run for their monies. The team will be a partnership between the government and private sectors especially AirAsia Berhad’s (KLSE: AIRASIA, stock-code 5099) and Naza Group. Nobody can deny the fact that Formula-1 is indeed one of the greatest platforms in advertising and marketing and if this latest stunt by Najib works it would move his rating several notches up, not to mention that it would put Malaysia on the world map once again *ahem*.
Of course the joke of the town was that it would do peoples’ favor if Proton or Lotus could at least fix the legendary window-problem first before try to take on the Formula-1. Many also sarcastically hope the 1Malaysia F1 team drivers (whoever that is) could drive faster that Formula 1’s safety car *grin*. But was Najib’s plan a wise move since even giants like Honda and BMW have decided to quit due to extraordinary high cost? Honda and BMW’s F1-teams were spending US$398 million and US$367 million respectively in 2008 alone. The team that spent the least, Force India, was spending US$122 million in 2008 and you don’t have to be a rocket scientist to calculate how much the 1Malaysia F1 team would be spending.
You can argue that the expenditure is the problem of the private sector, in this case AirAsia and Naza Group. But why would smart peoples like AirAsia and Naza decided to waste hundreds of millions of dollars in a project such as Formula-1? Wait a minute, AirAsia Kamaruddin mentioned the company is spending only £10 million (RM57 million) initially so it seems Proton or the government (public’s money) will be spending huge amount of monies for this project. Have they forgotten the disastrous experience and humiliation experienced by the country in 2001? It took the main sponsor Magnum three F-1 races before the lottery company threw in the towel, sending the then Malaysian F-1 driver, Alex Yoong, to drive A-1 instead.
Sure, Alex Yoong was the wrong candidate to drive in Formula-1 (is he coming back again?). He was there because of this father’s close connection with the then Mahathir’s administration. But since then do we have the local quality to drive such a powerful racing car? Will we try the same path as Alex Yoong again and in the process send Malaysia’s team to the bottom of the chart? Maybe they’ve shortlisted daredevil “Mat Rempits” as the future heroes. Otherwise it is misleading to declare that the F-1 car will be designed, manufactured, tested and basically everything is “Made-in-Malaysia”. Lotus may have the experience in the Formula-1 arena but its last F-1 face was in 1994, more than a decade ago. So was this project a genuine one or it’s another project to enable political cronies to dry up the country’s money?
As for advertising it wouldn’t do AirAsia or Naza any favor if the team continuously fails to finish the race, let alone winning. It’s a known fact that the Formula-1 via FIA is desperate for participants especially after the giants Honda and BMW decided to leave the race. Hence, it was speculated that the bar has been lowered to new participants. Nevertheless, Najib’s administration has to be transparent in disclosing the spending of public’s money in this Formula-1 project because it’s nobody will believe the government and Proton will not be spending a single cent in such a high-profile project. But one thing is for sure – if this project fails, you can be assured that some companies (or rather cronies) have made hundreds of millions in the process. One has to remember the ruling government is flush with monies because it’s holding back the money for development in developed states captured by the opposition especially Selangor and Penang.
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Thursday, September 17, 2009
Unloaded AAPL with 200% Profit
It's been many moons since I last publish my profit. It's definitely not easy to score 3-digits percentage profit and with the expiration about two days away, AAPL has been kind to me. The stock jumped a whopping $7 bucks a share prompting me to unload with profit well above 200%. With Dow Jones approaching 10,000 and Apple breaching $180 a share there's no reason I shouldn't dump it, not that I've any option since the expiration is two days away.
Monday, September 07, 2009
MCA’s Leadership to Change - minus a Ministry?
Corruption and racial politics are two main top ala-cartes on the ruling government’s menu headed by UMNO. These two authentic cuisines are so delicious that after 52-year of independence they (corruption and racial politics) are still being practiced by the ruling BN government. Just like in the stock market whereby the stock prices are determined by sellers and buyers, the corrupt and racist BN can still survive simply because the voters strangely endorse such culture. It’s true that you can’t put the blame entirely on the ruling BN government for the massive corruptions and the politics of racism. Hey, if there’s no demand then there should be no supply, literally, so blame the voters.
Of course one can argue that the people were to scare to voice their dissatisfaction after the “May 13, 1969” racial riots that killed many innocent people. Malaysia is a great country not too much because she is disaster-free but because this country seems to enjoy endless refill of wealth. The discovery of oil led to the formation of Petronas in 1974 of which the actual accounting remains the greatest government secret till today. Coupled with other natural resources the country is so cash-rich that it would be impossible for the ruling government not to plunder the wealth. Of course the standard modus operandi to do so is to jack-up many times the original cost of projects. Hence the name of the game is to create many gigantic projects, never mind it’ll become white elephants.
Along the years there were many scandals but nothing beats the controversial PKFZ (Port Klang Free Zone) scandal which looks to balloon to RM12.453 billion from the original RM1.957 billion in another two years if the government still drags its feet. But the project was designed in such that the politicians involved especially KDSB (Kuala Dimensi Sdb Bhd) was given a blank-cheque. Basically the idea was to ensure PKA (government’s Port Klang Authority) becomes rubber-stamp and additional costs over-run are being billed until it balloon to as much as possible. The project has made KDSB’s boss Tiong King Sing very very rich indeed. But he has many other “political friends” to thank for the smooth sailing amongst them Ting Chew Peh, Yap Pian Hon, Chor Chee Heung and not forgetiing former Transport Ministers Ling Liong Sik and Chan Kong Choy.
However the tycoon who is also the BN backbenchers’ chief received a rude shock when MCA newly elected president, Ong Tee Kiat, made public the audit findings by PricewaterhouseCoopers about irregularities on PKFZ project. The delay in the release of the findings initially however suggested that Ong Tee Kiat was under political pressure from his master, UMNO, to sweep the scandal under the carpet. But since the Mar 2008 general election, the ruling government cannot ignore peoples’ voice in totality whatmore with Ong’s promise to reveal all about the project, just before he becomes the president of MCA. Ong Tee Kiat also may think that it would be wise for him not to cover the scandal, not that he could in the first place, considering he’s still relatively “clean” compared to his predecessors Chan Kong Choy and Ling Liong Sik.
Politically, Ong Tee Kiat’s base is still quite weak compared to his rival Chua Soi Lek thus naturally he made the right move to project himself as the least tainted MCA president. But in the process he has offended the billionaire Tiong King Sing and many other politicians who received kickbacks for closing both eyes on the PKFZ project. Suddenly he was surrounded by tons of corrupt politicians who would like to see him vanish from the political arena. As much as Najib’s administration would like to see the scandal sweep under the carpet (again) Ong Tee Kiat may offered the PM the only solution to attract the Chinese votes it losts, or at least in maintaining what MCA has left from the Mar 2009 election’s slaughter – transparency and political will to fight corruption.
Even though Ong Tee Kiat may have made the wrong political move by sacking the “sex-actor”, deputy Chua Soi Lek, the fact remains that Najib likes Chua Soi Lek more than Ong Tee Kiat for obvious reason – both of them take care of their women well *grin*. Seriously, Najib prefers Chua Soi Lek because both of them speak the “same language” and share the “same channel”. Chua is definitely a “yes-man” to Najib’s UMNO but the same cannot be said about Ong. If not because of the changes in the political landscape Ong Tee Kiat would have been “ordered by UMNO” to vacate his president seat for violating BN’s code of conduct – exposing ruling government’s scandal publicly thus embarrassing the premier. Now political analysts are predicting that both Ong and Chua may shake hands, hug and kiss each others and start packing their stuffs together.
What better option than to have young and obedient chaps such as Health Minister Liow Tiong Lai and Deputy Education Minister Wee Ka Siong to become the new president and deputy president of MCA knowing well that both are guaranteed to “kow-tow” to their political master UMNO? The fact that Ong Tee Kiat was grilled twice by the Anti-Corruption Agency on allegation by Tiong King Sing that the former took free ride using his private jet and accepted RM10 million in donation clearly shows that Ong Tee Kiat’s tenure in MCA may not last long. Heck, which political parties within the ruling BN government never accept donations before? Short of freezing RM140 million of Kuala Dimensi funds which is chicken-feed to Tiong King Sing, the tycoon is still untouchable. The battle here is about who has the deepest pocket and there’s no prize for guessing who will win ultimately. It was hope that once Ong Tee Kiat is out of MCA the PKFZ scandal may be forgotten - forever.
That’s why the “cow head” incident was orchestrated – as the backup plan to divert PKFZ scandal and MCA crisis from the public. The main objective for such racial tactic (cow is considered sacred to the Indians) was of course to create havoc to the opposition who is governing the Selangor State. The fact that Najib’s cousin, Home Minister Hishammuddin, was biased and very protective of the “cow head” demonstrators was disturbing although the UMNO’s plan would be perfect if it could excite some Indians to the streets. Government’s demand for the video on the “cow head” protest to be removed from MalaysiaKini also shows attempt to cover-up the disgusting provocation allegedly involving UMNO leaders. If it was true that the “cow head” protest involved members from PKR, PAS and UMNO as alleged by the Home Minister then by all means put all of them under ISA or at least interrogate them. The ruling government is embarking on a full-scale of destructions and chaos to the states controlled by the opposition – the next is no doubt Selangor after Perak was captured.
There’s of course speculation that after Ong and Chua’s episode is over, MCA’s current ministerships may be reduced by one in the next Cabinet reschuffle. UMNO will take the opportunity and may argue that since MCA is weak it’s justifiable to relocate the minister position (Transport Ministry?) to stronger component party from the East (Sabah or Sarawak?). But nobody really cares if this is true because the Chinese voters have given up hope on MCA. However if Najib’s administration were to proceed with this hair-cut during such sensitive period it only goes to give the opposition especially DAP free bullets to attract the remaining Chinese votes currently attached to MCA. The idea of MCA pulling out from BN is laughable at this moment simply because the cake still has delicious icing on top of it. It would be fun to watch Chua Jui Meng gives Ong Tee Kiat a good hug and say “Welcome aboard Mr. former President. Now I’m the senior and you’re the junior here”.
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Wednesday, September 02, 2009
September – the month of Ghost Investing
Besides studying the fundamental and technical analysis of stocks there’re many other things you need to be aware of. One of these is the history of the stock markets itself. Too bad if you hate history but I found history to be very interesting although I’ve to admit I scored my history papers by memorizing the facts. Yes, history is about facts although there’re many politicians who are trying to re-write the history even from primary schools’ text-books – to ensure their individual’s survival based on racial cards. We learn from history and because of history we may not see another world war (hopefully) again, at least we’ve the will to prevent it because the Hiroshima and Nagasaki’s destructions were enough to spook us.
The month of September started with a bang – Dow Jones and Nasdaq went down the drain plunging 185.68 and 40.17 points respectively or 2 percent each. In fact, since 1929’s Great Depression September has been the worst single month in the history of U.S. stocks. With September and October traditionally being two worst months of the year, you should find this as an excuse not to enter the stock markets. Who can forget the Sept 11th terrorist attacks that left many stock punters flabbergasted? On Sept 2007 we saw queues of panic customers withdrawing their monies from Northern Rock while Sept 2008 witnessed the collapse of Lehman Brothers and the rest is, well, history.To the Chinese it’s the seventh month in the lunar calendar where all the souls from the “underworld” are coming to pay us visits *grin* - the Ghost Festival. And these ghosts do visit stock markets, mind you. So while you’re busy glueing yourself to the display board at the stock gallery, remember to leave some seats to these “brothers or sisters”, will ya? Heck, I was joking and you should not adopt investing by the calendar. Take it with a pinch of salt although it’s wise not to put all your monies on the table simply because investors are taking some of their monies off the table. This is natural after the recent rally from March to May although I think it won’t do any harm if you can spend some time monitoring the Shanghai Stock Exchange – hopefully S&P 500 is not following Shanghai’s pattern, if the Chinese stock market is indeed experiencing a huge correction.
But let’s not panic after the Dow’s overnight 25% plunge because the DJIA is still above 9,000-level. Maybe we can press the panic button only if it tumbles below this level. Furthermore recent investor sentiment survey showed 51.6% bulls, 19.8% bears and most importantly 28.6% actually expecting a correction after the recent rally. However I suppose in a market where the bull is taking its rest, rumors of more bank failures can easily send stocks players run helter-skelter. It seems investors have pulled a staggering $4.77 billion from two Cerberus hedge funds. That amounts to almost 20% of Cerberus’s total $24.3 billion in assets and although the managing director of Cerberus Capital Management LP has promptly denies the rumor that the fund has made huge losses on private equity investments in Chrysler and GMAC, the damage has been done.Supposing the rumors were untrue and the stocks are set to rebound soon, do you dare to jump in? Where is that buy when everyone is selling and sell when everyone is buying motto of yours *grin*? Anyway watch out for the Friday’s employment report from the U.S. government – it could send another round of selling if the reading is not right.
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