SIA & Ho Ching (cont’d)

Further to Thank you Ho Ching, here’s how SIA has performed compared to Cathay. And its declared a dividend of 10 cents a share.

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Thank you Ho Ching

SIA redeems outstanding zero coupon MCBs worth $3.5 bil

Edge magazine headline

reminded me that she retired from Temasek on 1 November last year.

It also reminded me that my mum and I made decent $ on SIA shares and MCBs.

My mum once had 900+ SIA shares. Why this odd number I don’t know and neither does she. It’s been there for decades.

Anyway I never got round to selling this when she transferred her shares to me for me to manage a few years ago. She’ll be 99 next year.

So when 2020 came and SIA did a “Temasek Special” (Massive and deeply discounted rights issue), I applied for excess shares and MCBs. Ended up with 3,000 shares and 3,000 MCBs.

(Applying was a massive headache because I had to use PayNow. But it was Covid time, so no-one to blame except self for being unfamiliar with this payment mode. First and last time I used it.)

And in 2021, we got another 6,000 MCBs.

I’ll get round to selling the SIA shares one day soon. And buy into SATs. There’s another pending Temasek Special that is upsetting minority shareholders.

Meanwhile an additional $3,000+ to pay for the groceries. There’ll be $100 early next from the PAP govt using our money.

SATS: Temasek gives away another free lunch?

Big opportunity to make serious money by buying into SATS if they have rights issue.

Buy “small” amount of shares cum and apply for excess (lots).

Those who did this for SIA and Semb Marine (last round) still sitting on good profits if they didn’t cash out already.

Temasek usually prices its rights “right” to make easy $, post rights for those buying into its rights issues.

But it got it wrong in earlier Semb Marine rights.

But whoever said share investing is riskless is an idiot.

Why SIA and other airlines, and tourist centric businesses need to donate US$50bn ASAP

Only US$50bn needed to reopen world by mid 2022

The covid-19 pandemic could be ended by mid-2022, if donor countries were willing to cough up a combined $50bn, according to the International Monetary Fund. The sum is the estimated cost of vaccinating 60% of the world’s population. It pales in comparison with the $16trn that governments have already spent supporting people and businesses during the pandemic.

Economist

Why oil prices will crash again/ Why SIA is a “sell”

If OPEC is not careful, oil prices will crash again. A full global revival in oil consumption won’t come until jet fuel demand also recovers.

Meanwhile, American wildcatters are shouting “Drill baby drill”.

Coming back to aviation oil usage

UOBKH downgrades SIA to ‘sell’ as it is ‘less optimistic’ of a traffic recovery by 3Q21

https://www.theedgesingapore.com/capital/brokers-calls/uobkh-downgrades-sia-sell-it-less-optimistic-traffic-recovery-3q21

The truth about SIA food

S’poreans are prepared to pay and pay (up to $4948 for a home delivery) to try SIA’s food.

I hope they enjoy the reheated food that is factory manufactured because that’s what all airline meals are.

They may be designed by a top chef, but they are produced in a factory (OK, OK massive kitchen), then put in cold storage and reheated before meal time.

Here’s more

Ready-to-eat meals that can be kept for 6-24 months part of S$25m investment by SATS to produce more, cut waste

BT headline. More at https://www.businesstimes.com.sg/companies-markets/ready-to-eat-meals-that-can-be-kept-for-6-24-months-part-of-s25m-investment-by

Xia suay: Must be SIA’s website not working again

(Update on 17 May at 6.00am: SIA’s rights issue application website still not working. WTF. Want shareholders to die of Covid-19 isit?)

What’s the point of setting up a website for shareholders to apply for the SIA rights issue (there’s a Covid-19 pandemic raging thru FT dorms many of whom flew here via its cattle class: It’s a Great Way to Fly), encouraging people to use it, and then making it non function-able?

I cannot even scroll the “consent” form or press “submit” to access the site: https://www.singaporeair.com/rights/intro

What a lot of BS. Juz like DBS: DBS: Some things never change, bad service is a given

HoHoHo: S’pore Auntie gets VD from Virgin

S’pore Auntie should know better than hook-up in a sleazy date with a Oz hot bod that goes by the name of Virgin.

Airline Virgin Australia yesterday confirmed it had entered voluntary administration. It’s Australia’s first big corporate casualty of the Covid-19 pandemic.

SIA has a 20% stake. Other shareholders are Richard Branson’s Virgin Group (10%), Etihad, and China’s HNA and Nanshan Group, each with around 20%.

The airline tried to get an A$1.4bn loan from the Oz govt but was told to bugger off because the shareholders had refused to put more cash into the airline, which is loss-making and has net debt of almost A$5bn (U$3.2bn). Another reason apparently was it wasn’t owned by Australians. The eaters of bats and sheep’s head could go stuff themselves.

The airline is now looking for new buyers and investors.

S’pore Auntie never learns. It had bad sex with Air NZ and Virgin Atlantic: What our MSM doesn’t tell us about Virgin Atlantic.

Which brings me to SIA’s rights issue: SIA: Ang moh and Jap brokers are going to look stupid.

One can only hope the war chest is not wasted away on ang moh hot bods Auntie wants to have sex with.

SIA: Ang moh and Jap brokers are going to look stupid

Look at the price targets for SIA. Basically JPMorgan and Nomura are extrapolating from the theoretical ex-price of $4.40. A dangerous extrapolation given that Temasek holds 55% and is not a seller.

Price targets(From the Edge) :
$6.27 HOLD (CGS-CIMB Research)
$5.54 DOWNGRADE HOLD (Daiwa Securities Research)
$4.00 DOWNGRADE UNDERWEIGHT (JPMorgan Research)
$5.80 HOLD (UOB Kay Hian Research)
$4.34 REDUCE (Nomura Research)
$6.60 DOWNGRADE HOLD (DBS Group Research)

I have an odd lot of 600 shares: don’t know where or how my mum got it. I’ll hold on them and subscribe at the price of $3 for each new share (3 new shares for 2 existing shares) even if the shares rebound to $6.60 (I doubt it’ll rebound to that price before the ex rights date. But it did close at 6.13 on Friday). Note there are also convertible bonds to subscribe for.

Looks like money for jam at this stage.

Will we see S’pore Girl working in hospitals?

Or in polyclinics?

In the UK

Thousands of easyJet and Virgin airline staff are being offered work in the new NHS Nightingale Hospital.

Those who sign up will support nurses and senior clinicians at the coronavirus field hospital in east London, the NHS said.

Virgin Atlantic said furloughed staff who help will be paid through the government retention scheme.

NHS England said many airline staff are first aid trained and already have security clearance.

The workers will be changing beds and performing other non-clinical tasks and helping doctors and nurses working on the wards, the NHS said.

https://www.bbc.com/news/uk-england-london-52085701

Rather die than not arrive on time

Vistara, which is a joint venture between Singapore Airlines and Tata, once had to manage a group of passengers staging a sit-down protest in front of an aeroplane when told their flight would not reach its intended destination because of fog.

FT

SIA enpowers oldies

The u/m NYT Dealbook story reminded me that SIA is also like that. One neighbourhood SIA pilot is 62 (my age). And I know a pri school class mate is still flying for SIA. Nice to know that it’s not only S’pore Aunties that are employed by SIA.

 

The Pilot in the Cockpit? In Japan, He Might Be a Retiree By JONATHAN SOBLE Many retired people in the country have returned to the work force as the population dwindles and jobs go unfilled, including Shigekazu Miyazaki, who is still flying at 65.

KPMG says SIA is not a global brand

This was published in the constructive, nation-building freesheet that is MediaCorp last week:

Can Singapore companies be globally competitive?

The United States has Apple. China has Alibaba. Japan has Toyota. Korea has Samsung.

Why doesn’t Singapore have a company or brand that is equally recognisable, globally?

This was written by

Larry Sim and See Wei Hwa are Tax Partner and Senior Tax Manager, respectively, at KPMG in Singapore. These are their own views.

What this piece shows is the ignorance or stupidity, or both, of the people working in KPMG.

In consumer brands, there’s  S’pore Int’l Auntie. Admittedly her bottom and breasts are sagging when compared to her A-Rab counterparts but still SIA is still a global brand* like Alibaba, Apple, Samsung or Toyota. In fact SIA has been around longer as a global brand than Alibaba, Apple or Samsung. Yet the men from KPMG doesn’t know this fact. Stupid.

And taz’s not all.

In the global offshore marine industry, we have Keppel and SembCorp. In commodities, there’s Wilmar and Olam (And there was Noble).

And we don’t have “a company or brand that is equally recognisable, globally?” Stupid KPMG.

Sad that these people working in KPMG doesn’t know S’pore. Or that KPMG employs such stupid people. They FTs where the “T” stands for “Trash” isit? Or are they S’porean products of our education system?

Or is KPMG another nest of anti-PAP cybernut pests, like TRE or TOC? There is nothing good in S’pore worth praising is the attitude of these nuts.

And is KPMG juz another pretentious, shirty company that thinks it is the peer of a company like PwC?

---

*I was talking to the a retired SIA gal yesterday who still looks glamorous; she’s the mother of a 17-yr gal.

Tiger shareholders related to scholar Eng & ministers?

Remember scholar Eng and that blind gal with a guide dog?

Some Tiger shareholders feel that they are entitled as these spoled brats isit? They think they like PAP ministers isit?

The Securities Investors Association Singapore (SIAS) said in the open letter dated Dec 18 that some Tigerair minority shareholders felt SIA’s offer was “not reasonable”.

The reason for this, Mr Gerald, president of SIAS, was that shareholders who bought Tigerair shares during its initial public offering in 2010 at S$1.50 a share and subscribed to all three rights issues since then would have paid an average of S$0.67 a share. The takeover price is 0,41

Maybank Kim Eng Securities, the independent financial adviser appointed by Tigerair’s independent directors, advised shareholders to accept SIA’s offer, saying the deal is “fair and reasonable”

But because they’hh lose money, these shareholders think that the offer is “unreasonable”.

WTF.

 

SIA: Cleared of EU fixing charge

Europe’s second-highest court has backed a challenge by 11 airlines against an €800m (£583m) European Commission freight cartel fine.

The General Court of the European Union said there were “internal inconsistencies” in the Commission’s 2010 decision.

Of the firms, Air France was fined the largest amount – €182.9m – while KLM was fined €127.2m.

The two carriers merged to form Air France-KLM in 2004.

Other carriers involved were Air Canada, Martinair, British Airways, Cargolux, Cathay Pacific Airways, Japan Airlines, LAN Chile, Qantas, SAS and Singapore Airlines.

http://www.bbc.com/news/business-35111824

SIA: Sweet spot in costs, safety and efficiency?

TRE and its anti-PAP cybernut posters are cheerfully running down SIA because it is ranked 29 in safety terms below even Chinese air;ines

Why always running down S’porean co and seeing Chinese cos no ak?

Given its safety record (when was last time anybody died in SIA crash?) It may have found the sweet spot between costs, safety and efficiency?

And btw, since when have TRE posters (Chris K excepted) been able to afford to fly. Going by their comments about public tpt fares, they can’t even afford to travel by bus.

Chris K:

April 7, 2015 at 8:01 am  (Quote)

Cynical Investor:
Why always running down S’poreanco and seeing Chinese cos no ak?

Given is safety record (when was last time anybody died in SIA crash?) It may have found the sweet spot between costs, safety and efficiency?

Really? If that is so, how come No.1 ranked Cathay Pacific is more profitable than SIA? Me thinks the disgraceful way SIA treats its frequent flyers is the reason it is falling behind. Have now gone with One World (Cathay and BA) – ended my 15 year Gold membership at SIA recently.

Rating: +11 (from 15 votes)

I’ve not compared the two in yrs because I don’t invest in airlines; so I can’t comment on Chris K’s retort. Save that he would be wrong if SIA’s margins are better.

And anway, I note he was on SIA’s frequent flyer programme until recently. A true blue s’porean. Waz he doing among the TRE ranters and losers?

 

Auntie’s still a “Great Way to Fly”

Despite aging body etc.

No not Auntie Sylvia (Quah Kim Song finds her a stunner) but S’pore Auntie: she’s still there in top 10 as is her rival Cathay. Keep on cursing anti-PAP paper warriors.

SIA boleh, MAS tak boleh

Malaysia Airlines’ 19,500 staff operate a fleet of 108 aircraft, while SIA operates 103 aircraft with 5,000 fewer employees. The result is that over the past nine years the Malaysian carrier has lost a net Rm3.56bn ($1.1bn), while Singapore Airlines has made S$8.86bn ($7.1bn) without a single year of losses.

Says a lot about how S’pore Inc and M’sia Inc do things.

 

MAS tragedy: SIA attacked by anti-PAP cyber warriors?

Really I can’t see why SIA was attacked for saying on Facebook and Twitter that its flights were not using Ukraine airspace.

Reuters reported: That triggered a flood of angry responses, with many lambasting SIA for not offering condolences to the victims’ families and for mounting what some perceived as a publicity stunt during a crisis involving its neighboring country’s flagship airline.

http://www.reuters.com/article/2014/07/19/us-ukraine-crisis-singapore-air-idUSKBN0FO0UF20140719

Anyway SIA did the pragmatic thing by apologising and rewording its messages. No pointing rowing with loonies, something PM Lee should learn. https://atans1.wordpress.com/2014/07/11/how-pm-roy-can-resolve-matters-satisfactorily-roysw-defence-work-in-progress/

 

SIA plane juz 17km away

The Daily Mail reports that, despite the conflict, the flight path was fairly crowded with a Heathrow-bound Virgin Atlantic jet and a Singapore Airlines plane both over Ukraine at the moment flight MH17 crashed.

The paper says the Singapore jet was just 17 miles away from the doomed flight.

One of the as-yet unknown questions, is why flight MH17 came to be flying over a conflict zone in which a number of aircraft had been shot down recently, the Daily Telegraph says.

MAS polot didn’t want to divert

The paper reports that a number of airlines, including British Airways, easyJet and Qantas had already changed flight routes to avoid the area, although Malaysia Airlines said there had been “no obvious reasons” to avoid the area.

Nonetheless, the paper says, flight path analysis suggested that other Malaysia planes had skirted the conflict zone, by flying south of the area.

The Telegraph says an expert from the Royal United Services Institute has learned the pilot of the downed flight decided not to change course after apparently telling air traffic controllers he “felt uncomfortable” over the diversion.

Extract from BBC

 

Why MAS really suay cont’d

According to Flight radar24, which monitors live flight paths, the airlines that most frequently flew over Donetsk in eastern Ukraine in the last week were: Aeroflot 86 (flights), Singapore Airlines 75, Ukraine International Airlines 62, Lufthansa 56, and Malaysian 48. It was not necessarily a risky approach. The chance of a rocket reaching above 32,000 feet was considered remote, says Sylvia Spruck Wrigley, author of Why Planes Crash.(Part of BBC report: see pix of flight routrs taken http://www.bbc.com/news/blogs-magazine-monitor-28364306 )

SIA flew 56% more flights thru Eastern Ukraine than MAS, yet it was a MAS jet that waz shot down .

SIA employs better bomohs?

 

Costs savings in airlines: every little bit counts

Singapore Airlines (SIA) has reported a 78% rise in net profit for its second quarter*.

This reminded of a story in the New York Times, some time back, that Delta Airlines by slicing an ounce off its on-board steaks saved US$250,000. It even calculated that removing a single strawberry from its First Class salads would save US$210,000.

Talking after looking after the pennies, and the dollars will look after themselves.

In investing, John Bogle, the founder of indexer Vanguard, keeps stressing the importance of buying funds that charge low fees. The expenses saved when compounded over time adds to performance. Besides most active fund mgrs underperform the market., so they mare a waste of money. Indexers charge very little in comparison with active managers.

Related posts:

https://atans1.wordpress.com/2010/01/01/the-perils-of-indexation-revised-and-updated/

https://atans1.wordpress.com/2010/02/16/even-the-rich-should-use-index-funds/

https://atans1.wordpress.com/2011/01/07/rebalancing-can-lock-in-profits-trim-losses/

 

——–

*Asia’s second biggest carrier was boosted by the sale of aircraft, spare engines as well as increased passenger traffic.

The firm posted a total net profit of $128.6m (£80.9m) for the quarter, up from $72.1m a year earlier.

But it warned it was facing tough competition and a strong Singapore dollar. (BBC report)

AirAsia is eating SIA’s lunch

(And that of every other Asian legacy airline like Cathay, Qantas, Thai and MAS)

When SIA sold to Delta its 49% stake in Virgin Atlantic for US$360, which it has owned since 1999, it said it was selling because of increased competition in its local market, where it wants to keep its focus.

In the same week, last week, AirAsia announced a US$9bn order for 100 A320 planes. AirAsias’s order is for 64 of the A320neo (new engine option) and 36 of the A320ceo (current engine option) aircraft.

M’sia Boleh!

Background info on SIA sale, so I don’t get dumb comments

http://in.reuters.com/article/2012/12/11/singaporeairlines-virgin-sale-idINDEE8BA09V20121211

http://www.bbc.co.uk/news/business-20576420

What our MSM doesn’t tell us about Virgin Atlantic

It’s in crisis. Deep crisis.

Auntie’s still a great way to fly but its record in investing in other airlines is horrible: think NZ Air.

And now the Arab airlines are stealing its premium customers via slightly better service, and just as good connections via the Gulf hubs. And lower costs: our S’pore Aunties are no longer that cheap. But bit susa to pass of PRC, Pinoy FTs as S’pore Gals. Only M’sians can get away with pretending to be S’poreans.

Good backgrounder (added at 8.50am on day of posting)

S’pore Gal becomes Auntie SIN

VietJetAir, a budget airline. had beauty contestants in bikini-tops dance aboard a plane on its first flight from Ho Chi Minh City to Nha Trang, Tuoi (Waz that?). The airline said it wanted to capture a “holiday atmosphere” for its new flight route to one of the country’s most popular holiday destinations. “Once passengers stepped on board they were met by flight attendants dressed in beach holiday attire [who] performed a sexy Hawaii dance,” it said. BBC article. Authorities were not amused: it was fined for not getting prior approval. Sounds so S’porean, this fine.

Back to the gals in bikini tops: they make S’pore Gal look like auntie:  like SIA falling behind its rivals from the Middle East in the premium business, JetAir and AirAsia in the budget segment.

So rather than juz redesign its cabins and seats, as SIA announced last week, time to replace Auntie and rethink strategy?

Its got the brain power. Senior mgt are SIA veterans. There was an attempt a few yrs ago to put a scholar, ex-general as a senior VP with the aim of making him CEO. He didn’t get the job and disappeared without a trace. Thank God, even though he RI boy, as I got one lot of SIA.

SIA: What our MSM will never tell you

The Air Transport Rating Agency (ATRA) has published its second annual list of the world’s ten safest airlines. The Geneva-based operation based its list on an assessment of 15 factors, using 2010 data.

 SIA has not made it into the top 10 again. This year, its greatest rival, Qantas, made it into the top 10.

ATRA’s ten safest airlines (in alphabetical order only): Air Canada, Air France-KLM, AMR Corporation, Delta Airlines, International Airlines Group, Lufthansa, Qantas, Southwest Airlines, United-Continental, US Airways.

But as the Economist’s travel blog points out:

Only one of the ten airlines in ATRA’s list (Qantas) makes it into the top ten of the most recent Skytrax world airline awards, which are derived from over 18m passenger responses and have a much more Middle Eastern/Asian tone. This either suggests that passengers do not consider safety when naming their favourite carriers, or they disagree with ATRA’s particular emphasis.

Anyway, I’m publicising this rating so that the likes of KennethJ, Chris balding, Dr Chee and his sis, Richard Wan and other TRE staffers and avid readers, TOC editorial staffers and Core Team, xmen and others of their kind, have a good excuse not to patronise SIA. They can fly Qantas instead. Actually, Dr Chee already has a good excuse already: he can’t leave S’pore without permission, and I don’t think permission has ever been given.

SIA: All the fault of previous CEO?

In a posting on SIA’s results, someone in Oz who seems to know the airline biz laid the blame on the previous CEO. I reproduce it because although I know bugger-all abt the airline biz, I know poster was right abt the property sale (can’t remember the dollar values though):

Chew Choon Seng, the previous SIA CEO from 2003 to 2010,sold the SIA building in Singapore for $250 mil, and the new owner sold it away for $550 mil barely 6 months later. He gave ground handling subsidiary SATS to shareholders as an in-specie dividend, thus making millions in the process through this special dividend and losing control of ground handling in his hub.

He barely ordered any aircraft and kept shrinking the airline, in the name of protecting “yields” that he wanted but could never achieve. He introduced an enormous and absolutely space-inefficient business class, and has the lowest density 77W of any airline, as well as the lowest density A380 of any airline (for the all upper-deck business class A380 configuration)

He cut route after route, and refused to acknowledge Emirates as a competitor (which SIA has only done like, yesterday presumably)

Initially, SIA thought they could charge a price premium for those enormous seats, but today they are among the cheapest network carriers out of Australia and Europe in business class. Low density and low fares = disaster for yields

The only thing protecting SIA today is their strong balance sheet, and the fact that they’re sitting on billions of dollars in cash (which they don’t seem to be doing anything with) and no debt – but that was a result of the hard work of the management before Chew Choon Seng.

And the sad thing is, he inherited an airline in 2003 which was unrivalled in terms of profitability, network and inflight product. (Who had heard of Emirates in 2003). The Singapore economy has been booming for the last decade, and tourist arrivals have surged beyond belief. Labour relations in the airline are healthy, their cost base WAS very competitive (without the low density aircraft), and they operate a single hub operation which, compared to QF and other legacy carriers, should theoretically make their operations far more efficient.

They have also had a surging local currency, which should have helped their fuel prices in SGD. (Do note that from 2002 till today, AUD:SGD has been stuck in a 1.20-1.30 range, not withstanding a few months after the Lehman Brothers collapse, so the SGD basically has risen in tandem with the AUD against the USD for the last decade)

And yet SIA has shrunk through the last 10 years. It’s not like they can blame any catastrophe other than themselves for the dismal financial performance last year.

Solution to SIA’s problem of higher fuel costs

US airline buys an oil refinery. Taz thinking out of the box.

Pros and cons

http://www.economist.com/blogs/gulliver/2012/05/delta-air-lines

It’s not as though SIA doesn’t have the cash.

SIA & Qantas: Different Strategies

Qantas has unveiled its strategy to meet the competition from low-cost carriers.

What is interesting is that it has taken a different approach from SIA, another legacy airline. SIA is planning to add a low-cost carrier to complement its existing premium and other legacy services. This is a conservative approach but one that risks cannibalising customers from its non-premium legacy services

But Qantas is taking a more aggressive approach. It is turning Qantas into a low-cost carrier with a premium service subsidary that will be based in Asia.

OCBC: Reward for avoiding balls-up?

OCBC Bank granted chairman Cheong Choong Kong more than 230,000 share options – the most he has received since being appointed chairman in July 2003.

Could this I wonder be for avoiding the investment mess-ups that happened at SIA when he was CEO? Make no mistake, he was a vv gd CEO: operationally. SIA went from “strength to strength” as the cliché goes.

But during his tenure, there were two big investment mess-ups — buying into Virgin Atlantic at a very gd price for one Richard Branson (at a time when he needed money) and Air NZ. Air NZ went bankrupt (mainly because of the crisis that hit the airline industry post 9/11) and it could have been worse. SIA wanted to increase its stake sometime before before 9/11 but was blocked by the NZ government because Air NZ was a “strategic asset”. While the Air NZ investment was only a peanuty S$403m, the 49% stake in Virgin cost £600m (US$960m).

But maybe OCBC shld have waited. The purchase of ING’s Asian private banking business could come to haunt OCBC. A few days before this deal was annced, ING sold its European biz, at a fraction of the multiple that it got for Asia. Only time will tell if the growth in Asian wealth and OCBC’s ability to grow the private banking biz will justify the hefty premium that OCBC paid.

It paid US$1.46bn which represents 5.8% of the unit’s assets under management, after adjusting for surplus capital of US$550m. This compares with the 2.3% measure paid by Julius Baer for ING’s Swiss assets which is in line with another European purchase by an American private equity group of a smallish private banking outfit — RHJI’s purchase of Kleinworth Benson from Commerzbank.

But to be fair to OCBC and its chairman, HSBC is rumoured to have also bid US$1.46bn but was unwilling to give an assurance that there would not be staff layoffs. OCBC was willing.

Update 22 April 2010

The media have reported that OCBC’s inhouse prvate banking team is unhappy, with resignations etc being made.

SIA Engineering financially engineered?

“A possible major catalyst for SIAE [SIA Engg] is if parent company SIA decides to divest its substantial ownership in the company as it did Singapore Terminal Airport Services (SATS) earlier this year. SIA currently owns an overwhelming 80.6% stake in SIAE,” says Kin Eng Securities.

My tots in mid June 2009:

SIA does in specie share dividend of SIA Engg saying:

“Distributing shares through an in specie dividend will unlock shareholder value by giving SIA shareholders direct ownership of SIA Engg at no cost to them …The proposed distribution will allow SIA to concentrate on its airline business, something advised by MM Lee in 2004 … SIA Engg will be able to independently pursue opportunities to aircraft maintenance, repair and overhaul businesses. The Proposal will improve trading liquidity of SIA Engg shares, potentially enhancing value.”

Then after some time has passed

SIA Engg announces Acquisition of 100% of ST Aerospace from ST Engg

“Acquisition consistent with SIA Engg previously announced long-term strategic plan”

ST Aerospace is the “Largest aircraft MRO company by commercial airframe man-hours” and has “Strategic partnership with RSAF”

Rights issue with Temasek taking up its entitlement and prepared to subscribe for shares that other shareholders don’t want.

Remember you first heard it here. But based on the companies’ past performance, SIA Engg should only buy ST Aerospace, if the price paid reflected Aeo’s lower margins. SIA Engg’s margins are consistently better than those of Aero. EG In financial yr ending Dec 2008, Aero’s turnover was S$1.9b with PBIT of S$272m, while SIA Engg turnover was S$1.1b but PBIT of S$301m.

But what price another national champion? And financial engineering by Temasek?”

SATS — More Dividends or a Rights Issue?

Who will be right?

“Now that SIA has divested SATS, the company’s true value is more likely to be appreciated by the market. We estimate a surplus of $0.20/share that can be paid as dividends to shareholders if properties held at cost are sold and leased back,” writes Kim Eng Securities.

In mid-June 2009, I analysed SATs as follows:

Why new SAT shareholders should be grumpy

On May 14, SIA announced that it was going to distribute to its shareholders its 81% stake in SATS by way of a dividend in specie. Since then share price is up 5%.

This comes after SATS has become cash poor.

In January 2009, SATS launched a takeover bid for its Temask stable-mate SFI. According to the takeover documents, the pro-forma balance sheet as at September 2008 would have shown that the net cash position of the SATS (including SFI) group deteriorated to minus S$21 from S$528. In particular, cash in fixed deposits would have fallen from S$573 million to S$64 million.

But SATS needs cash because “SATS is committed to growing its 2 core businesses of airport and food services”. It could borrow big-time, pro forma net gearing is 0.04% from (0.35)%. But in Singapore, where debt is a dirty word in GLCs (NOL comes to mind), a rights issue is reasonably probable.

Temasek as the new controlling shareholder of SATS has $356 million from its sale of SFI shares to fund any rights issue. But do other new SATS shareholders have the cash?

Finally, looks like MM Lee gets his way. In 2004, he said SIA should divest itself of SATS and SIAEC. SIA’s management demurred. Will SAEC be divested despite SIA mgt saying last night that the SAEC holding is strategic? Stay tuned.

——-

Or will be both wrong, and CIMB prove correct? It doesn’t have any expectations of corporate activities, being underwhelmed by SATS.

Preview of what to expect

For a preview of what I will be writing about below are some pieces I did in mid June for two weeks for a project that did not take off. They are in chronological order.

Winning whatever the price of oil

Last week, it was announced that PetroChina (subject to Chinese regulatory approvals) would buy from Keppel its entire stake of 46% in SPC for S$6.25 a share.

Immediately one thought of 2003, when Keppel sold a 28% in SPC to Hong Kong-based (but Indonesian owned) Kapital Asia for S$1.50 a share, and said it was considering divesting its entire stake.

In 2004 the price of oil took off and Keppel decided to keep the refiner to expand its oil and gas production in SE Asia. Could Keppel be repeating its mistake of selling SPC shares, just before the oil market takes off? It could.

But Keppel shareholders (especially Temsek) should not complain. In the announcement of the deal, it was said “PetroChina and Keppel also plan to explore opportunities in the offshore oil industry and in other areas of mutual benefit as such opportunities become available”.

Things like this are usually to be ignored as fluff. Maybe not in this case.

PetroChina is one of China Inc’s two flagship oil companies, tasked with developing oil and gas resources globally to meet China’s energy needs. The Chinese have been active recently making oil-for-loan deals with national oil companies of Brazil, Russia and Kazakhstan, all very good for the likes of PetroChina.

Keppel’s off-shore rig business, is only one of two world-class companies in Singapore Inc’s local portfolio. Should the value of SPC explode upwards, then Keppel has, at the very least, the goodwill of PetroChina when it bids to build rigs for projects where PetroChina has an interest.

And should the price of oil collapse, Keppel and its shareholders will have S$1.47 billion in the bank to fund the rig business.

And if anyone thinks that it is a no-brainer to buy SPC because PetroChina said it could serve as a platform for future transactions, suggesting it might try to use SPC to make takeovers that it would be blocked from making directly — think again.

There would still be concerns of takeovers by Chinese state-run firms, done directly or indirectly, through a Singaporean subsidiary.

Managers turn swashbucklers? Can pigs fly?

Short of plans to buy assets, NOL does not need the S$1.4b. NOL, which has S$400m in cash reserves, would have almost less than 2% net debt. (45% of equity at the end of 1Q) against container sector average between 60 and 65.

NOL intends to use about S$700m to repay debt, the remainder for investments and working capital.

But the prognosis for the entire shipping industry for 2009 and early 2010 remain gloomy, so likewise does NOL operational gearing.

Buying into NOL (its shares have risen from 0.85 in early March to 1.68 yesterday) is to believe that NOL’s management can use its great financial gearing into something tangible. EG buying ship at bargain prices from highly leveraged shippers in distress, and shipyards.

And increasingly its gearing again in the process.

Imagine going into the next cycle with cheaply acquired ships and a gearing of 45%. Wow Bam. This is an unproven thesis. NOL is one of the most conservative container lines and has taken a higher proportion of its ships out of service than other lines to tackle over-capacity.

Can cautious managers turn into swashbuckling asset buyers? There are the Greeks and Chinese buccaneers out there too on the prowl for ships.

Writer has some NOL shares in his CPF portfolio.

Looking a gift horse in the mouth or  Why new SAT shareholders should be grumpy

On May 14, SIA announced that it was going to distribute to its shareholders its 81% stake in SATS by way of a dividend in specie. Since then share price is up 5%. This comes after SATS has become cash poor.

In January 2009, SATS launched a takeover bid for its Temask stable-mate SFI. According to the takeover documents, the pro-forma balance sheet as at September 2008 would have shown that the net cash position of the SATS (including SFI) group deteriorated to minus S$21 from S$528. In particular, cash in fixed deposits would have fallen from S$573 million to S$64 million.

But SATS needs cash because “SATS is committed to growing its 2 core businesses of airport and food services”.

It could borrow big-time, pro forma net gearing is 0.04% from (0.35)%. But in Singapore, where debt is a dirty word in GLCs (NOL comes to mind), a rights issue is reasonably probable.

Temasek as the new controlling shareholder of SATS has $356 million from its sale of SFI shares to fund any rights issue. But do other new SATS shareholders have the cash?

Finally, looks like MM Lee gets his way. In 2004, he said SIA should divest itself of SATS and SIAEC. SIA’s management demurred.

Will SAEC be divested despite SIA mgt saying last night that the SAEC holding is strategic? Stay tuned.

Backward into the Future

November 8, 2009 [OK I did get this wrong, but it could still happen]

SIA announces that it is proposing a dividend in specie to its shareholders of the Company’s entire shareholding in SIA Engg.

“Distributing shares through an in specie dividend will unlock shareholder value by giving SIA shareholders direct ownership of SIA Engg at no cost to them.”

“The proposed distribution will allow SIA to concentrate on its airline business,”something advised by MM Lee in 2004.

“SIA Engg will be able to independently pursue opportunities to aircraft maintenance, repair and overhaul businesses. The Proposal will improve trading liquidity of SIA Engg  shares, potentially enhancing value.”

May 14, 2010

SIA Engg announces Acquisition of 100% of ST Aerospace from ST Engg

“Acquisition consistent with SIA Engg previously announced long-term strategic plan”

ST Aerospace is the “Largest aircraft MRO company by commercial airframe man-hours” and has “Strategic partnership with RSAF”

Rights issue with Temasek taking up its entitlement and prepared to subscribe for shares that other shareholders don’t want.

Remember you first heard it here. But based on the companies’ past performance, SIA Engg should only buy ST Aerospace, if the price paid reflected Aeo’s lower margins. SIA Engg’s margins are consistently better than those of Aero. EG In financial yr ending Dec 2008, Aero’s turnover was S$1.9b with PBIT of S$272m, while SIA Engg turnover was S$1.1b but PBIT of S$301m.

But what price another national champion? And financial engineering by Temasek?

Temasek’s recently revised investment priorities R SGX Listcos

Yes this was Temasek week, and we will end the week by looking to see which non-Temasek SGX-listcos fit into its recently revised investment priorities:

• non-West (It got its timing wrong with Merrills and Barclays coming-in and exiting. And misanalysing ABC Learning),
• poised to capitalise on the growth of middle class consumer credit in Asia, and
• with plausible competitive advantages, following its reinvestment in Olam.

What about the following?

• Bayan – manager and developer resorts, hotels and spas in the Asia Pacific.
• Creative – remember its MP3 player predated iPOD and Apple paid it damages for breaching its patents. All it needs is a bit more Zen meditation and it could have a mega hit on its hands.
• Eu Yan San – has reached the limits of what it can do with its resources in Chinese medicine. Needs outside capital, but family squabbles prevail. But Temasek is different.
• Raffles Education – big in Chinese education (and indirectly in property). In a bit of bother now but controlling shareholder and manager has a track record.

Bayan, Creative and RE are run by home-grown and-bred entrepreneurs. What better way of encouraging the growth of entrepreneurs with global ambitions, then by supporting these three companies?  We will keep you posted as we trawl through SGX listcos.

This continuing series will help us fill the gaps on those days when we wake up late or have nothing more interesting to say.

Whither the markets?

Fund managers, analysts, traders and media pundits are struggling to contain their confusion at what global equity markets have been doing since March.

The markets’ upsurge defies all rational explanations: just ask Temasek’s scholars and foreign-talent MBAs.

The conventional view is that this is a bear market rally. There will be a double-dip recession – a so called “W” recovery, where there is a steep fall, followed by a steep recovery and then another fall before another recovery finally appears which becomes more sustained.

Pundits pont out that, while not widely reported in the regular news, the bond markets had a mini crash in May. There’s talk of the ending of the multi-decade bull market in bonds, what with all the debt that governments have to raise.

My views on whether we are in bear market rally are just as irrelevant as anybody’s else.

But I heard something interesting on the FT (my second favourite newspaper) website a few weeks ago.

The strategist, from CLSA, belived that we are in the midst of a bear market rally. Nothing new here. But unlike other pundits, he said this rally could run for another two years before collapsing. He cited what happened after the dotcom bubble bust in 2000/ 2001.

He said, with hindsight, it was clear that the recovery from 2003 to 2007 was a bear market rally. Bottom line: A bull run or bear market rally can only be predicted in hindsight. Seating tight and doing nothing is not an option for a fund manager unless he is Warren Buffett.

Another reason to remain invested in Singapore mkt?

Could the plans to celebrate big-time the 50th anniversary of self-rule be a signal that the PM wants to calls a GE in the first half of next yr?

Remember that 50 years of self-independence coincides with 50 years of PAP rule, something that the celebrations are sure to link.

Have a good time tonite. And the next insight will be on tues morning.

Tempting the shorts

“China’s property market has been bouncing back over the last several weeks,” reports a FT publication. “Statistics from the China Real Estate Index System showed that residential property sales in 30 large cities increased by 11.42% April from March and transaction prices for new residential developments were up 3% week on week to the highest level this year between May 11 to 17.”

So it was not surprising that the CEO of CapitaLand over the weekend implicitly reminded investors that CapitaLand is NOT a Singapore property play but a China (property) play, “In 2008, our China operations accounted for about 26% of total group assets and contributed approximately 45% of the group’s earnings”.

The target is for China to make up 40 or 45% of assets in the next few years and for more than 45% of earnings. (Incidentally, if China assets are at 45%, then China earnings should be at 90%)

Is he reminding himself how big a bet CapitaLand is putting in China?

CapitaLand has just secured a S$5b three-year credit line with Bank of China and Industrial and Commercial Bank of China. What this means is that CapitaLand is gearing up just after completing a rights issue a few months back. It had reduced its net debt from S$5.6b to S$4.6b, a 18% improvement. Its net debt to equity had fallen to 0.32 from 0.47.

Now, making an assumption on drawdown by end FY2009, it will have net debt of S$9.6b and net debt to equity of 0.67. All very good if the Chinese property continues its bull run

But if it implodes (note that China super bull, Jim Rogers, is avoiding recommending property to investors: in 2008 he was negative about Chinese property) and CapitaLand has not sold assets before the downturn: another rights issue?

Hedge funds who are negative on China property could do worse than start to build up short positions in CapitaLand.

The perils of buying NTA

The share price of United Engineers is falling after its high of S$2.37 on 29 May. This illustrates that buying a counter at a deep discount to its NTA can be problematic, if there is no catalyst to unlock value. To recap. As part of an asset rationalising swap, Straits Trading and its controlling privately-owned shareholder swapped assets.

12% of UE was sold to Tecity at around S$1.52 a share, and 7% of WBL Corp was sold to ST as part of the asset swap. ST ended up with 19% of WBL. BTW WBL has another 10% of UE.

There was speculation that Tecity had immediate designs on UE. UE’s shares are at a deep discount to its published NTA of S$3.43. They remembered Tecity’s bid for ST which ended with Tecity paying S$6.70 for assets (revalued) worth S$6.52 a share. What is forgotten is that Tecity busy coping with the consequences of having spent S$1.1bn to own 82% of ST; is not likely to want to reward other UE shareholders at Tecity’s expense.

Assuming it bids at published NTA, it would have to spend S$679m. And if, the other major shareholder, GE Life starts a bidding war, the cost could escalate, like in ST. In early 2008, there were estimates that UE’s NTA could be S$6. And if it did bid at NTA or more, any time soon, ST’s minority shareholders would rightly cry foul.

TeCity’s founder, the deceased Tan Chin Tuan, would spin in his grave hearing his heirs being accused of being unfair to minorities.

Incidentally the cost of selling UE’s assets are likely to be very high.

Maybe future UE annual reports should give an estimate of the costs of selling these assets to unlock the published NTA. And maybe advisers to the independent directors of a target company; and the acquirer should subtract the costs of liquidating the assets when toying with NTA values in their reports.

If this had been done in ST, Tecity could have got away with a lower bid.

What price growth?

Bharti’s proposed acquisition of a 49% stake in South African MTN would give SingTel (at 30% Bhart’s biggest shareholder) exposure to markets in Africa and the Middle East, where there are a lot more mobile phones than people. Australia and Singapore (its biggest markets) are the opposite.

But the complex deal involving cash and a cross-shareholding by MTN into Bharti would mean that SingTel’s share of Bharti would drop to 19%. SingTel has indicated that it wants to rebuild its stake back up to 30%, if the deal goes through. At current prices, this means coming up with about US$5.3bn or S$7.7bn.

It has net debt of S$6.5bn and net gearing of 24%. But raising net debt to S$14.2bn and net gearing to 52% is not an option in a GLC, though it could make sense in any other telco that has stable underlying cashflow. Qwest (albeit it is now trying to reduce debt) has a ratio of 110%. (more debt than equity).

So if the Bharti/ MTN deal goes through, a SingTel rights issue will be necessary.

As to how dilutive this will be — S$7.7bn works out to only Singapore 48 cents a share, or 16% of its market capitalisation based on yesterday’s closing price of S$2.95.

Not too dilutive for exposure to fast-growing markets where there are more people than phones.

Long short pair

DBS Research’s economist issued a report suggesting Asia is on its way to an economic recovery because the region’s production is rebounding in a V-shaped fashion. “Asia is perched on a recovery path at the moment … we do not expect a W-shaped path in the near term.”

DBS Vickers Securities raised its 12-month target price for the stock of Singapore Exchange (SGX) to S$9.10 – the highest now among the target prices of 20 analysts polled by Bloomberg.

But does how does SGX look in the medium term vis-a-vis its rival, HKSE? Remember HK would benefit from a V-shaped recovery too.

Traditionally, an important measure of the success an exchange vis-a-vis its peers is the new IPOs it attracts According to Dealogic, some US$1.6bn has been raised this year through eight listings in Hong Kong. And the outlook is improving By contrast, Singapore raised US$12.5m from 3 IPOs all second board (sorry “Catalyst”) IPOs: with gloom pervasive, “2009 may be the worst year in memory for the IPO market”.

Funnily this just when FT reports that “Asia is expecting a strong pick-up in market listings in the second half of this year thanks to a steady flow of flotations in Hong Kong and amid growing expectations that Beijing could soon allow domestic listings for the first time in almost a year.”. It quoted Dealogic’s Ken Poon, “Given the strong liquidity flows into the region, I would expect 2009 IPO volumes will exceed 2008 … As Asian IPO volumes in 2008 was US$23bn while in the first half of 2009, it’s less than US$2bn … That would mean a really surprising second half. Sentiment is strong and liquidity is there to support new issues.”

And Hong Kong can look forward in 2010 to the AIA listing, the $5bn-plus IPO of AIG’s Asian life insurance unit This IPO is set to be the world’s largest IPO since 2007, when incidentally thanks to the Chinese, more money was raised in HK than in New York. So shouldn’t hedgies be thinking of shorting SGX, and buying HKSE? Even though SGX’s forecasted PE is below 20x, while that of HKSE is closer to 30x.

SIA’s Investment Prowess

If SIA were not such a great airline operationally and financially, I should be worried about its: “still keeping an eye out for possible acquisitions in China and India, despite the current economic downturn”.

The last time it went on a buying spree between 1999 – 2001, it showed that investing in airlines was not a core competency.

In April 2000, SIA purchased a 25% stake in Air New Zealand for 426 million New Zealand dollars (352 million Singapore dollars), or NZ$3 a share. Yes it was the usual “strategic” investment. SIA also participated in a subsequent rights issue, paying an additional S$51 million, to avoid diluting its 25% stake. The original purchase plus rights amounted to S$403 million.

SIA in 2001 tried to invest more, failing only because the NZ government was dilatory in approving an increase in its stake in Air NZ. Phew!

When 100% owned subsidiary Ansett failed in late 2001, pulling AirNZ down with it, SIA’s unapproved offer of NZ$1.31 a share was still on the table.

And in late 1999, a cash-strapped Richard Branson sold a 49% stake in his airline, Virgin Atlantic, to SIA for £600m (US$960m), a very good price for Mr Branson. SIA still has the stake and the much talked about synergies have been quietly forgotten.

There were also rumours of rows between Mr Branson and SIA on Branson’s plans to muscle-in on SIA’s lucrative UK to Oz route. So has the idea of selling the stake, what with valuations of airlines falling.

But let’s be fair. The then CEO of SIA has moved on to become chairman of OCBC, not bringing with him his deal-making enthusiasm: for that OCBC shareholders should be happy.

And recently SIA kept its nerve and refused to up its offer for a stake in China Eastern Airlines, which is now in financil difficulties. So maybe SIA is a more disciplined investor.

But being disciplined has its perils. Ask PSA which refused to outbid the Arabs for a stake in a choice HK terminal, only to have play catch-up on a second-rate terminal.

Things might not be as they seem

Consoling yrself that higher petrol prices are the price to pay for a V-shape recovery? The Western and Chinese economies are on their way to recovery, and rising oil and commodity prices are foreshadowing this recovery.. Think again because this NYT article http://www.nytimes.com/2009/06/11/business/economy/11commodity.html?ref=business reports that growing evidence suggests that a sizable portion of this buying has been to build stockpiles in China, and may not be sustainable.

Core competency of new Temasek CEO

Could the new CEO of Temasek finally sort out the strangeness of Temasek having

• two world class competing offshore rig builders in two separate listed listcos; two property listcos — one big, one tiny
• two MRO aerospace cos – one listed and the other part of a listed conglomerate?

Surely the national interest could be served by merging these and creating national champs. Yes, these have discussed inside before, but nothing happened. Gossip says that the bosse at the helms of TLCs are protective of their turfs: bit like Chinese lawlords throughout history. It always took a great leader to unify China over and over again.

But this is unlikely to be his priority. Neither is going into natural resources.

When he was hired to be CFO of Melbourne-based miner BHP in 1999, the “Big Australian” had lost its way.  In the 1990s, it did a series of ill-conceived acquisitions and failed projects, amid historically low commodity prices.

The former investment banker was one half of an American duo. The other was CEO Paul Anderson, who came from Duke Energy.

In their first two years, BHP got rid of 2,000 jobs and A$6.9bn worth of assets. They then merged BHP with Billiton, createding the world’s biggest miner.

Goodyear then became CEO and a key legacies, analysts say, is the financial discipline he brought to BHP. He ensured it grew fast enough to capitalise on the commodities boom while avoiding the ill-conceived spending of the past; and all the while,  returning cash to shareholders.

Shortly after he took charge as CEO,  it was announced that BHP would increase its capital management programme by more than four times to US$13bn, beginning with a US$2.5bn off-market return in Australia.

With the Singapore government tapping the reserves, someone with a track record of returning  cash to shareholders while growing the portfolio is needed.

There is no Singaporean with these skills.