Changi Airport Group: Winner’s curse?
The Aeroportos do Futuro group led by Odebrecht SA, and including Singapore airport operator Changi Airport Group, offered 19 billion reais (US$8.3 billion) and won the right to run Galeao airport in Rio de Janeiro, which will host tourists for the soccer World Cup next year and the 2016 Olympic Games, for 25 years. The consortium offered nearly four times the minimum bid for the right to operate Rio’s Galeão airport for the next 25 years.
We will only know the consortium overpaid if we know the next highest bid. Will let you know if this info is made public in Brazil )))
Last chance to buy Olam?
More bull points to add to this:
– When Olam released its quarterly results in early November, it showed it had generated positive free cash flow – the first time in four years for a seasonally weak quarter.
Its executive director of finance and business development A Shekhar told analysts and reporters: “We’re very pleased that we’re striking the right notes on both objectives of profit growth as well as free cash-flow generation.”
– Ang mohs are still sceptical about the parts of the stock’s biz model.
– But they bulls on Afica and Olam got an edge there. Africa is now seen a destination mkt, not juz an exporter of commodities i.e. origination mkt:
The commodities houses are attracted to the African destination business for three reasons. First, demand is rising fast, in many cases at double-digit annual rates. Second, many African governments subsidise basic commodities such as petrol and wheat, in effect guaranteeing a return to the traders. Third, most African countries lack the infrastructure needed to import raw materials, from silos for storing wheat and rice to terminals for unloading petrol. The commodities houses say that, as they build this infrastructure, they will be able to secure a market and benefit from years of rising demand. (FT report on Africa dated 10 November 2013)
Even Chris Balding flies SIA
Would the Temasek model help improve the efficiency of China’s state-owned enterprises? Only one (Singapore Airlines) or possibly two (DBS bank) of Temasek’s GLCs have established themselves as international brands, according to critics such as Chris Balding of Peking University*. SingTel has made successful foreign acquisitions, but other GLCs have fared less well. STATS ChipPAC, a semiconductor firm, lost money in the second quarter of this year, as a result of the costs of closing a factory in Malaysia.
The few academic studies of Singapore’s GLCs are more encouraging, however. A 2004 article by Carlos Ramirez of George Mason University and Ling Hui Tan of the IMF showed that the country’s GLCs enjoyed a higher market value, relative to the book value of their assets, than comparable private firms. They also generated a higher return on assets, on average.
In judging the performance of Temasek’s GLCs, the counterfactual is important. They may not be as obviously successful as private titans from the region such as Samsung or LG. But they are not nearly as bad as most SOEs, including China’s. The enthusiasm for reform of SOEs in China reflects their deteriorating returns and accumulating debt. According to M.K. Tang of Goldman Sachs, their return on assets was 6.5 percentage points below that of other Chinese firms in 2012 and their shares trade at a growing discount. Even Mr Balding, meanwhile, is happy to fly Singapore Airlines.
*Cock Balding forgets Keppel and SembCorp in rigbuilding. More on these two cos later this week.