Hong Leong to acquire PBB???

http://stocktube.blogspot.com/2009/10/hong-leong-to-acquire-public-bank.html

I was reading the above post over at Stocktube - my dad sent it over actually. He owns this stock and wanted an opinion. Well, here's my 2 cents:

The author asks whether its a matter of time for HLB to buy PBB. The primary basis for this are certain rumours over PBB's founder Teh Hong Piow's health. A secondary basis is the company's management style and prudence.

Well, rumours are hard to assess. The first question I would ask is "who's your source"?

On the risk of holding the stock:
In an M&A situation, the purchaser would post a purchase price - a valuation, that would give value to shareholders. This can be between 5-50% on top of the trading price of a specific day. Otherwise, why would a shareholder want to sell his stake? Overall, I dont see a problem on holding the stock.

The author asserts that the basis of risk is the lack of a succession plan and, perhaps, poor employee morale / high dissatisfaction. The latter is not surprising in any stretch of the imagination but its neither here nor there - Malaysian companies are not known for innovative management.

Now the lack of succession plan is not something I'd worry about though admittedly the lack transparency those cause worry. The founder would have many captains capable of rising to the occasion - especially those careerists who've stayed with the bank for the majority of their lives. It would be business as usual for the most of them as it is unlikely for any dissenting voices to remain for long.

Admittedly, I do not know much about the internal workings of this bank but any company that's known to be "prudent" wont stray far from the line. We may actually see Public Bank buying Hong Leong instead - usually the over-prudent monarch would be replaced with more progressive minded heirs.

I would expect that Public bank shares would drop a little if news of Mr Teh's health comes out but not by much. The fundamentals of Public Bank are still very strong though intensely boring. But boring is good in the long term, it means the performance and thus share price wont have much surprises in store.

And what has Amber Chia (the close model friend) have anything to do with Public Bank's performance??? Is the author saying that Amber is a major recipient in Mr Teh's will??? I suppose if Mr Teh gave the majority of his stock to Amber, THAT would be news. I would then pay attention to what happens in the immediate term after that announcement to see what Amber's direction for the company would be. THAT would be exciting! And for Public Bank, a welcome change of pace. :D

Market Cap (RM):
HLB = 12.2 Billion (26-10-09)
PBB = 32.37 Billion (25 Feb 09)
MBB = 20 B (approx. 12-03-09)

With the above numbers, who do you think is going to acquire someone? It is not impossible for a David and Goliath situation - it has happened before in multiple industries such as finance and technology. But its really unlikely at this time, perhaps during the peak periods of the financial world but not in the immediate 6 month term.

I have no calls on PBB as I do not know enough about it. But fundamentals of this company is strong despite the global financial crisis. And they have managed to maintain disciplined good practices in their mortgages and loans - allowing them to ride out most of the sector's problems.

A Long Term View: Malaysia vs Indonesia

I was reading this article at the Malaysian Insider:
The View from Middle Malaysia

Karin Raslan makes a very important and significant point regarding Indonesia:

We’re so used to it being the sick man of South-east Asia... But what emerged from the financial crisis is the importance of critical mass and size. Indonesia has that and investors are realising that they have to be there for future growth.

Malaysia's present course of upholding the NEP is disaster in the long term. Malay rights will cause Malaysia to become extraordinarily uncompetitive against its huge neighbour in the long term.

Today we see Indonesians migrating illegally to Malaysia, there may come a day where Malaysians migrate to Indonesia illegally.

Perhaps our Malay brothers should push for our education to be in Bahasa Indonesia rather than Bahasa Malaysia.

Market Watch: MGM not looking to sell Macau stake

Reuters:

http://www.reuters.com/article/innovationNews/idUSTRE57254N20090803

As per my previous post regarding Genting's highly unlikely purchase of MGM's Macau assets, this bit of news supports this view for another business cycle.

It is more likely for MGM to divest itself of American casino interests as I believe the Macau operations will prove to be more profitable in the long run - the basis being the inherent Chinese gambling culture contra the American's more leisurely gambling culture.

Opinion: Schumacher might replace Massa

30-07-09: I turned out to be wrong, it has been reported that Schumy will replace Massa after all.

Both today's The Star Newspaper and CNN highlighted Schumy may replace Massa.

This is an incorrect bit of speculation. Schumy is quite retired and has not been in an F1 cockpit for quite a long while. During a past interview, he mentioned that he does not see himself returning to F1 though he is willing to help out Ferrarri in any way he can.

He is so retired that he is 2-3 seconds slower than the average qualifying time. That's not a good choice to replace Massa especially when the Ferrari F1 car is already uncompetitive - a full second slower than leaders Brawn GP even after the rear wing fiasco.

There is no doubt that given a short period of time, Schumy could quickly retrain himself and return to team Ferrari. But I wouldn't bet on that.

Market Analysis: Genting Berhad

I had meant to post this up a long while ago.

A month or two ago, speculation began that Genting may buy-out MGM's stake in MGM Grand Macau. This was sparked by the New Jersey Gaming Commission telling MGM to "disengage itself from business association" with their joint venture partner Pansy Ho, the daughter of infamous Stanley Ho. The NJGC apparently recommended that Pansy Ho to be "unsuitable".

Just so we all know, Mr Ho has alleged links with triads in the region. Now, don't get me wrong, this is all "alleged". Nothing solid has ever materialised.

Genting was, and is still, in a very strong financial position despite minor YoY earnings declines for the quarter. As of today, it is still the only gaming company in the world with a strong and fairly positive balance sheet. Genting Berhand and its subsidiary Genting Malaysia Berhad (formerly known as Resorts World Bhd) together hold nearly 5 billion ringgit cash in the war chest (USD 1.4 B). The most likely (or rather, the ONLY) candidate in any buy-out offer for MGM's Macau holding.

Further compounding this speculation was the purchase of MGM debt (bonds) - USD 50M by Genting Bhd (GENT) and USD 50M by Genting Malaysia (GENM). This was further supplemented by a purchase of an addition USD 100M in MGM stock. Let me explain - the MGM debt is a good deal in a business that Genting is most familiar with. The bonds were secured against rock solid MGM assets with 50% paying annual interest of of 10.375 per cent, due in May 2014. The rest carry a rate of 11.125 per cent and maturing in November 2017. Definitely better than leaving it in a bank. The further USD 100M in MGM stock is also a fantastic deal - at USD 7 per share, that's a steal! They are affectively buying at the bottom.

I do not believe that Genting will purchase MGM's Macau holdings. The reason for this is Singapore. Just after Genting Singapore Plc (GENS) won the Sentosa development, RWB subsidiary Star Cruises announced a deal with Stanley Ho for a Macau development. Singapore issued a warning: GENT was to disengage from any business dealings with Stanley Ho. GENS may have got the Sentosa development but the casino license would only be issued on the project completion and launch. The deal with Mr Ho was quietly swept under a carpet somewhere.

Any attempt to do business with Pansy Ho will incur similar consequences. The sins of the father... or so they say. It is quite inconceivable that Singapore would want anything to do with with the daughter either. The idea that Genting would jeapordize their massive SGD 6B (USD 4B) investment in Sentosa just does not compute.

[Image courtesy of Reuters: symbol GENT.KL]

At the time of my thinking this, GENT was trading at RM 5.30 or so. Today (28-Jul-09, day close) it is trading at RM 6.70. Gosh, what a big jump. And just 5 months ago we were buying at RM 3.80.

So what's in store for GENT stock? In my view, its a clear buy. Market sentiment is bullish overall, bouyed by less than awful results in the US. I expect the price to drop tomorrow (29-07-09) on negative sentiment off Wall Street and pending the earnings results from Europe - I'm calling a target low tomorrow within RM 6.20 - 6.30 but the day-end should be above that. If Wall Street ends in positive territory today, we may actually see GENT touch RM 7.00.

What's in store for the future? Well, this stock is definitely a buy Buy BUY! Buy low (as if you could now) because this is pretty much guaranteed. Market sentiment affects notwithstanding, we have a very clear uptick on the horizon - the opening of Resorts World Sentosa. That's good for a 5-10% rise on the stock at any price, at any time.

Earnings from power, plantation and property have already come in with good results overall. All publicly traded subs are doing well. Barring a sudden and catastrophic fall in the commodities market or drastic legislation changes affecting power tarrifs or an airplane crashing into Genting Highlands Resorts, the overall sentiment for Genting is just UP! (in capitals and with an apostrophe no less)

Please call your friendly remisiers and brokers to either take your profits now, or leave buying instructions within the RM 6.20 - 6.50 band and sell at RM 7.00 (good til at least 14-August). I expect negative market corrections coming off US and Japan in the next few days.

Or you may contact me to use my remisier.

29-Jul-2009

: GENT.KL Open:6.68, Low:6.30, Close:6.40 (-4.19%)

: DJIA closes -0.29%

30-Jul-2009

: expect KLCI to close downwards due to carry over market sentiments from DJIA and Shanghai - this is just about guaranteed as there have been no local upward affects.

: I expect GENT.KL to close around -2%, we may see it close at RM 6.00 - 6.10 by weekend

Hunch: Is the ocean Florida's untapped energy source?

I read this article on CNN about Florida trying to tap the power of the Gulf Stream:

http://us.cnn.com/2009/TECH/07/27/ocean.turbines/index.html

For some reason or another, I have this odd feeling that the Gulf Stream would shutdown within the next 50 years. Must be the "Harbringer of Doom" within me talking...

Hopefully, the investors would have recouped their investments by then.

Social: The cost of raising children

Lite FMs "Topic of the Day" 27-07-09

There was a lot of talk about how much it costs to raise kids. A number of callers would call in to remark about this or that toy and gadget such as PS3s.

Another part of the conversation did touch on the how large families could not afford to give all their children good education and a good head-start in life. Or that when the parents leave this life, there is not much left behind.

The cost of raising children is insubstantial. Yes, it is irresponsible to have more kids than you could afford. But the major issue missed is the fact that it is not about the money. It is about the good values you invest and teach and inculcate into your kids. Whether its with pinky lovey gestures or a nice thick rotan. I have memories of a wire clothes hanger that thought me that doing anything "bad" is really bad for me.

I was reading The Star newspaper over the weekend about old folks being dumped at hospitals by their children. This is a significant social problem. And it shows the quality of parenting. It shows what the parents are teaching their children. That life is about money, that life should be easy, that living day to day means being selfish.

This is screwed up.

The greatest, most valuable thing you could invest into your children is a good moral compass with a healthy dose of care. It is not about having fancy PS3s or a grand international university education. It is nice to have toys, it is an advantage to have a grand piece of paper. But in life, its about hardwork, being kindly and honest to your fellow man/woman, being courageous and tough against all odds. These are the important bits - the good and indomitable spirit.

Without which you as a parent would be abandoned at a hospital. It is the failure of parents to teach courage, kindliness and humility that pervades our society and affects us on all levels - from Teoh to Altantuya, from the PKFZ to the MACC, from the wasteful society to the over-privileged.

Just A Thought: Blog Starts Here

I've not been writing much for a while. Time to do so; the brain's all rusty.