Reasons & Rhymes

So what caused yesterday's slump in most markets? I love it when everyone is asking the same question, and nobody seems to have answer. Its like debating how we know if there is a God for sure. The usual market weakness reasons would not be sufficient to explain the shareper than usual daily losses.

Bloomberg has this to say: "Asian stocks fell, dragging a benchmark regional index lower for a third day this week, on concern U.S. unemployment and efforts by emerging countries to tame inflation will hamper a global economic recovery."

Hmmm, ok Bloomberg, you need to do better than that.The FBM KLCI fell 2.09% or 32.08 points to 1,503.99, the steepest fall since it lost 2.11% on Nov 6, 2008. YTD, the FBM KLCI lost 0.98%. Losers thumped gainers by 750 to 160, while 223 counters traded unchanged. Volume was 2.23 billion shares valued at RM3.13 billion.

Hong Kong’s Hang Seng Index fell 1.97% to 22,708.62, Taiwan’s Taiex lost 1.89% to 8,836.56, South Korea’s Kospi fell 1.81% to 2,008.50 and Singapore’s Straits Times Index lost 1.5% to 3,103.39. However, the Shanghai Composite Index rose 1.59% to 2,818.16 and Australia’s S&P/ASX 200 Index added 0.20% to 4,914.40

Then we go searching for reasons to attach to the picture, some said its the Javanese burning of 3 churches. Hmmm, read closer, no one died, it was an orchestrated thing by a small minority extremist group. Not sufficient reason.

Then there are those who cited China's recent rate raises. Old story man, even Chiuna was the sore thumb yesterday gaining substantially. Fears of other Asian central bankers doing likewise, well, its a maybe but WE ARE COMING from such a low base rate, surely any rate hikes are not sufficient to turn people off - sounds logical but underwhelming.



Then there are the experts who say foreign funds are moving out in droves. Pleeassee la people, institutions do not act as one. Its not like they collude at a monthly meeting and say lets get the hell out on these 3 days. We tend to blame foreign funds when markets are down, in reality, there are always buyers and sellers both local and foreign. There are good and bad fund managers, good and bad investors, local or foreign - its too simplistic to attribute the day's weakness or strength to just one group of people. Its bigger than all of us.

We try to make it "small" by being able to explain things away, but we are belittling the market's predictability and in many ways, the market has a mind of its own which is difficult to fathom if you look at it on a day to day basis.

The OZ markets closed higher albeit slightly, hence the markets really started to turn late. China was not affected and that tells a tale. Its program selling, especially weakness seen in indexed stocks as they were sufficient liquidity, index related.

Why trigger the program selling, well if you receive some bad news during Asian time zone but the bad news is for US companies, which you think is sufficiently bad to turn sentiment southwards, the easiest is to sell futures of any markets stock indices. That in turn triggers sell programs further in selling down stocks as the disparity in futures would cause these programs to buy futures and sell stocks to cover.

So, what's the bad news? Cisco’s shares declined 10%-12% in premarket trading after the network-equipment maker late Wednesday warned of declining public spending and posted weaker quarterly margins. Cisco is a big enough barometer to pull down other big techies for sure. So, it was a bet, which I think is pretty shallow. It may not just be Cisco but an aggregation of factors, but once program sells hit the markets, they tend to exaggerate the downside as "no one seems to know the real reasons, so they sell first ask questions later".

Believe you me, I think the US markets will be able to hold onto its sensibilities and we should see a steadier market tomorrow.

One can easily concoct a bad scenario for the same event or paint a good one, its just shifting the reasoning to suit where the markets are headed. For example, US jobs figure is still bad which is bad if you are looking from a recovery angle, but good as it will maintain low rates there much longer, thus making stocks more attractive.

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When Hu Visits The US

definition of irony ...

the fund manager ...


the funniest one of all, a brilliant retake of Abbott & Costello's Who's On First ....

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The $1 Billion Mark - A Most Important Posting

You probably have to pay money to get this tip, but its all part of sharing. What is the $1b mark? Its a very critical level for emerging market stocks. You will find that the companies going for international roadshows all fall over that mark.



You would have made good money in Indonesia last year if you focused on stocks hovering just below the $1bn mark. That is a critical level as plenty of emerging market funds or listed funds or ETFs have it written that they cannot invest in stocks that have a market cap of less than $1bn.

I know it, the fund managers know it, and seriously, plenty of CEOs know that as well. If you are too far off the mark, no point trying to get there. If you check with international brokers over the last few weeks as to their flow of orders. You will find a significant flow into stocks which are hovering close to the $1bn mark. There are always vultures around, especially smaller funds or hedge funds which do not have those kind of restrictions.

Once that level is breached you will find it attracting a lot of new international investors. Thus it was often that plenty who breached it, moved pretty swiftly to $1.5bn market cap.

Valuation aside, what is premium valuation compared to the usual under valuation of good stocks? Its not that they are not good enough, they are just not big enough for the funds to plough their funds into. They really like some of the smaller stocks but just shrug their shoulders.



What constitutes premium valuation, being investable by large foreign funds would bring about that premium for sure. Consistency in delivery and execution would count as well.

Is it a coincidence that recent strong run ups were seen in the following stocks, note their market cap NOW in brackets:

Hap Seng (RM4bn)
DRB Hicom (RM3.3bn)
Tan Chong (RM3.3bn)
Dialog (RM4.1bn)
Kencana (RM4.2bn)
Sapuracrest (RM4.6bn)
Boustead (RM5.1bn)

You would also have noted that its the recent run up which has pushed them past the $1bn mark. As mentioned before, we can be sure that there were vultures when they were hovering around $800m-900m. Coincidence?

If you were to consider the present landscape, Mah Sing has attracted a lot of vultures as its market cap stands at just over RM2bn. Is it a bit early? Probably not because if you look at their projected EPS growth and PBT this year and next, its sustainable to move to RM3.50, by which then its market cap will be RM2.6bn. For them, its necessary to move the share to RM4.00, hopefully supported by more aggressive land banking or by securing some new influential and value-add jv by issuing new shares, now, that would propel them to the "investable range".

The same strategy looks to be in place for YTL Land, its market cap now stands at nearly RM1.7bn. I think Francis Yeoh is smart enough to know about the $1bn mark having been around those circles for so long. Thats probably why the upcoming asset injections would easily push the stock past the RM3bn mark. Look for a long sustained run in both counters.

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Rants About My People

In the news, people would free 1,188 fishes for good luck and prosperity ... I guess the same goes when people do it by freeing birds - Well, don't fucking catch the fishes and birds in the first place if you really want to do good!!! Its the same argument for not eating shark fin, if you don't eat, they won't catch them. Well, if you don't FREE them, there won't be people there to catch them in the first place.



When some people go for vegetarian food, the whole shebang tries to taste like real meat??? If you really like the taste of meat, go and eat meat la! If you are truly vegetarian, then eat things that taste like veggies. Its like you have sworn off sexual intercourse for religious reasons, but still want to look at porn.

In Singapore, there is this stupid thing where you can "chope-seats" by placing a packet of tissue. "Chope" as in saving a seat. You go to any food court, the entire place is filled with tissue packs on seats, I mean how do they know which tissue pack belongs to them? How to argue that that Kleenex extra soft packet belongs to you??? You want to save a seat, get somebody to sit down and say the other seats are taken, but noooo ... all you see are empty tables but filled with tissue packs. Chope-my-ass.

Whats our local driving mindset? Are we Hannibal Lecters driving in disguise? We see somebody crossing the road, we speed up, why... why do you want to scare the shit out of the pedestrians, they could be your mum, your friends' relatives you know ... All cars come with indicator lights, is it soooo fucking hard to push left-right indicator when you are turning??? You help others to navigate better, so they may slow down, or turn without having to wait for your car to pass them. What kind of "heart" you have when you do these little things. We cannot blame it on cultural reasons as an excuse, it speaks volumes about your small mindedness and flawed character - the "cannot lose, tidak apa, fuck them, fuck you, no need la, their problem ... attitude".




I absolutely abhor people who treat their maids/helpers badly. Why aren't we glad or feel fortunate that we are not in their shoes. I have seen a whole family sitting down for dinner and the maids have to be left standing ... wtf??? I am not even talking about mistreatment by way of hurting them physically. ..... Then there are those who have their maids at the same dinner table, but they only get to eat crap and not what the rest are having, why you so like dat? In case you forgot, everyone is a fellow human being with the same unalienable rights to their integrity. Your pathetic acts does not demean them so much as they reflect what an utter load of crap of character you have - I pity your children. They will learn that they can treat some other people with disdain rather than with respect and a generosity of spirit. ...... Be thankful that you have someone helping you in your household chores, they are family, they have to abandon their friends, families, husband, wife and children ... so that you can have a fucking easier life. We have no right to make their hard lives any harder.

Every year at around the same time, it floods in certain places, yes this year is a bit worse in some areas ... but if it happens every fucking year at around the same time, why aren't we better prepared, why are we still running around like a chicken without its head searching for simple resources to alleviate the situation?

We Malaysians are not among the best paid in Asian societies, and yet we probably have the highest ownership of cars per capita. Needless to say, Malaysia is the first or second most expensive place on earth to buy cars as well, Malaysia Boleh! ......... What that means is we shove a huge chunk of our not so high pay to "subsidise" you know what. That means we take out a huge portion of our disposable income for "dead activities", you might as well lump it as tax because its the same. At least taxes pays for certain services, I don't know what the "extra sum" we pay for cars go to??? ...... We should not say how low our fucking fuel prices are compared to the rest, we have to add how much more we are paying for the same cars, average that over the life of a car, and you add that to our fuel bill, and you will find we ARE PROBABLY WORSE OFF. And we are asked to suffer together by removal of subsidies in certain goods .... I don't mind, but get rid of the fucking excise/import duties, protectionist measures of a failed industry thats not worth protecting in the first place. ... I think its Ok to protect some strategic industries when we are nurturing them, 5 or 10 years seem fine, but its 25 years and obviously we cannot compete / do not have the scale / technological prowess / execution or marketing sense / the right people for the job ... stop this billions of ringgit wastage every year ... we all don't want to puke any more everytime we go overseas and see the same local cars selling for 40%-50% cheaper than the home-made product at HOME.

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Patterns and Trends Spotted By klseventure

Spotted this blog which has decent commentary and postings. Plus, he/she had an interesting chart comparison post CNY.


http://klseventure.blogspot.com/

KLCI to breach 1600 by 16-March-2011? Pre-CNY sell down is OVER?

This blog will be short as the pictures will tell the story...

This is 2010 KLCI:

And this is 2011, will history repeat itself?

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YTL Land Is Top Pick For 1Q2011

As investors start to gather back to watch their screens, we all wait with hope and trepidation. The easy money run through December and January seems to have petered out towards the last 2 weeks before CNY. While many still harbour hopes of a good run after the holidays, many are still waiting for further confirmation that the bull run is intact.



After having so much free time to read through reams of research, share price movements over the holidays, I am glad to say that I have found one stock that still presents enormous upside despite its sharp run up in 4Q2010.

YTL Land, here's the short version if you don't feel like reading any further. Under covered stock, only ONE house has issued a report over the last 3 months. If we consider the numerous property counters that have gone sky high, you will find that YTL Land presents possibly the best portfolio, landbank and valuation.

While many have been lauding the property plays that are beneficiaries to the expanded MRT, no one will have the better exposure than YTL Land. It will be the biggest beneficiary of MRT given strategic landbank in Sentul, KLCC-Bukit Bintang & KL Sentral.

There is still a corporate exercise pending which should be going ex-all by 1Q2011. The deal will almost double its potential paid up/shares but the landbank injection will more than make up the prospects going forward. It will transform into regional developer with YTL Corp’s injection of prime land in KL & Singapore. If they did not do that, YTL Land would not have the scale and stir sufficient interest as a genuine branded developer with regional aspirations.

The bulk of attention centers on Sentul. The early concept for that master plan development stemmed from the Sentul KTM Komuter station and its tracks which split the 294-acre land. Sentul is located 5km north-west from the heart of Kuala Lumpur and 45 minutes from KLIA. The MRT is the "killer app" so to speak.

Executive director Datuk Yeoh Seok Kian unveiled Sentul's first commercial development - d7, a seven-story block comprising 20 retail stores on the ground floor, 78 office suites and 34 duplex offices in Sentul West. The project is completed and 100% sold. Another project d6, on Sentul East, is being planned. A sky bridge connects the two. d7 was launched at RM380 per sq ft a few years ago. It is expected to be priced about RM650 per sq ft in the secondary market. Rental rates are between RM3.50 and 4.00 per sq ft.

Yeoh says the company will build residential and commercial projects with a total sales value of about RM8bil over the next seven years. That location will be among YTL Land's largest property development. The plan was to characterise the two halves differently. Over time as Sentul West becomes more established, the community is likely to be more senior and relatively more sedate, compared with the community in Sentul East which will cater more to the up-and-going younger group of people living there.

Spanning 186 acres, Sentul West will be the crown jewel of the location comprising a 35-acre private park and residences, offices and retail shops. Sentul East, which spans 108 acres, with all its vibrancy, will set the tone for modern downtown living. Work started on that site in 2002, beginning with The Tamarind in Sentul East and subsequently The Maple in Sentul West - but that was before the better transportation infrastructure.

Sentul Link also provides access to Jalan Sentul and Jalan Ipoh by connecting Jalan Mahameru at the intersection of Jalan Kuching.

Say what you like but YTL property projects are usually not one-off, it comes with careful planning, continuous value add to the surroundings, a master of regeneration of public spaces and niche locations. We all have seen the transformation along Jalan Bukit Bintang from a near Petaling Street chaos to an Omotesando feel.

The regeneration of Sentul is not just about renewal of the physical environment and wealth. It is also about the renewal of its community, their access to local services and their relationship with the area and the people that live and work there," he says.

YTL Land, which has a market capitalisation of about RM1.5bil, currently has a land bank (with no holding costs) of over 2,000 acres with a sales value of about RM12bil. May I repeat this here, no holding cost.

YTL Land has the biggest exposure to potential MRT interchanges (66% of RNAV) through its landbank in Sentul (119 acres), KLCC-Bukit Bintang (5 acres), and KL Sentral (5 acres). With potential stop(s) on the MRT Circle Line in addition to existing LRT and KTM stations, Sentul could turn into a major interchange with direct train to KLCC (just 3-4 stops away). This should significantly re-rate property values in Sentul, especially land (RM150psf vs KLCC’s RM2400psf).

Size does matter. Parent company YTL Corp is in the midst of injecting prime land in KL (KLCC-Bukit Bintang, KL Sentral) and Singapore (Sentosa Cove, Westwood Apartments in Orchard Road) into YTL Land for a reasonable RM476m (to be satisfied by cash and ICULS). Upon completion, YTL will transform into a regional player with track record in high-end residential and a bigger balance sheet. Although net gearing could increase to 1.45-1.8x from 0.2x currently, progress billings from the S$468m Sentosa Cove (substantially sold) should pare down borrowings quickly.

YTLL has a fully diluted RNAV of RM2.80-RM3.00 now. The successful launch of Capers high-end condos in 1Q11 at RM700psf should help re-rate Sentul, with implied land price of RM500psf. Many expect Sentul land values to appreciate to RM1000psf within the next 3-5 years, driven by MRT, higher ASP and plot ratio expansion. Along with higher land prices for KLCC-Bukit Bintang and KL Sentral, this would boost YTLL’s RNAV to RM4.10, according to HwangDBS. I do agree that the gap will narrow as we get nearer to ex-all date, which is why I think RM3.00 is an easy target.

RNAV is one thing if the projects are not launched at sufficient speed to be reflective in EPS growth. Here lies YTL Land's transformation from a sleepy developer. HwangDBS expects exponential earnings growth (3-year CAGR: 54%) on the back of a more aggressive launch pipeline & margin expansion for Sentul. There could be potential upside as we have yet to factor in contribution from YTL Corp’s asset injection.

YTL Land owns ~170 acres in KL City, comprising of Sentul (119 acres), KLCC-Bukit Bintang (5 acres), KL Sentral (5 acres), and Pantai Dalam (38 acres). YTLL is also the project manager for YTL Corp’s Lake Fields and MidFields residential project at Sungai Besi (entitled to 10% share of GDV). It is the master developer of the 294-acre Sentul, which is located less than 5km away.



Ripe for re-rating. Sentul’s land price is currently at a depressed RM150psf vs KLCC’s RM2400psf (RM38psf ppr vs RM240psf ppr). Many expect Sentul’s land values to leapfrog by 500% to RM1000psf within 5 years (46% CAGR), on the back of:

a) Potential major interchange with stop(s) on Circle Line. Sentul is already a multi-modal interchange for LRT and KTM. With the MRT, Sentul will turn into a major interchange with direct trains to KLCC on the Circle Line. This should significantly re-rate property values in Sentul, which are currently transacting at RM500psf vs KLCC’s >RM1000psf.

b) High density mixed development. As a major interchange, Sentul should benefit from higher traffic, which encourages high density mixed developments. Sentul East currently has only two commercial developments i.e. D6 and D7 which are less than 10-storeys (there are still three plots yet to be developed).

c) On-going urban renewal. Sentul has the potential to be the next KL Sentral, which is a good case study of successful urban renewal with transportation hubs. YTL Group has a strong track record in urban rejuvenation i.e. Bukit Bintang, Pantai Dalam near Bangsar, Lake Fields@ Sungai Besi, and now Sentul.

d) Plot ratio revision. Under the Revised KL Draft Structure Plan, Sentul’s allowable plot ratio will be raised from 2.5x to 4x. This should increase net saleable area for Sentul West alone by 57% to 16m sf. Even at 4x, we believe Sentul has one of the lowest plot ratios in KL for high density developments. We do not discount the possibility of plot ratios being raised further (possibly to 6x) given:

(i) Sentul is among the last large contiguous parcel of undeveloped land near KLCC;
(ii) strategic location just 10-15 minutes by car or 3-4 stops by MRT (direct train on the Circle Line) to KLCC; and
(iii) urban renewal in progress.



Based on RMpsf ppr, expected growth should be a more modest 344% ie from RM38psf ppr to RM167psf ppr (5- year CAGR of 35%) – still a significant discount to KLCC’s RM500ppr and KL Sentral’s RM292psf ppr.




Based on a plot ratio of 4x, ASP of RM700psf would imply a land value of RM500psf (assuming 25% pre-tax margin, gross construction cost of RM300psf) - significantly higher than the current asking price of RM150psf around Sentul.

Although net gearing may increase to 1.45-1.8x post completion of the entire exercise (including refinancing of S$448m advances made by YTL Corp for the acquisition of Westwood Apartments previously), progress billings from Sentosa Cove can be used to pare down borrowings fairly quickly. The S$468m or RM1.1b GDV project is already substantially sold and in advanced stage of completion (delivery by end-2011). The redevelopment of Westwood Apartments (acquired en-bloc in end-07) will have a GDV of S$728m (ASP S$3400) consisting of hotel and serviced apartments.

Media Releases:

(YTL Land) has sold all 343 units in the second
 phase of its Dale residential enclave in Sungei Besi in the Klang Valley
 way ahead of launch.
   The Dale preview on Aug 25 for buyers and registrants at Starhill
 Gallery, Kuala Lumpur, saw more than 50 per cent of the units sold by the
 second day and the rest snapped up before the end of the preview on the
 fourth day.
   Priced between RM638,800 and RM1.33 million, Dale has set both a new
 price standard for homes in Sungei Besi and demonstrated the area's
 potential as KL's next property hotspot.

Property developer, YTL Land and Development Bhd will launch its iconic condominium, "The Capers" in Sentul East in the first quarter of 2011, its customer relation's manager, Karen Tan, said. The stunning architectural icon comprising two 36-storey towers interrupted at random with sky gardens and flanked by two five-storey low-rise duplex townhouses, will definitively be a statement of loft living, she said.

However, she could not divulge the project's gross development value as it was still being assessed but added that the iconic condominium was set to change the face of the 100-year old former railway town that was now a draw for the young modern crowd. Two other condominiums in the area, built by YTL Land, are "The Tamarind" and "The Saffron", completed in 2005 and 2008, respectvely.

A total of 5,000 buyers have expressed thier earnest enthusiam by registering for units in the project, she told a press conference to announce the completion of the first office project in Sentul West and Sentul East, called "d7". d7, is a seven-storey architecture and cutting edge duplex sky office, located on prime land, which boosts of boutique offices, retail, food and beverage outlets encased in a lush landscaped courtyard atrium area. Karen said "d7", which was completely sold out, had appreciated by more than 40 per cent since its debut in September 2007.

The launch price for "d7" then was RM380 per square feet and today it is valued at RM650 per square feet. "d7" will soon be connected to "d6" via a sky bridge stretched over Jalan Sentul and the elevated Sentul Skywalk will connect all of Sentul East developments in the future to provide convenience to the community.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

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Making The Perfect Cuppa

Nothing like making a perfect cuppa in the morning. I think I will call it the tiramicinno ; )


Recipe: 1/4 cup Farm House milk, one teaspoon brown sugar, froth till twice the size, pull two espresso shots with a time lag of ten seconds in between ... walla ...

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