Jan 27, 2015

Thai market in January

January was pretty eventful. With a few days left till February, the SET is up 6% YTD with a P/E of 19x. Local institutions and proprietary trading are net buyers, and I expect foreign investors soon, as well. I also have not bought or sold anything this year, and am sitting on autopilot for ADVANC and TTW only. I am also considering TT more funds to my Thai account, which takes about 3 days using DBS.

In no particular order... Rumors that Bank of Toyko-Mitsubishi UFJ had plans to delist Bank of Ayudhya (BAY) were refuted by BAY, and BAY plunged 13.8% yesterday, and another 7.4% today. BAY, which accounts for about 5% of the SET's market cap, jumped almost 30% last Friday due to this rumor. I wonder who these guys really are. The SET is really lively, and also the land of opportunity if you know where to look.

CP and Itochu to invest US$10.4 bn in CITIC. CP and Itochu will invest via CT Bright, a 50:50 (CP and Itochu) joint investment vehicle, in two transactions. The first will be CT Bright buying 10% of CITIC shares worth US$4.5 bn, from CITIC Group. The second will be paying US$5.9 bn in cash to CITIC Limited for convertible preferred shares. Upon the completion and full conversion, CT Bright will own about 20% of CITIC Limited. Dhanin really has a huge appetite, but I suspect Tesco would end up in someone else's hands, maybe Central or Charoen.

1 million tons of rice set to be auctioned this Thursday, I wonder who the buyers turn out to be, China maybe? While rice prices are down, the floor prices are set even lower, lower than market prices. Recall from the junta's audit, that only 10% of the 18 million-ton stockpile was considered good quality. I think the rice-pledging scheme really screwed Thailand up. Does anyone have any idea what can you do with substandard, yellowed rice? Feed them to the pigs? There might be a possibility for ethanol production but then this is unconventional, and would probably incur costs to be viable.

Thai Airways to reduce workforce by 20%, not through layoffs, but by retirement programmes. THAI report a loss of B9.2 bn for 9M14 with adjusted debt to capitalization of about 82%. THAI also has 6 consecutive quarters of loss from operations. I hope the restructuring pays off because personally, I really like flying with THAI.

The Board of Investment approved 3469 investment projects worth B2.19 trn in 2014, surging 117% in value, from 2013. The number of investments projects are a 50-year high, with a majority coming in from December 2014. This was likely due to the new BOI investment policy taking effect since the start of the year, which no longer supports activities that have low added value, labor-intensive, low technology and simple production processes. A B150 bn investment budget will be launched for fast-track projects, with B110 bn for water management projects and B40 bn for road maintenance and construction.

About 3000 fish at the abandoned Bangkok mall will be netted out and relocated, before the mall is demolished! Finally something is being done about this wreck, but its a pity, I had seriously considered the thought of tracking down the entrance and getting in to take a look-see. I am happy that at least the authorities are clearing them out by relocation to rivers and reservoirs.

Thailand is also expecting 72 million mobile broadband users this year, a growth of about 44% from last year. Processed seafood will be subject to sharp increases in import duties to the EU, as Thailand loses GSP privileges this year. Thailand also has no FTA with the EU. 

Jan 15, 2015

Wrapping my head around this "buying electricity from Laos" thing

I did not see any indications of the potential size of electricity orders in future, but to put things in perspective, Singapore’s total licensed electricity generation capacity was 12,521 MW in 2014, while Laos’ hydropower plants have a capacity of about 3230 MW with the potential to increase to 28,000 MW.

In 2013, total electricity generation in Singapore was 4124 ktoe (48 TWh), while Singapore’s total electricity consumption was 45 TWh in 2013. Electricity tariff from Jan-Mar2015 is 23.29 cents/kWh.
I know some of the numbers are outdated but I think they shouldn’t be too far from +/- 2% in Singapore’s context.

I have a really weak understanding of all these energy stuff, not to mention power transformers or transmission. If anyone has a sense of all these, please share them with me!

What I am trying to wrap my head around is really this; are we really going to source for electricity from Laos? It is unlike commodities where you can just ship them over. I am really sceptical about how the power lines are going to be taken care of.

Also, using the 2013 figures, it does not seem like Singapore might face a power shortage. Laos is also charging a fair price so there should not be an argument for cost. My guess is Singapore will purchase only a small/bite-sized amount of electricity just for an "ASEAN display" to kick the ball rolling for the ASEAN power grid.

Here are the news articles:

Four Asean nations - Laos, Malaysia, Singapore and Thailand - held talks yesterday in Vientiane to consider a plan that would see Laos export electricity to Singapore via transmission lines in Malaysia and Thailand

Malaysia has pledged to take responsibility for technical affairs relating to the envisioned project.
Laos' electricity transmission line is connected with Thailand's, while the Thai network is connected with Malaysia's and the Malaysian transmission line is connected to Singapore.
Deputy Minister of Energy and Mines Mr Viraphonh Viravong said previously that Singapore agreed in principle to purchase 100MW of electricity from Laos as a pilot scheme, while Thailand and Malaysia offered their support for the envisioned project.
Laos sells electricity at a unit price of just over 7 US cents per kwh to Thailand and just over 6 US cents per kwh to Vietnam and Cambodia, while the unit price in Singapore is about 20 US cents per kwh, according to Mr Viraphonh.
In recent years, electricity has been the main revenue generator for Laos. Total income generated from electricity sales in fiscal year 2013-14 hit more than US$880.9 million (more than 7.100 trillion kip), a remarkable increase compared to the year before, according to a recent report.
Of the total, income generated from electricity exports amounting to more than 11,332 million kwh reached US$535.47 million (more than 4.316 trillion kip), an increase of 6.62 percent compared to the year before.
As of October last year, Laos had 25 operational hydropower plants with a total installed capacity of about 3,230MW, exceeding domestic consumption needs of about 1,000MW.
Laos has strong potential to build hydroelectric plants with a combined installed capacity of about 28,000MW, including the existing dams.

Nation, 25 Sep 2014

Building a transmission line to carry electricity from Lao hydropower plants to Singapore can save as much as US$26 billion over 10 years for the four countries involved, according to a new study.

Laos envisaged itself as "Battery of Asia", with plans to generate hydropower for sale to Asean countries aside from Thailand.

Through the transmission grid that will link the four countries, ERIA estimates that the four countries could save between US$23 billion and US$26 billion over 10 years of operation.

Dr Li said they had studied ten years of power trading among the four countries, especially Lao and Singapore.

"But Thailand and Malaysia would also benefit from this because the power goes through their territories and they can carry out some sort of relay power trade in between," he said.

Dr Li said, "Based on the current level of power demand in all four countries, we also projected the future power demand growth over the next ten years and this level of demand is already enough to justify power interconnection between Laos and Singapore."

He said Laos, Thailand, Malaysia and Singapore had determined that the transmission line was technically feasible but had yet to work out a business model for the cross-border trade. He estimated that construction could begin in one or two years’ time.

Jan 5, 2015

IHH Healthcare and BGH, McDonalds and CPF

IHH Healthcare and Bangkok Hospital (BGH), McDonalds and CPF. These were 2 news items that caught my attention today.

IHH Healthcare is reportedly targeting a 11.5% stake in Bangkok Hospital, the Thai, acquisition-machine, behemoth otherwise known as Bangkok Dusit Medical Services. The Star broke the news about IHH possibly funding the stake with a mix of cash and issuance of new shares. The Straits Times reported the same news a few hours later (as usual!). And the latest from Reuters is BGH themselves refuting the news.

''BGH has not been contacted by IHH... BGH has no plan to issue new shares to IHH'', rest of article here.

To put things in perspective, the 11.5% stake in BGH is worth slightly over S$1.2 billion when the first article was written, based on 17.20 baht per share. Today, BGH closed at 18 baht per share, up 4.65%. That is almost S$60 million more expensive, if IHH is really going to pursue the stake.

It is not uncommon for both the target and acquirer to both come out and publicly deny this kind of news, and then a few weeks later, the acquirer makes the offer in a supposed about turn. Perhaps in this case, someone really spilled the beans too early. This could be a minor example of the ''rumor theme'' I pointed out in a previous post. Regardless of whether the offer is going to turn out real or just smoke, the +4.65% number today is real.

The second news, a piece of vinyl was found in a chicken nugget sold in an outlet in Aomori, and the offending nugget is being sent to Tokyo for investigation.

Vinyl? What the hell is that supposed to mean? A gramophone record? Or a piece of PVC?

Why are you so surprised? What did you think your chicken nugget is made of anyway? Hah!

Well, Mcdonalds Japan had been relying on three plants in Thailand for Chicken McNuggets ever since the saga of Shanghai Husi Food Co. last year. Now, did the vinyl come from McKey or Cargill?

That is not determined for now, and well, Cargill is Cargill, and McKey... GFPT owns 49% of McKey Food Services, who also distribute to McDonalds Thailand. 

GFPT is a competitor of CP Foods. If not GFPT, then who? Well, CPF will be more than happy to step up to fill the orders. Just like how they are going to feed the Russians!