The world's leading airlines are all buffeted by the double whammy of the economic recession and the influnza A flu. Singapore Airlines just reported a 92% plunge in its profit for the quarter ending March 2009. Cathay Pacific recorded a loss of more than a billion USD in 2008 and its revenue for the 1st quarter is down 22%. Japan Airlines reported a loss of 63.2 billion Yen for the year ended March 09 and is predicting negative results this year too. Qantas is forecasting its results for the year to June 09 will be less than half of that of last year.
Amidst all this gloom, there is one nascent airline that is very bullish. Air Asia X is talking about acquiring more planes and connecting to new destinations. It wants to increase its fleet from 4 to 8 planes and its destinations from 4 to 10. It is wishing for a revenue of 1 billion RM in 2010 and with a margin of 10 to 20% (very optimistic), is projecting itself to be among the top 100 companies on Bursa Malaysia. Its CEO is definitely very gung-ho and bullish. He is already counting the chickens even before the eggs are laid.
Tuesday, May 19, 2009
Thursday, April 16, 2009
YTL Corp
This company is known for being very savvy with its funds. It builds up its war chest during good times. It and its CEO always claim that, in crisis times, they will emerge to buy up cut-price assets. They proclaim that to be the company's forte or signature.
Lets look at some of their recent investments in Singapore. First, they bought the Lake Front Collection in Sentosa Island for S$150 million. This consists of 18 bungalow lots and is done with a joint venture partner. Then, they bought the Sandy Island residential development consisting of 19 bungalow lots for S$135 million. The price for these purchases does not look dirt cheap.
Their foray into Singapore includes the en bloc purchase of Westwood Apartments for a record price of S$435 million. The land area is 62179 sq ft and at a plot ratio of 2.8, the land cost per gross development area is $2500/ft2. This price does not look cheap and with today's market condition, profits will hard to find.
They got a good deal in Macquarie Prime Reit. They paid S$285 for 26% of the reit company and also 50% of Prime Reit Management Holdings.
The big one came when its subsidiary, YTL Power, got hold of Power Seraya for S$3.8 billion. This was bought through and unsolicited bid after Temasek has called off its tender excercise. The offer price can, at best, only be described as fair. Temasak wouldn't have left off the power generator at a steal to YTL Power.
YTL Corp is purported to have a war chest of RM11 billlion. The above purchases more or less used up its available funds. They have little left for further acquisitions. So, did they moved too fast or has its CEO loss some of his Midas touch.
Wonder why they suddenly poured so much funds into Singapore. They did not really get fire sale prices. Safe haven?
Lets look at some of their recent investments in Singapore. First, they bought the Lake Front Collection in Sentosa Island for S$150 million. This consists of 18 bungalow lots and is done with a joint venture partner. Then, they bought the Sandy Island residential development consisting of 19 bungalow lots for S$135 million. The price for these purchases does not look dirt cheap.
Their foray into Singapore includes the en bloc purchase of Westwood Apartments for a record price of S$435 million. The land area is 62179 sq ft and at a plot ratio of 2.8, the land cost per gross development area is $2500/ft2. This price does not look cheap and with today's market condition, profits will hard to find.
They got a good deal in Macquarie Prime Reit. They paid S$285 for 26% of the reit company and also 50% of Prime Reit Management Holdings.
The big one came when its subsidiary, YTL Power, got hold of Power Seraya for S$3.8 billion. This was bought through and unsolicited bid after Temasek has called off its tender excercise. The offer price can, at best, only be described as fair. Temasak wouldn't have left off the power generator at a steal to YTL Power.
YTL Corp is purported to have a war chest of RM11 billlion. The above purchases more or less used up its available funds. They have little left for further acquisitions. So, did they moved too fast or has its CEO loss some of his Midas touch.
Wonder why they suddenly poured so much funds into Singapore. They did not really get fire sale prices. Safe haven?
Thursday, April 2, 2009
Why inflation now is good
Keynesian economics recommend that in an economic depression, the correct course of action should be to encourage spending and discourage saving. Governments should borrow money and boost demand by pushing the money into the economy. That's why countries like the US, UK, Japan, China, Malaysia and others are lauching huge stimulus packages for their conomies. Their aim is to stall any recessionary tendencies and hopefully set the economies on a growth path.
But what if the stimulus spendings don't work? Then, the country would go into recession, or worse, depression. The economy will slow down and jobs will be lost. In such a scenario, deflation may come into play. This means that price of goods and services will be lowered. Salaries too may drop.
However, debts such as home mortgages and business loans are in nominal trems (not adjusted for inflation). By this, it means that in a deflationary situation, your loans become more difficult to service. The instalment payment is a larger portion of your decreased salary. More people may default on their payments. This leads to more gloom in the economy.
But, if the extra injection of funds makes the economy sputter along and results in a modest inflation, then prices will move up. So too will your salary. Luckily, your loan remains the same. So, your instalment payment becomes slightly easier. This leaves you with more cash to spend which hopefully will boost the economy a bit. That's why it is important and good to have inflation in bad economic times.
But what if the stimulus spendings don't work? Then, the country would go into recession, or worse, depression. The economy will slow down and jobs will be lost. In such a scenario, deflation may come into play. This means that price of goods and services will be lowered. Salaries too may drop.
However, debts such as home mortgages and business loans are in nominal trems (not adjusted for inflation). By this, it means that in a deflationary situation, your loans become more difficult to service. The instalment payment is a larger portion of your decreased salary. More people may default on their payments. This leads to more gloom in the economy.
But, if the extra injection of funds makes the economy sputter along and results in a modest inflation, then prices will move up. So too will your salary. Luckily, your loan remains the same. So, your instalment payment becomes slightly easier. This leaves you with more cash to spend which hopefully will boost the economy a bit. That's why it is important and good to have inflation in bad economic times.
Monday, March 9, 2009
Temasek
She may have a 1st class honours from NUS and a Masters from Stanford both in Electrical Engineering, but she is no financial pundit. She worked as a civil servant and later as a corporate head in Singapore. She has no experience in international finance and has no foreign exposure. Yet, she is made head of an investment firm with a fund size of more than S$100 billion.
Worst still, she is not too risk-averse. So, what do you expect the results to be? She bought Shin Corp in 2006 and loss big. She has no experience in US dealing and wheeling and yet she spent billions buying Merrill Lynch. The firm has been absorbed by Bank of America and the price of BoA shares is in the dumps.
Temasek lost S$58 billions in the eight months from March to November 2008. The value of its portfolio declined by 31% from S$185 billion to S$127 billion. But the investment in Merril Lynch is close to being wipe off. Can you attribute this all to poor market timing? What about incompetency?
Worst still, she is not too risk-averse. So, what do you expect the results to be? She bought Shin Corp in 2006 and loss big. She has no experience in US dealing and wheeling and yet she spent billions buying Merrill Lynch. The firm has been absorbed by Bank of America and the price of BoA shares is in the dumps.
Temasek lost S$58 billions in the eight months from March to November 2008. The value of its portfolio declined by 31% from S$185 billion to S$127 billion. But the investment in Merril Lynch is close to being wipe off. Can you attribute this all to poor market timing? What about incompetency?
Monday, January 12, 2009
A disgruntled old man
This is an elderly statesman, who has relinquished power and who has biased and prejudiced views. But, he seems to be unable to accept the fact that he is no longer the ruling leader or the spokesman of the country. He still likes to make statements and comments on all sort of things. However, he lacks objectivity and fairness. As a result, his views are not taken seriously.
An example is his call for the boycott of US goods because of Isreal's invasion of the Palestinian controlled Gaza Strip. True, the Isreal aggression is cruel and brutal. But, he made no mention of the rockets fired at Isreal from the Gaza Strip. Also, his economic deliberations are no very sound. Hence, a lot of people, including the ruling leaders, don't agree with him.
Over the years, he has rattled a lot of biased and prejudiced views. Internationally, he is recognized more as a loose cannon than a credible statesman. As such, not much is taken for what he says.
An example is his call for the boycott of US goods because of Isreal's invasion of the Palestinian controlled Gaza Strip. True, the Isreal aggression is cruel and brutal. But, he made no mention of the rockets fired at Isreal from the Gaza Strip. Also, his economic deliberations are no very sound. Hence, a lot of people, including the ruling leaders, don't agree with him.
Over the years, he has rattled a lot of biased and prejudiced views. Internationally, he is recognized more as a loose cannon than a credible statesman. As such, not much is taken for what he says.
Tuesday, December 16, 2008
Budget Travel
Malaysians are having a bonanza time in the travel arena. Near free air tickets to international destinations are offered by Air Asia, Firefly and lately even MAS. What does all this mean to our economy?
It all depends on whether we are attracting more foreign tourists than the number of Malaysians going overseas. If the prevalence of budget travel has resulted in more Malaysians jumping on the bandwagon, then the local economy would probably suffer a bit. Local tourist destinations would probably have fewer visitors. Also, Malaysians doing their shopping overseas while on holiday would be buying less at home.
If the budget carriers have attracted more foreign travellers to the country, then the economy should be better off. The tourism revenue would be increased. This would improves our country's balance of payment. But, my gut feeling is that this is not the case.
It all depends on whether we are attracting more foreign tourists than the number of Malaysians going overseas. If the prevalence of budget travel has resulted in more Malaysians jumping on the bandwagon, then the local economy would probably suffer a bit. Local tourist destinations would probably have fewer visitors. Also, Malaysians doing their shopping overseas while on holiday would be buying less at home.
If the budget carriers have attracted more foreign travellers to the country, then the economy should be better off. The tourism revenue would be increased. This would improves our country's balance of payment. But, my gut feeling is that this is not the case.
Wednesday, December 3, 2008
Poor MCA
It is a pity that the MCA has not had a strong leader for the last 30 years. All the leaders had not been strong characters and a few of them were embroiled in personal business problems. What this means is that the Chinese community was not well represented. They were at the losing end of a power sharing alliance.
The latest one is no exception and to my mind the worst. From day one, he has decided to relegate his deputy. He has decided to divide and rule. He thinks that his faction alone will be able to run the show. And he has the cheek to tell the community that he is not sidelining his deputy. Who is he trying to fool. His action smacks of arrogance.
The deputy president of MCA may not be the most holy of all man. But, he is legitimately elected. He has the support of most of the grassroots in MCA. This point should be considered. He is also a capable leader. His talents should be tapped for the betterment of the community.
It is said that unity is strength and division is the recipe for disaster. So the new MCA president better get smart and learn to live with his deputy. Only by working together can the MCA be strong and be well prepared to represent the community.
Look at Obama. He has appoint his opponent in the primaries, Hilary Clinton, as his secretary of state. He has also appointed a republican senator as a member of his cabinet. The MCA president should take a lesson from him.
The latest one is no exception and to my mind the worst. From day one, he has decided to relegate his deputy. He has decided to divide and rule. He thinks that his faction alone will be able to run the show. And he has the cheek to tell the community that he is not sidelining his deputy. Who is he trying to fool. His action smacks of arrogance.
The deputy president of MCA may not be the most holy of all man. But, he is legitimately elected. He has the support of most of the grassroots in MCA. This point should be considered. He is also a capable leader. His talents should be tapped for the betterment of the community.
It is said that unity is strength and division is the recipe for disaster. So the new MCA president better get smart and learn to live with his deputy. Only by working together can the MCA be strong and be well prepared to represent the community.
Look at Obama. He has appoint his opponent in the primaries, Hilary Clinton, as his secretary of state. He has also appointed a republican senator as a member of his cabinet. The MCA president should take a lesson from him.
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