DRB hi-com auto horror

From the Edge:

KUALA LUMPUR (May 28): DRB-Hicom Bhd saw a sharp drop of 46% in net profit at RM89.9 million in its final financial quarter ended March 31, 2015 (4QFY15), due to lower profit contribution from certain companies in the automotive and services sectors.

Its earnings per share (EPS) shrunk to 4.65 in 4QFY15, from 8.6 sen in the previous corresponding period. Revenue fell 23% to RM3.2 billion, from RM4.16 billion.

Despite the substantial decline in earnings, DRB-Hicom declared dividend per share of 4.5 sen, maintaining the total dividend declared for the financial year to six sen.

For the full financial year ended March 31, DRB-Hicom posted accumulative net profit of RM300.28 million, down 35% from RM462.16 million the year before. Revenue came in lower at RM13.68 billion, against RM14.2 billion. EPS contracted to 15.53 sen, compared with 23.91 sen the year before.

Zooming in on the horrible Auto sales numbers in April, the worst performer was Proton with a 50% drop compared to 19-35% for other top manufacturers.  I'd stay away from this one.

Too many Tenaga bears in the forest

From the Star:

The mere speculation of purchasing the power assets under 1Malaysia Development Bhd (1MDB) had caused Tenaga Nasional Bhd (TNB) to lose some RM6bil in value over the last six trading days.

On the back of poor sentiment affecting the stock market, TNB’s shares had lost RM1.06 since May 18, largely due to the dominant electricity provider being touted as one of the possible purchasers of 1MDB’s power generation assets.

The counter continued its losing streak yesterday, shedding 46 sen, or 3.36%, to close at RM13.24 – its lowest since mid-December 2014 and off its intra-day low of RM12.98 yesterday – and erased 3.36 points off the benchmark FTSE Bursa Malaysia KL Composite Index.

Last week, TNB president and chief executive officer Datuk Seri Azman Mohd had said that the company would not pay a premium for 1MDB’s power assets. But it had not stopped the market from viewing the possible deal negatively.

Tenaga might be shaping up to be the best trade of the year.

They've been beaten down as the market has caught whiff they will may take over 1MDB's power plant venture.  I think this is not an issue.  I actually mentioned it here first in a previous post before it became big in The Star.  For one, I'd rather they take over the plant venture or else, they will likely not enjoy the very lenient tariff structure that has produced outsized profits.

At any rate, I'm probably just waiting for the news to be baked into the market.  If they do take it over, they could probably just list the company and recoup their money back.  This will probably tie up massive amounts of money.  I doubt Tenaga will be hurting.  with the billions of profits every quarter.  They could probably pay for the entire 1MDB plant in just 1-2 years of earnings.  I'm just waiting to get more clarity on if 1MDB didn't screw up the power plants finances and if it has cost overruns.

Malaysia needs the power assets.  We've got such a huge population from foreign workers, the current infrastructure is insufficient.

Bumi Armada doing well surpisingly

From the Edge:

Oil and gas (O&G) offshore oilfield services provider Bumi Armada Bhd (fundamental: 1.05; valuation: 0.85) announced its net profit for the first quarter ended March 31, 2015 (1QFY15) rose 11% to RM72.05 million or 1.23 sen per share, from RM64.78 million or 1.37 sen per share a year ago, on improved revenue.

Its revenue was at RM572.15 million, up 22% from RM468.92 million a year ago.

Segmentally, Bumi Armada’s floating production, storage and offloading (FPSO) division saw its segment profit improved 36.88%, while profit for its transport and installation (T&I) division soared 969.98%.

However, profit contribution from its offshore support vessel plunged 98.4% on lower utilisation of Class B vessels, due to challenging market conditions.

Considering one of its main divisions' profit was almost nil, The overall revenue grew 22%.  It's pretty impressive.

The uptake in oil activity due to 60 USD oil is strikingly fast.  I would think that companies would take longer to feel the buoyant effects of higher priced crude oil as earnings have some lag, but almost right away high priced oil is contributing positively to Bumi Armada.

Boustead not as good as I thought

From the Edge:

Boustead Holdings Bhd's net profit for the first quarter ended March 31, 2015 (1QFY15) has plunged 99.8% to RM100,000 or 0.01 sen per share from RM56.4 million or 5.45 sen per share a year ago, on lower revenue.

Revenue was down 24.3% to RM1.89 billion from RM2.499 billion in 1QFY14, its filing to Bursa Malaysia today showed.

Despite the weaker financials, Boustead (fundamental: 0.65; valuation: 2) declared its first interim dividend of 5 sen per share in 1QFY15, which will be paid on June 30, 2015.

Upon closer look at the financials,  not enough profit comes from insurance to be a major factor in its business operations.  It's something like 1/5 of total profits.  Say each business line varies by about 100-200 million in profit or loss per year.  Insurance would have a poor impact on stabilizing the earnings variability.

I have to take back what I said about Boustead.  Their insurance line is a good investment against the other cyclical divisions of the company but it's too little overall for a long term buy and forget holding.

Malaysia not making the TPPA is a big deal

From the Malay Mail:

Malaysia’s dire record on people smuggling may be used by a US lawmaker to derail talks in the controversial Trans-Pacific Partnership Agreement (TPPA), the Huffington Post reported.

While the White House is on the verge of securing the fast-track approval it needs to push ahead with the long-delayed free-trade deal, a US senator has succeeded in inserting a provision that would bar his country from entering agreements with countries officially viewed as engaging in slavery, which includes Malaysia.

The provision authored US Senator Robert Menendez — reportedly unhappy with attempts by the Obama administration to override his efforts to address human trafficking — would also effectively prevent the early conclusion of the TPPA in which Malaysia is one of the negotiating nations.

The insertion of Menendez’s provision means the US House of Representatives must now either amend the bill or pass it and subsequently negotiate with the Senate. But either solution means further delays to the Obama administration winning the approval it needs to bulldoze the TPPA through, before the country gear’s up next year’s presidential election.

The TPPA is a big deal.  We are an export oriented nation.  We need to export our products out.   Furthermore the TPPA is something that could help lower the blow of the effects of GST.  It is more of a necessity now than a luxury that Malaysia make the TPPA.

When people think of human trafficking, they think of slavery.  But a lot of the foreign workers are being put to work building things in Malaysia.  It's a fine line between what is considered human trafficking and foreign labour to do jobs people in the country don't want to do.   A lot of the workers are sending money home to their families in their home countries, thus are better off than before.

The major problem lies in the fact that Malaysia does not really want to create political problems with official immigration policies and have instead gone down the path of  lax immigration policies, which is more cost effective and faster to implement but with little oversight.  It's a sad state of affairs for Malaysia.

The Ultimate Measurement of Education

From the Malaysian Insider

He told the Dewan Rakyat that the study, which placed Malaysia at 52nd place out of 76 countries, derived its results from the 2012 OECD Programme for International Student Assessment (PISA) results, which he said were no longer relevant.

“They are using the facts from the PISA 2012 results. But in 2014, we took a new PISA test. The results will be out soon, maybe next year,” Idris said during question time.

“In 2013, we published a new (education) blueprint. So it is unfair for us to judge our education system based on facts from 2012.”

Idris said this in reply to DAP Gelang Patah MP Lim Kit Siang, who had noted in his question that Malaysia was among the bottom third in the OECD study. Lim also said that Malaysian varsities could not rely on the QS Quacquarelli Symonds rankings alone to evaluate their performance, and asked when they planned to take part in the Times Higher Education (THE) rankings.

“We are aware that the QS ranking isn’t the only ranking out there. But we must begin with the QS rankings. For instance, children start out by riding ponies before they ride horses,” said Idris.

He said THE emphasised research and citation in its rankings, and told the Dewan Rakyat that last year’s SCimago Journal and Country Rank revealed Malaysia had published more journals than Singapore in 2013.

 Rankings are funny.  They have methodologies that may or may not work.  While competency in subjects is a quite black and white on what they measure.  What is the end result?

Papers are good, but if the papers are just churned out and not published in scientific journals, is it really relevant?

The ultimate test of an education system is the productivity in the work place and ingenuity on a world class level.  But, by the time productivity can be measured, it will be decades later as the child will need to have grown up to their 20s and 30s and mostly later as their startups will likely mature when they reach 50.

It is important to note although US has education ranked in the mid 20s, it still produces the world's best entrepreneurs and competent individuals.  Education isn't everything.  But it needs to be basic. Malaysia should aim for the mid 20s in the rankings, and criticize the government for not reaching that level every year.  No excuses.

Bad bank earnings

CIMB and Affin reported earnings.  Both were horrible.  CIMB is suffering due to Indonesia's operations, but Affin took a bad impairment on loan charge in its commercial banking unit.

I wonder if Affin just took loans no one wanted.  It seemed one large impairment was enough to take down it's whole quarter's earnings.  Good earnings to bad.  It's amazing what one quarter will do.  I know Affin wanted to grow its commercial banking unit, but taking loans no one wanted is not the way to do it.  Does it have any more loans no one wanted?

I actually foresaw Affin doing decently for this quarter and the next due to big IPOs.  But the sentiment has become suddenly bullish on the selling of the Affin-Hwang investment bank stake.  Thus Affin will probably trade down.

I'm back to neutral on this bank.  This current quarter blew any trading opportunities with this stock.

From the Edge:

KUALA LUMPUR (May 20): Affin Holdings Bhd ( Financial Dashboard), the country's seventh-largest lender by assets, posted a 78.9% drop in first-quarter net profit as higher loan impairment and overhead expenses eroded earnings.

Net profit fell to RM30.09 million or 1.55 sen per share for the first quarter ended March 31, 2015 (1QFY15) from RM142.73 million or 9.55 sen per share a year ago, mainly dragged by the commercial banking segment, but its investment banking and insurance segments performed well.

Revenue for 1QFY15 rose 21% to RM448.93 million from RM317.1 million in 1QFY14.

From the Edge:

CIMB Group Holdings Bhd ( Financial Dashboard) is likely to have a weak start to the year, if the first quarter financial results of its Indonesian and Thai banking subsidiaries are any indication. 

Higher levels of provision for bad loans in PT Bank CIMB Niaga Tbk and CIMB Thai Bank PCL saw each of them turning in a worse-than-expected performance last week. 

This will continue to weigh on CIMB Group’s earnings, say analysts. The group had one of its worst quarterly performances in the fourth quarter of last year, mainly because of high provisions. 

CIMB Group (fundamental: 1.05; valuation: 1.65) is expected to announce its first quarter results next month. 

“Generally, we expected a weak quarter because of CIMB Niaga,” AllianceDBS says in a research note. “However, the Malaysian business should see a better quarter in the absence of goodwill impairment for the investment banking business and a one-off large provision related to a legacy corporate account that was booked in the fourth quarter of 2014 (4Q2014),” the research house adds.

The Malaysia operation still accounts for the biggest chunk of CIMB Group’s earnings. Indonesia made up 19% of the group’s full-year earnings in 2014, but in better years, it used to be about 30%. 

Malaysia Auto sales down BIG. Good luck on GDP targets.

From dj news wires:

Malaysia's vehicle sales fell 23% in April from a year earlier due to the introduction of a consumption tax during the month, the Malaysian Automotive Association said Monday.

Sales of both passenger and commercial vehicles totaled 45,187 units in April compared with 58,781 units a year earlier. However, vehicle production rose 7.0% year-on-year to 61,534 units in April from 57,586 units.

This is by far a horrible number. Compared with March which saw a 13% increase.  I'd rather have no increase in March than no decrease in April.  Combine March and April, we have 112, 501 cars sold, a decrease of 4.3 percent.

With the lack of current economic in Malaysia, this is probably the most important and relevant economic data out of Malaysia every month.  The percent of GDP Malaysia makes off of cars is ridiculous.

This about summarizes the effect of GST.  GDP will take a major hit.

With sales down and production up...guess who's going to have a bloated inventory...you guessed it auto makers.

Income producing subsidiaries

A lot of companies are having "incoming producing" subsidiaries to strengthen the durability of their company.  If I'm not mistaken, Dayang purchased Perdana Petroleum due to the "income strength" of the company with its 5 year contracts with Petronas.

A lot of companies have decided to go this route so their business can sustain in bad times as Malaysia has seen its fair share of financial troubles.

It's commendable that companies do this as they are "thinking outside the box" when it comes to diversification of revenues.  But most companies don't take this step far enough.  Quite frequently the defensive income producing business is still related to the industry, example Dayang and Perdana Petroleum or Malaysia smelting co with its tin smelting as the sustainble income vs. the tin mining subsidiary.

Most of these businesses are doing it wrong. it is better that the income producing business be hardly related to the cyclical business.  Boustead is doing it right, construction and insurance.  Both industries have very different business characteristics.

It's this diversification which will likely see the business through thick and thin.

Too soon to call a down market

Reviewing data from Trading economics:

We can note a few positive data which are considered as reflective of the current economic information in Malaysia.  These data have low lag times compared to items such as GDP which is extremely lagging.

1.  Industrial production is up for the month

2.  Exports are still up 13 billion year over year.  Source, CIMB

3.  Loan growth grew in March.  Source, CIMB



All in all, with this data, the next month or so should see a rebound in markets if sentiment becomes harsh enough.  The latest US jobs report is also supportive of an up market.

Game theory in effect?

From the Star:

KUALA LUMPUR: Malaysia, the world's second-largest palm grower after Indonesia, will keep its crude palm oil export tax for the month of June at zero percent, continuing duty-free exports from this month, a government circular showed on Thursday.

In April, a 4.5 percent tax was implemented, based on a tax structure where a monthly crude palm oil reference price above 2,250 ringgit per tonne leads to a duty being imposed. It can run from 4.5 percent to a maximum 8.5 percent.

Malaysia has decided not to implement the palm oil export tax.  It seems the producers have been hurting quite bad with sub par earnings and decided not to hurt the biggest market cap companies in the country with unnecessary export taxes.

I suspect Malaysia will ultimately benefit in terms of higher corporate income taxes from palm oil profits.  I'm guessing Indonesia will do what it wants to do, independent of Malaysia's decision as they are content to use the palm oil to run their vehicles.  Any deviation will come as a big surprise and thus become a game of game theories.

Big holders stakes.

From the Edge:

KUALA UMPUR (May 13): Citigroup Global Markets Ltd has emerged as Stemlife Bhd ( Financial Dashboard)’s new substantial shareholder, having acquired a 6.42% direct stake in the stem cell banking firm recently.

Based on a filing with Bursa Malaysia this evening, Citigroup Global had acquired over 15.89 million shares in Stemlife in the open market on May 6, 2015, at undisclosed prices.

When people think about big funds coming into shares, it's a vote of confidence by a big player and bodes well for the stock price.  But can they make the shares go up is another question.  The answer is it depends.

Big players mean that they are less likely to be shaken out by price movements, only if the price moves a lot will they think about moving out.  Generally they will stick to their thesis.

Hedge funds move in and out faster and more prone to price moves.  Normal mutual funds and high net worth individuals have probably made their money by buy and hold so they will likely keep their investments.

Strategic investors likely are in the company for other reasons than price.  They see the potential and will likely not withdraw unless the company goes bankrupt.

Entry of big players will end up having fundamentals shape the trajectory of their stock prices.  If no big players are in, it is harder for the shares to move on fundamentals.

HSR looks like its becoming a reality

From the Singapore Urban Redevelopment Authority

The Singapore Government announced today that the Kuala Lumpur-Singapore High Speed Rail (HSR) terminus will be located at the current site of Jurong Country Club (JCC) in Jurong East. The site will also be comprehensively redeveloped for new mixed-use developments and community facilities to serve Jurong residents, HSR passengers and visitors.

Kuala Lumpur-Singapore HSR

At the 6th Singapore-Malaysia Leaders’ Retreat on 5 May 2015, Prime Minister Lee Hsien Loong announced that the HSR terminus in Singapore would be located in Jurong East. This is in line with the Government’s vision to develop Jurong into a second Central Business District and as a new gateway to Singapore.

Singapore seems pretty keen on the HSR even chewing out a big chunk of land for the project.  I think it may become a reality faster than most people think.  The announcement of the delay was hard for contractors to stomach, but perhaps it is possible the HSR may be fast tracked.  I believe the hold up mostly lies in Malaysia.

Good news for companies vying for construction.  90% of the project will be in Malaysia as most of the track will be located here.  Also its positive for neighbourly relations.  Usually if Malaysia proposes, Singapore will resist, but in this case it seems like both are on board.

Tenaga caught between a rock and a hard place

From The Edge:

KUALA LUMPUR: No offer has been made by the government to Tenaga Nasional Bhd (TNB) ( Financial Dashboard) to take over Project 3B, a 2,000mw coal-fired power plant which 1Malaysia Development Bhd (1MDB) has not been able to commence on time, said TNB president and chief executive Datuk Seri Azman Mohd.

Azman acknowledged that TNB is keen to take over Project 3B amid concerns that any delay in the project would result in a power shortage in the future. However, he stressed that if and when TNB does take over the struggling project, it would not be a bailout since the utility giant would not pay a premium.

“I want to clarify that as of this moment we have not received any offers from the Energy Commission (EC) or the government to take over the project. We are interested no doubt,” Azman told The Edge Financial Daily in an interview yesterday.

TNB cannot be forced to take over the project by the government, Azman noted, since the “final decision rests with our (TNB’s) board”.

“Even if the commercial terms are favourable, the board can still reject the project on other grounds. We have to answer to our shareholders.

“We will not pay a premium for the project. We will just pay them (1MDB) for costs incurred. If anything, we will ask for a discount. They (1MDB) are not in a position to dictate the terms,” said Azman, brushing aside the perception that TNB may bail out 1MDB.

“Whatever the decision of the government, it will be subject to commercial considerations and in line with our corporate governance,” he said.

I like the President and CEOs statement regarding Tenaga not paying any price.  But it's hard to see them trying to defy the government.  The profits Tenaga is enjoying now is a factor of two things:  lower coal prices and Government allowing them to keep the tariff rates high.

It doesn't take much to revise the rates down and put Tenaga in a bad spot.  Yes the board can reject, but I don't think it'll be good.  Tenaga seems to be caught between a rock and a hard place, stuck with a bill of 11 billion ringgit to construct the new power plant or rejecting the project and see the potential for electricity tariffs to get cut.

If Tenaga undertakes the project, the government might not do anything with the tariffs, but if they reject the possibility of tariffs being cut is extremely real. I think investors would generally like them to take the project up.  Less of a bigger pie is better than more of a smaller pie.  But that comes with the 1MDB stigma.  So what is Tenaga to do?

MBSB sentiment makes a good buying opportunity

From the Edge:

KUALA LUMPUR: Much of Malaysia Building Society Bhd ( Financial Dashboard)’s (MBSB) net profit decline for the first quarter ended March 31, 2015 (1QFY15) was attributed to a jump in the non-bank lender’s bad loan allowance but analysts are more surprised that high loan loss provisions will be the norm for the next two years.

MBSB last week announced a sharp fall of 37% in net profit to RM124.3 million for the 1QFY15 from RM196.73 million, dragged down by the provision for impairment loss on loans, advances and financing that came in at RM101.32 million.

This is a significantly larger provision for loan losses when compared with the RM15.19 million made in the previous corresponding period, creeping close to FY14’s whole-year provision for loan losses at RM126.2 million.

This, along with a weaker Islamic banking net income, led to the big drop in MBSB’s net profit for the 1QFY15.

On a quarter-to-quarter basis, however, the 1QFY15’s loan loss allowance is comparable with the 4QFY14’s sum of RM100.1 million. This means that the non-bank lender has made a provision of over RM200 million for loan losses in just two quarters.

This could be a “kitchen-sinking” process to clean up the books.

You ever hear of the saying, buy when blood is in the waters?  This could be one of those moments if I ever saw.  MBSB's earnings most recent announcement was not good, but people are probably looking to the bad earnings prematurely.

The article points out the strengths in that the business garnishes wages directly unlike other banks and its doubtful people in government easily lose their jobs.  Civil government workers pay their loans before they pay for necessities in life, unlike most bank loans in the private sector which the borrowers can choose to pay their loans.

The real issue withTabung Haji

From the edge:

May 8): Datuk Saifuddin Abdullah today questioned the conflict of interest arising from revelations that a top executive of Lembaga Tabung Haji (TH) also sat on the board of state investment vehicle 1Malaysia Development Berhad (1MDB).

Weighing in on Tabung Haji's controversial purchase of a plot of land within the Tun Razak Exchange (TRX) project by 1MDB in the Kuala Lumpur city centre, the former Umno deputy minister said the wealthy pilgrims' fund was only supposed to invest in shariah compliant businesses.

"Isn't Tabung Haji CEO Tan Sri Ismee Ismail also on 1MDB's board: isn't that a conflict of interest here?" he wrote on his Facebook page today.

A check on 1MDB's website lists Ismee as one of the six people on its board of directors.

What is TH doing in investing money in property.  LTH is ONLY SUPPOSED TO INVEST IN SHARIAH COMPLIANT BUSINESSES.  It invested in Property.  That is a nono.  It doesn't matter whether the price was good or not.

This is like saying oh we are a bond fund and want to buy shares.  IT DOES NOT HAPPEN.  How would you like it if you invested in an equity fund and it suddenly bought bonds.  IT does not happen in the fund world.

The Directors failed in their duties to the clients.

When you fail to put the interests of your fund contributors to pander to the government.  You are dead meat.  You can be sued to hell and back honestly.

Good luck directors and CEOs and Directors of Tabung Haji.

Tabung Haji not really bailing out 1MDB.

From the Star:

KUALA LUMPUR: Lembaga Tabung Haji will be selling the parcel of land it purchased from 1Malaysia Development Berhad (1MDB) and expects to seal a deal within a fortnight.

The pilgrimage fund chairman Datuk Seri Abdul Azeez Abdul Rahim said they were acting on the advice of Prime Minster Datuk Seri Najib Tun Razak to end the controversy that has made headlines the past few days.

"We have had three offers and we will announce the decision next week," he said in a press conference on Saturday.

Abduk Azeez  said all three offers were at least RM188.5mil but they were selling to buyer who would give them at least RM5mil profit.

Azeez said they received the advice, and not instructions, from Najib on Saturday morning.

He said the deal would be sealed in the next two weeks.

Honestly, Tabung Haji might be at fault for investing outside its mandate, but in the grand scheme of things, 188 million is hardly anything when compared to 40 billion that 1MDB owes.  At this point the scrutiny over 1MDB is incredibly intense and any small amount of money is lambasted extremely hard.

It's probably blown out of proportion as SRC international is on an even grander scale of 4 billion Ringgit which I'm surprised isn't picked up from by Dr. M.  1MDB scrutiny is ridiculous right now.  It's at a boiling point.

The offers for the land will be scrutinized and need to be by private parties or public companies else people will talk that another gov't entity is buying the land and covering up 1MDB.

People waking up to the nonsense at gov't run funds

From The Edge:

KUALA LUMPUR: Lembaga Tabung Haji (Tabung Haji) yesterday admitted to buying a 1.56-acre (0.63ha) of land within the Tun Razak Exchange (TRX) from 1Malaysia Development Bhd (1MDB) for RM188.5 million, a move that critics say is to inject cash into the controversial debt-stricken company owned by the Ministry of Finance.

This confirmation by Tabung Haji came a day after its  chairman Datuk Seri Abdul Azeez Abdul Rahim denied via his Twitter account an article by a blog called The Benchmark that the pilgrims’fund will spend over RM700 million to buy land in TRX from 1MDB which is facing an acute cash flow problem.

In a statement yesterday, Tabung Haji said the purchase of another bigger parcel of land was just a proposal.

“Leakages of proposed papers are not proof of approved investment decisions,” said Datuk Johan Abdullah who is Tabung Haji deputy group managing director and deputy chief executive officer.

I've complained about how KWSP invests in things like SRC International which is strictly out of normal pension fund's mandates.  Liquid equity stocks are what these big funds should be allowed to do or shopping mall REITs.

Now, the article is focusing on the obvious related party transactions and the how property development, which even the EPF doesn't do can make its way into Lembaga Tabung Haji.  Before, I've never really seen articles criticize out of mandate investments, even when I was commenting about KWSP with their out of mandate investment on SRC International.

I guess the Edge has been reading my articles.  Okay maybe not, I'm just a small time blogger, but if Lembaga Tabung Haji's mandate is to keep to bonds and liquid equity stocks, they are out of mandate and have violated their duties to their clients by investing in things that they should know better not to invest in.  It's the most basic ethic in running a fund. Someone should get a hold of their mandate and take them to task.

Dr. M still taking names

From the Edge:

Tunku Abdul Aziz Tunku Ibrahim has refused to be drawn further on Tun Dr Mahathir Mohamad's rebuttal to his newspaper column in which he criticised the financial scandals that took place during the former prime minister's 22-year tenure.

In response, Dr Mahathir said Tunku Aziz should apologise if no evidence was found against him.

"As a member of the MACC, he can make a full investigation of my record to find out how many billions I stole from the government as he seems to imply. If he fails, he should at least have the decency to apologise," he said in his blog chedet.cc.

He also took jibes at Tunku Aziz, asking him if he had "selective awareness of what's going on around him".

"As someone who professes to be concerned about corruption, shouldn't he ask how Jho Low and Riza Aziz have hundreds of millions of dollars?" Dr Mahathir said.

"Shouldn't he be interested in public servants who are living well beyond their means?"

Dr. M is still taking names at the ripe age of 90.  He might as well be 20 years younger the way he takes apart people in the press.  His writing skills are as sharp as ever.

It's like, anyone else from Najib's camp want to take a shot at the reigning champ?  Jeez.

It's funny, even Azmin admitted at Permatang Pauh during his speech Dr. M is playing a huge role in the popularity of Najib taking a nosedive.  Recall the statement along the lines of a 90 year old lion than a young buck who just takes orders.  

But honestly Dr. M is accelerating the popularity decline so the pain will be now instead of later at the next GE.  Without a clean house, BN can't rebound.

High speed rail proposal by YTL unlikely to get rewarded

From the Edge:

SINGAPORE (May 5): Singapore and Malaysia are reassessing a 2020 target for the completion of a high-speed rail project linking the two countries because of the scale and complexity of the venture.

A new timeline will be available by the end of the year, Singapore Prime Minister Lee Hsien Loong said at a joint press conference with his Malaysian counterpart Najib Razak in the city state Tuesday. The initial target needs to be studied as it will take at least two years to design and put out tenders for the project and another five for construction, Najib said.

The proposed rail line linking Singapore and Kuala Lumpur will reduce the 300-kilometer (180-mile) journey over land to 90 minutes from about five hours. Leaders of the two countries announced in 2013 the rail link may be completed by the end of this decade, with Najib calling it a “huge game changer” that will transform the way the neighbors do business.

The HSR project is certainly ambitious by YTL.  But unfortunately too many people will try to bank on YTL getting the project as they proposed it.  It's poor judgement for two reasons:

1.  HSR is extremely complicated and takes two countries to collaborate.  It's doable, but its hard.  The timeline got pushed back as a result.

2.  YTL may not even get the project.  In Malaysia, its all about the best deal or best connections.  Here we are talking about Sunway, Gamuda, and IJM.  YTL has a high chance not to get anything.

The major benefactor of these projects are probably the cement companies.  I suppose YTL does benefit but not on the scale that construction companies will.

Not a share buy back fan

From Yahoo:

Billionaire investor Warren Buffett defended some of his core holdings in a televised interview on Monday, but reiterated that equities in general would look expensive in an environment with normal interest rates.

The remarks from Buffett, chairman of Berkshire Hathaway (BRKa.N), come as several of his core holdings, including International Business Machines Corp (IBM.N) and Coca-Cola (KO.N), have showed declining revenue trends in recent years.

Buffett told CNBC that Berkshire had bought more shares of IBM during the first quarter, and forecast higher earnings at the company over the next 10 years.

He also praised IBM's stock buyback program, which he said had been "enormously beneficial" for shareholders, though he stressed that in general, buyback programs should be done based on share price and not as an all-purpose strategy.

At some point, I thought share buybacks were a good thing, but now no.  When we think of a company, it needs to take capital and invest it in projects that will reap a good return.  They need money, and if they don't, they should return it to shareholders.  I'd prefer direct methods such as one time dividends or some tax efficient method.  Bonus shares would be good as well.  Let investors sell if they need actual money.

Here's the main issue I have with buybacks as a form of shareholder return.  The shareholder only gets the return in a form of value of shares.  These values fluctuate tremendously.  Some argue that share buy backs are super tax efficient.  They might be, but I argue, taxes will have to be paid at some point.  Capital appreciation is taxed, which is the main return of the share buy back, so its hard to escape the tax problems.

The main point though is beyond the tax question, it focuses on the returns of the shareholder.  Typically companies won't put their money in projects unless they can get fantastic return out of it.  something north of 20 percent per year.  The shares of a company are unlikely to get that same rate of return on their shares.  Especially if they keep using their capital to buy their own shares instead of invest it in projects to get a return on capital.

It's a chicken and egg story.  I'd argue just give more bonus shares or dividends because no point buying your own stock, its like patting yourself on the back.  Doesn't make any sense.

Market still a little to bullish for my liking

From the Edge:

 For me, this article points towards earnings recovery in 2016.  But unfortunately 2016 isn't now.  And now isn't good.  

Why talk about 2016 earnings when a ton of 2015 still remains.  It's just too much happiness about whether something will reverse in 2016.  When Malaysia instituted a 5 percent tax in palm oil exports.  the end consumers weren't too happy about paying 5 percent more.  so actually who ate the 5 percent tax?  It's the palm oil producers.  In Europe, the tax did absolutely nothing to the palm oil price traded there.

To put two and two together.  who is going to eat the 6 percent gst tax?   consumers are unlikely as everything costs 6 percent more now, but they aren't likely to spend unless they get a similar income increase.  So, we are left with corporate entities.  Yes they are the ones that will get hurt the most from GST.

Furthermore if it will take oil prices, the ringgit and construction spending to boost up the market, I'm guessing some of those won't pan out.  Simply because the more variables that are introduced, the more likelihood of all the events working out gets increasingly smaller.  I'd err on the side of caution.

5 things PKR and DAP can do to improve

With Dr. M clearly the biggest ally in taking down Najib, Both PKR and DAP seem to somewhat feel at ease.

I've already mentioned problems with Anwar led PKR and DAP.   If they want to grow as a party they need to start with the fundamentals.  Fundamentals will get the party more "sticky" supporters and not short term support.

1. They need to be principled and not resort to chidish BN and pre-anwar tactics.  Politics isn't a short term game.  It lasts decades.

2.  Invest in campaigning in winnable rural areas in Malaysia.  Most PKR people won't get out of their cities to do the real work, winning the rural vote.  Presence is key.

3. DAP needs to come up with a better "non-corrupt slogan, clean and transparent" that they have been campaigning under. It doesn't relate to humans at all. How about fair and progressive.  Something people can attach feelings too.

4.  Relate their plight to the rural people.  Persecution of the opposition is a real problem.  People understand whether they are on BN or the opposition side.  BN are shooting themselves in the foot.  Explain this to people and they will understand.

5.  Cut losses with PAS unless a moderate leader wins the party leadership.   Nik Aziz was the glue, but with him gone, the right wing candidates have taken control.  Support his son, to rise from the ranks, but as of now he's not in power, just cut your losses.  Focus on what you can do, not what you can't.

TM still trying to deny no problems exist

From the star:

KUALA LUMPUR: Telekom Malaysia Bhd (TM), which is targeting 4% to 4.5% growth in revenue this year, is unlikely to be affected by the Government’s call to keep broadband prices low.

“The impact (on earnings) will not be significant,” group chief executive officer Tan Sri Zamzamzairani Mohd Isa said after the company’s AGM.

He said the company had announced new broadband packages but it would only be launched in June. He added that this move could “encourage” people to move up if they become heavy users.

“When we reduce prices of broadband, people tend to think of the downside of the decision but not the upside,” Zamzamzairani said.

The first package introduced by TM was at RM38 a month (excluding goods and services tax) for 1Mbps with data usage of up to 1GB. This is 57% cheaper than the current offering at RM88 for the existing 1Mbps package.

The other is a new UniFi 10Mbps triple-play package at RM179 a month (excluding GST) that includes unlimited broadband Internet access, free fixed telephone calls nationwide and 22 basic HyppTV channels. This package is 10% cheaper than the existing UniFi 10Mbps package of RM199/month.

I don't quite understand all the current talk about TM's revenue not being affected by the government call to keep broadband prices low.  It's like why not wait until the real revenue numbers come out and then comment.

They may be right, revenue won't drop.  But no one really knows what will happen till it actually does.  So lets wait for the numbers to come in instead of just keep telling people revenue will be fine. I personally think TM will be fine, but there is a significant chance revenue will take a hit. That's why people ask about it.

The truth is no one knows as it is in the future, so why take the chance to look like an idiot over some cocky statements.