Apr 24, 2014

GrabTaxi and Comfort: Disruptor and Disruptee

I only discovered GrabTaxi when I saw Lip Hong share this link on Facebook. (Lip Hong also writes at Investment Moats.

Anyway, I was pleasantly surprised that something like this is happening in Singapore. My mum who did not know of this app, thought that it was also a good idea because of many bad experiences while trying to book taxis before.

I took a Comfort taxi today, and decided to ask the driver if he was using it.

He was not, however, he did try and accepted 1 booking job but did not continue using it despite being equipped to do so. His reason was that Comfort banned its drivers from using GrabTaxi, so he did not dare to use the GrabTaxi service even though he said he was able to get bookings almost anywhere he was driving. He added that some drivers have switched over to other taxi companies recently.

I thought I had heard the answer there. The answer to the problem of people finding difficulties getting taxis at certain 'ulu' places, miscommunication between the customer and the driver (or even the call centre), and etc.

He mentioned briefly that GrabTaxi was Temasek-linked which got me curious so I decided to find out more. Indeed it was, a subsidiary of Temasek and angel investors have come together to inject an 8-figure sum into GrabTaxi, you can read more here.

Just like the disruptive innovations that this VC firm invests in, Singapore needs more of such especially in mature sectors with little to no competition.

It is still OK to be kiasu

I arrived early in the morning at the Starbucks outlet in NUS and got a good table with 2 power sockets behind me. I like the breakfast set here which is only $6.90 for a coffee and something to go along with it.

The staff here are cheerful and perform great customer service. Some are students at NUS who work part-time, and I daresay their service is better than some full-time F&B service staff that I have encountered.

I took out my laptop and began doing some work, I did not plug in my charger because I had a full battery. The outlet was getting filled with students progressively into the morning and soon, a girl approached and plugged her laptop in right behind me and left it there. I smiled to my partner and joked that I should probably plug in my charger too just in case the last point was 'lost'.

A few moments later, another girl came up and snagged the last one.

This had got me thinking; should I have been kiasu and just 'choped' one of the charging points even if I did not immediately need it and it was only behind me?

I recalled a moment when I went to lunch with my office colleagues at a food court. We spotted an empty table and went to it. Then we looked around to see if there were better tables and just then, someone else just walked up beside me, tossed a packet of tissue onto the middle of the table, and then went off to queue for food!


Just like what Beyonce always said; if you liked it, you should have put a ring on it. We probably should have placed a tissue 'chope' too even though we were standing beside the table!

You can never be too kiasu, although what is unreasonable to one may be within reason for another.

A few months back, I was grocery shopping at a market in the town of Sheffield. I picked a nice punnet of strawberries and left it in the handbasket which I placed on the floor beside the fruits section and went to look-look-see-see other goods. Just when I was away, a local auntie came by and started browsing for strawberries. The rest were pretty average to bad, and I suppose my punnet looked pretty juicy and appealing, because she just took it from the basket and swiftly handed it to the grocer. Ninja!

This is the end of my random tale today, there is no polished or witty anecdote relating any of these to finance or investing though, sorry to disappoint!

OK let me give this a try.

On hindsight, I should have 'secured' my power supply once I sat down by connecting my charger even if I had a full battery.

Similarly, in reference to the 5.125% Genting Perps issued back in 2012. Genting already ''got a good seat'' with the first S$1.8B tranche. The funds are not immediately needed, but since retailers are also interested, so might as well lah, eat them also, for the second tranche of S$500M. Also because of the amount of liquidity available in the market, bank/FD rates at all-time low, other companies are also going to issue perps anyway, so must faster grab lah.

I am a holder of the Genting Perps. ever since the beginning.

Apr 23, 2014

Genting Singapore AGM 22 Apr 2014

I am not going to do any analysis here but some of the main points that I noted are as follows;

1. Gaming Revenue $2.19B (down from $2.37B in 2012), Non-Gaming Revenue $0.66B (up from $0.59B in 2012), Net profit $0.71B (up from $0.68B in 2012). Dividend of $0.01/share.
Directors' remuneration + >25%

2. Building a 550-room hotel, the first in the Jurong Lake District, expected to open in mid-2015. Genting is aiming for the ''premium-mass'' or so they described at the meeting. Anyway it is basically a move to get in early in Jurong.

3. Joint venture (50/50 with a Chinese property developer) in an integrated resort on Jeju Island, South Korea, slated to be open progressively from end-2017. It will comprise of luxury hotels, a large retail mall, a theme park and other leisure and entertainment facilities. It is foreigner-only and they will target Chinese gamblers.They did not confirm how large scale it would be (tables, etc.). The management explained that it was next to impossible to obtain onshore financing in South Korea, so this investment of about US$300M+ will be majority financed by the sale of property and the rest will come internally.

(I did some digging and the Chairman of the Chinese company revealed that there will be 800 tables including 200 for high-stakes gamblers)

4. Potential gaming business opportunity in Japan. They mentioned the proposed gaming legislation in Japan and that they are already preparing for it. It was also said that if successful, this venture will be very profitable and could be about 2.5x Genting Singapore's cashflow.

5. USS is operated by Genting SP on a franchise model which is 15-years long, after which is subject to re-negotiations. I missed the part where the director mentioned about the proportion of profit-sharing with the franchisor. (10% I think, perhaps someone can enlighten me)

I am back in Singapore during the Easter break, and attended the Genting Singapore AGM on Tuesday with my parents who are shareholders. I used to be a shareholder too but divested long ago and have not kept track of this company since.

This was an interesting AGM. The hall was fully packed with shareholders and proxies, I guess maybe a few hundred or more. Most of the questions raised were about why the dividend payout was only 1 cent/share, and why did directors' remuneration increase by more than 25%. 

To justify the remuneration, they emphasized repeatedly that their directors are under more scrutiny and have more regulations to comply with that were set by the Casino Regulatory Authority. Generally, the shareholders agreed (or grudgingly) that if the management runs the company well, they are deserved to be paid well.

For many of the shareholders there who were fixated on the low dividend payout, Genting does not have a dividend policy so any payout should be considered a bonus. The management have outlined their plans for growth and expansion and these require financing and cash. The nature of their business also requires them to keep a sizeable cash hoard to capitalise on opportunities even if it is not immediate. Thus Genting should not be seen or expected to be a dividend stock, at least not until its expansion projects have matured. 

Apr 20, 2014

Thai stock market and economy

According to Kasikorn Research, the Thai economy is close to entering a recession and first quarter GDP estimated to have declined by 1.8% from the previous quarter (but expanded 0.7% y-o-y), in line with the National Economic and Social Development Board (NESDB) who forecasted that first quarter GDP may fall by 1.7% from the previous quarter.

The prolonged political unrest had affected the economy as well as domestic spending ever since the first political protests started in Oct 2013. Public investment has largely stalled and the tourism sector has not been spared and international tourist arrivals in March were poor at -9% y-o-y.

Quoting from the Bank of Thailand on 31 March 2014, y-o-y, the Private Consumption Index (PCI) is down -2.5%, Private Investment Index (PII) is down -7.7% as businesses defer investments and the Manufacturing Production Index is down -4.4%. Merchandise exports are up +2.2% from the same period last year. Automobiles, electronics, electrical appliances, agricultural products, machine and equipment also picked up. In contrast, steel and metal exports growth are still negative y-o-y and petroleum exports fell due to the maintenance shutdown of refineries.

Unemployment rate remained low while inflation rose on the back of rising fresh food, prepared food and liquefied petroleum gas prices. Current account is positive, due to a surplus in trade balance while capital account recorded a deficit as financial institutions repaid short-term foreign loans, foreign investors reduced portfolio investment in Thailand and Thai investors increased overseas debt securities holdings.

Therefore I believe exports will bear most of the burden of driving the economy this year. I am not very confident, however economic recovery of Thailand's trading partners may boost their exports this year.

The political deadlock is approaching a turning point soon as the Constitutional Court is set to rule on a case against Prime Minister Yingluck.

While many institutions and people perceive that the political unrest will end sometime in the middle to late this year, lets take a look at the Thai stock market (SET) based on last friday's closing.

Quoting from Bualuang Securities, the SET recently traded on forward PER of 13.5x compared with 11.1x for Asia and 10.2x for emerging-market countries. Ever since the market plunge on political tensions, foreign and local institutional investors have been on buying sprees causing the index to rebound quickly.

Comparing from last October 31st (1442.88) to last friday's close at 1409.18, the SET is down only about -2% (Line drawn in chart for emphasis). Thus, the SET is not offering a political-risk discount anymore for the slow-movers. In the best case scenario, the political situation is resolved peacefully with both parties satisfied (somehow), domestic fiscal stimulus resumes and foreign investment is back on track. Note that elections may occur this June-July.

As for now, it is time to review my SET holdings. 

1. Krung Thai Bank - I have been averaging up since last September. KTB offers an upcoming (end-April) dividend of about 4.5% at the current price. P/E ttm is about 8.06, still very attractive among the big banks of about 10-11. KTB is trying to shed its state-owned image by positioning itself more to the market. It bears the most political risk as compared to the other big banks. One of the main reasons that I invested in KTB initially was in anticipation of the government's planned infrastructure projects. I did not foresee this whole political fiasco and recession at the time. Expectations are still on the share price to catch up to its peers as most of the other banks have already released first quarter results (mixed, big banks are generally still hanging in there). I expect KTB to at least meet estimates for earnings.

As political risks have now added another dimension (and risk) into KTB, I will lock in some profits soon based on P/E. 

I have attached a chart of the bank sector comparison against the SET below. Banks are strongly correlated with the index and both are approaching several resistance levels.

2. MK - I missed several chances since the IPO listing date because I did not want to chase the price, and my average price is very near the IPO price. Business has been affected by the political situation and outlet expansion has been delayed. MK is still the most profitable restaurant operator in Thailand however, and there are several projects in the pipeline such as growing its other restaurant brands and also hunting for an acquisition. My holdings in MK is relatively small, as compared to my KTB investment, therefore I have no qualms to take profit soon. I will probably do a detailed write up in future, of MK to better explain what I see in it.

I have attached a chart of the food sector against the SET below, I admit that there are not that many quality food companies and their performance varies widely from one to another, so the correlation with the SET is not that helpful. 

Despite the index being relatively strong (and not cheap) in this climate, there is still value to be found in individual stocks. However they are not immune to the swings of the main index and I am looking at a few more stocks and will invest when the price offers more margin of safety. In the long run, I aim to have my THB account at least 50 to 70% of my invested capital.