Mind your own business

A pot of gold down under

2008-03-24T12:24:00.002+08:00

Stamford Land Corporation (formerly known as Hai Sun Hup Group Ltd), led by Mr Ow Chio Kiat, received an unsolicited offer of AUD 850 million (SGD 1.05 billion) for its hotel portfolio.
Not surprisingly, the current market cap of Stamford Land, prior to the announcement, was way below the offer price (Market cap of S$388.7million). (Byebye EMH?) The hotel portfolio is valued at a total net book value of just AUD 382 million.

SLC received AUD1.3 million for the purposes of conducting due diligence under the exclusivity agreement (which has since lapsed on 7 March 2008). Since then, SL has received approaches from other parties for the hotel portfolio.

Stamford Land said its property development arm is a growing core business. If its hotels are eventually sold, it said it would focus on increasing its investment in property development and return surplus funds to shareholders.

In its statement, the group said the high and continually rising cost of hotel development in Australia and New Zealand means it will not face much competition as there is unlikely to be an oversupply of room stock in the foreseeable future.

Stamford Land said its second core business - property development - has evolved from its initial foray into the hotel industry. The development and sale of luxury apartments has prospered and expansion is on the cards, it said.

Its property development portfolio, also based in Australia and New Zealand, includes The Stamford Marque, an 83-unit luxury residential development in Sydney.

MYOB thinks that....

Given the current unfavourable situation in the credit market, it takes a strong buyer to fork out such a significant sum. The buyer was said to be a substantial public group with a diversified international portfolio of investment and residential properties and hotel.

Some background on Mr Ow. He's a man who enjoys (and thoroughly deserves) the high life. Back when Stamford ventured into hotel development, Mr Ow did the unthinkable – he chose to operate the hotels under their own name. Stamford Land now owns a collection of landmark luxury hotel properties strategically located in key cities in Australia and New Zealand.
Stamford Land launched its foray into the hotel sector by buying up existing hotel properties. For property transactions, valuations are based on three methodologies: replacement cost; willing-buyer, willing-seller based on the most recent transactions; and yields from earnings streams.

'I feel very passionate about the hotel business because I built it up myself since 1994,’ --- Mr Ow

MYOB assesses that it is a matter of time (and price) before SL sells the portfolio. Back in 2002, Mr Ow emphasized the importance of the expected yield. He strongly claimed that he would not buy properties without yield. Fast forward to 2008, based on the bid of S$1.05 billion, the entire hotel portfolio is offering a low yield of (about) 2.1%. Unless there is something spectacular about the hotel's performance in the coming years, MYOB thinks that at S$1.25billion/yield of 1.75%, SL and Mr OW should seriously consider parting with the pot of gold.

No doubt the hotel portfolio is the core business of SL, the property development arm has the potential to replace the hotel business. Mr Ow has also confirmed the intention to return funds to shareholders which are surplus to requirements. Followers of OCK should know that he is known to be fair to shareholders. Cougar Logs returned much cash from the sale of one of its unit.

If only the market cap of SL is much larger, I would believe that Mr Whitman favours such a unique company which is safe and cheap. With the Aussie economy well supported by the commodity bull, there is less risk of the market falling off the cliff, as compared to the US economy.

MYOB will continue to analyse the numbers to give you a better idea.

Straits Trading AAR: The Coast is clear!!

2008-03-23T14:31:00.003+08:00

As a round up to the STCL saga, MYOB would like to report that Ms Chew Gek Khim has been appointed as the Non-Executive and Non-Independent Director of the Board of The Straits Trading Company Limited on 20 Mar 2008.

A little background on Ms Chew:

"Ms Chew, age 46, is the Executive Chairman and Chief Executive Officer of the Tecity Group of private investment companies, the controlling shareholders of the Company. A lawyer by training, Ms Chew graduated from the National University of Singapore and practiced law with the local law firm of Drew & Napier, before she joined the Tecity Group in 1987. She is also director of CapitaRetail China Trust Management Limited, a listed trust of the CapitaLand Group with retail malls in China, as well as FJ Benjamin Holdings Ltd, a fashion retailer in Singapore. Ms Chew is also the Deputy Chairman of the Tan Chin Tuan Foundation in Singapore and the Tan Sri Tan Foundation in Malaysia. She is active in community and public service, and serves on the boards of organizations such as Singapore Totalisator Board and National Heritage Board. She is also a member of the Advisory Board of the Faculty of Law at the National University of Singapore and Deputy Chairman of the National Environment Agency Board."

Currently, The Cairns hold 84.31 % of STCL. They are very close to the 90% mark but I hope they retain the listed status of STCL.

It has been a good ride with STCL. MYOB greatly admire the astuteness of Ms Chew. We wish her all the best in bringing out the hidden value in STCL. It would be interesting to see how things turn out over at Robinson.

Words of Wisdom

2008-03-19T13:30:00.003+08:00

MYOB brings you a controversial figure in this WOW entry - George Soros.

"The worse a situation becomes the less it takes to turn it around, the bigger the upside. "

The Federal Reserve cut interest rate by 75 basis points to 2.25% to send the market into euphoria. Dow rallied more than 3.5%, led by Financials. JPMorgan's rescue of Bear Stearns also ensured that no financial institution gets insolvent. Any instance of that would be the final nail in the Wall Street coffin.

MYOB would like to quote Mr Soros on bottom fishing. There is no certainty, or any clarity for that matter, that a turn-around is near. The market, driven by bad economic conditions, could sink further. Nevertheless, MYOB would like to highlight that even with all the gloom in the market, we should make it a point to balance the gloom and the optimism. You want to be there when the train leaves the station.

Emptor caveat.

Words of Wisdom

2008-03-18T12:23:00.002+08:00

"My major hobby is teasing people who take themselves & the quality of their knowledge too seriously & those who don’t have the courage to sometimes say: I don’t know...."

Nassim Nicholas Taleb, post trader

Taleb wrote the best non-fiction seller on Amazon in 2007. "The Black Swan" was preceded by Fooled by Randomness: The Hidden Role of Chance in the Markets and Life. Basically, Taleb explains a lot of 'successes' that we envy to randomness. In one of the most counter-intuitive example, he would rather invest his money with a fund manager who has outperformed from the population of 3 managers than one who has outperformed in the total population of 300.

Taleb also argues that the world has under-estimated fat-tails. His real idea is that the more remote the event, the less we know about its probability.

Down in Wall Street, it is perhaps impossible to find a person who can see how the turmoil would unfold. Quants, MBAs, CFOs are all lost. If they are not, we would not be here in this state in the first place. Taleb shows incredible humility and appreciation of risk and uncertainty, far more than the highly paided CEOs running Corporate America.

If you have time, do check out the two books.

Words of Widsom

2008-03-15T01:36:00.003+08:00

In today's trading, Bear Sterns dropped more than 50% from yesterday's close. MYOB has a famous quote from Mr Guru himself, Warren Buffett, on investing.

"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price. " --- Warren Buffett

You can decide for yourself if Bear Sterns falls into the former or latter catergory.

Participation Certificates - Make it your business?

2008-03-15T01:27:00.003+08:00

Merrill Lynch to issue four China Participation Certificates on SGX

Merrill Lynch announced on 5 Mar 2008 that it will issue four Participation Certificates in April on the Singapore Exchange (SGX) that provide investors with a cost effective way to obtain access to selected China-themed sectors.

The four Participation Certificates are China Water, China Consumer Brands, China HShares
Discount and China S-Shares and as the names indicate, provide transparent access to the
China water sector, China consumer brands sector, a basket of H-Shares which are trading at a
discount to their A-Share counterparts and a basket of S-Shares which likely to benefit from
China’s economic growth and subsequent money flows into the Singapore stock market,
respectively.

The underlying indices for the four Participation Certificates are the Merrill Lynch China
Water SGD Index, the Merrill Lynch China Consumer Brand SGD Index, the Merrill Lynch HShares Discount SGD, and the Merrill Lynch S-Shares SGD Index, respectively. Each index is
based on Merrill Lynch research and the composition is reviewed at least twice a year.

The Participation Certificates are designed to be buy-and-hold investments, whose price
return is tied to a stock index, a single stock or a basket of stocks and indices. It is a non-leveraged product with exercise price of zero and is suitable for investors who wish to have an exposure to some of these unique baskets of stocks, indices or both.

As I type, Bernanke is speaking on CNBC talking about measures to solve the housing/credit problem. The Dow is down some 200+ points. The martket will continue to be highly volatile, with down side bias. MYOB will dissect the participation certificates to see if you should make it your business.

Stay tuned.

Words of Wisdom

2008-03-13T14:40:00.002+08:00

MYOB brings to you a new series -- Words of Wisdom. This new series will feature poignant quotes on value investing. In this chaotic period, the inaugural post will feature Mr Benjamin Graham.

"Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed."

Straits Trading: OCBC's white flagl!!!

2008-03-07T23:14:00.001+08:00

Following the Lees and GEH's decision to sell their stake in STCL to Tecity, it is no surprise to MYOB when OCBC also gave up their stake in the company, citing the loss of the added value of being part of the combined stake in 33.4% held by OCBC Bank, Great Eastern Holdings Group, Knowledge Two and Lee Family Companies.

Just for the records, MYOB did not think that the Lees would give it up so easily. MYOB has assumed that the status quo would remain, based on the state of the affairs after Tecity's declaration that $6.70 would be their last offer.
Having received valid acceptances of more than 50%, Tecity has on 4 Mar made their offer unconditional. Accordingly, as at 5.00pm on 4 Mar 2008, Tecity has 74.37% of the issued share capital of STCL. The Closing Date of the Offer will be extended to 3 April 2008.

MYOB hopes and expects that Tecity keeps the listed status of STCL. Once again, MYOB does not think that it might not be such a bad idea to hang on for your shares.

Legendary Investor Series: Martin Whitman - The safe and cheap man (Part II)

2008-03-07T22:42:00.003+08:00

If you're a value investor, you need to know who Marty Whitman is.

Whitman writes quarterly in the Shareholder letters for his TAVFX. The investment advice beats any MBA textbook easily. You could get a better understanding of investing through these than most major MBA programs in the U.S.

Whitman is totally committed to TAVFX due to his personal stake in it. Few things align your investment manager's interests with your own like him putting $63 million worth of his own money beside yours. Much of it came from his initial success in the buy-out of failed companies.

Today, the Third Avenue Value Fund has more than $11 billion in assets under management. Yet this massive size isn't hurting Whitman's ability to generate returns. In the last year, he's up 17%. Most managers find their performances stagnate as soon as assets under management rise above a couple billion.

Strangely enough, Marty Whitman currently has 54% of his equity position abroad. Only one of his top five holdings is a U.S. play.

Obviously Whitman favors development companies, particularly those located in Asia. Whitman's favorite Hong Kong company of all is Cheung Kong Holdings, one of the largest property developers in Hong Kong. Whitman has more than $880 million worth of his fund's assets in the stock. To Mr Safe and Cheap guy, he simply loves the conglomerate discount.

MYOB can understand why. Firstly, holding companies are often discounted, even to the extend that the SOP is greater than the total market cap. Check out Wheelock Holdings. Whitman obviously doesn't mind this. This only adds on to this profits when there is any unlocking in value. It also allows him to collect on the cheap.

Secondly, Whitman appreciates and values FCF over 'paper' NAV. The conglomerate discount gives him a good ratio that he is paying for compared to the FCF.

In the next series, MYOB will look at the gripes Mr Whitman has over paper valuation of company based on NAV.

Straits Trading: GEH throws in the towel!!!

2008-03-04T00:13:00.003+08:00

GEH has made the following announcement at the close of trading:

The committee of Independent Directors have evaluated the two offers relating to the Group's shareholdings in the Straits Trading. Holding a strategic nature in the Straits Trading, any premature announcement by GEH could have influenced the outcome of the competing offers.

"The Special Committee has decided, after careful and extensive deliberations and taking into consideration, inter alia, the advice of the financial adviser, to accept Cairn's offer of $6.70 per share in the best interest of the Group's policyholders and shareholders."

MYOB feels that this is a decent outcome for Tecity and The Cairns. I believe that Ms Chew was prepared to paid up to $6.70 per share for Straits Trading. The Lees, including OCBC and GEH, played their cards well to ensure that they extract maximum value out of Tecity.

Relating to a similar 'buy-out' of OUE, MYOB believes that shareholders who hold STC can hang on for the ride. Firstly, liquidity has been reduced greatly. Any weak sellers would have sold out already, or accept Tecity's offer. If you believe that Tecity could unlock further value in STC, hang on to your shares. Of course, once the offer closes, there is a high potential that the shares may drop below the offer price of $6.70.

Straits Trading: The Winner! Tecity!

2008-03-03T08:20:00.001+08:00

In a surprise move, the Lees have accepted Tecity's bid for The Straits Trading Company at $6.70. Tecity now owns 33.15% of the company. With the offer slated to close in a few days time, it will be interesting to see how OCBC and GE will respond.

MYOB thinks that Tecity has played a good game of poker. From the onset, with their starting bid of $5.70 per share some two months ago, Tecity must know that this wasn't going to be easy. Ms Chew played her cards well and now she will most likely get to gain control of one of her grandfather's flagship.

Legendary Investor Series: Martin Whitman - The safe and cheap man

2008-03-01T23:33:00.006+08:00

"We are cowards." That's how Marty Whitman, the octogenarian dean of deep-value investors, describes himself and his colleagues at the firm he founded, Third Avenue Management.

Why? Simple, Whitman explains: "We hate to lose money."

Martin Whitman is a veteran value investor with a long, distinguished history as a control investor. He is Co-Chief Investment Officer of Third Avenue Management and has successfully identified value in securities for more than 50 years.He has managed the flagship Third Avenue Value Fund since its inception. Mr. Whitman has also taught at the Yale School of Management for over 30 years.

Driven by that fear, Whitman and his crew focus on finding stocks that are "safe and cheap." Talk to him about his investing philosophy and those two words come up regularly. And always in that order: safe, then cheap.

Safe, to Whitman, means companies with rock-solid financials and managers whose interests are aligned with those of their stakeholders. Rather than focus on near-term earnings projections, which aren't always a reliable guide to a company's health, Whitman looks at assets, and prefers companies with holdings that can be readily valued - a bias that often leads him to financial and real estate concerns.

He and his team search worldwide for companies that can grow what they call net asset value, or NAV (Third Avenue's calculation of the company's intrinsic worth), by 10% annually. They buy only when a stock is selling at a discount to net asset value. "We buy growth - we just don't pay for it," Whitman likes to say.

"Safe and cheap" makes for a comforting mantra. Rather than timidity, though, Whitman's approach actually calls for remarkable fortitude. It requires the nerve to pick through distressed companies that others are ignoring and demands the conviction to see big gains come to fruition.

Turnover at Whitman's flagship mutual fund, Third Avenue Value runs at less than 10%, meaning that the average holding period for a stock is more than ten years.

In the long run Whitman's patience has been handsomely rewarded. Over the past five years, for example, his fund has delivered annualized returns of 22.5%, topping the S&P 500 by more than seven percentage points. During the past decade Third Avenue Value has delivered about 12% a year, some five percentage points better than the S&P.

With a record like that, it's no wonder that even at age 83, Whitman says he intends to continue at the firm as long as he is "compos mentis." "If I could be a tennis pro, I would do that tomorrow," he quips. Instead, the avid tennis player recently signed a contract to stay on at Third Avenue for five more years.

Whitman's willingness to go against the crowd was on display this summer. As investors were bailing out during Wall Street's wild ride, "We were buying like crazy," he says. To ensure he had a margin of comfort, he stuck to well-financed companies that would not need regular access to new funding from capital markets in the next few years. Here are three of his purchases.

"You have to accept the fact that you're not going to buy the bottom and you're willing to ignore what might be a chaotic operating picture over the next two to four years," he says, "there are fantastic bargains."

Whitman's focus on strong managers and great values has led him to invest alongside some other smart investors. He partnered profitably with Eddie Lampert to buy Kmart bonds before the retailer emerged from bankruptcy.

Another pro Whitman admires is 42-year-old J. Bruce Flatt, who, Whitman says, has been described as Canada's Warren Buffett. Flatt runs Brookfield Asset Management, a Toronto-based firm.

MYOB understands that the TAVF is only open to US residents. A pity. However, TAVF has a heavy Asia focus (check out their largest holding) and TAM has opened a Singapore office.

The Fight for Straits Trading

2008-02-25T13:32:00.003+08:00

Hugh Young, the high-profile managing director of Aberdeen Asset Management Asia, said Aberdeen had not sold its stake in takeover target Straits Trading but was reviewing recent bids for the commodities and property firm.

Young, who set up Aberdeen's Asian operation in Singapore in 1992, said Aberdeen would like to see "the maximum value realised" for its 2.5% stake in Straits Trading.

"Now whether that is the cash from either Tecity or the Lees, or a longer term restructuring and release of value, we are open minded," he said

Speaking in Aberdeen's Asian headquarters, a converted Singaporean shophouse decorated with Asian art and artefacts from Young's own collection, the fund executive said Aberdeen was considering trying to boost the performance of some funds by using conservative options strategies.

These could include writing options that would be triggered when the stocks hit the firm's target price, which would enable Aberdeen to earn a slightly higher return.

While regarded as one of the region's best long-term performers, Aberdeen stumbled in recent years as its conservative, research-intensive, low turnover strategy lagged its benchmark in three of the last four years.

But its portfolio of blue-chip Asian companies began to outperform again late last year as the region's multi-year bull run gave way to sharp falls.

Young, a tennis enthusiast who grew up in the London suburb of Wimbledon, likens the Aberdeen's investment style to the fabled tortoise that beat the hare over time. He said working through the stock market crash of 1987 had partly influenced his aversion to risky or overpriced companies.

"The fundamental thing of basic research and just checking whether a company is in a decent business, decently financed and run by honest people ultimately has not changed. We're unashamedly traditional," he said.

"We try not to worry about the markets and we certainly fully accept that there will be markets where we do appallingly."

Aberdeen's major bet at the moment is on Asian financial shares, which Young noted have largely avoided investment in the complex debt instruments that have hammered their Western peers.

Financial holdings include Singapore's United Overseas Bank and Overseas-Chinese Banking Corp, as well as property stocks and conglomerates like Hong Kong's Swire Pacific B.

"Typically the banking models in this part of the world are the banking models one remembers from one's youth. They take deposits and they make loans," he said.

"They're not betting their equity and more on exotic financial instruments ... you could say maybe they haven't been clever enough, they're just not up to speed with many of these things."

~~~~~~~~~~~~~~~~~~~~~

MYOB thinks that the game is almost up for Straits Trading. Tecity continues to mop up small shareholding behind their offer price of $6.70. It is unlikely that they will succeed.

On the other hand, MYOB points out that when there is irrationality in the market, 'traditionalists' ala Warren Buffett tend to underperform the market. But like the fabled tortoise, slow and steady wins the race for practisioners of Graham. To paraphase Young, "We're unashamedly Graham".

Straits Trading: Round 3. Fight!

2008-02-20T23:08:00.001+08:00

Reproduced from the Straits Times 11 Feb 08 Two old S'pore families compete for Straits Trading
Even though the battle for the tin mining firm puts them on opposing sides, The Straits Times looks at how the Lee and Tan families share a common history through OCBC Bank
By Lee Su Shyan, Assistant Money Editor
Mr Tan Chin Tuan aka Mr OCBC TWO of Singapore's most famous corporate families - the Lees and the Tans, which have been linked for decades through OCBC Bank, now find themselves on opposite sides of the fence. The Lee family, the largest shareholder of OCBC, and the Tan family, that of the late Mr Tan Chin Tuan, a long-standing chairman of OCBC are now vying for control of The Straits Trading Company, an equally venerable company with tin mining and property interests. On Jan 6, the Tan family made an offer of $5.70-a-share for the company. On Jan 24, the Lee family, made a counterbid of $5.76-a- share. The Tans swiftly responded on Jan 28 by raising their offer to $6.50 per share. The Tans own about 22.4 per cent of Straits Trading. The Lee family owns only about 6 per cent. But as it is a key shareholder in OCBC and Great Eastern Holdings, which also own Straits Trading shares, it is seen to represent about 32 per cent of the company. The apparent clash between the two families - and the direct involvement of the usually reticent Lees - has set tongues wagging in corporate Singapore. Just how far back do their links go? And what does today's tussle for Straits Trading say about a decades-old relationship? The Lee Family THE Lee family is the largest shareholder of OCBC and a regular fixture on the Forbes rich list with a fortune previously estimated at US$3 billion (S$4.3 billion). The foundations of the family's fortune were laid with Mr Lee Kong Chian, the father of current OCBC director Lee Seng Wee. Mr Lee Kong Chian hailed from Fujian province, China, arriving here in 1903 at the age of 10. He was talent-spotted by famous rubber tycoon Tan Kah Kee. One of the richest men in Asia, Mr Tan wanted to expand his rubber business overseas and hired Mr Lee as his manager, mainly because of his grasp of the English language. Not only did Mr Lee land the job, he also eventually married Mr Tan's daughter, Ai Lay. The Great Depression gave the financially conservative Mr Lee the chance to buy acres of rubber land at rock-bottom prices. With the wealth he made from rubber, he expanded into pineapples, coconut oil, saw mills and biscuits. But other than being the 'Rubber and Pineapple King', he was behind the creation of what is now known as OCBC. Facing a banking crisis, three banks - Oversea-Chinese Bank, Ho Hong Bank and Chinese Commercial Bank - merged to form the Oversea-Chinese Banking Corporation, the largest bank in Singapore then. Mr Lee was seen as the merger's chief architect. He became OCBC's vice-chairman, then chairman in 1938 - a post he held until just before his death in 1967. But while he was a banker and a rich businessman, he gave back generously to society. In 1952, he founded the Lee Foundation, leaving it as much as half his fortune. Mr Lee had three sons and three daughters. His youngest son Seng Wee, 77, is a director at OCBC. Second son Seng Tee handles the rubber businesses while eldest son Seng Gee, 86, is chairman of the Lee Foundation. The three daughters are Siok Kheng, Siok Tin and Siok Chee. The Tan Family IF MR Lee is associated with the birth of the bank, then Mr Tan, who spent half a century at OCBC, is hailed as the man who expanded its empire. Born in 1908, he was the son of a general manager of the Oversea-Chinese Bank. After his father died when he was a teenager, a family friend offered him a job at Chinese Commercial Bank. He helped in the merger and in 1933, was promoted to be the manager of OCBC Properties and a new subsidiary Eastern Realty Company. He attended property auctions and was on the lookout for bargains for the bank. As joint managing director of OCBC's overseas operations, he ran the bank's operations from India until the end of World War II. Over the next couple of decades, Mr Tan was to spearhead the bank's investments into a variety of non-banking businesses, many of which are household names today. These included Straits Trading, Raffles Hotel, department store Robinson & Co, beverage giant Fraser & Neave, Malayan Breweries (now known as Asia Pacific Breweries), Wearnes and others. One of the earliest deals he was involved in was taking a stake in Raffles Hotel. It had rankled OCBC that whenever it wanted to book a dining suite to entertain its clients, Raffles Hotel always turned the bank down. Eventually, Mr Tan helped OCBC secure the shares of one of the directors who died and he eventually became the first Asian on the board. As the British and other foreigners exited Singapore, Mr Tan thought it was a good opportunity for the locals to take over such non-banking businesses. This was how OCBC came to own shares in Straits Trading, which was set up by a German entrepreneur to smelt tin late in the 19th century. What laid behind his investment philosophy was a belief in growing the OCBC group, with the bank at its core. The companies in the 'OCBC stable' could support each other, with each other's services. From 1966, he was chairman and managing director of OCBC until 1983 when he retired and was made life president. He died in 2005. As OCBC invested in other companies, Mr Tan did likewise personally. A shrewd investor, he was a very wealthy man in his own right. He had three children - son Keng Siong and daughters Kheng Choo and Kheng Lian. The latter of the two daughters is the mother of Ms Chew Gek Khim. Ms Chew, 46, runs a group of family investment vehicles headed by Tecity. Word has it that she was groomed from an early age by her grandfather to take over. Mr Tan's nephew, Dr Tony Tan, was also general manager at the bank before entering politics in 1979. He went on to become its chairman and chief executive between 1992 and 1995. The winds of change BOUND inextricably by the pivotal roles they played in the history of one of Singapore's largest banks, the two families have had close ties for decades. This is why the battle for Straits Trading is startling to observers, and could be a signal that after three generations, the winds of change are starting to blow. There are a few theories as to why this is happening now. One theory has to do with OCBC's recent sale of its stakes in companies like Robinson and Raffles Hotel. There is speculation that the Tan family is unhappy with the moves, which could be seen to be detracting from the legacy that Mr Tan had built up. And this could be why his granddaughter - Ms Chew - could be bidding for control of companies like Straits Trading, which he helped bring into the OCBC stable. Opposed to an earlier sale of 29.9 per cent of Robinson by OCBC to Indonesia's Lippo Group, Tecity has now accepted an offer from Dubai's Al Futtaim group for its shares in Robinson. Ms Chew pointedly said:'Robinson is no longer part of the stable of companies my grandfather was instrumental in building.' Al Futtaim will 'understand and cherish the brand'. OCBC's stake sales have been driven by changes where financial regulators hold banks back from having significant non-banking businesses. But the Tan family could be worried that any decreasing involvement of the Lees in the bank could speed up the divestment process. Although Mr Lee Seng Wee's son Tih Shih, 44, sits on the OCBC board, none of the third generation of the Lees is as closely involved in the banking business as previously. With rumblings - on and off - that the Lees could exit the business and OCBC be swallowed up, the new owners of OCBC - or its managers - could accelerate the break-up of the bank's stable of companies. The Tans still own stakes in many of those companies and may have to deal with less-than-friendly majority owners. Finally, with the passage of time, the original partnership forged between Mr Lee and Mr Tan is just not as strong. Many see the Straits Trading tussle as proof that the relationship has now become much more business-like. As investors wait to see if the Lee family will raise its offer, there may have been a time-out during the Chinese New Year period. Business was apparently put to one side, with an exchange of gifts.

The Return of the Pennies

2008-02-19T12:39:00.002+08:00

After months in the doldrums, the market has finally shown some signs of activities in recent days. Once again, pennies led the way. Favourites like Memstar, Jade, GMG, LottVision and even Uni-Asia are once again leading the way.

Is it a sign of things to come?

MYOB advocates caution and points out that in such volatile times, it is perhaps best to buy into stocks with large margin of safety.

As a outreach series, MYOB will start a feature on legendary investors. Martin Whitman, founder and Chairman of Third Avenue Management, will be the first. Regarded as the modern day Graham (by moi), Whitman loves buying into cheap and good ....

Stay tuned!

Straits Trading: Round 2. Fight!

2008-02-17T23:16:00.003+08:00

CIMB-GK has been appointed as the independent financial adviser to the directors of
The Straits Trading Company Limited (STCL).

Here are some of the interesting highlights from their letter to the Independent
Directors of STCL.

STCL has four distinct core buseinsses comprising:
(a) Tin mining and smelting;
(b) Hotel operations;
(c) Property operations; and
(d) Securities trading and investment holding.

Using the SOP valuation analysis, CIMB-GK values STCL between $6.09 to $7.27 per
share.

The summary of the valuation as follows:

Tin mining and smelting $118m - $212.2m
Hotel operations $66m - $274.8m
Property operations $1064.1m
Investment in UE $66.3m - $115.5m
Investment in WBL $81.5m - $116.4m
Remaining investment portfolio $316.6m
Other net tangible assets $270.7 m

Total - $1983.2m - $2370.3m

At $7.27 per share, it is perhaps a highly optimisstic target. Interestingly, the Lee
family has raised the stakes in the fight for STCL. At $6.55, it would be interesting
to see how The Cairns would react. MYOB knows little about The Cairns or the
directors, mainly Ms Chew Gek Khim. However, it is worth noting that Tecity recently
gave an irrevocable undertaking to sell its stake in Robinson to Al-Futtaim. The
significance of this move could be related to OCBC and GE 'selling out' Robinson to
the Lippo Group.

In any case, MYOB thinks that there is a chance for a final bid by The Cairns.

Looking at a recent similar event, shares in OUE were privatised at $10.20 each by
the Lippo group (them again!) and Ananda Krishnan in May 06. Disregarding the
dividents, OUE's last traded price is $15.40. So even in the event that both the
offerers fail, STCL should have generated enough interest. Lastly, Ms Teh of BT have
done a comparison of privatisation offers and concluded that cash deals triumph share
deals.

What MYOB likes:
- Cash offer
- Quality of STCL
- Strong investors
- Attachment to STCL

Make it your business? Just hang in there.. the show just started!

Straits Trading: Round 1. Fight!

2008-02-15T08:27:00.005+08:00

OCBC Lee Family Ups Offer For Straits Trading To S$6.55/Shr

SINGAPORE (Dow Jones)--A vehicle controlled by the Lee family, the main shareholder of Oversea-Chinese Banking Corp has increased its offer for all of Straits Trading Company to S$6.55 a share, from S$5.76, according to a filing with the Singapore Exchange late Thursday.

The increase was in response to Singapore-based investment firm Tecity Group's move to increase its offer for Straits Trading last month to S$6.50 a share from S$5.70.
The vehicle making the offer for the Lee family, Knowledge Two Investment Pte. Ltd., owns 33.4% of Straits Trading, whose business includes mining and smelting, and hotel investment and management.

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MYOB finds it interesting that two families, with long connections to the company and one another, are fighting it out for control of Straits Trading. According to various reports, it is believed that ST could be valued as much as $7.80.

Stay tuned! MYOB will bring back some numbers to see if it's worth making it our business...

All quiet on the Eastern front

2008-01-28T20:51:00.000+08:00

On 28 Dec, EH announced that negotiations pursuant to the previously announced non-binding Letter of Intent entered into with Singapore Press Holdings regarding the divestment of several of the Company's exhibition businesses have ceased. Both parties were unable to reach agreement and will not proceed with the proposed transaction.

MYOB thinks that this is a non-event. The magazine business is a good cash cow that can provide some stability to EH, especially if the state of the economy is more uncertain now. Property development should slow down.

Sale of 71, 71A, 71B Tras Street.
A little welcome news. This should lend some support to the earnings.

Since the last update, EH has fallen in tandem with the market. Coupled with the one-for-two bonus, EH has fallen to 20 cents. At this price, EH's market cap is back to $60 million.

Director Kenneth Tan is also lending some support to the share prices. He bought 20k shares at 19 cents on 16 Jan 08. Although insignificant, this presents some confidence in EH.

MYOB's quick back of the envelop calculation puts EH at almost $140 million. Given that the fluff in the market is almost gone, discounting some already conservative numbers, MYOB puts EH at $120million, which is double from here.

In this market, MYOB remains cautious but sees low risk in putting some money into EH at this point. Caveat emptor!

RAWWWWWRRRRRRRRR

2008-01-28T20:25:00.000+08:00

Today, LAP announced its intention to sell its 6.16% in AHJA for at least RMB7.5 a share.
This is at a slight discount to the closing price of RMB7.76.

More importantly, AHJA's 21x FY07 IBES consensus P/E compares favourably to its more expensive peers' 19x-75x. This means that there is potential to up the final sales price.

At RMB7.5, LAP's stake is worth $120 million.

At 26.5 cents, LAP's market cap = $107.5million

The rest of LAP's business comes free.

Bring on the Eastern Wind

2007-11-13T21:29:00.000+08:00

MYOB did a sum of parts of Eastern Holdings a few weeks back. Today, EH announced a good set of results.

Boutique Property Developer, Eastern Holdings interim net profit surges 585% to S$13 million
- Revenue tripled to S$40.2 million on the back of Singapore property boom
- Property business contributed 75% of the total revenue
- Rewards shareholders with 1-for-2 bonus shares; to improve trading liquidity of the Group’s shares

"Over the years, Eastern Holdings has developed the reputation as an emerging boutique property developer. Looking forward, we will continue to concentrate on developing and investing in a good mix of commercial, residential and industrial properties in local and overseas markets. Barring unforeseen circumstances, the Group expects to do reasonably well in the next 12 months."

"The Proposed Bonus Issue is intended to reward shareholders for their loyalty to, and continuing support for, the Company. In addition, by increasing the number of shares in issue, we hope to improve the trading liquidity of the Group’s shares."

~ Mr. Tay Thian Boon, Stephen
Chairman, Eastern Holdings Limited

Singapore, 13 November 2007 – Eastern Holdings Limited, ("Eastern" or the "Group"), an emerging boutique property developer with a growing portfolio of residential, commercial and industrial properties, has announced its financial results for the six months ended 30 September 2007 (1H08). Net profit jumped 585% from S$1.9 million in 1H07 to S$13 million in 1H08. This is largely attributed to the increasing demand in the local property market.

The Group is also proposing a bonus issue of 100,000,000 new ordinary shares (the "Bonus Shares") in the capital of the Company. This will be on the basis of one (1) Bonus Share for every two (2) existing ordinary share in the capital of the Company held by the shareholders of the Company.

1H08 Financial Performance Review
The Group’s 1H08 revenue improved to S$40.3 million; a 254% jump compared to 1H07. The increase in revenue was the result of prominent sales from sold properties namely D’Evelyn, Walmer Drive, Brighton Crescent and Coronation Drive. Sales and rental of properties contributed 75% of the total revenue, up from last year’s 16%.

Eastern‘s net profit increased by 585% to approximately S$13 million for 1H08 as compared to S$1.9 million for 1H07.

Earnings per Ordinary Share for the year increased to 6.49 cents for 1H08 from 0.95 cents in the same corresponding period last year.

As at 30 September 2007, the Group has more than S$15 million in cash and cash equivalents.

Outlook & Future Plans

According to a local broking house’s report, the physical property market in the short to medium term, should still continue its growth momentum as the industry fundamentals are still robust. In addition, property developers have stronger cashflow from locked in presales over the past few years and are unlikely to lower selling prices to boost sales.

According to Urban Redevelopment Authority (URA) statistics, a total of 6.9 million sf of office GFA is likely to be completed between 2H07 and 2010 or an average 2 million sf a year. This compares with annual demand of 1.96 million sf and 10-year annual take up of 1.3 million sf. As such, in the short to medium term, demand of office space is likely to remain robust and will continue to strengthen office rents and capital values.

As Eastern embarks on the new developments of its two industrial and two residential projects, the Group believes that its property related business will continue to contribute substantially to the Group’s overall operations.

The Group has recently moved to divest selected media assets, which include the IT show, Computer Exhibition, the Food and Beverage Fair and the World Food Fair. The Group expects this transaction will have a material financial impact on the company if it is successful.

MYOB?
EH has enough cash on hand to give out 7.5 cents per share. This is before the divestment of the selected media assets listed above. Together with the management's commitment to inprove liquidity and to reward shareholders, the next few months could be interesting.

RAAAWWWRRRRR!!!

2007-11-01T22:06:00.000+08:00

An old report from KE:

The lion's appetite for lime and steel

Since our last update, LAP has almost completed the disposal of itsmotorcycle businesses in China which were beginning to face declining profits. The company found a new focus in the production of quicklime -a purifying agent commonly used in steel manufacturing. LAP's limestone processing plant in Banting commenced trial production in Apr 07 with acapacity of 215k tpa, making it the single largest plant in Malaysia.

Possible plans for expansion include backward integration involving thepurchase of a quarry, which will give it better margins. Subsequently,LAP may also diversify into the production of high quality quicklime used in water treatment, as it offers more lucrative returns.

Volatile earnings for remaining businesses

Although subsidiary Advent Electronics expects FY07 revenue to outperform last year's $70m, bottomline profits will be lower thanFY06's due to higher provisions for inventory obsolescence. Given itscompetitive operating environment, margins for the business remains at~3-4%. In our view, the earnings trend will continue to fluctuate as itis largely dependent on the number of projects secured.

On the new automotive component trading unit, we see a possible slowdown in 2H earnings while LAP irons out technical issues involving the conversion of parts from left to right-hand drive to cater to the Malaysian market.

Anhui Auto stake is worth $0.325 per share LAP owns a 6.16% stake (66m shares) in Anhui Jianghuai Automobile Co.(AHJA), which is listed on the Shanghai bourse. At RMB10.02, this investment has a market value of S$132m ($0.325 per LAP share) or 145%of LAP's entire market cap; meaning that investors will be getting LAP'sother businesses for free.

We also view LAP as a cheap proxy to the booming Chinese automobile market. AHJA's 21x FY07 IBES consensus P/E compares favourably to its more expensive peers' 19x-75x.

Deep discount to SOTP value, Upgrade to BUY with $0.36 TP

Using SOTP valuation, we have included inter alia 1) marked-to-marketvalue of S$132m for its 6.16% stake in AHJA, 2) share of proceeds fromsale of Zhejiang Victor Motorcycle and 3) the group's strong net cash position of $39m. We also abscribed a conservative 5x P/E to our earnings forecasts for LAP's limestone, electronics and tradingbusinesses. After taking into account the dilutive effects of LAP'soutstanding warrants, we derive a fair value of $0.36. This gives acompelling 60% upside potential for a grossly undervalued stock which offers significant hidden value and indirect exposure to China's fast growing automotive sector.

Upgrade to BUY.

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MYOB:

At 26.5 cents, LAP's market cap = $107.5million
Huge amount of cash: S$62 million
Investment in AHJA: 79.38 million shares @ RMB8.5 = S$131 million
Limestone business

Make it your business? Yeah, in anticipation of a handout after divesting AHJA. The limestone business, the cash, and the electronic business are all free.

Business Update

2007-11-01T12:58:00.000+08:00

Stocks closed up sharply following the latest interest-rate cuts by the Federal Reserve, ending the month of October on a strong note. For the month of October, the Dow Jones Industrial Average rose 0.25%. The Nasdaq rose 5.83% for the month, and the S&P 500 rose 1.48%. Note that the Volatility Index VIX remained high amid continued uncertainty over the effects of the credit crunch.

STI is near the all time high. HSI broke through the roof with the liquidity from China. MYOB remains slightly cautious at this point, possibly selling into strength.

U

2007-10-01T22:12:00.001+08:00

U

Yes, U for Uranium.

Today, MYOB will explore Uranium as an investment. Gone are the days of cheap oil. Let's see if investing in uranium makes good business.

Background
Uranium was discovered in 1789 by Martin Klaproth, a German chemist, in the mineral called pitchblende. It was named after the planet Uranus, which had been discovered eight years earlier in 1781. Uranium occurs in most rocks in concentrations of 2 to 4 parts per million and is as common in the Earth's crust as tin, tungsten and molybdenum. Like other elements, uranium occurs in slightly differing forms known as 'isotopes'. These isotopes (16 in the case of uranium) differ from each other in the number of particles (neutrons) in the nucleus. Natural uranium as found in the Earth's crust is a mixture largely of two isotopes: uranium-238 (U-238), accounting for 99.3% and U-235 about 0.7%.

Nuclear reaction
The nucleus of the U-235 atom comprises 92 protons and 143 neutrons (92 + 143 = 235). When the nucleus of a U-235 atom captures a moving neutron it splits in two (fissions) and releases some energy in the form of heat, also two or three additional neutrons are thrown off. If enough of these expelled neutrons cause the nuclei of other U-235 atoms to split, releasing further neutrons, a fission chain reaction can be achieved. When this happens over and over again, many millions of times, a very large amount of heat is produced from a relatively small amount of uranium.A typical 1000 megawatt (MWe) reactor can provide enough electricity for a modern city of up to one million people.

Nuclear power
Over 16% of the world's electricity is generated from uranium in nuclear reactors. This amounts to about 2400 billion kWh each year, as much as from all sources of electricity worldwide in 1960. In a current perspective, it is twelve times Australia's or South Africa's total electricity production, five times India's, twice China's and 500 times Kenya's total. It comes from about 440 nuclear reactors with a total output capacity of more than 350 000 megawatts (MWe) operating in 31 countries. About thirty more reactors are under construction, and another 70 are on the drawing board.

MYOB Pop Quiz: Which country has the highest nuclear generation?

Sources of uranium ore:
Australia accounts for 30% of the world's total at 1,142,000 tonnes, Canada at 12% (444,000 tonnes). Others Kazakhstan (16% of world total), USA, South Africa, Namibia, Brazil, Niger and Russia. Uranium is sold only to countries which are signatories of the Nuclear Non-Proliferation Treaty, and which allow international inspection to verify that it is used only for peaceful purposes. Customer countries for Australia's uranium must also have a bilateral safeguards agreement with Australia. Canada has similar arrangements.

Make it your business?

Positive: Uranium supplies are estimated at 100 tonnes a year. Demand for U is at 180 tonnes. The rest is taken from stockpiles. Uranium has fallen to as low as US$10 a tonne, up to a few years ago. Supplies have since not been able to keep up with the demand. There are 439 nuclear power plants in operation with a total net installed capacity of 371.671 GW. More importantly, 31 nuclear power plants are under construction (hello China). The weird thing about nuclear power plants is that they run safer at full capacity. Hence, there will be continued demand for U regardless.

Negative: Uranium is sold only to countries which are signatories of the Nuclear Non-Proliferation Treaty, and which allow international inspection to verify that it is used only for peaceful purposes. Customer countries for Australia's uranium must also have a bilateral safeguards agreement with Australia. Canada has similar arrangements.

Positive: The U.S. Department of Energy (DOE) Secretary Samuel W. Bodman today released a Conditional Agreement for companies building new nuclear power plants in the United States to qualify for a portion of $2 billion in federal risk insurance.

Negative: The U.S. nuclear industry has been virtually frozen since the accident at Three Mile Island in 1979, the worst nuclear accident in U.S. history. No company has followed through with plans to build a new nuclear plant since the accident.

Negative: Uranium is not publicly traded on any exchange. Trades are carried out on a private basis. Hence, valuation is based on recent deals.

Answer to MYOB Pop Quiz: Lithuania

Quality Demand Is It?

2007-10-01T21:06:00.000+08:00

QDII - Quality demand?

China's largest fund house - China Asset Management - raised US$4 billion within a day under the Qualified Domestic Institutional Investor scheme. Funds approved under the QDII can invest in stock markets outside China. The aim is to allow the vast amount of liquidity in China to flow overseas and ease the pressure on the yuan as well as the high asset prices on the mainland. Singapore is expected to be a beneficiary of the outflow of the Red Yuan.

Readers who frequent Shareinvestor.com might have heard Oldman aka Michael Leong say that, ultimately, the price of each stock simply follows the law of demand and supply. Over the past two days, the Redchips have collectively powered the STI to a new high. SESDAQ has been left behind in the recovery while STI is back to making new highs. If you had gone to bed in Aug and woke up in Oct, you probably would not be able to tell the carnage and panic from the US subprime 'scare'.

According to ML's conservative estimates, up to US$3.3 billion per month on average over the next 15 months may potentially flow into the HK stock market. To give you an idea, that mount has the same effect as SPH being swallowed up in 6 weeks. That is how much buying power there is.

Is it our business?

Be afraid, be very afraid. There's more to come. Beijing has just launched the US$200 billion China Investment Corp over the weekend that would unleash the largest fund in history onto
the world's financial markets. Just look at the Shanghai Index. That is the buying power of 1.3 billion Chinese. CIC is a soveriegn fund, just like our GIC.

The QDII effect on STI is immense. MYOB expects the STI to be more decoupled from the US
markets, and track the Chinese market more closely. Just look at Hang Seng over the past few months.

Stay tuned.

MYOB

Hang on to the Eastern Wind

2007-09-21T10:24:00.000+08:00

"Eastern Directories Pte Ltd has signed a non-binding Letter of Intent with SPH to dispose off selected media assets, namely, the IT Show, Comex, Food and Beverage Fair and the World Food Fair.

This transaction is expected to have a material financial impact on the Company."

In a previous post (The Sun rises from the East), MYOB has conservatively valued the entire business at $20 million, based on a generous ROI of 10%. SPH paid $7.1 million to take over Hardwarezone, an regional online media portal with a magazine business.

For FY06/07, Eastern's revenue from the sale of exhibition space was $8.05 million. A rough estimate would value the deal with SPH at $8-10 million.

Management has said that the media business was a cash cow that would provide the company with a solid base to work through good times, and bad. Management would have to justify their move. Perhaps the MICE space is getting too competitive.

We'll have to wait for more details, and more importantly, the price that SPH is paying.