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Wednesday, August 31, 2011

Why You Can't Invest Like Warren Buffett


Warren Buffett is renowned as America's best investor. He's a grandfatherly guy who lives in a modest house in Omaha, Neb. and only invests in everyday companies that he can understand. He is friends with Bill Gates, but never invested in Microsoft or any other Internet company.
Buffett's technique is simple. He finds a good company, invests at a bargain price, and then rides the company to greater success. He's made millions in Coca Cola, American Express, Wells Fargo, and the Washington Post. And he makes it look so easy that anyone could do it. But it's extremely unlikely that you will be able to match Buffett's level of success, even if you pick the same investments he does.
Back in 2008, during the height of the financial crisis, Warren Buffet made a highly publicized investment in the Wall Street firm Goldman Sachs. Buffett was buying when everyone else was panicking, and as a result many experts thought he was getting into a top company at a discount price.
You, too, could have invested in Goldman Sachs in 2008. But here's the difference between you and Buffett. If you had an extra $12,000, you could have purchased 100 shares of Goldman common stock at $120 a share. Considering that Goldman had been worth over $200 a share the year before, you might have thought you were getting a pretty good discount. You also would be receiving the Goldman dividend of $1.40 a share, a rate of just over 1 percent.
But Buffett had more than $12,000 to invest. He had $5 billion. So he negotiated a much better deal. He bought preferred stock that came with a special dividend. Instead of 1 percent, he negotiated a 10 percent dividend. So now every year he receives a check for $500 million. Then, only after he gets paid, do common stockholders get their paltry 1 percent.
So now, three years later, how have we done? Goldman is selling at roughly $110 a share, slightly below its 2008 price. If you had invested with Buffett, you would have lost about $1,000. Buffett's lost some capital too, but he's collected $500 million a year in his special dividend.
Buffett made a similar deal with General Electric. In 2008 he bought $3 billion in preferred shares with a 10 percent dividend. But you wouldn't have done well to follow him. The stock was selling at around $21 a share in the fall of 2008. Now it's running between $15 and $16, a loss of over 20 percent. But remember, unlike regular investors, Buffett's been collecting that 10 percent dividend. He's still ahead of the game.
Now Buffett is investing in beleaguered Bank of America. He invested $5 billion in a special preferred stock and will be getting a 6 percent dividend, while the regular stock you can buy pays less than 1 percent. Now I don't know whether Bank of America is a good deal at current prices. Maybe it is. But the point is, if you buy now, you're not getting the same terms as Buffett. You're just pumping money into his dividend payment and hoping for the best.
You can profit from the stock market. You can probably profit from following Buffett's advice to keep it simple, invest in what you know, and buy when others are fearful. You might profit from buying into some of Buffett's long-term holdings like Coca-Cola, American Express, and Proctor & Gamble. These stocks are unlikely to provide spectacular growth, but are probably going to produce decent returns over time. You eventually might even be able to afford a modest house in a place like Omaha, Neb. But if you try to jump in now and buy on Buffett's coattails, you will surely be left behind.

Tuesday, August 30, 2011

Unit trust strong growth expected to continue


PETALING JAYA: The unit trust industry is expected to continue its growth momentum into the second half of this year, albeit at a slower rate, due to global economic uncertainties arising from the unfavourable US economic outlook and sovereign debt crisis in Europe.
Fund managers, nevertheless, said they expected a strong single-digit growth supported by demand in less riskier funds like fixed income, dividend and money market funds.
According to data from the Federation of Investment Managers Malaysia (FIMM), the private fund industry in terms of assets under management grew by RM48.4bil or 95% from 2006 to 2010 despite the 2008 global financial crisis.
Ng: ‘We expect risk appetite to remain low.’
The asset size of the unit trust industry had been on an upward growth trend since 2004. Between end-2004 and end-2007, growth had been at 12%, 23% and 39% per annum respectively.
In 2008, asset size declined by 22% due to the global crisis and rebounded by 47% by end-2009 and this growth continued into 2010 with a growth rate of 18%.
HwangDBS Investment Management Bhd chief investment officer David Ng told StarBiz that given the softer unit trust industry outlook this year, he expected growth would likely moderate but could still safely achieve a high single-digit growth.
He said the company's unit trust fund assets grew 26% year-on-year, adding that this year's unit trust assets had largely been driven by its income and dividend-type products due to its relative stability and evergreen nature.
“It is likely that aggressive-type equity funds will take the brunt of the softer outlook, but less volatile income-generating assets such as good quality fixed income and dividend-type funds should see more inflow as money will eventually need to find a home'.
“Due to the uncertain outlook, we expect risk appetite to remain low. As such, high quality dividend yielding funds and fixed income funds will continue to be in demand,” he noted.
Such funds, Ng said, would tend to outperform in such market conditions due to its general defensive and less volatile nature and tend to be more popular among investors.
Pacific Mutual Fund Bhd acting CEO Gary Gan said although investor sentiment had clearly shifted towards the less risky funds, like income-type and money market, nonetheless there have not been mass panic or mass redemptions from retail investors.
To understand more about unit trust, visit http://yourunittrust.webs.com/

This, he added, was a good sign as it could be viewed as merely a re-balancing of portfolios as investors re-assess the outlook and re-allocate accordingly.
From the product perspective, he said that industry-wise there had been 37 new funds launched in the first half of the year and eight new funds were launched in the second half, up till Aug 11, this year.
So in terms of product launches, Gan noted there was still a healthy growth, adding that 71 new funds were introduced last year.
For 2011, he said there was a strong inflow into Malaysian and Asean-centric equity funds and believe this trend would continue as these markets appear to have the best investor confidence and prospects going forward.
Meanwhile, Areca Capital CEO Danny Wong felt long-term investors should park more money in equity funds to take advantage of the recent price correction for mid-term opportunity, but also have other liquid assets for contingency requirement.
He anticipates a stronger equity market performance after the dust has settled from the economic uncertainties as emerging market, especially Asia, would continue its strong growth and attract more returns-seeking funds.
“Bursa Malaysia would benefit from the spillover effect along with the implementation of some of the Economic Transformation Programme (ETP) projects. The possible forthcoming general election coupled with corporate earnings would continue to drive stock prices to new heights,'' Wong said.
On the challenges facing the industry, Ng said it was usually compared to investing in the stock market and as such there was a need to change the short-term mindset and short-term price tracking.
Over the long term, he said education on the basics of financial planning was important for the growth of the unit trust industry. Wong said competition from substitute products and less-regulated products and activities such as land banking, commodities trading, illegal high-yield deposit taking activities could impact the industry by pinching money from investors.
Land banking is a scheme to buy undeveloped land for subsales later after a conversion for use of other purpose or extraction of raw materials.
Shortage of talent was another issue that the industry needed to resolve to bring the industry to a higher level, he said.
Gan said two key areas needed to be looked at.
Firstly, the challenge to continue to perform amidst a highly volatile investing environment with more new entrants and other alternative products, and secondly, to enable more local fund managers to gain experience and recognition investing offshore, especially for Islamic funds, he added.

To understand more about unit trust, visit http://yourunittrust.webs.com/

Star Online, 31 August 2011

Friday, August 26, 2011

CIMB stock hit by growth concerns


KUALA LUMPUR: The stock of Malaysia's number two lender took a beating yesterday, closing 4.6 per cent down to a one-year low of RM7.25, on concerns of slower growth this year.

Analysts said as the stock has a lot of foreign owners, it was no surprise that there were more sellers than buyers since Wednesday, despite CIMB Group Holdings Bhd's record second quarter earnings on Tuesday.

"It is similar to Axiata's stock. Axiata also has high foreign shareholding and it suffered the same fate," said one analyst.

The analyst said since CIMB has always commanded a high valua-tion, a slight concern over its performance can easily affect the stock price.

CIMB's earnings rose 9.1 per cent to a record RM970.01 million in the second quarter ended June 30 2011 from RM889.46 million a year ago.

Despite that, it was considered to be still 9.2 per cent below the consensus of most analysts.

They attributed the sell down of the stock to mostly concerns over slower loans and non-interest income growth.

MIDF Research for one has cut CIMB's earnings forecast for 2011 by 6 per cent due to the low loan growth.

OSK Investment Bank equity capital market head Gan Kim Khoon said CIMB's results were below the expectations of many.

"And there are concerns over its stake in Indonesia's Bank Niaga as CIMB has got more to lose with the new ruling compared to Maybank," he said
.

PETRONAS Chemicals reaps RM1bil in profit


KUALA LUMPUR: PETRONAS Chemicals Group Bhd (PCG) recorded a pre-tax profit of RM1.058 billion on a revenue of RM3.345 billion for the three-month period ended June 30, 2011.
The company which has changed its financial year end period to December 31, beginning this April, said overall profit for the period grew to RM814 million, rising 12 per cent year-on-year.
Its earnings before interest, tax, depreciation and amortisation (EBITDA) rose 14 per cent year-on-year to RM1.24 billion in the current quarter from RM1.09 billion.
The group attributed its higher performance primarily to strong prices across most petrochemical products, but added that the impact was partially offset by a stronger Ringgit against US dollar.
During the quarter, methane gas supply limitation affected the production in the fertilisers and methanol business segment, it said in a statement today.
On the other hand, the supply of ethane and propane was unaffected and continued to support the operations of the olefins and derivatives segment, a key contributor to group revenue, it added.
However, as the group had undertaken maintenance activities during the quarter, production volume declined inevitably, PCG said.
Nonetheless, higher product prices and lower feedstock costs lifted the group's operating profit by RM114 million or 13 per cent year-on-year to RM981 million, it added.
"Going forward, we remain highly focused on improving our plant utilisation rate. In addition, we are working diligently with our counterparts on feedstock to secure a reliable rate of gas supply to support our operations as we compete in a continuously challenging business environment," said Dr Abd Hapiz Abdullah, President/Chief Executive Officer of PCG.
During the quarter, a single tier final dividend of 19 sen per ordinary share, amounting to RM1.52 billion in respect of the financial year ended 31 March 2011, was paid to shareholders on August 25. - BERNAMA

Thursday, August 25, 2011

Steve Jobs resigns as Apple CEO


SAN FRANCISCO: Apple's legendary co-founder and top ideas man Steve Jobs resigned as chief executive on Wednesday, the company said, in a long expected move after he began a dramatic fight with cancer.

In a written statement, Apple, the world's second biggest company by market capitalisation, announced that chief operating officer Tim Cook would take over as CEO but that Jobs would stay on as chairman of the board.

"Steve's extraordinary vision and leadership saved Apple and guided it to its position as the world's most innovative and valuable technology company," board member Art Levinson said in a statement.

Jobs' resignation sent the company's shares tumbling 5.3 percent in after hours trade.

The shares of the maker of the iconic iPhone and iPad fell to US$356.10 after closing normal trade at US$376.16, following the announcement that the long-ailing company founder would step down.

No reason was given for Job's resignation, but his health problems, including a lengthy medical leave for a liver transplant in 2009 and his increasingly gaunt appearances at public events, fuelled speculation he would have to give up the everyday running of the company he co-founded in 1976.

Cook ran Apple when Jobs went on medical leave and has essentially been running day-to-day operations since early this year with the company racking up record revenue and profit.

Jobs is seen as the heart and soul of Apple, with analysts and investors repeatedly expressing concern over how the Cupertino, California-based company would handle his departure.

"The board has complete confidence that Tim is the right person to be our next CEO," Levinson said.

"Tim's 13 years of service to Apple have been marked by outstanding performance, and he has demonstrated remarkable talent and sound judgment in everything he does," Levinson continued.

Jobs submitted his resignation on Wednesday and urged the board to implement its succession plan and name Cook as his replacement, according to Apple.

Cook was previously responsible for Apple's worldwide sales and operations, including management of the supply chain, sales activities, and service and support in all markets and countries.

Jobs is a living legend in Silicon Valley. He is the beloved visionary behind the Macintosh computer, the iPod, the iPhone and the iPad.

Born on February 24, 1955 in San Francisco to a single mother and adopted by a couple in nearby Mountain View at barely a week old, he grew up among the orchards that would one day become the technology hub known as Silicon Valley.

Jobs was 21 and Steve Wozniak 26 when they founded Apple Computer in the garage of Jobs's family home in 1976.

While Microsoft licensed its software to computer makers that cranked out machines priced for the masses, Apple kept its technology private and catered to people willing to pay for superior performance and design.

Under Jobs, the company introduced its first Apple computers and then the Macintosh, which became wildly popular in the 1980s.

Apple's innovations include the "computer mouse" to make it easy for users to activate programmes or open files.

Jobs was elevated to idol status by ranks of Macintosh computer devotees, many of whom saw themselves as a sort of rebel alliance opposing the powerful empire Microsoft built with its ubiquitous Windows operating systems.

Jobs left Apple in 1985 after an internal power struggle and started NeXT Computer company specialising in sophisticated workstations for businesses.

He co-founded Academy-Award-winning Pixar in 1986 from a former Lucasfilm computer graphics unit that he reportedly bought from movie industry titan George Lucas for $10 million.

Apple's lustre faded after Jobs left the company, but they reconciled in 1996 with Apple buying NeXT for US$429 million and Jobs ascending once again to the Apple throne.

Since then, Apple has gone from strength to strength as Jobs revamped the Macintosh line, revolutionising modern culture with the introductions of the iPod, iPhone, iPad, and iTunes online shop for digital content. -- AFP

Steve Jobs resigns as Apple CEO


SAN FRANCISCO: Apple's legendary co-founder and top ideas man Steve Jobs resigned as chief executive on Wednesday, the company said, in a long expected move after he began a dramatic fight with cancer.

In a written statement, Apple, the world's second biggest company by market capitalisation, announced that chief operating officer Tim Cook would take over as CEO but that Jobs would stay on as chairman of the board.

"Steve's extraordinary vision and leadership saved Apple and guided it to its position as the world's most innovative and valuable technology company," board member Art Levinson said in a statement.

Jobs' resignation sent the company's shares tumbling 5.3 percent in after hours trade.

The shares of the maker of the iconic iPhone and iPad fell to US$356.10 after closing normal trade at US$376.16, following the announcement that the long-ailing company founder would step down.

No reason was given for Job's resignation, but his health problems, including a lengthy medical leave for a liver transplant in 2009 and his increasingly gaunt appearances at public events, fuelled speculation he would have to give up the everyday running of the company he co-founded in 1976.

Cook ran Apple when Jobs went on medical leave and has essentially been running day-to-day operations since early this year with the company racking up record revenue and profit.

Jobs is seen as the heart and soul of Apple, with analysts and investors repeatedly expressing concern over how the Cupertino, California-based company would handle his departure.

"The board has complete confidence that Tim is the right person to be our next CEO," Levinson said.

"Tim's 13 years of service to Apple have been marked by outstanding performance, and he has demonstrated remarkable talent and sound judgment in everything he does," Levinson continued.

Jobs submitted his resignation on Wednesday and urged the board to implement its succession plan and name Cook as his replacement, according to Apple.

Cook was previously responsible for Apple's worldwide sales and operations, including management of the supply chain, sales activities, and service and support in all markets and countries.

Jobs is a living legend in Silicon Valley. He is the beloved visionary behind the Macintosh computer, the iPod, the iPhone and the iPad.

Born on February 24, 1955 in San Francisco to a single mother and adopted by a couple in nearby Mountain View at barely a week old, he grew up among the orchards that would one day become the technology hub known as Silicon Valley.

Jobs was 21 and Steve Wozniak 26 when they founded Apple Computer in the garage of Jobs's family home in 1976.

While Microsoft licensed its software to computer makers that cranked out machines priced for the masses, Apple kept its technology private and catered to people willing to pay for superior performance and design.

Under Jobs, the company introduced its first Apple computers and then the Macintosh, which became wildly popular in the 1980s.

Apple's innovations include the "computer mouse" to make it easy for users to activate programmes or open files.

Jobs was elevated to idol status by ranks of Macintosh computer devotees, many of whom saw themselves as a sort of rebel alliance opposing the powerful empire Microsoft built with its ubiquitous Windows operating systems.

Jobs left Apple in 1985 after an internal power struggle and started NeXT Computer company specialising in sophisticated workstations for businesses.

He co-founded Academy-Award-winning Pixar in 1986 from a former Lucasfilm computer graphics unit that he reportedly bought from movie industry titan George Lucas for $10 million.

Apple's lustre faded after Jobs left the company, but they reconciled in 1996 with Apple buying NeXT for US$429 million and Jobs ascending once again to the Apple throne.

Since then, Apple has gone from strength to strength as Jobs revamped the Macintosh line, revolutionising modern culture with the introductions of the iPod, iPhone, iPad, and iTunes online shop for digital content. -- AFP

Tuesday, August 23, 2011

Uncertainty will continue to plague equity markets


PETALING JAYA: The uncertainty of the past three weeks will continue to plague global equity markets despite speculation that the US Federal Reserve may make a decision on a third round of stimulus at a summit of central bankers from around the world in Jackson Hole, Wyoming, later this week.
Barclays plc analysts said 10-year Treasury yields indicated traders had priced in US$500bil to US$600bil of bond purchases while a Citigroup Increport said current rates could only be justified by more central bank bond-buying or assuming the US economy would shrink by 2%.
Asian markets fell for a third day with the FBM KLCI down 0.8% at 1,472.16. European markets, which opened lower, were up at press time while US index futures also rose.
Analysts continue to advise caution as weak economic data and eurozone troubles impact investor confidence. Spot gold advanced US$35.72 to US$1,887.85 per ounce at 5pm, Nymex crude oil added 28 cents to US$82.54 per barrel and crude palm oil for November delivery gained RM17 to RM3,020 per tonne.
Analysts continue to advise caution as weak economic data and eurozone troubles impact investor confidence.
They also pointed out that the local bourse was headed for more downside risk ahead of the Aidil Fitri holidays.
HwangDBS Vickers Research Sdn Bhd analyst Goh Yin Foo said in a report that the situation remained vulnerable as investors were facing a confidence crisis.
“Until they are able to climb over the wall of worries by changing their perceptions on the stalling global economic recovery and the European sovereign debt troubles investors will be in the mood to sell rather than buy shares,” he said.
Goh said against the wobbly backdrop, the inclination to sell stocks would gather space as the holiday-shortened trading period approached next week with investors focusing primarily on any nasty earnings surprises by companies which would be rushing to announce their April-to-June quarterly report cards by next Monday.
HLIB Research head of research Low Yee Huap reiterated the house's cautious stance in another report.
“Indicators are weak, implying the local bourse may drift lower in quiet trading ahead of the long holidays next week. As such, we only advocate investors to stay defensive or sidelines,” he said.
Low said alternatively, risk-takers could adopt a short-term trading-oriented approach to buy on sharp falls in share prices and sell into any rebound.
He indicated that immediate resistance levels were at 1,500 to 1,530 with key support levels at 1,470 and 1,466. “A breakdown below 1,466 will trigger more downside risks towards 1,423 to 1,443 zones,” Low said.

Sunway Berhad falls on debut after property merger


Sunway Bhd fell on its debut on the Kuala Lumpur stock exchange after acquiring and merging two property and construction companies.

The stock slid to RM2.64 at 9:05 a.m. local time, lower than the reference price of RM2.80.

Sunway bought Sunway Holdings Bhd and Sunway City Bhd by offering cash and new shares at RM2.80 each.

The share slump on its debut is due mainly to the “global situation,” executive chairman Jeffrey Cheah told reporters in Kuala Lumpur today.

“We are quite happy with our share price given the circumstances,” he said.

“Markets go up and down. We are not worried too much.” -- Bloomberg

Friday, August 19, 2011

World in crisis but outlook in Asia optimistic, says bank chief


MELBOURNE: The world economy is on the edge of another economic crisis because the US and Europe have not shown leadership, ANZ chief executive Mike Smith says.
But Smith, whose bank has a stake in Malaysia’s AmBank Group, is focusing on Asia to drive profit growth and remains optimistic for the outlook in the Asia-Pacific region.
“The fact is that we are incredibly well positioned because of our linkage to Asia, which remains the best performing part of the global economy,” he is reported by the Australian Associated Press as saying.
He said policymakers in Europe and the US have failed in dealing with massive debt problems and risks, causing serious financial and social pain around the world.
“That’s created further concern to what was already a pretty fragile recovery,” he said while delivering a trading update for ANZ here today.
The significant falls on world equity markets, which continued overnight and locally today, showed investors were concerned about weaker economic growth being a reality for most advanced economies, he said.
Meanwhile, ANZ Bank is on track to achieve full-year earnings growth of 17% to another record profit.
Smith said ANZ had good earnings momentum in all of its divisions during its third quarter to June 30, 2011 except for the investment markets exposed to institutional business.
He said credit demand remained weak but business lending was expected to pick up in 2012.
An underlying profit of A$1.4 billion was booked in the three-month period to June 30, taking underlying profit for the nine months to A$4.2 billion, up 16% from the previous corresponding period.
Underlying profit is the bank’s preferred measure of profit as it takes into account any one-off effects in the value of non-cash assets.
Smith said Europe’s economic woes meant many banks would earn less than their cost of capital and this could provide ANZ with opportunities to further its Asian growth strategy.
“At some stage some of them will probably have to sell their family silver, which is the Asian assets. Well I hope, anyway,” he said.
He remained cautiously optimistic about the economic outlook for the bank’s key markets.
“The Australian economy is in pretty good shape despite the short-term challenges.
“I am confident about the long-term opportunities for Australia and for New Zealand because of our linkage to Asia,” he said.
- Bernama

FBMKLCI likely to continue slide



Bursa Malaysia is likely to see a more bearish trade next week as players reprice assets to reflect a riskier environment with Germany being the latest casualty to affect global growth, an analyst said.

They expect risk aversion and eroding global investors confidence with most punters anticipating higher inflation and lower growth to cause sooner-rather-than-later global recession, he said.

"Going forward, we expect the FBMKLCI to continue sliding down to test the lower 1,450 support level," Affin Investment Bank head of retail research, Dr Nazri Khan told Bernama.

He said the bearish catalysts would be the weak US economic data, including the expectation of weaker retail sales and reports of anticipated weaker business climate in Germany.

"Global stocks are to be dragged by the European banking stocks which became the centre of sell off last week," he said, adding that this suggested a serious liquidity weakness in the European interbank market and more fears about the funding of European banks.

Nazri also did not rule out that the European temporary short-selling ban may have contributed to the sell-off with investors unable to hedge equity risk and roll forward their contracts.

On the positive note, he said the current bearishness in the US and European market were also positive catalysts for emerging market with more investors looking at Asia as an alternative floatation venue.

He said the plunge in global equities would likely benefit Malaysia as investors seek out Islamic bonds and more solid syariah compliant banking stocks for alternative investment strategy.

"The recent challenges faced by initial public offerings in many developed markets has already led some western companies to do listing in Asian markets, such as Manchester United, Prada, Samsonite who sought dual listing in Hong Kong and Singapore.

"Despite the potential sell down, the local market is fundamentally more resilient now with most local stocks having stronger balance sheet, higher cash and anticipating more positive upgrades," he said.

For the week just ended, the market started firmer and climbed to the 1,500-point psychological level on technical rebound but fell back below psychological level on Friday due to profit taking.

The FBM KLCI dropped 117 points or by 7.3 per cent since the mid July peak near 1,600 level.

On a Friday-to-Friday basis, the FBM KLCI increased 0.31 of a point to 1,483.98 from 1,483.67 previously.

The Finance Index rose 68.25 points to 14,140.99, Industrial Index went up 30.88 points to 2,745.89 and the Plantation Index added 30.68 points to 7,239.13.

The FBM Emas Index rose 10.86 points to 10,157.96, FBM Ace increased 31.98 points to 3,826.07 and FBM70 went up 47.71 points to 11,099.91.

Total weekly volume decreased to 5.067 billion units worth RM8.921 billion from 7.776 billion units valued at RM14.682 billion previously.

The Main Market turnover fell to 3.853 billion units worth RM8.727 billion from 6.135 billion units valued at RM14.448 billion last Friday.

Volume on the ACE market dropped to 808.225 million shares valued at RM138.994 million from 1.033 billion shares worth RM162.075 million last week.

Warrants decreased to 390.381 million units worth RM46.624 million from 586.675 million units valued at RM64.915 million previously. -- Bernama

Thursday, August 11, 2011

AirAsia remains a 'sell': UOB-Kay Hian

AirAsia Bhd, the region’s biggest listed budget carrier, fell to a six-week low in Kuala Lumpur trading amid continuing concern over a planned share swap with national carrier Malaysian Airline System Bhd.

Its shares fell 4.8 per cent to RM3.37 at 9:07 a.m. local time, after dropping 10.4 per cent yesterday.

UOB-Kay Hian Holdings Ltd maintained its “sell” call, saying in a report today that collaboration with Malaysian Air may dilute its market niche. -- Bloomberg

Wednesday, August 10, 2011

Fernandes now MAS director, Azmil resigns


KUALA LUMPUR: Malaysian Airline System Bhd (MAS) has appointed Tan Sri Tony Fernandes and Datuk Kamarudin Meranun as non-independent non-executive directors effective Aug 11, 2011.

Fernandes is the founder/group executive officer of AirAsia Bhd while Kamarudin is the co-founder of Tune Group and deputy group chief executive director of AirAsia since December 2001.

In a statement today, MAS also announced the appointment of Tan Sri Wan Azmi Wan Hamzah, Tan Sri Tan Boon Seng @ Krishnan, Datuk Rohana Rozhan and David Lau Nai Pek as independent non-executive directors of the company.

Mohammed Rashdan Mohd Yusof was also re-designated as executive director of the company, being seconded from Khazanah Nasional Bhd.

These appointments will be effective Aug 9, it said.

Wan Azmi is an active investor, whose family has significant interest in E&O Bhd, Pure Circle Ltd, Steppe Cement Ltd and other gold and mining exploration companies.

Tan is currently executive deputy chairman of IJM Corp Bhd.

Rohana is the chief executive officer (CEO) of Astro Malaysia Holdings Sdn Bhd.

Lau is a director of Axiata Bhd, Celcom Axiata Bhd and Shell Refining Company (Federation of Malaya) Bhd.

Meanwhile, MAS said Datuk N. Sadasivan N.N. Pillay, Keong Choon Keat, Datuk Seri Panglima Mohd Annuar Zaini, Datuk Amar Mohamad Morshidi Abdul Ghani, Datuk Sukarti Wakiman and Martin Gilbert Barrow resigned as independent non-executive directors of the company effective Aug 7 and 8, 2011.

It also announced the resignation of managing director (MD), Tengku Datuk Seri Azmil Zahruddin Raja Abdul Aziz, effective today.

Azmil will join Khazanah as executive director, investments, effective Sept 12, 2011, MAS said.

MAS chairman, Tan Sri Md Nor Yusof, said Azmil has made a significant contribution in the company’s transformation during his tenure as both CEO and chief financial officer.

"I would like to record my thanks to Azmil for his contributions and services to the company for the last seven years, initially as a non-executive director, later on as an executive director/chief financial officer and finally as MD/CEO.

"This is a passing of the baton to our new directors, all of whom are immensely qualified and will bring a diverse set of management experience to our board," he said.

The board also announced the establishment of an executive committee (exco) to be chaired by Md Nor.

The exco will comprise Datuk Mohamed Azman Yahya, Mohammed Rashdan, Tony Fernandes and Kamarudin Meranun, it said.

It will oversee the management of the company until such time a new managing director is appointed, it said. - Bernama


Tuesday, August 9, 2011

MAS-AIRASIA MERGE 2011- Analysts say MAS stands to benefit more than AirAsia


PETALING JAYA: Although it remains to be seen if a proposed share swap among key shareholders of Malaysia Airlines (MAS) and AirAsiacan save the former from its troubles in the long term, MAS stands to benefit the most from the transaction.
Under the highly anticipated deal to be announced today, AirAsia groupchief executive officer Tan Sri Tony Fernandes and his Tune Air partner and AirAsia deputy CEO Datuk Kamarudin Meranun are expected to swap a portion of their AirAsia shares for 20% of Khazanah Nasional Bhd's stake in MAS.
Analysts said MAS would gain the most from this deal on an individual stock basis, as MAS was coming off from a very low base and given the negative investor sentiment as the airline is expected to post full-year operational losses this year.
Standard & Poor's equities research analyst Shukor Yusof attributed the gain to AirAsia's market position, expertise and slick management.
“We think this is certainly the hope of Khazanah (in entering such a deal). However, the cost differentials for Khazanah and Tune Air suggest that the former will need to pay a premium for AirAsia's stake based on its last closing share price, while Tune Air will find the purchase of MAS stock relatively cheap.
“It seems like a sizeable gain for Tune Air's main shareholders but not necessarily for its minority shareholders,” he added.
Meanwhile, a foreign aviation analyst said his concern was for AirAsia as an individual stock, as he felt the tie-up could result in a dilution of the strong AirAsia brand.
“After all, AirAsia has spent years distancing itself from MAS and the way MAS operates. So a shareholding swap will see AirAsia's top management buying into the full-service carrier space,” he said.
The analyst added that the impact for regional airlines once the deal was cemented remained relatively muted, as the tie-up between MAS and AirAsia would see a streamlining of domestic routes which was not operated by regional peers.
“On an individual stock basis, we think MAS is slated to rise significantly due to scarcity value (MAS effective free float is 18%). Tune Air would never have been able to purchase MAS on the open market. AirAsia, on the other hand, is very liquid and Khazanah would not have had any problems to procure it in the open market,” Maybank Investment Bank (IB) said in a report yesterday.
AmResearch Sdn Bhd the consistent discord between both airlines needed to be resolved if a National Aviation Policy was to be put in place.
The share swap is seen as a prelude to the ironing out of issues related to such a policy, including route rationalisation which could see AirAsia monopolises most domestic and short-haul routes, a committed traffic to feed into MAS' long-haul network and AirAsia using MAS' maintenance, repair, operations (MRO) facilities.
With Asean Free Skies scheduled for 2015, most regional airlines were now aggressively growing and starting up their own low-cost carriers (LCCs), which were turning out to be effective vehicles to garner regional traffic to feed into legacy, premium airlines' long-haul routes, added AmResearch.
“Strengthening and co-ordinating the two local airlines are necessary to stave off incoming competition, particularly considering that KL International Airport is stuck between Singapore as a major business hub and Thailand as a major tourism hub,” it said.
Maybank IB said it was a stark reality that Firefly's jet operations would be discontinued, as Firefly was encroaching into AirAsia's market and severely depressing yields on the East-West Malaysia services.
“Firefly's turbo-prop operations might be amalgamated into MAS branding and operate as a regional link airline similar to Silk Air and Singapore Airlines,” it added.
The report said that roughly 70% of the combined capacity of MAS Group (MAS, Firefly and MasWings) and AirAsia Group (Malaysia, Thailand, Indonesia and AirAsia X) were deployed on overlapping routes.
“Often, these flights are duplicates (as they depart at the same time) which severely undermines yields, load factor and ultimately profitability. Unfortunately, these irrational practices are a permanent feature due to both airlines' adamant quest for domination,” it said.
Analysts believe that leakages can be done away with if both groups share data and make decisions objectively, helping to stop irrational capacity deployment, overcapacity on selected domestic routes and predatory pricing.
While this tie-up could be viewed as a cartel, business overlap between both groups can be reduced, allowing them to prosper financially together as MAS focuses on premium travel and AirAsia focuses on the low-cost market.
Shukor said in a report that the MAS-AirAsia alliance could lead to a politically correct “1Malaysia Airlines”, allowing both carriers to focus on the premium and budget sectors, respectively.
He added that Fernandes was unlikely to sign the deal unless he and AirAsia stood to benefit from it.
“If he does get himself into the deal, Fernandas, for all his successes at AirAsia, may find MAS a bumbling beast best left to fend for itself.”
Shukor added that while there were no direct comparison of such a deal in the region, the closest would be the “cross-shareholding between Cathay Pacific and Air China Cathay owns about 19% of Air China and Air China owns 30% of Cathay”.
“This tie-up was driven by business (creating a force in Chinese aviation as well as developing Hong Kong and Beijing as hubs) and political needs. I see some similarity with the proposed MAS and AirAsia swap,” he said.
Maybank IB said a tie-up involving operations would provide synergies of up to RM1bil annually in the form of yield, network, growth, fleet, staff, MRO and cargo, but the full synergy could take time to materialise.
Although the synergy and benefits appear substantial, it is also highly dependent on whether both companies can work together. After all, MAS and AirAsia have been at loggerheads from the time AirAsia took flight almost a decade ago.
Analysts said with Tune Air buying into MAS, it was the fastest way for AirAsia to put a stop to Firefly eroding the former's market share in the LCC space while its partnership with Khazanah would help AirAsia X secure international route rights, which had hampered its growth and was pivotal ahead of AirAsia X's plan to list next year.
Meanwhile, Khazanah's presence in AirAsia as a shareholder will give it exposure to a leading Asean LCC.
“Khazanah clearly understands the benefit of air travel to the country's economy. It is crucial that it has exposure to a winning airline rather than one airline versus the other a situation that has prevailed in the past decade.
“Too much money and resources have been wasted over the past decade. By teaming up with AirAsia, Khazanah can extract great value for its investment and to the country's benefit,” said Maybank IB.

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