FSL - will there be storm ahead?

In my previous posting (http://mycroeconomics.blogspot.com/2009/07/fsl-whats-in-their-mind.html), I concluded that cutting the payout ratio will depress the unit price while do no good to the company.

Now let's look at what happen.

The general market sentiment since the announcement (21/Jul) has been on the uptrend. In fact, FSL tracks ST pretty well few days before the announcement, and even 4 days after that. Then on 25/Jul, we observed an expected drop upon XD. However, after that we see a clear decoupling, and it goes against the general trend.

This is interesting as it shows that the market need time to digest information, or in other words it is not 100% efficiency. Were the investors blinded by the immediate distribution?

Now the other shipping trust Rickmers is going to announce its results next week. If it can sustain its distribution, will it encourage investors to switch boat? If it cut further its distribution, will it damage further the sentiment on shipping trust? Will there be storm ahead?

STMicro first customer for Globalfoundries

As I mentioned in my previous post (http://mycroeconomics.blogspot.com/2009/07/if-you-are-shareholders-of-chartered.html), Globalfoundries was to announce its first non-AMD customer. And the answer is ... STMicroelectronics.

Globalfoundries does not need to be successful to create harm to Chartered. Its sheer existence will bring the burdens described in previous posting.

Furthermore, Globalfoundries announced that they will produce STMicro product based on 40nm (lower better) Low Power technology in 2010, while Chartered is currently at 65nm. Looks like Chartered would be lagging behind the technology race.



# Quote - Globalfoundries Press Release 29/Jul/2009 #
SUNNYVALE, CA – July 29, 2009 – GLOBALFOUNDRIES today announced a strategic customer relationship with STMicroelectronics (NYSE: STM). One of the world’s leading suppliers of semiconductor solutions, ST will partner with GLOBALFOUNDRIES to produce products based on 40nm Low Power (LP) bulk silicon technology. The 40nm LP process is ideal for the next generation of wireless applications, handheld devices, and consumer electronics, which require excellent performance and long battery life. First tape out and production of ST products by GLOBALFOUNDRIES is planned to start in 2010.

# Quote - Chartered Semicon Press Release 13/Jul/2009 #
SINGAPORE - July 13, 2009 - Chartered Semiconductor Manufacturing (Nasdaq: CHRT and SGX-ST: CHARTEREDSC), one of the world's top dedicated foundries, today announced the general availability of an enhanced version of its 65-nanometer (nm) low-power (LP) process, called 65nm LPe. The 65nm LPe process utilizes innovative leakage-reduction techniques to significantly improve system-on-chip (SoC) standby power consumption by up to 50 percent. The result is a lower-power process especially suited for battery-operated and cost-sensitive mobile applications that require active standby conditions, such as mobile handsets, multimedia players or personal internet devices. The process is also supported by a robust range of IP specifically optimized for the lower leakage capabilities.

Interest of CFO

In this severe downturn, most of us would be happy to just keep a job. But not for CFO or Financial Controller.

In the 3 months from May-Jul 2009, a total of 27 of them left the jobs. This is equivalent to 9 per month.



Various reasons are given.

If you look at the pareto, almost half of them left the jobs to pursue other interests or commitment and personal reasons. Only 30% is to pursue better career opportunities.

I would think that CFO and FC are numerical, logical and probably boring people. But this results show that they do have a lot of 'interests' and 'commitments' to pursue. As to what really interests, or de-interests them, only they have the answer.

Subsidy, sub and silly method?

Digitimes (28 July, 2009) reported that China Karaoke operators are buying LCD TV subsidy rights from farmers. To the farmers, LCD TV probably is not a necessity, and even with the subsidy, they still need to fork out a handsome sum of money. Therefore, trading the rights for some cash seems to be a good option. In other words, the benefit of the subsidy has been shared by the Karaoke operators and the farmers. Fair? Well, that's not the government intention. The government hopes to see improvement in the farmers' living standard. However, that's how market works, when 2 parties see different values on the item, in this case the subsidy, they can trade.

Closer to us, we also see recently a few employers were charged for hiring phantom employees to enjoy job credits from government. The intent of job credit, according to the government, is to save jobs by lowering cost of doing business here. Job credit is also a form of subsidy. In general, from economics point of view, wage subsidy is not good, as it may lead to various problems, including sustainability, effectiveness, and exploitation concerns. As job credit is a short-term measure, sustainability is not an issue. Effectiveness is a question mark. Will companies agree to cough out $100 in order to get back $12? We will probably never know the real answer, but that may not be important after all. In a deep crisis, confidence and hope have its value. Finally, we can see that exploitation does happen. The ones caught represent probably the tip of iceberg.

Dell - Lawsuit risk could propogate along the supply chain

According to report, Dell has mispriced some products on its online shop, and refused to honor it. The consumers in return sued it, and frozen its bank account temporary, thus affecting in turn affecting Dell's payment to its suppliers.

This is quite surprising, considering that the amount involved is pretty small. In Tech space, many companies are involved in multiple lawsuits, particularly in IP litigations. If the bank accounts could be frozen easily, it could mean that many Tech companies at the downstream of suppliers could be affected negatively.



Dell account frozen over pricing mishaps

Publication Date：07/24/2009
Source： China Times
U.S. Computer giant Dell Inc. reportedly faces a charge of price fraud with its Citibank account frozen temporarily by court order, sources said.

Dell’s online shopping Web site in early July mislabeled Latitude E4300 laptops and other products at very low prices. As a result, 26,000 consumers made orders via the Internet within a week, but Dell only agreed to compensate laptop buyers with coupons for NT$20,000(US$610) each, and purchasers of other products with coupons for NT$1,000 each.

This response dismayed several big consumers, who reportedly ordered computers and monitors worth a couple of million NT dollars at the mislabeled prices, and transmitted money to Dell’s bank account. They sued Dell for price fraud because the company would not fill the orders. The Chungli Criminal Police Bureau accepted the case and submitted it to the court, which then ordered a freeze on Dell’s Citibank account in Taiwan.

Compal Electronics Co. Ltd and Foxconn Technology Group, two major product suppliers for Dell, reportedly were affected financially by the account-blocking.

According to a local supplier for Dell, only a small part of Dell’s cash flow in its Taiwan account comes from online orders. Most of the capital is remitted by company headquarters to pay panel providers. Local provider companies, worried that they would not receive payment, reportedly called Premier Liu Chao-shiuan for help after they learned of the account-freezing.

Some argued that a consumer dispute should not be exaggerated into an online fraud case, especially when online orders for Dell products in Taiwan are usually at a very low volume.

Francis Huan, public relations manager of Dell Asia Pacific and Japan, would not comment on the account-freezing incident, but stressed “it has all passed now.” Dell’s operations in Taiwan have returned to normal, although Huan believes that “no ordinary consumer would place such a large order.”

Dell will refund money to all online purchasers who have already made payments, Huan said. But as many of them use pseudonyms to order and only leave cell phone numbers, it will take some time before all refunds can be made. (TYH-THN)

Medtecs - to benefit from H1N1?

This announcement by Medtecs seems to be very important, it takes its Board of Directors to announce, and its Chairman to submit.

However, its content only tell us that it has received an order of 2 million pieces of gowns (from the title, we can guess that it is to protect against H1N1), from an unknown customer at a unknown country, to be delivered at an unknown date, and expected to bring some unknown profit at an unknown date.

This seems to fan more guess work.

Chartered shareholders - watch out Globalfoundries!

If you are a shareholders of Chartered Semicon, I really think you should be concern of this development. Globalfoundries, a spin off of AMD, is going to announce its first non-AMD customer in a month time.

And it has huge implication.

Before Globalfoundries, the wafer foundry market is basically dominated by TSMC, with spill over to smaller wafer foundries, like UMC and Chartered. TSMC is leading at all aspects, it has the technology, and process capability, and is able to exercise customer selection. Strictly speaking it is very difficult for the remaining to survice. Luckily TSMC has not expanded too aggressively, and to some extents, large customers would not want to see a monopoly.

This will change with Globalfoundries. Well I believe TSMC will still be the number 1. However, Globalfoundries will clear preferred choice for the number 2 candidate. I would believe that the customers would like to see a worthy opponent for TSMC, and clearly UMC and Chartered have failed them in this aspect.

Specifically what does this mean to Chartered?

1) Lower ASP (average selling price) - With the announcement of Globalfoundries in a month time, you can expect many of Chartered customers would go to Chartered and threaten to move the business to Globalfoundries. I believe an erosion on ASP is unavoidable.

2) Higher cost of sales - With such a big competitor fighting for resources (raw material, equipment), the bargaining power of these suppliers will be enhanced significantly.

3) Lower utilization - Obviously when some of the business is pulled away, the utilization will be lower. And you must remember that Chartered is still struggling to meet their own goal of breakeven at 75% utilization.

4) Loss of good quality customers - The customers always like to have dual source. I cannot see any reason why they would not choose Globalfoundries. Yes, may not be immediate, but it is inevitable.

5) Harder to find technology partners with customers - When there is good solution out there, I suspect customers will be less likely to invest in technology partnership with Chartered.

In summary, shareholders please watch Globalfoundries with respect.

Chartered Semicon - a big cash outflow burden

Based on Chartered 2008 annual report, it has almost $3 billion contractual obligation over next 5 years.

Just how big is $3 billion? As a reference, GlobalFoundries is building a brand new 12" Fab in New York at a cost of $4.2 billion ($3.4 billion excluding construction cost), designed to ramp at 28nm and subsequently 22nm technology nodes, with a capacity of 35k 12" wafer per month.

Chartered total capacity per quarter is about 640k 8" equivalent wafer, or 213k per month, and that should equivalent to about 95k 12" equivalent wafer per month.

In other words, Chartered is carrying the cash outflow obligation equivalent to building 1/3 of its current capacity.

As of 30/June/09, Chartered has a current asset of about $1.25b, about $0.8b is cash or equivalent (remember the $0.3b cash call?). With the $800m obligation (see picture) and the latest $500 capex plan announced, it certainly seems very stretched for Chartered, even though it is expected to have positive operating cashflow.

We shall see how it resolves this ... very soon.

SGX CEO package - variable only on positive side

Many people certainly envy and maybe even jealous of Mr Magnus Bocker's package. Well you need to pay well to attract talent ... and I guess the justification can only be answered by SGX shareholders ultimately.

What catch my attention is how SGX presented the information. First of all, SGX must be commended for the transparency, very detail description is given. However, something puzzles me. In describing the short-term incentive, SGX says 'Minimum varible bonus of S$933,000'. Literally, this means that Mr Magnus Bocker will get a minimum sum of S$933,000. Err ... if this is minimum sum, doesn't it mean that this S$933,000 is fix rather than variable? And if this is minimum, what is the maximum? Or at least what is the formula?

It is regrettable that SGX, as a role model to other listed companies, uses this type of confusing wordings.

Unknown note BC040022

Hi, I am a novice notes and stamps collector. I came across this strange note. Any experts out there know what is its origin country?

The only thing I can recognize there is 1917, which I believe is the year of issue of the note.

Thanks in advance.

An apple a day ... well what if you lose the apple?

It is reported that a 25 year old Chinese worker killed himself after he found a prototype of a new Apple iPhone model went missing. The worker worked for Foxconn, to which Apple outsources the munufacturing of iPhone. It was alleged that he was brutally treated and detained by Foxconn security. Apple is well known in the industry for the way they keep things secret, sometimes to the extent of leaking false information intentionally so to trace the source. You can imagine the pressure on Foxconn on having such a customer.

If the allegation is true, it is really sad that a young life is lost this way. Sometimes people or even organization sinks so much into the work or business that they forget there is life out there.

http://www.telegraph.co.uk/technology/apple/5885923/Chinese-worker-kills-himself-after-Apple-iPhone-prototype-goes-missing.html

Maersk, can Rickmers depend on it?

Further to my research earlier on Maersk's stand on their shipping line business, I try to find out a little more. And to my surprise, the same CEO Mr Andersen, who vowed not to invest in the shipping line anymore (see previous posting), is the same guy who is committed to make the shipping line 'top priority' in Maersk Group just 2 years ago (see article below).

The flipflop in a short 2 years time makes me more convince that the fate of the shipping line could be questionable. I urge Rickmers management to seriously look into this, so that it will not be caught in surprise.


Publication date: 11/6/2007

New Maersk chief makes shipping line ′top priority′

Improving returns in its struggling container shipping business is the number one priority for AP Møller-Maersk, the Danish group's first externally appointed chief executive has said on his first day in the job.

Nils Smedegaard Andersen, who came to Maersk from Carlsberg, the brewer, said a team was developing plans to increase returns at the Maersk Line container shipping business, which has been losing market share in spite of being the world's largest container line and has had to slash its rates. Mr Andersen was speaking only hours after taking office yesterday morning. However, he admitted Maersk Line faced complex problems.

"Usually when you have a problem that cannot be fixed in a few months, it's because it's a composite problem," he said. "What we have to do is really focus on holistic solutions."

Mr Andersen comes to Maersk after a management shake-up in June saw two senior executives - Tommy Thomsen and Knud Stubkjaer - pushed out and Jess Søderberg, chief executive, advance his retirement by two years. The changes were seen as a response by Michael Prem Rasmussen, chairman, to the problems facing Maersk Line since it botched the integration of computer systems with P&O Nedlloyd, the former world number three container line, which it took over in 2005.

Mr Andersen is only the fourth chief executive in Maersk's 103-year history. Before Mr Søderberg, Arnold Peter Møller ran the company from 1904 until 1965 and Maersk McKinney-Møller, his son, ran the company until Mr Søderberg's appointment in 1993. Mr McKinney-Møller, 94, still has a major influence over the company.

The container shipping business is not growing fast enough and not making enough money, according to Mr Andersen. "I think improving returns at this point is the first priority" followed by, mid-term, creating more growth in the business, he said. The container division would have to concentrate on finding the right routes to operate and the right pricing mechanisms, he added.

"We just have to get better and better all the time," he said. "There's no way you can take a quick decision and everything is good. This is about improving the way we work day-to-day." Losses at the container division depressed last year's earnings at the group, which produced pre-tax profits for 2006 of $6.05bn on $44.5bn revenue.

Source: msnbc.msn.com




http://www.freshplaza.com/news_detail.asp?id=10576

Maersk - Mixed signals for Rickmers

We were told by Rickmers CEO that Maersk needed the new ships badly, so I decided to do some research on this saviour.

From the article below, there are 2 mixed signals. One is that the group actually views the shipping line as a less profitable business and will not receive much investment in future. I think for a CEO to say this in public is a very strong statement. Will it lead to divestment? If so how will it impact Rickmers?

The good news is of course, if they do not want to buy new ships, the alternative is to rent. It will mean a good growth prospect potential for Rickmers.

For now, there is no clear answer.


No more ships for Maersk
The Maersk Group began on the back of its shipping fleet but now wants to invest in more profitable areas

Executive management in the A.P. Møller-Mærsk Group have indicated that the foundation stone of the company – its container shipping line – is not as profitable as other areas and will not receive as much investment in the future.

Maersk chief executive Nils Smedegaard Andersen told Berlingske Tidende newspaper that the heavy investment in Maersk Line over the last two decades meant that the company’s fleet simply can’t get any larger.

That, coupled with falling profits, means the Copenhagen-based group will focus its future investments in its oil and terminal activities.

‘We must spread our investments in the areas where we will get the best returns. Maersk Line has given bad yields in the last few years, and it is a complex area to make money in. Where investments are concerned, our main focus in the future will be directed towards oil and terminals, among others,’ said Andersen.

In recent years, the Maersk Group has invested up to 60 billion kroner in new ships and projects, but now wants better returns from areas of ‘great potential’.

‘Our oil business and terminals, together with other business interests, continue to grow significantly faster than the market,’ said Andersen.

The CEO confirmed that even when global economies stabilise again, the group does not intended to order new ships for Maersk Line, but rent vessels for varying periods to increase flexibility.

The Copenhagen Post



Edited June 22, 2009

FSL - What's in their mind?

Disclaimer: This is not an investment advice, purely my own opinion and I do own the stocks.

Ok, so FSL decides to cut the payout ratio to 50% in FY09 3Q. This is the second cut after the cut from 100% to 73% in FY09 1Q.

What we know here is the problem, the need to refinance, and we also know the outcome, the management decides to cut payout ratio. But we do not know why they make this decision!

First all let's see what are the options available and considerations:

By cutting the payout ratio, the management seems to have abandoned the option of raising fund from investors, unless they can get strong support from major shareholders or new stragic investors to inject funds.

However, at the same time, it is also hard to see how cutting the payout and prepayment can help in the other 2 options. FSL has an outstanding loan of $509 million. By cutting the ratio to 50% from 73% (FY09 2Q), it only saves about $4 million a quarter or $16 million a year, which is a mere 3%. It is clearly not a significant internal generated fund, and I can't see if any bankers would take this as good faith, and thus improve FSL credit rating. And even if for some reasons bankers like this, why didn't they do this earlier? How can the management suddenly wake up and say hey let's cut the ratio? The inconsistency is uncalled for in a relatively simple and predictable business model.

So in summary, I see this as a move with no clear direction.

FSL - 3Q FY09 DPU guidance US1.50 cents

FSL release 2Q FY09 results.

Key points:
- DPU US2.45 cents, which 74% of net cash from operation, no distribution reinvestment scheme this round
- No surprise from the business side
- Allocation of 50% free cash flow for distribution (last quarter was 75%), so 3Q FY09 guidance is US1.50 cents (down 38%)
- The cash retained will be used to repay debt.

As I highlighted in a previous posting, distribution from depreciation undermines the sustainablity of the trust in the long run, and has immediate impact on the unit price. However, reducing the payout would hit the unitholders pocket immediately, especially retirees dependent on the distribution.

http://mycroeconomics.blogspot.com/2009/07/depreciation-noncash-non-concern.html

It is interesting to see how the market reacts to this today.

China Kunda auditors - the more the messier

Learnt quite some new stuff here. To cut the story short, SGX found that while China Kunda group auditor is Ernst and Young, it uses different auditors for their China subsidiaries. China Kunda responds that while E&Y audits everything, including the subsidiaries, they have additional auditors to audit the subsidiaries local audit requirements.

Given benefits of doubt to everyone here, I infer that:
1) China regulation requires local auditor
2) SGX does not know that there is such a local audit requirement, otherwise they would not ask (all other China companies listed here never report this?)
3) China Kunda thinks that SGX already know, that's why they do not elaborate in the annual report

If you have the answers, please let me know.

For shareholders, one thing learnt is that, 2 auditors are paid to do the same job. That either gives you double comfort or double heartache.

http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_120FE94E2A386F8C482575F9003C3876/$file/CHINAKUNDA_Responses_to_SGX-ST_Query.pdf?openelement

Depreciation - Noncash, non-concern?

One of the key features of business trusts and normal stocks is that normal stocks can only distribute dividend from profit, whereas the trusts can do so from their revenue after deducting some necessary expenses and meeting compliance to loan covenants.

This has sometimes even been highlighted as an advantage as there is more cash to distribute. This prompts me to write something about it here.

One of the key components that makes up the delta between revenue and profit is depreciation. Depreciation is basically an allocation of upfront investment cost across its useful life. For example, we buy a ship for #30 million, and the useful life is 30 years, and further assume we use a linear depreciate method, the depreciation per year would be $1 million, ie $30 million divided by 30 years.

You may ask, since the money already paid upfront, why should I care about depreciation? After all it is just accounting profit and loss.

Well, remember the 30 years useful life? What happen after 30 years? Depreciation actually is a way that companies re-accumulate the capital needed to replace the asset when its life expires. If the company does not accumulate its earning, it would not be able to sustain it earning capability.

Now you may ask again, why should I care about what happen after 30 years? Well it matters. For instance, in discounted dividend flow valuation model, a finite dividend flow, and an infinite one will have very different values. In other words, what is projected to happen 30 years later will have impact on your trusts price today.

So make sure you understand what you get.

TheEdge 200709 - 7-11 Biz opportunity in Shanghai?

I gather these points in Sunita Sue Leng's article.

1. Taiwan has highest density of convience store, 1 for every 2500 people
2. President Chain Store Corp controls 52% of it, ie 4,810 outlets.
3. In Beijing, there are 75; In Guangzhou 512. Shanghai? 4.
4. Map of control for 7-11 in China, North: 7-11 Japan, South: Dairy Farm HK, East: President Chain Store.
5. President took 7 years and 100 stores to break even in Taiwan. It estimates to take 3-4 years and 250 stores to achieve break even in Shanghai.

It certainly looks like there is a big potential market, and an experience and determined franchisor. Doing a franchise 7-11 was one of the many business ideas I considered once, but I dropped it when I saw it almost every corner, and don't forget NTUC Cheers. Anyone interested in running the business in Shanghai may consider it. :)

Gold, for an alien attack?

You must have heard from your parents or grandparents, in time of war, money has no value, only gold is acceptable in business transaction. However, for the new generation, a war probably is as distant as an alien attack.

There is some truth in what they said though. In fact gold has been used as money or currency for generations, directly or indirectly. Before 15/Aug/1971, the value of $35was fixed at one troy ounce of gold, under the Bretton Woods System (since 1946). On 1971 Aug 15, then US President Richard Nixon abolished this.

Since then, for the first time in human history, there is no official link between currency and real asset (eg: shell, copper, gold). Therefore, what you have today in your wallet does not have an intrinsic value by itself, it is call Fiat money. It is a form of IOU by the government, promising you that you could exchange the note for some values. Therefore its value is highly dependent on the credibility of the governments. Now you know, in time of war, the survival of the country, therefore the government is already a big question mark, who talks about credibility?

Will the greatest mankind invented wealth creation technology, called printing technology defeats the thousands year wisdom in pursuing gold? Will the aliens strike one day? This is a complicated topic, let me do more research.

Overview of shipping trust & panel discussion

The event was one of the many conducted in the Asian Investment 2009 in Suntec. Below I try to capture some of my observations and important points, by no means a comprehensive one. Please do you own research before any investment decision.

It started with individual talks by OCBC analyst Meenal Kumar, FSL CFO Cheong Chee Tham, PST CEO ALvin Cheng Yu-Dong, Rickmers CEO Thomas Preben Hansen, and finally a panel discussion.

Meenal basically presented some basics of what a shipping trust is. I am not very sure of the objective of her presentations. But certainly she did not use the opportunity to sharpen investors' ability to understand the business model, she also did not even attempt to question any of the 3 companies directly. I hope one day we can see analyst really playing their part.

Next come FSL CFO, Cheong Chee Tham. Nothing surprise or exciting, he kept highlighting that FSL is more like a bank specialized in shipping than a shipping operator, as they only involve in bare boat leasing. And very importantly, they have a Chief Risk Officer to assess customer (counter party risk).

The next presenter was PST CEO Alvin Cheng. He started with history, saying that the company is the first listed shipping trust, in May 2006, and other aspects of the company. He appears cool and calm, really the trusted CEO type. However, he made 2 statements that gave me some uneasiness. First, he mentioned that the management fee is 4% of revenue, and therefore the management interest is aligned to that of unitholders to grow revenue. However, revenue can grow in many ways, and may not necessary benefit unitholders, eg right issue for acquisition. While I believe Alvin has no intention to sacrifice unitholders' benefit, this type of sweeping statement somehow made me feel my IQ is insulted. Second issue I have is on his illustration of PST asset value. First he talked about BV at $0.38, conservative value at $0.26, and then 'value in use' (which he said is a cashflow model) at $0.54, from which he concluded the stock is undervalue. My point is this, if this is a cashflow model, then the discount rate would be determined by the market, and reflected by stock price. You can't fix your own discount rate and claim market undervalue it. Other than the 2 points, I think Alvin gave a good presentation, especially on PST effort to continuosly deleveraging, and that the company loan has no asset covenant.

Finally, we have Rickmers CEO Thomas. First thing that caught my mind was the difference in management fee structure. For base fee, it has a fix $1.6 million plus a variable of 0.9% of the revenue. No incentive for acquisition or disposal. Sounds good to me. Again Thomas concurred that counter party risk is the major risk in shipping trust, and Rickmers managed that with choosing on large and financially sound customers. He mentioned that even under current financial turmoil, none of the 3 shipping trusts have been affected in terms of revenue as of now, and this is certainly a big plus compared to REITs. I think yes, but does it mean that the market is inefficient? When the market cannot adjust freely, a collapse could be inavoidable. Well I certainly hope no. On bare boat vs time charter, Thomas insisted that time charter, which means having their own crew on the ships make sense to Rickmers. He recognized an operating cost is incurred (which is small compared to revenue), but that gave him the assurance that the assets are well taken care of. Thomas further touched on the upcoming challenges including the pending $800 million capex requirement, and loan repayment next year, which Rickmers is still exploring many options. While no solution is given, he is certainly giving a lot of transparency, which I think is a good strategy.

Roger (SIAS), Meenal (OCBC research), Thomas (Rickmers), Chee Tham (FSL), Alvin Cheng (PST)

Okay, finally the panel discussion. The moderator Roger Tan from SIAS told the panel that, in order to encourage his wife to invest rather than to spend last year, he promised his wife to cover any loss if any. And expectedly they ended up in shipping trust. What could the panel offers? Well think longterm, look at the business model, look at the cashflow! Will globalization end? Will world trade end?

Next, a question from the audience thrown to Rickmers: What if there is no success in the $800 million capex financing or Maersk just don't want it? Thomas appears confident, firstly there is no way out for Maersk, secondly he knows that Maersk needs the ships badly to be compettive as the big new ships are more efficient. And even in the worst case when everything else fails, Rickmers last option would be not to take delivery. while there is contractual obligation, probably the impact is less than $800 million.

Second question addressed to PST, why not quoted stock in SGD? Well simple, the company asset and liability, revenue and expense, are all in USD. And many investors are USD based. Thomas made a good point when he suggested PST to keep it that way (Rickmers stock quoted in SGD), as he sees the industry will grow in Singapore, and differentiation in the different companies will offer investors choices that fit their needs best.

Finally, time's up, last question. Will the loan to acquire a ship fully paid by the time the first lease end. I think the question makes no sense. If the sum of the first lease is sufficient to fully pay off the loan, in other words the customers comitted a sum greater or equal to the price of a ship, why should the customers lease, they would just buy! To my surprise, PST says some of their ships met this criteria. Those are their IPO fleet, which understandably taking a lower loan. Rickmers and FSL just say said no.

Hope this summary helps for those did not attend.

Zero interest? Zero interest!

Nowadays, many banks, including DBS, UOB, Citibank, etc have this zero interest personal credit program.

The telemarketer would tell, hey sir or madam, now the bank charges you ZERO percent interest rate for 6 months, do you want to take up the loan? blah blah blah and we only charge you a 2% admin fee.

Zero interest? 2%? Still sounds good?

Wait, 2% for 6 months is equivalent to 4% per year. See the trick now? And by the way admin fee is upfront payment, not monthly rest. In other words, if you repay the loan within 3 months, the interest rate is actually 8%!

Well, good deal or not depends on how badly you need the loan at that moment. Even 8% is much better than Ah Long Pte Ltd, right?

But key point is, if it is zero interest, banks will also have zero interest to loan you the money! Loan with your eyes open.

Rocking Wall Street

This is a very mind opening book, written by Gary Marks, who is a fund manager, and unexpectedly also a songwriter.

A weird combination maybe, but if the title of the book or his music talent makes you think that he is a risk taker, then you are totally wrong.

In fact, he is against risk taking, to an extent that surprises me. For example, he is against market timing, short term trading, equate these to gambling. He suggests long term trading only on good companies, treasury, and well-managed hedge fund or fund of funds.

He also look at investment from a bigger picture, from the perspective of life. You do not want to waste your life monitoring the market, worrying about your investment.

We probably do not have the luxury to invest in treasury or hedge funds, but the book certainly makes me have a different view on risk and life.

I strongly recommend every investor to read this book.

The Human Side of M&A

This book is on HR management during Merger and Acquistion, written by Dennis C. Carey and Dayton Ogden, both are veteran in top/senior management recruitment and advisors in M&A.

The reason I invested my time reading this book is to learn what makes a M&A successful, and what makes it not. I hope this can help me to make appropriate investment judgement and decision when a company is involved in M&A.

Unfortunately I do not gain the confidence after finishing the book. The authors advocate proper attentions and efforts taken to manage the transition and to keep the talents. However, exactly how? I suspect due to confidentiality, the authors did not disclose much details.

One thing I learnt though, be skeptical when a M&A is announced, the success is still pretty much a big question mark.

Asian Investment 09 - Suntec 18-19 July 2009

I plan to attend this exhibition this coming weekend. I think they have some very good programmes.

There are a number of talks and panel discussions, quite a number of them by the CEOs. I will try to catch some of the events. Stay tuned for my discovery.

More details here:
http://www.asiainvestment.com.sg/program_day1.htm

Mycroeconomics

Hello there,



Confused by my title? No, your eyes aren't playing trick, and neither is there a typo.



I name it this way intentionally. Why? Because, it is not macroeconomics or microeconomics that matters to me, ultimately I only care about what affects me, that is MYcroeconomics.

By the way, I can't find this word in Wikipedia. English teachers please do not scold me :)