Cash Talks Loudest in Mean Times

Izwah Idris wrote in the online STAR today (19 June) about how money talks in quiet times. I would like to amplify that.

Cash talks loudest in mean times!

These cash-rich companies enjoy a significant advantage over their less fortunate rivals in these horrendous times.Having lots of cash in the treasure chest provides these firms leverage to buy into strategic assets when an opportunity arises as well as to hunker down when business is slow.

In a recession, cash is king, or so the cliche goes. and money is useless insavings with current almost dead-beat interest rates.

To boost returns to shareholders, cash-laden companies like Genting Bhd and Carlsberg Brewery Malaysia Bhd have set out plans to make their pile of cash work harder.

Genting recently bought bonds and a small equity stake in troubled US gaming giant MGM Mirage. Analysts say this is likely a prelude to bigger things, with a potential partnership between the two groups being the most anticipated outcome.

Genting has an estimated RM3bil cash hoard, the bulk of which comes from subsidiary Resorts World Bhd’s RM4.8bil stash.

There is lingering talk on the possibility of Genting selling off its power business, which could expand “the group’s cash hoard in preparation for potential merger and acquisition (M&A) deals,” a CIMB Research said in an update on the company dated June 15.

Meanwhile, the market is waiting for Carlsberg Malaysia to announce a regional acquisition.

Earlier this year, the local unit of the Danish brewer held back at least RM52mil cash from shareholders after it cut the dividend payout for 2008, citing the need to conserve funds for expansion.

With a war chest of RM220mil, Carlsberg Malaysia is probably intending to make a significant purchase.

Another company said to be on the prowl for acquisitions and new projects is YTL Power Bhd. After completing the Power Seraya acquisition last year, YTL Power’s gross cash position remained at a strong RM7bil.

Companies operating in the gaming, consumer and utility sectors normally have steady positive cash flow from operations given the nature of their businesses.

This helps big-sized firms in these industries to build up their cash holdings rapidly.

RHB Research Institute estimated that Petronas Gas Bhd added about RM150mil in net cash every quarter and had in its coffers some RM1.5bil in cold cash as at end-March. This is after taking into account total liabilities that amounted to nearly RM500mil.

An interesting finding is that most listed motor vehicle players in the country have strong balance sheets.

As at end-March, Proton Holdings Bhd’s cash and equivalents stood at RM900mil, while total debt was RM358mil. UMW Holdings Bhd, which has a significant oil and gas business, has RM1.5bil in cash and RM1.27bil worth of debts.

Parts maker APM Automotive Holdings Bhd’s net cash position is RM180mil, while Oriental Holdings Bhd has about RM1.4bil net.

About half of both APM and Oriental Holdings’ current market values are supported by cash.

Among the smaller capitalised companies, quite a few companies have very little borrowings and a healthy cash pile.

Oil and gas equipment maker APB Resources Bhd is one of those companies with a clean balance sheet. It had no debts and RM71mil in cash, mostly placed in banks, as at end of last year.

At yesterday’s close, the stock was valued at RM112mil.

So, for those intending to enter the market;watch these stocks:

Genting Berhad
Genting Malaysia Berhad(formerly known as Resorts World Berhad)
YTL Power
Carlsberg
Bursa
Proton
Petronas Gas
UMW holdings
Oriental holdings
APM Automotive Holdings.

Remember entry point is important!

Happy shopping on the Bursar.

The Illegal Proxies

Certainly a pertinent issue.

I think most companies do not follow the letter to the law. The possible reason is more the enforcement incapacity than just allowing the breach.Practical issues rule the day.

Section 149 of the Companies Act 1965 states that "a member is not entitled to appoint a person who is not a member of the company as his proxy unless that person is an advocate, an approved company auditor or a person approved by the Registrar of companies in a particular case."

Roselie from Genting Berhad explained to me that you must be firstly a shareholder to be made a proxy. If not, you would fall under the category called "illegal proxies". I guess no company is stopping these people who are not shareholders from being nominated as proxies at AGMs.

Anyway, if they can get rid of the illegal proxies, a lot of problems especially the 'greedy mob syndrome' can be cut off at the bud.

So,when you attend the next AGM, ask yourself - are you attending as a valid proxy or otherwise?

In seek of Marital Solace in Singapore

Yes, it is confirmed at least in Singapore.

Bachelors who 'missed the boat' there have been importing foreign wives.

The Straits Times reported today (18 June) that older Singaporean men whom Cupid missed, are seeking marital bliss by marrying non-Singaporean women. The numbers have increased substantially from 18% ten years back to 35% last year.Most involved men above 40.

These men married foreign women significantly younger, with four-fifths of their brides being under 40.

These figures were culled from an occasional paper put out by the National Population Secretariat (NPS), corroborating anecdotal evidence from marriage agencies, counsellors and MPs.

A number of these marriages have failed fail due to cultural differences or financial difficulties. Howver, there are success stories where the children of their union, exceled academically.

At the national level, most marriages involving foreign spouses tie persons of similar educational levels together.

Half of the Singaporean men with foreign brides had secondary education or lower, a figure that was similar for their brides.

Almost all these brides came from Asia, according to the NPS.

Matchmaking agencies point to significant demand for brides from places like China and Vietnam. (This was to be expected!)

Now let us look at the other picture-Singaporean brides marrying foreign men. The demographic here is vastly different. These women are younger, with three-quarters aged between 25 and 39. Also, half of these ladies, like their foreign grooms, have a degree.

Last year, around 70 per cent of their grooms were from Asia, 15 per cent from Europe and 6 per cent from the Americas.

NPS expects more citizens will marry foreigners as Singapore continues to globalise.

The Government will expand the network of Overseas Singaporean Clubs in major cities abroad in a bid of promote marriage.

There are now 13 such clubs in Singapore-owned or Singapore-run hotels in places like New York, Beijing, Sydney and Hanoi. They hold monthly events for citizens to meet, and have a reading corner with Singapore newspapers and magazines.

In Malaysia, there are also efforts locally by MCA in this direction. The unmarried Senator Chew Mei Fun once helmed such a club. Strangely there was no proposal for her.

Has Cupid missed again?

What is the FBM KLCI?

I attached an article from the online edition of the STAR this morning (18 June.

According to this article,finance stocks will be biggest beneficiary of new index.

Bumiputra-Commerce Holdings Bhd (BCHB) will emerge as the stock with the largest weightage on the FTSE Bursa Malaysia KLCI (FBM KLCI) index which replaces the current KL Composite Index (KLCI) on July 6. They will be by power stocks and gaming counters.

The top 10 stocks in the FBM KLCI weightings are BCHB, Malayan Banking Bhd, Sime Darby Bhd, Public Bank Bhd, Tenaga Nasional Bhd, IOI Corp Bhd, Genting Bhd, Axiata Group Bhd, MISC Bhd and Resorts World Bhd.

Banks and plantations together would have a combined weighting of 55% in the new index.

The top five sectors, which include power, gaming and telecommunication stocks, will have an index weight of 85%.

It's also sayonara for seven sectors – building materials, construction, hotels, insurance, property, timber and technology will will disappear from the radar screen altogether.

In terms of stocks, the major winners from the increase in weightings are Public Bank Bhd and BCHB.

The report also highlighted other stocks with significant gains will be Sime Darby Bhd, Tenaga Nasional Bhd, Malayan Banking Bhd, IOI Corp Bhd, Genting Bhd, Axiata Group Bhd, AMMB Holdings Bhd, Berjaya Sports Toto Bhd and UMW Holdings Bhd.

The major losers were 15 big-cap stocks that would see a drop in weightings due to their lower free float and liquidity.

“They are still in the new index but due to their smaller weightings, they may face selling pressure,’’ it said.The steepest fall in weightings would be RHB Capital Bhd, Malaysia Airlines, Petronas Dagangan Bhd and Petronas Gas Bhd.

Also downgraded were MISC Bhd, DiGi.com Bhd, PLUS Expressways Bhd, Hong Leong Bank Bhd, Astro All Asia Networks Plc and MMC Corp Bhd.

The two largest construction firms on the stock exchange, IJM Corp Bhd and Gamuda Bhd, failed to make the cut into the new benchmark index.

Impact wise, Bursa indicated the direct impact on indexed funds will be minimal at below RM200mil.

The report was of the view that concentration in the top-10 stocks in the FBM KLCI has been intensified.

“Under the KLCI, the top-10 stocks have a combined weighting of 51% whereas under the FBM KLCI, their weighting is 71%,’’ it said.

With the FBM KLCI,we will once again be in uncharted waters.

So do keep your eyes keenly glued to the 10 counters of the FBM KLCI if you are looking for good buys.

The UK's |Economy to contract by 3.8%

I paraphrased a Reuters Report on the British economy released this morning (18 June).

The British Chambers of Commerce indicated that the British economy will contract by 3.8 per cent this year and can see a muted recovery in 2010.

This business group said the worst of the recession was probably over and output would likely turn positive in the fourth quarter of 2009.

However, it said recovery was not guaranteed and there was a risk the economy could deteriorate again if stimulus from record low interest rates and expansionary fiscal policy were withdrawn too early.

"A temporary rebound driven primarily by the stock cycle will not produce a sustainable recovery unless consumer spending, investment and exports start to improve," said BCC chief economist David Kern.

The BCC's forecast of a 3.8 per cent contraction this year and 0.6 per cent growth next year brings it more into line with consensus. Its previous forecasts in March — for 2.8 per cent contraction this year and growth of 0.8 per cent in 2010 — were well above consensus.

The BCC is the latest business group to warn that the green shoots of recovery may be fragile. The Confederation of British Industry took a similar line earlier this week.

Britain's economy shrank by 1.9 per cent in the first three months of this year, its sharpest contraction since 1979, but forward-looking indicators suggest the economy is stabilising and may soon return to growth.

The BCC said it expected the cumulative decline in GDP in the current recession to come in at 4.9 per cent. That would be much worse than the 2.5 per cent decline recorded in the recession of 1992-1993 but less severe than the recession of the early 1980s.

I am watching for more concrete signs of recovery.

Berjaya Sports Toto-Walk the Talk

Fresh on the heels of its announcement on 15 June 2009, Berjaya Sports Toto (BST) has given the notice of book closure.

The items involves:

1) Fourth Interim Dividend of 11 sen per share tax exempt dividend.
2) Interim Dividend of 19 sen per share comprising of 9 sen per share tax exempt dividend and 10 sen per share single tier exempt dividend.
3)Share Dividend via a distribution of 89,714,285 Treasury Shares on the basis of One(1)Treasury Share for every Fourteen (14) ordinary shares held.

The following is the schedule of its pay-out,its ex-dividend and re-quotation dates

1) BST shares will be traded and quoted ["Ex - Dividend"]
from 13 July 2009.

2) The last date of lodgement will be 15 July 2009.

3) Date Payable for the dividends will be 27 July.

Thus, those who wants to partake of the declared dividends should buy BST before 15 July 2009.

Genting Berhad- Why the Missing Reports?

I guess people are generally protective of their interests.

And the same goes for missing annual reports. Minority shareholders were angered when they were denied what was due to them.

So before, the Genting Berhad AGM could start on the right footing this morning, Kok Thay was swarmed with the pricky issue regarding lost annual reports.

Not that many care to read these reports or even could understand the legal or financial aspects of it. But they wanted their reports. Why?

Mainly it is because of that coupon sheet that is sent along with the report. That coupon sheet give the holder, two nights' stay at the Genting Hotel during non-peak seasons as well as other discounts.

So where did these reports disappear to?

Some shareholders went to the mike and gave their conspiracy theories. One said that the reports were hijacked at the Registrar Office because of that coupon sheet. Others blamed Pos Malaysia's inefficiency in failing to send out the reports.One shareholder told the meeting that he had to go to the post office personally to get his copy and he said he was shocked to see stacks of the reports lying on the floor. Others felt that Pos Malaysia's staff was hoarding them to sell as recycle paper. Another shareholder told the meeting he has reported this problem unofficially to one of the directors at the recent Pos Malaysia AGM.

Many also pointed out that postmen were lazy to stuff the reports into the postboxes and instead were content to just stick them between the grills of the gates. These attracted attention and were eventually stolen by opportunistic neighbours and outsiders who knew about the valuable coupon sheets within.

To overcome this, a shareholder suggested that the coupon sheet be sent in a separate cover to ensure that the shareholders get them even though they do not receive the reports. Kok Thay supported this idea.

To those who failed to receive these reports, Kok Thay suggested that they check with the Registrar to claim back their coupon sheets.

I certainly intend to do so, to get my lost coupon sheet for Resorts World Berhad. Hope they will consider my request.

Believe me these coupons are valuable and can be sold in the black market from RM22-RM28 per sheet.