What Will LPI's price ex-Bonus?

Riding A Curve Ball of Profits

Today's AGM and EGM meetings of LPI was certainly fast and furious.

It started at 11 am and the whole thing including the extraordinary meeting  finished just before 12 noon.

As usual, after the highlights of the financial year and the MSWG questions, you get only praises for Teh Hong Piow and how much money LPI is making from year to year.

So, the bonus of 1:2 has been approved by capitalising the reserves.

After a sharp fall of more than 50 sen in the morning, LPI settled at a price of RM 22 when trading stopped at 5 pm.

The bonus will go ex on 20th March and the entitlement date will be 24 March.

What would be the ex-bonus price of LPI be?

For a person holding 1000 shares, he will receive another 500 units.

RM 22,000 divided by 1,500 units comes to possibly RM 14.66 per share.

Anything above that price will be a bonanza.

Assuming that LPI goes ex- bonus at RM 15, that means a 1,500 holdings will fetch RM 22,500.

RM 500 is a small bonanza.

Unsinkable LPI

It really punches through today!

After announcing a bonus of one share for every two shares held, London Pacific Insurance saw hyper-space action this morning ramping up its price to RM 20.68 for a RM 2.18 increase.

Tracing its share from the prior 13th GE period in 2013 to the effects of  oil slumping in mid 2014 till today, the price did have short-term weaknesses every now and then but every time there was positive news, it ran ahead of the pack.

I expect some price correction as we approached the ex-date.

Assuming someone has 1000 shares, would it mean that  he will be better off with an additional 500 shares at a new price?

His holding at current price is RM 20,000. If he sells it today, he will reap RM 20 K.

However, if he doesn't, then this will be his risk scenario.

If the theoretical ex-price is about RM 10.00 per share, then his holding of 1.5 K shares will be worth RM 15 K. He will then take on a paper loss of  RM 5 K.

However, in the event that it ends at yesterday's price of RM 18, then his 1.5 K holdings will translate to a cool RM 27 K.

If and when this comes true, then it will one super bonanza of RM 9 K for such a holder!

So can this one Teh Hong Piow stock be the one with the kapow effect?

Beware,Odd Lot Counter Players

Stuck on One!

If you think that you can bargain on the Odd Lot Counter of BSKL, you may have to think twice.

I have played the odd lot counter quite frequently and this is the third time that the sellers had ensnared me.

I started by playing a counter called Gas Malaysia. I asked for 50 units and they gave me 7 units only.

The same goes for Bank Islam Malaysia Berhad (BIMB),where I got another 7 units only in spite of the 50 units I wanted to buy.

Then, there was  IHH Holdings (IHHH). They gave me only one unit of it, while holding the selling price at about 10 times the price I bid.

This late afternoon, they had me again. They gave me again one share at 57 sen while holding the balance at 80 sen for the counter I wanted to buy. I need to buy another 49 units.

What are the implications?

If you are satisfied with what you get,then take no more action.

That was what I did with Gas Malaysia and BIMB.

However, I could not do the same with IHH Holdings (IHHH).

Why?

If I did not buy in a trading 100 unit on the Main Board. it would mean my share would be the price of that unit plus RM 30 for overheads such as brokerage, clearing fees and stamp duty.

Let us assume you bought one unit of IHHH at RM 4.50. Failure to take follow up action to buy more will mean that your IHHH share is priced at RM 34.50 .This would means it cost about the price of KLK and most other blue chips. Big loss, my friend!

So,what do I have to do today for that counter that I have been ensnared?

If I lucked out, it can only mean I would have to buy it at a much higher price than currently on offer.

On the Main Board,the offer price is 58.5 sen. Perhaps, I would have to take up the seller's offer before trading ends at 5 p.m. today.

So,watch your steps when playing in this no-holds barred; anything can happen to you God-forsaken Odd lot counter on BSKL.

Post-script:

I had to buy 100 more shares at 57.5 sen on the main board and 9 more shares at 57 sen on the odd-lot board. He gave to me the 9 units in the afternoon session.

What a hassle.

Strangely, the seller threw in the towel and gave his shares even at 33 sen for a 24 sen loss.

So, I may not have gained but those who bought at 33 sen certainly did!

Hot Seats on MAS!

Going Nowhere?

On 6 November 2014, the same Board of Directors of MAS will again face the bitter minority shareholders.

Unless they can say something pleasing and reassuring to the ears of the minority shareholders or give them a handsome subsidised flight ticket to partly off-set their massive losses holding below par value MAS shares for ages, expect fireworks just like what MAS experienced at their recent rowdy AGM.

This time around-will the minority shareholders allow Khazanah to take MAS shares off their hands for a song? Will Khazanah succeed in privatising MAS?

While independent adviser AmInvest Bank may verbalise the obvious financial platitudes to placate minority shareholders and that the Khazanah offer is prima facie both 'fair' and 'reasonable', I think it will be an uphill task as the shareholders may be looking for a better deal.

Khazanah proposes paying 27 sen per MAS share to take it private so that they can restructure the company and resuscitate it back to financial health. 

It involves both a capital reduction and repayment exercise. 

Let us look at the forces of Khazanah and the minority shareholders.  While Khazanah owns 69.37% interest in this airline, the next 29 biggest shareholders sadly only hold an aggregate quantum of 6.57% of MAS shares. Strangely, 4 billion shares or 24% lie in the hands of the average Joe and Jane investor. They are  an absolutely unhappy lot!

To get through its SCR proposal, Khazanah needs at least 50% in numbers as well as 75% in value acceptance (Likely through a poll with proxy strength). 

I am not sure about what 50% in number means? Does it mean Khazanah and the 29 biggest shareholders of MAS? Or the 4 billion share bloc? Or those who are attending in person and through a vote of hands?

Apart from that, Khazanah needs 90% acceptance from shareholders to de-list MAS from Bursa Malaysia. This may be a tall order again if the mood and tide goes awry on 6th November with the average Joe and Jane shareholder. 

As part of the new plan to salvage MAS, Khazanah will invest RM6bil more, cut 6,000 jobs and migrate the airline’s into a new company which will be operational on July 1,2015.

Interestingly, the circular warned that if Khazanah failed to get the votes it needed to push through its plan, MAS would remain listed and there would be no RM6bil cash-injection from Khazanah, and if MAS continued to incur heavy losses coupled with its cash reserves of RM2.4bil depleting over the next 12 months, the airline could become a PN17 company.

I wonder how the minority shareholders will hold up against this serious scenario.

Will they bite the bullet and go down with the airship or will they run helter skelter with 27 sen to a dollar?

This is an EGM that will  likely see conflagration,not a whimper. 

All minority shareholders should attend!

Can the Chairman, CEO and Board members of MAS willing and ready to be on these hot seats to be grilled once more on 6 November?

The jury is out on that one.

Starbucks Sparkles!

Upshot for Coffee!

This article was taken from the On-line STAR.

If you are interested in this counter, read on......

"BY buying out Starbucks Coffee International Inc’s 50% stake in Berjaya Coffee Co Sdn Bhd (BStarbucks) for RM279.5mil, Berjaya Food Bhd (BFood) will be able to have a better control of the cash cow, which may translate into higher dividend payout ahead.

BFood chief executive officer Datuk Francis Lee Kok Chuan tells StarBizWeek in an e-mail reply: “BFood will determine how the cashflow will be utilised instead of having to obtain permission for paying out dividends to BFood from the cash generated in BStarbucks.”

BStarbucks generated cash of close to RM60mil as at financial year ended April 30, 2014 (FY14) and BFood gets to fully decide how to spend the money upon completion of the acquisition, expected in September.

“We have a free hand to run the operations when it is a 50:50 ownership but we cannot simply pay ourselves dividends without getting approval from our partner, Starbucks International. They frown on us for paying out big dividends although cashflow in BStarbucks is very strong,” he adds.

He explains that BStarbucks managed to pay out RM2mil and RM6mil dividends in FY13 and FY14, respectively, and BFood only received half of the amount.

That will change once it owns 100% in BStarbucks.

He says all the dividends it received from BStarbucks were paid out to BFood shareholders as BFood has strong cashflow itself and does not need the monies.

The food and beverage (F&B) group paid out 49% of its earnings in FY13, 58% in FY12 and 42% in FY11.

AmResearch projects higher dividends of 5.3 sen and 6.3 sen in FY15 and FY16 respectively. Notably, dividend yields will be compressed due to the recent spike in its share price.

BFood is also in a better position for other merger and acquisition (M&A) activities due to a stronger cashflow from BStarbucks although it is not looking at other deals currently.

“Any M&As must make sense for BFood shareholders and should be earnings accretive. If a good deal comes along, we will not walk away from it,” Lee says.

Analysts opine that BFood got a sweet deal for buying the 50% stake in BStarbucks at a price-to-earnings (P/E) of 16 times of the latter amidst the booming coffee culture.

On the other hand, Starbucks Corp US is traded at an estimated consensus P/E of 30 times.

AmResearch forecast that BStarbucks will contribute 54% to BFood’s revenue, followed by Kenny Rogers Malaysia at 27%, going forward.

Operating costs unchanged

Operationally, growth plans and investment costs for BStarbucks remain intact.

“There is no change in royalties and franchise fee rates for the next 25 years, which is good for BFood.

“Investment in stores is no different from previously except that now the company is wholly owned by BFood,” Lee says.

New stores, which may come in the form of stand-alone shops and outlets in malls and petrol kiosks, cost RM800,000 to RM1.1mil depending on the size while the investment cost for drive-throughs are higher.

The company plans to open at least 23 to 25 outlets per year over the next five years. It has 173 outlets at present.

Lee does not expect changes in BStarbucks’ operating cost as it has been prudent in cost management.

As for the competition from boutique cafes, he says: “We welcome competition and it is healthy as more people get into the coffee culture.

“We spent a great amount of money in training our partners and I believe this will set us apart from other boutique cafes sprouting all over the country.”

On top of that, BStarbucks has a strong principal that comes up with innovative designs in its stores coupled with great coffee and tea products.

AmResearch points out that the full control in BStarbucks allows BFood to further explore potential business in fast-moving consumer goods and distribution rights in Starbucks products.

As a group, Lee notes that BStarbucks has a better growth potential compared to its other franchise brand, Kenny Rogers Roasters, although profit margins for both businesses are close.

He says it is opening 10 to 12 Kenny Rogers outlets per annum and five to six Jollibean stores per year.

On the industry outlook, he says: “The F&B sector is getting more competitive and we see a slowdown, especially after the last budget announcement.”

He anticipates a knee-jerk reaction from the implementation of goods and services tax (GST) as consumers do not know what to expect but that should normalise over time.

“Starbucks, however, is different and we continue to see strong growth in all our stores. In fact, we are gunning for a world record of having same-store sales growth of double digit in the mid teens over four years,” he elaborates.

Lee expects the streak to continue into the fifth year, which is unheard of in the F&B industry.

He believes that BFood’s store counts growth is sustainlable for at least the next three years.

“With the Government’s Economic Transformation Programme and mass rapid transit sprouting all over, a lot of activities will be created over the next few years.”

On the flip side, a possible growth dampener will be a downhill domestic economy or global economic turmoil.

As for its preparation for the implementation of GST next year, Lee says: “We are starting to talk to our major suppliers and making sure they are GST-compliant too with proper registered GST tax numbers for us to claim our input and output tax.”

Although investors have chased the stock up over 60% in the past two days after the announcement of the BStarbucks stake purchase, some analysts opine that there might be upside in the long term.

“With a full control in BStarbucks, the higher valuation (in BFood) is justified,” a consumer analyst says.

Profits from the fast-growing coffee franchise will be fully consolidated into BFood in FY16 while revenue from BStarbucks will almost triple from the current level.

At current price, the stock is trading at an estimated P/E of 26.76 times for the financial year ending FY15, Bloomberg data shows.

AmResearch has a “buy” recommendation on the stock with a fair value of RM2.50, which is pegged to a P/E multiple of 22 times fully-diluted calendar year 2015 forecast earnings."

How Soon will AAX Turn Around?

Predicting Better Times

If you read what CEO Azran has to say, you may want to have a re-look at this stock. After all it has  lost almost all its shine off its IPO price of RM1.25 . Currently it is trading at just below 80 sen, for a loss of 45 sen.(36% loss )

Let us look at this latest article on AAX from THE STAR On-line.

"Could it be time to relook at AirAsia X Bhd? This long-haul, low-cost affiliate carrier of the AirAsia Group will be turning around in the second half of the year. Very likely in the third quarter to Sept 30 too.

That’s not all. The viability of AirAsia X flying to favoured destination London appears much stronger than before.

For the better part of this year, the hype and bluster on AirAsia X has died down significantly, following the announcement of two straight quarters of losses.

Long before that, the cancelling of the popular London and Paris routes in 2012 had already cast aspersions on the low cost carrier’s model.

Perhaps flying long haul for a low cost carrier was never viable in the first place.

Not surprisingly, its share price has been heading south, down 16.5 sen to 83 sen on a year to date basis.

It’s also 25.6% or 42 sen down from its initial public offering (IPO) price of RM1.25.

Even during the day the company was floated in July 2013, its share price never performed. The stock finished the day just 2 sen above its IPO price.

Were many already lacking faith for low cost long haul flights at that point?

Over the week, rumours of a merger between Malaysian Airlines Systems Bhd (MAS) and AirAsia X intensfied, as many speculated that a privatisation of MAS would fuel some kind of a tie-up.

On Thursday, Khazanah issued a statement quashing the rumours, saying that the media reports were unfounded and speculative.

Launched in 2007, AirAsia X competes with the likes Singapore Airlines’ Scoot and Qantas Airways’ Jetstar. Its biggest shareholder is the Tune Group with a 17.83% stake while AirAsia Bhd owns a 13.76% stake.

AirAsia X currently serves 19 destinations across Asia, which mainly consist of Japan, Taiwan, China and Australia. It also flies to Jeddah and Kathmandu,raking in a profit in the second half.

During the Farnborough Airshow in London, AirAsia X chief executive officer Azran Osman-Rani confidently said that AirAsia will be turning around in the second half of the year.

Analysts say there is a strong likelihood that this will happen in the upcoming third quarter results.

What’s more, now that AirAsia X has signed a memorandum of understanding (MoU) with Airbus to buy 50 ‘energy efficient’

A330Neos for US$13.8bil with an additional 50 purchase rights, this allows AirAsia X to once again revisit flying to London - the unspoken compulsory route needed for traveller endorsement.

The deliveries will take place between 2018 to 2024.

The key feature of the A330neo is that it is able to save fuel consumption by 14% compared with the normal A330. This makes it the most efficient, medium range wide-body aircraft in the market.

Apart from expanding AirAsia X’s fleet size, the new A330NEO will be used to replace some of its existing aircraft which will be 12 years old by 2020.

On turning around, Azran first explained that the low cost carrier model for long haul flights is viable.

“The losses had nothing to do with an unsustainable business model but was due to the typical start up costs related with setting up a new business,” he says.

“For every new route AirAsia X goes into, there will be an average of a 12-month start up losses incurred. AirAsia X will be turning around because we are reaching the end of that 12 month period for many of our routes,” he explains.

Some may say that AirAsia X is walking on egg shells with its borrowings of RM1.66 bil and cash position of RM75.08mil as of March 31. However, the airline business is a lot more capital intensive than other sectors.

Azran says that when a company starts a new business, it would have to invest in new capacity, stimulate demand and throw in promotions to fill up the flight. All these were typical start up costs invested by AirAsia X in the last two years.

AirAsia X has been expanding aggressively in the last one year.

To its credit, it has carried th most number of passengers to North Asia in 2013. The north Asian markets consist of China, Korea, Japan and Taiwan.

Looking at its first quarter to March 31, 2014, the statistics for the expansion are very telling.

Its average seat kilometre (ASK) which is the number of seats per kilometre, increased 60.12% to to 6.22 million from 3.89 million in the previous period.

Heavy discounting was seen in average passenger fares, which dropped to RM467.11 from RM623.53 previously.

The total number of passengers carried over the three month period increased 66.9% to 1.08 million from 647.366 passengers.

Thus, load factor improved to 85.8% from 84.2% previously.

This resulted in AirAsia X recorded losses of RM11.28mil from a previous profit of RM50.2mil for its first quarter to March 31, 2014. This was on the back of a 40% increase in revenue to RM749.48mil.

The carrier consumed 930,616 barrels of jet fuel for this period, a 72.4% increase from 539,676 consumed previously.

“The increase of AirAsia X’s capacity in its Australian routes as well as capacity expansion by its competitors had led to major losses in the fourth quarter of 2013 and the first quarter of 2014,” says MIDF analyst Chua Boon Kian.

He points that tourist statistics during the first quarter showed a healthy growth trend in arrivals, particularly from South Korea, which registered a 37% year-on-year increase and 19% jump from visitors from Australia.

“If Malaysia Airlines exercises capacity restructuring by the end of FY14, AirAsia X will be able to recoup some of its earlier losses through the recovery of fare yield in the second half of 2014,” he said.

Thus, Chua maintains a “buy” stance on AirAsia X with unchanged target price of 96 sen, premised on an FY15 price earnings ratio of 10 times.

Cheap flights to London again?

AirAsia X had previously flown to Paris and London, offering connections from its Australian routes, but halted serving the routes in 2012.

During the Airshow, AirAsia X co-founder and director Tan Sri Tony Fernandes said that with the orders for the A330NEO,this is a huge sign that it will only be a matter of time before an AirAsia X operates in Japan and India.

With AirAsia X in India, Fernandes added that AirAsia X can then fly to Africa and London, with Bangalore being a big hub.

Meanwhile from Japan, it can start flying to South America.

“Now that we have the A330NEO, it certainly makes London a whole lot more viable. We learnt from our old mistakes. The last time we didn’t have the support and it wasn’t aggressive enough. The rule of thumb is to have 20/30 short haul planes as a feeder, to make the long haul attractive and use it as a base,” says Azran.

Chua says that the longer range capability of A330NEOs will be more fuel-efficient for AirAsia X to resume its European route and the possible opening up of the US west coast route by 2018. “As the Asean region’s income per capita continues to grow, we believed that demand for leisure travel, especially for long haul destinations, should grow simultaneously,” he says.

This year, AirAsia X will take delivery of seven aircraft, hence bringing its fleet size to 23 Airbus A330-300s by the end of this year.

AirAsia X will take delivery of between seven and eight planes yearly.

Azran adds that AirAsia X started operations in Thailand earlier this year. For the first three months, it has already recorded a load factor of 88%. AirAsia X’s Indonesian affiliate will start operations later this year."

MAS-Double Jeopardy

Luck Changer Wanted

Called it what you may.

Bad luck;  bad fengshui, bad management, karma.

You asked for it, MAS! or whatever.

Losing two wide-bodied jets within 4 months is statistically improbable but it has happened.

What a crying shame.

After playing Russian roulette in the Ukraine, there is again rumour that another MAS flight traversed war-torn Syrian airspace.

Are we pressing our luck too far?

So what now is the strategy for MAS, in the midst of tragedy?

MAS apparently has only two ways to go.

The unpalatable one is to go under bankruptcy which will have a political backlash and unemployment to the loyal employees of MAS.

As  for its senior executives and Board of Directors which should rightly be, they should resign en-bloc before they get the big boots!

The second way is easier on everyone. Khazanah should immediately mount a takeover by taking over the remaining 35% of the shares it does not own.

At today's price of RM 0.205 it amounts to somewhere close to RM 1 billion which is chicken feed for the sovereign fund.

By taking it off the listing on Bursar, it can then take time to privatised it and to do whatever corporate surgery that it wants.

The thing to do is to make sure only those who are meritorious get to helm MAS and to turn it around in double quick time.

MAS-Looking for the Golden Key to Unlock Assets

A No Hope Situation for MAS?

This is the Malaysian Insider report of the AGM  of MAS held today.

"Stung by criticism, nine non-executive directors of Malaysia Airlines (MAS) today decided unanimously to return the fees paid to them last year, amounting to RM396,000.

MAS chairman Tan Sri Md Nor Yusof told a press conference that the non-executive board members had agreed to return the money to the airline.

It had been previously reported that many high-ranking civil servants were also sitting on the boards of government-linked companies.

The Malaysian Reserve had reported that Putrajaya was looking to ensure that active civil servants did not become board members of GLCs.

Performance and Management Delivery Unit (Pemandu) chief Datuk Seri Idris Jala had reportedly said civil servants sitting as GLC board members faced potential conflicts of interest.

MAS board member Tan Sri Irwan Serigar Abdullah is also Treasury secretary-general and chairman of Cyberview Sdn Bhd, the master developer of Cyberjaya.

Md Nor also said that there had been calls from shareholders for the immediate resignation of the board and MAS management.

"It is only natural for the shareholders to be angry considering how events have unfolded.

"However, we have tried to explain to the shareholders that MAS has been facing chronic difficulties over the past 15 years,"  he said.

Meanwhile, MAS group chief executive officer Ahmad Jauhari Yahya refused to confirm or deny that filing for bankruptcy or retrenching staff were among the possibilities they were exploring.

He refused to answer questions, saying that the airline was looking at all options.

"We are looking at all options, I am not going to answer 'yes' or 'no'," he said at a press conference when asked whether MAS was mulling bankruptcy.

The press conference, at the MAS training centre in Kelana Jaya, was held shortly after the end of the annual general meeting.

The media were not allowed to attend the annual general meeting but it was understood to be a fiery affair due to MAS's balance sheet.

Md Nor said the impact of missing Malaysia Airlines flight MH370 had been widely disseminated by the media, both local and international.

"We have reached a critical point in our efforts to return Malaysia Airlines back to a stable footing," he admitted.

"The loss of MH370 means that MAS also has to grapple with perception and a loss of confidence in the airline.

"Although unjustified, we are determined to rebuild the brand," Md Nor said, adding that 2013 was not a good year for the airline.

But he was confident that all was not lost, saying MAS, like the national flag and the hibiscus flower, was a national icon.

"We are Malaysia's embassy on wings, as we carry the nation's name every single time one of our flights is in the air," he said.

"These are factors which must be taken into consideration," he told the press conference.

Ahmad Jauhari said despite its appalling balance sheet, Malaysia Airlines still had strong assets.

"We have a world class engineering team, we have award-winning crew, a very young fleet," he said, adding these were all genuine tangible factors.

Ahmad Jauhari said they were looking at putting more seats on the existing Boeing 777 fleet, or densing up in aviation parlance.

"Studies have shown that we will be able to recoup the costs within six months," he said, adding it would boost the balance sheet.

Ahmad Jauhari had earlier told the media that MAS was looking to retire its entire fleet of Boeing 777 aircraft within a three-year period.

However, he said as MAS was able to recoup the cost of adding more seats to the Boeing 777 aircraft within three months, they would proceed with that initiative. – June 25, 2014."

A Bashing Time at the MAS AGM

MAS's CEO Ahmad Jauhari - Biting the Bullet!

Tumultuous is the word here to describe the MAS AGM held today.

The minority shareholders really showed their temper at the Board of Directors who were 100% in defensive mood; admitting inefficiency and a poor performance irrespective of the MH 370 tragedy.

While the Chairman noted the anger of the shareholders, the latter retorted they were more sad than angry at the continuing saga of the poor financial performance of the airline and its share price.

As the investment banks' negative appraisal of the stock continue to force the price down, Khazanah's untimely statement that they will be reviewing MAS's position in a time-frame of 6 to 12 months only, was badly-timed and a real bummer.

Comments like the whole board should be summarily dismissed;that they should only be paid RM 1 allowance only as well as fixing KPI's on all of them were part of the biting rantings.

Kinibiz has this to report.

The MAS annual general meeting (AGM) was extended by two hours today after a poll vote was called to decide on a resolution concerning directors’ fees.

On chairperson Md Nor Yusof’s insistence, voting was switched from a show of hands to a poll vote. Under a poll vote, shareholders’ votes are counted based on the number of shares held.

The resolution to “approve payment of directors’ fees amounting​ to RM396,000 per annum for the financial year ended December 2013” eventually passed with 79 minority shareholders voting for the resolution and 70 against. Those going against represented 0.07% of all shares held.

However, in an unexpected development, non-executive directors  chose not to accept the directors’ fees after conceding that the board’s performance during 2013 was poor.

Shareholders had earlier expressed deep dissatisfaction, going as far as to call for top management to resign.

The AGM ended at close to 3 pm.

There was certainly a leaf of experience to be learnt from this meeting for all Board members in general .

It's not all ice-cream and cherry pie helming a public listed company that cannot perform!

Foreign Fund Managers Pursue Aeon

The Ubiquitous Aeon Sign

To best the competition, Aeon Co (M) Bhd will now diversify into electronic and furniture stores.

Aeon Malaysia formed a joint venture with Thailand’s furniture retailer Index Living Mall Co in September to set up shops in Malaysia

Aeon's focus thus far is on enlarging its domestic operations through shopping centers, department stores and pharmacies in the country.

According to Aeon, this strategic move is driven by competition in the retail industry and changing consumer behaviour. According to its spokesman, there is an ample increase in retail space in 2013 and it’s going to increase further in the next two or three years. 

Aeon’s competition in Malaysia includes Tesco Plc, the UK’s largest grocer.

Retailers in the Southeast Asian nation are seeking new ways to lure customers as price increases on fuel, power and sugar slow private consumption. Aeon Malaysia plans to spend RM 1.4 billion (US$435 million) this year and next to open more stores and refurbish existing ones as it prepares for a goods and services tax that it says may hurt sales for three months after implementation in April.

Private-sector consumption expanded 7.1 per cent in the first quarter from a year earlier, after climbing 7.4 per cent in the last three months of 2013, according to BNM data. 

“Aeon Malaysia has been one of our core holdings for the past 15 years,” said Gerald Ambrose, managing director of Aberdeen Asset Management Sdn Bhd, which owns shares in the stock. “The company does seem to have the ability to grow their business.”

Shares of Kuala Lumpur-based Aeon rose 1.9 per cent at 11.52 am local time, extending gains for a seventh day. The stock is headed for its highest close since June 4, 2013. It earlier surged as much as 4.6 per cent. Stock purchases on Aeon were mainly from foreign funds.

Aeon shares went down to a low of RM 3.69 after it ex-all and found sustainable traction recently above RM 3.80. It has been advancing ever since due to new fund  interests. 

The ex-all theoretical  price was RM 3.75 . At today's price of RM 4.23, a shareholder of 4000 shares ex, would have made a clean profit of  RM  1,6,92 if he sells. 

If Aeon shares are chased upwards to RM 5 in the next few weeks, then our shareholder would have gained RM 5,000;an equivalent return of 33% within 60 days.

Powering On Through ITC As Well?

After investing more than two billion ringgit in building up the 4G infrastructure, product development and network, YTL Communications(YTLC) expects to incur only a limited capex when it rolls out its Long Term Evolution (LTE) technology soon.

According to its CEO, Wing K Lee, the current 4G WiMAX network has been  'future-proofed' as they have built a flat IP network enabling any IP-based technology to just plug in.

He said the company will not be abandoning its WiMax service which it has adopted since November 2010 to roll out its LTE technology. "No, we will not be migrating away from WiMax. Instead we will work hand-in-hand with LTE," he said.

Wing said YTLC's 4G network which covers 85% of the population with over 4,000 base stations, has proven to be robust and will continue to serve its customers well.

He added further that while the mobile WiMAX network has delivered favourable economics, adding LTE to its network would allow for an expanded array of device and service possibilities.

YTLC has completed trial runs and will be rolling out its LTE soon, without giving a definitive date.

Howevert, Wing was reluctant to reveal which LTE variant YTLC is planning to adopt except to say it is
a "newer version".

Wing had previously said that he liked the Time-division-LTE (TD-LTE) spectrum as it is more flexible and efficient compared to Frequency Division Duplex (FDD) spectrum, which is a different standard of LTE 4G technology.

He said the latest version offers faster speed, higher network capacity and at the same time present better quality of Internet multimedia experience.

Wing assured that  YTLC should be in a good position to be the first company in Malaysia to launch the newer version of LTE.

"We are looking for the right time and point of entry to launch the new version of LTE," he said.

YTLC will collaborate with Asiaspace Broadband Sdn Bhd's 30MHz allocation on the 2.3GHz band in infrastructure and spectrum sharing.

This collaboration will help avoid duplicity of infrastructure and maximise the use of bandwidth for the wireless broadband services nationwide by both companies to provide quality and uninterrupted services.

YTLC was among the eight companies awarded the LTE spectrum in late 2012. The other companies include Celcom Axiata Bhd, DiGi.Com Bhd, Maxis Bhd, Packet One Networks (Malaysia) Sdn Bhd, Puncak Semangat Sdn Bhd, REDtone International Bhd and U Mobile Sdn Bhd.

Celcom Axiata, Maxis, DiGi and U Mobile were more aggressive in their LTE rollout. Celcom said it plans to have more than 2,000 LTE sites, while DiGi expressed its plans to have more than 1,500 LTE sites by end of this year. Maxis, which has set aside RM1.1 billion of capital expenditure (capex) this year, said it will spend a significant amount of this capex to expand its LTE coverage.

On another note, Wing said YTLC will be launching the 1BestariNet project in Sarawak this year.

So far, 90% of 10,101 primary and secondary government schools in Malaysia are connected through the cloud-based virtual learning.

So, it looks like YTL Power International may get more cash in its pocket through the advent of YTLC's LTE technologies when they are implemented.

Perhaps, it is time to collect some more YTL Power shares?

Fine-tuning for Tune Insurance

An Ever Expanding Pie?

The CEO of Tune Insurance Berhad (TIB) Peter Miller wants to triple the company’s market value to RM 6 billion by 2018.

How?

By way of capitalising on AirAsia group’s rapid growth, as he plots expansion into neighbouring countries.

“If we can improve take-up rates as well, AirAsia’s contribution can be reasonably expected to somewhat nearly double over that timeframe,” he told reporters after its AGM yesterday (6 June 2014).

TIB provides online travel protection products for AirAsia and has established partnerships with Cebu Pacific and Air Arabia. Miller said the company was keen to expand its services to include other full service and low-cost airlines.

Low-cost carrier AirAsia  owns 16.2% of Tune Ins, while Tune Group Sdn Bhd, controlled by Tan Sri Tony Fernandes and Datuk Kamarudin Meranun, is its single largest shareholder with a 25% stake.

Miller said it would work hard to benefit from the natural growth of AirAsia and AAX, especially with new plane deliveries, as well as new AirAsia entities such as AirAsia India and AAX Thailand.

The group is also focusing on integrating the business of 49%-owned Thai insurer Osotspa Insurance into the group, with a re-branding exercise to be launched soon.

“We are very optimistic about the shareholder value we can create in Thailand over the next two to three years. And of course, the online insurance business sales will grow over time,” Miller said.

Currently, the company has a market capitalisation of RM 1.8 billion.

On its expansion into Indonesia, Miller said TIB had identified a new target to acquire by the year-end and that it was commencing the registry process.

“We are still optimistic we will own a company in Indonesia before the end of the year. Ideally, we want to get Thailand down first because a lot of what we will do in Thailand is what we can pick up and replicate in Indonesia,” Miller said.

Currently, TIB has 14 insurance partnerships in 18 markets in Asia and plans to increase its partnerships in the Middle East-North Africa region to 30 by year’s end.

So, when do you think is the right time to go into this counter?

AAX-Not Out of the Woods But Hoping

Seeing the End of the Tunnel?

With MAS shares tumbling like tumbling weeds down to a low 16 sen and now hovering at 17 sen, what is in store for the nearest competitor, AAX?

Since its listing on the Bursar, AAX has gone down almost 44% from its RM 1.25 IPO price.

To date, there has been no traction as the price gravitate downwards and there is possibly no treasury buy-in from the company itself.

According to the CEO of AAX, Azran Osman, shareholders can expect a better second half of the year performance for the long haul low cost carrier.

What are his hopes buttress upon?

For one, the added capacity is expected to yield result. Barring unforeseen circumstances and development, he expects a good positive 3rd and 4th Quarters for 2014.

He has this to say: "Every time you grow, you need time for capacity to mature, so forward sales looks positive in the third and fourth quarters because the new capacity we added last year is showing signs of bearing fruit,"

For the financial year ended Dec 31, 2013, AAX posted a pre-tax loss of RM212.98 million on the back of RM2.3 billion in revenue.

Azran said the expansion was necessary for the long-term.

"AAX wants to have a commanding lead like what happened to AirAsia back in 2007/2008 when they expanded and profits accrued to AirAsia in 2009, 2010, 2011, 2012, 2013.

"You need to get the scale of advantage and that is why we need to accelerate growth in 2013 and 2014," he added.

On new markets, he said Indonesia offered tremendous opportunities for the company.

AAX has applied for the final air operator's certificate (AOC) licence to operate and hopes to obtain it by year-end.

We do hope AAX is not on autopilot like MAS.

YT-Profit Trending Upwards

Moving up again

Construction conglomerate YTL Corp Bhd (YTL) saw its profit increased 40.5% to RM1.93bil for the nine months ended March 31, 2014 from RM1.37bil in the previous corresponding period on better performances from its cement, property development and investment and hotel divisions.

The group, hence, declared an interim dividend of 10%, or one sen per ordinary share of 10 sen.

Power Assets

Resorts

Rapid Transit

Despite strong growth in its group profit, YTL’s revenue declined a marginal 1.9% to RM14.66bil during the period under review from RM14.95bil due to decreases in its construction and utility divisions.

“Our cement, property development and investment and hotel divisions all registered stronger revenues, offsetting decreases in our construction and utilities divisions,” YTL group managing director Tan Sri Dr Francis Yeoh said in a statement.

Yeoh pointed out that the group’s higher profit for the nine months under review was due primarily to better performances of the concrete and quarry businesses in its cement division; contributions from the uniquely-styled Fennel and Capers condominium developments in its Sentul urban regeneration project, and consolidation of results from Starhill Global REIT in Singapore, which owns prime retail properties across Singapore, Malaysia, Australia and Japan.

“In addition, better performance in the water and sewerage, mobile broadband and power generation sub-segments of our utilities division also bolstered profit for the nine months under review,” he added.

For the nine months to March 2014, YTL Power International Bhd’s profit fell 1.2% to RM752.3mil from RM761.6mil previously, while revenue fell 7.4% to RM11.05bil from RM11.93bil.

YTL Land and Development Bhd’s revenue more than doubled to RM239.4mil for the nine months in review, compared to RM113.9mil in the previous corresponding period, while its profit increased to RM20mil from RM11.6mil previously.

YTL Hospitality REIT’s revenue rose 68.9% to RM324.6mil, while net property income increased 16.9% to RM157.7mil.

YTL e-Solutions Bhd, meanwhile, registered a marginal 0.2% decrease in revenue to RM65.1mil, while profit fell 6.4% to RM42.5mil.

The Fall and Rise of YTL Corp

An Observable  W Wave Pattern

Having plunged from a strong 1.76 level to a low of RM1.61 because it was taken out of the Syariah Compliant List, YTL started moving northwards in a vibrant manner. It hit RM 1.71 before closing for a 9 sen gain at RM 1.70.

What can one deduct from this price resuscitation?

Adding Revaluation Value to YTL Corp

Is it a treasury buy-in that has caused new 'blood' of interest to course through the price trajectory artery of YTL Corp?

Maybe so, as a defensive reaction.

But I thing it is more that that this time around.

May be it was a re-rating perspective scenario brought about by an article from CIMB.

From the business pages, it can be read that CIMB Research has upgraded YTL Corp to Add from Hold, with the target price revised upwards to RM 2.42 per share from RM 1.94 based on a revaluation of the company’s cement business to better reflect its position as a key growth catalyst.

For the down-cast investor of YTL Corp who has yet to see the revival of YTL Corp to beyond RM 2.00 for a long, long time, this new development of YTL  Cement's revaluation is manna from heaven!

This research house has also upgraded earnings per share forecasts by 6% to 8% after factoring in construction earnings from the recent Track 4A concession to a consortium led by YTL Power. This was another good news for investors of both YTL Corp and YTL Power International.

According to CIMB Research, after many years of global expansion, YTL Corp has shifted focus back to the home front to reap the value of its investments across the infrastructure cycle, spurred by the current Economic Transformation Programme.

“Our recent meetings with management underscored the theme of YTL Corp shifting its focus from growth-via-acquisition abroad to growth-via-execution at home,” it said.

It added that “construction is poised to be a new powerful earnings catalyst” for the company. This has been kicked off with the recent RM 6 billion Track 4A independent power plant award, and that its order-book could very well swell further with the possible RM 8 billion express rail link (ERL) extension to Malacca and the RM 30 billion high-speed rail project to Singapore.

CIMB Research said YTL Corp’s valuations, at 10.3 times financial year ending June 30, 2015 price-to-earnings, were among the cheapest among regional conglomerates.

Brave Brinkmanship

That indeed is a sign of relief for tired YTL Corp shareholders!

AEON: Expectation of 2014 and Managing 2015

Managing 2014-2015

Notwithstanding expected lower retail growth in Malaysia, Aeon Co (M) Bhd (Aeon) , is set to increase its investments this year.

As it envisaged sustained consumer spending, Aeon plans to invest RM 700 million in 2014 capex which is an increase of RM 536 million from FY13.

Aeon remains optimistic about consumer spending though it is apparently described it as "cautious" now.

Aeon will follow-through with its plans to open three outlets this year in Bukit Mertajam, Taiping, and in Quill City, Kuala Lumpur adding that they will be the anchor tenant at Quill City.

The RM 700 million capex planned for this year will include the three new stores, expenses of stores opened last year as well as refurbishments of current stores. 

“In the first year of operations, we usually have to contend with start-up costs of between RM 1 milionl and RM 2 million in each store that we open,” Aeon added.

Aeon also mentioned recently how operating costs has increased due to higher electricity tariffs which kicked in this year.

This cost component rise had an impact on the company’s recently announced first-quarter FY14 financial results to end-March that saw bottom line declining by 8.3% year-on-year to RM 46.88 milion despite top-line rising by a similar 8.8% to RM 945.5 million.

“This year, we are witnessing the impact of the increase in electricity tariffs. It is not only impacting us but also the rest of the industry. On a net basis, costs have increased by 17% so far after the tariff hike. This cost (component) needs to be reduced to a certain extent,” an Aeon spokesman said.

But given this is only the first quarter, generally the (financials) tend to grow stronger as we move along into the third and fourth quarters. We are looking at environmentally friendly; power-efficient devices and methods to reduce power consumption to cap these costs." Aeon said.

Such measures will include using LED lighting and installing escalator sensors. It will be done in phases on a store-by-store basis, with the aim of completing it within the next 12-15 months. Aeon does not intend to pass on these new cost increases to consumers. 

The company has notably been able to face rising costs in components such as labour, fuel and materials, as net margins have been maintained at a decent 6.5% in the past three years.

Aeon had also over the past five years reported steadily rising top and bottom line figures.

The company also plans to introduce an online shopping portal soon, with the aim of capturing an additional revenue stream from this business segment with a capex allocation of about RM 2 million over two years.

“We recognise the need for online shopping and growth possibilities in this area. This year, we will start developing the online side and are now working with some consultants to try to establish and set up our own website. In the future, we will also consider digital advertising,” Aeon indicated.

“The online business will work hand-in-hand and complement the brick-and-mortar business. I don’t think it will replace it, as Malaysian consumers still like to feel and touch (a product),” the Aeon spokesman informed.

Aeon, which also has a property management service business presently, owns 12 of its outlets, leases 13 and is anchor tenant at five of its outlets.

“We are anchor tenant at Sunway, Bandar Utama, IOI Mall, Queensbay and Mid Valley. We basically manage the whole shopping centre at the ones we own or lease - with Aeon inside and the rest of the space sub-let to other tenants,” Aeon said.

However, Aeon does not have any intention to establish a real estate investment trust at the moment, as there is no need for it.

“It’s an option that we are open to (in the longer term), but there is no necessity to jump into it right now,” Aeon added.

Aeon will open its first furniture outlet called the Index Living Mall in Puchong via its 70%-owned joint venture with the Thai-based Index Living Mall, which is the largest furniture retailer in Thailand. The furniture and wood products will be sourced from Thailand. The initial capital is about RM 10 million.

Index Living Mall has its own manufacturing plant in Thailand and is currently already exporting to other countries with a franchise business as well.

Why Investors Make Bad Choices

Fear or Guts?

I took this from the On-Line Star so that any one dabbling in stocks will learn how not to make bad choices.

"Investments are a very serious matter. As with other important aspects of our lives, proper decision-making is integral when it comes to investing. While not every investment decision we make can be 100% accurate, we do possess the necessary prudence to differentiate what a smart choice is from a less ideal choice.

So, despite having the aforementioned prudence, why do we still make ill-advised choices in terms of investments? There are three factors that affect our choices, as these are closely in line with our behaviour.

 Availability bias

According to behavioural scientists, availability bias is a person’s tendency to assume that if a certain incident has happened before, then that incident happens to be “available” or can and will happen again in the future.

The problem is that people also have a tendency to exaggerate on the probability that those events deemed available will happen again.

In terms of investments, availability bias works both ways. For one, investors who have enjoyed a measure of success in a particular investment in the past will have a particular prediction to the same type of investment, even if the results strongly advise against further investments. 

By the same token, people who have experienced some form of failure in specific investments will tend to exaggerate the frequency with which such instances do occur, thus clouding their decisions.

Loss aversion

Loss aversion is something that affects investors for the simple fact that nobody likes suffering loss of any kind. In fact, it is theorised that the level of impact loss has on a person is greater than the impact of a gain. This means people will not generally mind not gaining anything, as long as they do not suffer any loss. 

From an investment point of view, losses tend to come with the territory. However, it is hard to bounce back from loss, even for seasoned investors. 

A loss, especially a significant one, naturally affects choices investors will subsequently make; essentially preventing them from taking risks that may possibly yield high returns because the negative feelings—the disappointment, frustration, pain and even, to an extent, humiliation—associated with the loss are all too much to go through again. 

While many will argue that a person tends to harden after several losses, behavioural theorists claim that loss aversion operates mostly on a subconscious level. Most of us even avoid loss without even knowing we are doing it. 

Probability neglect     

Probability neglect revolves around how people tend to become emotional during high-pressure situations or any scenario wherein there is a weighty consequence to every course of action. 

Basically, this means that people get emotionally rattled, so much so that the focus will remain on the worst-case scenario of any situation instead of logically analysing probable scenarios and looking at the situation with a level head. 

When it comes to investments, a level head can mean the difference between a smart call and a poor choice. Probability neglect prevents an investor from looking at all the available pieces of information regarding a particular investment—seeing, instead, only the pieces of evidence that reinforces the perceived worst-case scenario. 

One solid example of this is the investing attitudes in the market after the recession. After the crash, investors were more reserved in their investing, due not just to probability neglect, but to a combination of all three factors specified here. The huge losses a lot of investors suffered have had most of them second guessing all the investment choices they have made. 

After all, if they were wrong once, the possibility remains that they can be wrong again. They have suffered losses they do not wish to suffer through again. And, a lot of them have become focused on the potential of another crash that an objective and logical decision becomes harder to make. 

This whole scenario shows that investors, despite all their power, resources and savvy, are also subject to the same kinds of pressures everyday Malaysians face. These factors are all normal human behaviour.

The difference between successful investors and failed ones, however, is not just making consistently right choices, but also knowing how to anticipate and appropriately deal with losses as they come.   

This content is created by Nazirah Ashari for the readers of The Star. Nazirah is Head of Content at CompareHero, the leading Malaysian financial comparison platform, aimed at helping Malaysians save time and money. "

AEON-The Kenanga Prediction

A Value- Buy Ex-All?

Kenanga Investment Research has put out an underperforming call on AEON.

It has downgraded AEON at the current RM 15 level to below RM 14 or to be more exact to RM 13.78 from an earlier Top price (TP) of RM 13.83. This is six sen short of the former price expectation.

Rolling forward to FY15 estimated earnings per share (EPS), it has maintained a price to earnings ratio of 19X for this counter.

The change of heart at Kenanga on AEON was based on the slightly lower profits and higher costs occasioned by increasing operating expenses and higher utility bills  by the group,effected in  Q1F14, particularly with new store openings and promotional costs.

Kenanga said AEON's net profit for the first quarter 2014 (Q1,F14) amounted to RM 46.9 mil which made up 18% of the full year consensus estimates.

However, it has been noted by Kenanga that while  topline growth met the research house's expectations at 25% ,its earnings were slightly below expectations as the first and second quarters were traditionally weaker quarters compared to a stronger 2H as promotional expenses tends to be front-loaded.

On the upside, Kenanga said AEON's longer-term growth prospects appear positive as it plans to open another three new AEON outlets and two MaxValu stores in smaller towns such as in Bukit Mertajam, Taiping and Klebang in the next three years as well as its strategic  intention to branch into Sabah and Sarawak to have a presence there.

As a result of Aeon's expected lowered earnings estimates, Kenanga has reduced the TP slightly to RM 13.78 (from RM 13.83) (ex-bonus and split target price of RM3.44).

My Comments:

The share is now trading at RM 15.00. Unless it goes down further during the cum period, the theoretical price adjustment should be RM 3.75.

If this stock is demand-driven when it goes ex-all, then expect some aggressive spurt buying by pent-up potential buyers who could not get in at the cum RM 15.00 price level.

We will have to wait until June 2 to see what is the market perception of the price of AEON stocks.