Monday, December 22, 2008

Noble founder Richard Elman turns scrap into gold

Tom Miles and Nao Nakanishi, Reuters
HONG KONG -- In an office full of modern Chinese paintings overlooking Hong Kong's Victoria Harbor, Richard Elman, founder and head of Asia's largest commodities supplier Noble Group, says he has been lucky.
Elman, who began his career in a scrap yard in England at the age of 15, is among the few non-Chinese listed by Forbes magazine as the wealthiest in town.
"I've just been lucky...being in the right place at the right time," Elman said, adding he has always believed in fate.
Noble, which he set up 21 years ago with his savings of US$100,000, is capitalised at around US$4.8 billion.
It supplies raw materials from coal, iron ore to coffee, chartering more than 100 ships at any given time. Its assets stretch from iron ore reserves in Brazil and ports in Argentina, to coal mines in Indonesia and soy crushers in China.
Fuelled by surging demand from Asian countries such as China and India, Noble's net profit spiralled to US$258 million by 2007, rising more than 10-fold since 2000.
"I never had any great ambition. I did it for fun, because I enjoyed it, and to make a living. That's what I still do," he told Reuters on Friday, sipping his tea, relaxed in an open white shirt with beige Chinese bead bracelets dangling from his arm.
Elman, 67, said nobody knew much about commodities when Noble was established. The company moved its stock listing in 1997 to Singapore from Hong Kong, where they felt they had not been understood and appreciated.
"We started in the years when nobody even talked about commodities," he said. "We built the company during years of disinvestment, very tough years."
Noble has expanded through economic downturns, taking over a series of companies in financial difficulties such as Andre & Cie SA from Switzerland, once one of the world's top five grains traders with a history of more than a hundred years, earlier this decade.
Noble prides itself on building pipelines from production to consumption, controlling and profiting from every link in the supply chain of raw materials, including ships and warehouses.
"At the beginning we could sit with two telephones and make a living. But over the years that disappeared," he said. "We don't have to actually own the assets but to secure more long-term marketing rights we bought some assets."
Elman said he hoped Noble would be larger and more professional in five years. It already employs more than 10,000 people and has over 100 offices in 40 countries."The company has grown about 20 percent every year in physical volume," he said. "For us to increase physical capacity gives us the ability to work with very tight margins."
Combining its business and geographical presence, the company is expanding rapidly into new businesses, such as biofuels and carbon credits. It had a market share of 28 percent in certified emission rights to the carbon credit market last year.
Despite Noble's growing ethanol business, Elman said he was not fully convinced about biofuels, which many countries have promoted with generous subsidies.
"I am selectively convinced," he said. "Ethanol works in Brazil. There's no question about it. (But) if you look closely at biofuels around the world, it often has its challenges."
With global food prices soaring, prompting riots in some countries, the biofuels industry has come under growing criticism as it eats up corn, sugar cane, rapeseed, soy and palm oil.
One area of potential expansion is uranium, which has seen prices soar to historic highs in the past five years, due to a nuclear power renaissance in the face of energy shortages and global warming caused by greenhouse gas emissions.
"I think the future energy requirements of the world will come from nuclear," he said. "We'd start with (uranium) mining...if they're the right price, we'll pursue them."
Elman said Noble would look at each opportunity and there was no shortage of offers coming its way, even though some of the easier targets had already been taken.
"There's consolidation in all these industries. We live off the crumbs of the big boys, which could develop into loaves of bread."
As a teenager in the 1950s, Elman started out sorting non-ferrous scrap metal after dropping out from school in London. His barrister father and his mother, who made women's clothes, got him his lucky break into the business.
He first landed in Hong Kong in 1968 as a metal merchant for a U.S. company. Following a stint in New York, he returned to Hong Kong to set up his own company after leaving Phibro, now part of Citigroup Corp.
Elman moved commodities in and out of China in the 1970s, when it was ruled by Chairman Mao Zedong. He was the first to sell China's Daqing crude oil to the United States.
"That was a place you could make a lot of money. You had one customer for everything," he said. "So it was very easy, and volume was enormous because they were buying for a country."
Asked about the key for success, Elman said: "Don't forget where you came from. Don't forget your origins. Don't forget you're fallible. Respect people, trust people."
Within Noble, Elman likened his role to a music conductor, pointing to a portrait of Herbert von Karajan, a renowned conductor of the last century, behind his desk.
Recalling a TV programme on the conductor, Elman said: "It occurred to me that this guy was a huge disciplinarian, but he managed to create beautiful music because he got everybody playing together."
Asked about his pastime, Elman, father of four and grandfather of two, said: "Not very much, apart from spending time with my family."
Yet pointing to model cars on the shelf, he said: "I like to watch motor racing. We sponsor some cars at the Macau Grand Prix. But I don't drive (racing cars). They drive too fast for me."
Thursday, December 11, 2008

Banking Weekly Review: 1st – 7th December 2008


· Public Bank – still going strong
During the week, we hosted a luncheon with the Public Bank Group for our clients, and came away confident that the Group will continue to grow in strength and build on its already strong base. Valuations are arguably "expensive", but for good reason. Its asset quality is the best in the industry, and loan loss provisioning the most prudent. Management's commitment to
maintaining its dividend in absolute quantum going forward offers a gross yield of 6%, admirable in current market and economic conditions.
· Elsewhere, more shedding of jobs
Credit Suisse, during the week, announced that it was reducing its workforce by 5,300 globally, mostly in investment banking. This comes on the back of a USD2.5bn loss as at the end of November. HSBC had also recently announced the shedding of 500 jobs at its British banking business following a review of the business.
· Valuations relatively undemanding
While we continue to maintain our NEUTRAL stance on the sector as a whole, we are positive on the propsects of and expect stronger recoveries in the share prices of AMMB Holdings and BCHB Holdings when market conditions improve. Maybank's potential impairments on its overseas
acquistions continue to concern us, despite its current weak share price. Public Bank will continue to remain a solid investment into strength, despite its risk-rewards leaving slightly lesser scope for upsides as compared to the rest. Its attractive dividend yields however, warrant continued exposure to the stock. The same can be said about Hong Leong Bank, though not in the
same breath.

We hosted a luncheon with the Public Bank Group for our clients during the week, where we had the pleasure of the company of Chief Operating Officer Mr Wong Jee Seng and Group Economist En. Nasaruddin Arshad share with us on the prospects and challenges of the Group, and we came away with confidence that management is fully "on-the-ball" and that its growth path is on track despite visibly tougher economic and operating conditions. Valuations are arguably expensive, but for good reason. Asset quality is the best in the industry, with net NPLs at 0.9% against the industry's 2.4% and loan loss provisioning the most prudent. We continue to like the Group for its strong earnings prospects, astute credit policies, superior ROEs and attractive dividend yields.
Key takeaways from the meeting, which may not necessarily be altogether new to the investing community, but nevertheless good points to reinforce:
· Focus will continue to be on the retail segment, an area it has always been strong in, and which currently contributes in excess of 80% of Group earnings. Home mortgages, vehicle financing, credit cards and personal financing are points of growth.
· Weaker capital markets will not impact Group as much as other banking groups given the relatively smaller contribution of non-interest income to net income.
· Cost of funding for loans is low as 92% comprise of deposits, hence "healthier" spreads.
· A 1% drop in OPR will impact the Group's net profits by approximately RM100m, should all rates (BLR and correspondingly, savings) fall in tandem. Given the current operating condition however where BNM has set a floor for FD rates (1- month, 3.0% and 12-months 3.5%), the impact will be slightly more pronounced.
· The recent reduction in SRR will "bring back" some RM300m to the fold, which it can then lend to the inter-bank market and generate income. RM10+m is the anticipated amount.
· Exposure to SME is not too much of a concern as close to 80% of it is to importers of consumer goods which feed the domestic services sector which is expected to remain strong in the coming quarters, and not the exporters of goods and services to the global marketplace which is undeniably going to face harsh operating conditions.

The Employees Provident Fund (EPF) continued to be the signficiant player in the market last week with regards to banking stocks, albeit on a relatively muted scale as compared to previous weeks. Share prices remained mostly flat for the week.

· Citigroup Inc plans to sell Nikko Citi Trust and Banking Corporation, its trust bank unit in Japan, in its efforts to reduce payroll and costs at its Japanese operations. The deal could possibly raise up to USD420m, with major Japanese banks like Mitsubishi UFJ Trust and Banking Corp, Sumitomo Trust and Banking Co Ltd, and Mizuho Trust and Banking Co Ltd reportedly showing interest in making bids.
· Citibank (M) Berhad, locally-incorporated subsidiary of the Group, has meanwhile reinforced its financial soundness and preparedness to weather the on-going economic and financial crisis. The bank is backed by an asset base of RM43.3bn domestically, while liquidity stood at RM14.5bn as at Sept 30th. In the recent financial quarter (Sept 30), the bank posted cumulative nine-month net profits of RM611.2m on revenue of RM2.2bn.
· Swiss bank Credit Suisse, announced during the week, that it had posted losses totaling USD2.5bn at the end of November and was trimming its workforce by 5,300 globally, mostly in investment banking. The Group has thus far managed to chart its course through the worst financial crisis since the Great Depression without state aid, but hefty losses at its investment banking unit have dragged it into a 1.3bn Swiss Franc (approximately USD1.1bn) loss in the third quarter.
· HSBC, Europe's biggest bank, also made an announcement during the week saying that it was cutting 500 jobs at its British banking unit following a review of the business.
· China's sovereign wealth fund, China Investment Corp, stated recently that it was "not brave enough" to invest in foreign financial institutions and lacks confidence in the shifting US financial regulatory situation. The fund is most well-known for investing in private equity firm, Blackstone Group, just before its listing at USD31 a share. The stock recently closed at about USD5 a share. Its 10% investment in Morgan Stanley at USD50 a share has fallen in value to about USD12 a share.

Saturday, December 06, 2008

CAO exploring long-term jet fuel supplies

Source: business times
They'll supplement those that the firm obtains through monthly tenders
CHINA Aviation Oil (Singapore) - with stronger controls in place after its restructuring - is discussing long-term jet fuel supplies for Chinese airports with parties including British Petroleum.

Top up: The new arrangements with BP gives CAO more flexibility in the procurement of jet fuel for receivers in China
These supplies will supplement those that CAO obtains through monthly tenders, which so far have been its sole source of fuel.
Pending the outcome of negotiations, BP Singapore will supply 'a small portion' of CAO's monthly fuel requirements for onward supply to China under a one-year arrangement from Jan 1 next year.
BT understands that CAO supplies about 10-12 cargoes a month, each of 30,000-40,000 tonnes, to Chinese airports including Shanghai Pudong. A CAO official declined to say what BP's 'small portion' amounts to, saying only that 'it is not significant'.
She also declined to say what volumes are being discussed for a long-term trading arrangement with BP.CAO chief executive Meng Fanqui said in a statement that the new arrangements with BP 'give us more flexibility in our procurement of jet fuel for PRC receivers'.
The interim deal ends the 'guardianship' role played by BP Singapore.

'Going forward, CAO will procure jet fuel through various means, instead of solely through regular monthly tenders,' he said.
'We believe this will enhance CAO's value proposition to its customers.'
Most of CAO's jet fuel is now sourced from Japan, South Korea and Taiwan through monthly tenders.
CAO is talking to traders, oil refiners and oil majors in these places and elsewhere about long-term supplies, a source said.
BP Singapore's chief executive for integrated supply and trading, Michael Bennetts, said that the interim agreement with CAO 'marks the beginning of a new stage of business cooperation' and that BP and CAO 'will continue to work together to explore and collaborate on new opportunities'.
BP Singapore, which has a 20 per cent stake in CAO, has been helping the jet fuel supplier get back on its feet after its US$550 million loss in a 2004 speculative derivatives trading scandal.
This help has included the secondment and subsequent transfer of several BP Singapore officials to CAO to help it put in place more checks and balances so that it can resume oil trading proper again. So far, CAO has ventured back into some jet fuel and petrochemicals trading.
CAO's interim trading arrangement with BP Singapore replaces an earlier business cooperation agreement. Under that agreement, BP Singapore advised CAO on jet fuel tenders and had pre-emptive rights to supply fuel on terms more favourable than those obtained by CAO through tenders. Pending a longer-term agreement, the interim jet fuel supply deal essentially ends the 'guardianship' role at CAO played by BP Singapore.
When the economy began to teeter a few months back, I proposed that Chinese investors would not look first at the Big brands (although I still believe one of the Big 3 will be bought in part/ whole by a Chinese firm), but that they would go after the real estate.
Domestic investors to shop for cheap US houses reports:
A GROUP of domestic investors is expected to visit the United States next month
to purchase discounted houses.
The 10-day trip from January 15 will cover San
Francisco, Los Angeles and Las Vegas, Shanghai Morning Post reported today.
Now for those of you who have not witnessed this before, this is a phenonmenon that was very popular in Beijing, Shanghai, Shenzhen, Hangzhou,Chengdu as full planes of HK, Taiwanese, and S’porean investors would fly into China get on a bus - and then proceed to buy property.
Typically following a single developer (Shui On, Capitaland, Hutch, etc) these fleets of investors essentially provided the hot money needed to drive the rampant property development. They were held as investments, flipped on a dime, and often remained empty for years.
Were this to be the first plane of many, there would be many interesting opportunities here, and my guess is that if you are in a city that is (1) safe (2) has a strong/ burgeoning Chinese community (3) has good academic institutions (4) has large clusters or developments in need and (5) has clean air… you are probably in the best position, and if you are one of those Americans looking to sell a property I suggest you learn a few simple phrases on welcoming guests and real estate terms over at Chinesepod.
New Technology to Speed up Alternative Solutions

By degassing Chinas coal mines, many of the gas explosions at Chinas coal mines can be reduced. Coal bed methane is actually methane gas present in coal seams. This is the gas that threatens the lives of miners working in underground mines.
China emits 6 billion cubic feet of methane gas annually from its mines. Methane gas is released into the atmosphere, from working mines, abandoned mines and through the exhaust system of mines, leading to emission of a greenhouse gas. By releasing the methane trapped inside virgin coal seams, it could instead be captured and used as an energy source.
There are on the order of 800 basins in the world with coal in them, explained Dr. David Marchioni, who was also interviewed in Part One of this report. There are probably still only about 30 or 40 producing coal bed methane areas. The pre-eminent coal bed methane (CBM) geologist, who is also overseeing the CBM exploration by Pacific Asia China Energy (TSX: PCE) in China, added, They havent all been looked at, but a lot of them have. New CBM drilling technology, which China has been openly soliciting for the past four years, may help resolve some part of the pollution and mine fatality issues.
China United Coal Bed Methane Company (CUCMB) President Sun Maoyuan believes the expansion of Chinas coalbed methane industry may help reduce the high incidence of coal mine accidents. Sun said, Development of this resource has great strategic significance for China, as it could help narrow the growing energy supply and demand gap, while reducing environmental pollution in the country. According to the US Energy Information Administration, overall natural gas consumption in China is projected to grow at an average annual rate of 7.8 per cent, from 1.2 trillion cubic feet in 2002 to 6.5 trillion cubic feet in 2025 jump of more than 500 percent. Every available method, including CBM development will be necessary to help meet that forecast.
The Xinhua news agency announced in March 2002 it was partnering with a Canadian executive agency help develop Chinas CBM resources. The Canadian group included the Canada Alberta Research Council, the Canada Computer Modeling Group Ltd, and Sproule International. The project aimed to effectively exploit the coal bed methane gas using Canadas
advanced technology. The 19th CBM concession awarded by China United Coalbed Methane Co (CUCMB) was announced in March 2004 through a news release issued by the Embassy of the Peoples Republic of China in New York. The 150.8 square kilometer CMB concession had estimated gas reserves of 30 billion cubic meters. What was noteworthy was this mention far down in the press release, According to the contract signed with CUCBM, Sino-American Energy, which specializes in the exploration, development and production of coalbed methane resources, will introduce its advanced horizontal well technology for pilot development in China.
China is eager to exploit its resources, lower its pollution standards and reduce the number of mine fatalities. However, technology is what will move China into major superpower status before 2050. CUCBM was granted favorable policies, not often awarded when dealing with foreign investors. Such include tax reduction, duty exemption and independence in investment and the same for their import and export decisions. In other words, free market pricing. China needs energy and will move mountains to get it. China is also developing its relationship with Canada. After the United States, China is Canadas largest trading partner. In late January 2005, the largest ever trade mission led by a trade minister took place in Shanghai, Beijing and Hong Kong between Canadian and Chinese companies with over 370 Canadian delegates from 279 companies participating. More than 100 agreements were signed between those countries leading companies. China is hungry for Canadian technology while Canada is eager to strengthen its ties with the worlds next major superpower.
Dr. Marchioni, who is also a director of Pacific Asia China Energy (PACE), strongly endorsed his companys relationship with CUCBM, They are your partners so it is to their benefit to make sure that things happen. They assist us in negotiating with the provincial coal bureaus. But PACE is carrying the project through the initial exploration. What does CUCBM
bring to the table for their share? Marchioni shot back, We have access to quite an abundance of coal exploration data before we even start drilling. That was provided by the regional coal group. CUCMB aided and assisted in that negotiation. Wheres the government interference one might expect? Its that committees job to get the project done, Marchioni explained. Its one of the benefits in having CUCBM as a partner because they have a vested interest in it. These people are bureaucrats within the organization within the govt. The success of our project would shine very nicely upon them, because they are part of the committee and part of the operation.
To date, PACE has been granted two CBM concessions by CUCMB. One of those concessions is about one-half the size of Rhode Island. Sproule International, which was part of the initial Canadian executive group that partnered with CUCBM in 2002, reviewed PACEs CBM 970-square-kilometer concession in the Boatian-Qingshan property in the Guizhou Province of China. For those unfamiliar with China, its sometimes called the Home of Coal in South China, and the region is reportedly Chinas second largest coal producer. The highly regarded Sproule research team, among Canadas leading specialists in evaluating coal bed methane projects, published an independent technical report announcing the concession may contain up to 11.2 trillion cubic feet of gas. A most likely scenario would be production capacity up to slightly more than 5.2 trillion cubic feet. By comparison, other CBM concession blocks, which we reviewed, announced CBM gas resources on the order of 30 billion to 150 billion cubic feet.
Other Canadian CBM exploration companies have also been awarded CUCBM concessions. Verona Development Corporation (TSX: VDC) followed in the footsteps of Pacific Asia China Energy in late November 2005 when CUCBM awarded the company its 23rd concession. Veronas 1015-square kilometer concession in northern Shilou may hold about 150 billion cubic meters of gas. Earlier this month, CUCBM signed a production sharing contract with Ivana Ventures Inc (TSX: ANA) in Suzhou of east Chinas Anhui province. Ivanas goal is to confirm Chinese estimates of more than 3.3 trillion cubic feet of gas on the 856-square kilometer concession.
MDCs Dymaxion Technology Opens Doors
Why the preferential treatment for Pacific Asia China Energy? True, it was the first Canadian publicly traded company to be awarded a CBM concession. Now they have two. Perhaps these valuable CBM concessions might have something to do with PACEs recent announcement of a joint venture with Mitchell Drilling Contractors (MDC) of Australia. All companies who wish to use MDCs proprietary drilling technology in China must make arrangements with the MDC-PACE joint venture company. A February 6th news release issued by Pacific Asia China Energy, announced,The Joint Venture company will have the exclusive license to use Mitchell's proprietary drilling Dymaxion System in China. Dymaxion is a unique and highly effective surface to in-seam drilling technique which the company has deployed since early 2000. To date, over 200 Dymaxion wells have been drilled on CBM projects.
What makes Mitchell Drilling special? Theyve developed things as simply as possible, as inexpensively as possible, as efficiently as possible, Dr. Marchioni pointed out. They are doing things probably at half the cost of what it might cost in Alberta. Theyve developed some unique approaches into how they drill their wells. Because they keep everything light, everything is simple. Efficient, less expensive, more portable most of their work is done with truck-mounted rigs, Marchioni added. They have fewer people on their well sites, mainly because of the small equipment.
We looked into Mitchell Drilling. Started in 1969 when founder Peter Mitchell bought his first drill rig for $11,500 at a repossession sale, the company has become Australias largest privately owned drilling company. Mitchell Drilling became involved in minerals exploration in 1971. Over the past thirty-seven years, the drilling company has contracted to nearly every major exploration company, drilling for oil, uranium, gas and coal reserves throughout the key mining states of Australia. With more than 150 staff, including some of Australias top engineers and geologists, the company has since expanded outside of Australia. Originally, we wanted to bring them over to work for us, Marchioni told us. The more we talked to them, the more they got interested in China, and the more excited they got about it. Not a bad partner to have in a country which does a lot of business with China.
Why are CBM geologists excited about the Dymaxion drilling technology? They have one of the highest success rates in this type of drilling, said Steven Khan, executive vice president of Pacific Asia China Energy. While there are other companies who have successful horizontal drilling techniques, they provide a service more successful and at significantly lower cost. While horizontal drilling is the nature of the beast in CBM drilling, MDCs Dyamxion surface to in-seam (SIS) technique is different, hence its proprietary nature. It is a new blend of oilfield, civil and mineral drilling technologies.
Most drillers will use methods that are either (a) vertical or horizontal underground or (b) surface penetration. Mitchell Drilling brought in a little of both. In Australia, where coal seams are found at shallower depths, greater pressures have to be created to bring out the gas from the horizontal seams. Khan said, The combination of vertical and horizontal drilling allows for a much more efficient extraction of water from CBM wells while it increases the flow rates of gas from the wells. A number of coal, gas and oil companies have turned to Mitchell Drilling, including BHP, Anglo Coal and the Oil Company of Australia. MDC has drilled more surface to in-seam wells than any other Australian company.
It was a marriage of equals for PACE and MDC. PACE needed a drilling company, but PACE had built up strong network of relationships in China. While MDC would be used to potentially drill a large number of wells on the companys Guizhou project, both saw a new revenue source. We are both leveraging on our connections, network and the ability to tap into these advanced projects in a shorter time frame. Khan believes revenues could be flowing into the PACE-MDC joint venture by the end of 2006. When would such revenues become substantial? Initially, they would be somewhat minor, but they should ramp up quickly from two sides, explained Khan. Revenues would come from outside companies who are seeking resources, and from PACEs own drilling activities within China.
How soon does Khan believe PACE will need the services of the MDC-PACE joint venture? We have plans to move the Guizhou project into pilot production in 2007, he responded. We may step up that program based on the results from our slim-hole test production program this year.
PACE announced earlier this month it should soon start drilling. Is Dr. Marchioni satisfied about the coal seam thickness on the first property the company plans to drill? Very much so, he responded instantly. At the depths were considering right now, geological structure is relatively uncomplicated. The advantage we have here is the maturity of these coals means that the gas contents are quite high by most standards, at relatively shallow depths. Presently, our plan is to try to exploit at relatively shallow depths, down to 800 or 900 meters maximum. This will give us a lot of gas. It will optimize our chances of finding permeability.
This year, Alliance Global Inc. chair and Chief Executive Offiver Andrew Tan made two big bets—on casinos and in tourism. They will make him the biggest hotelier in the Philippines, in addition to being the biggest business process outsourcing office developer and the second biggest mid-income high-rise residential and office developer.
Tan, 59, is chairman and CEO of Alliance Global Group Inc., his holding company, and chairman, president and CEO of Megaworld Corp., his property development company.
Alliance is one of the Philippines’ leading conglomerates, with interests in the food and beverage industry, real estate development and quick service restaurants.
Tan, who doesn’t gamble, is investing at a dicey time when many casinos are in financial doldrums and attendance has dropped. At the same time, high-end hotels are having problems drawing top tourist dollar.
Tan thinks hotels and entertainment are revenue-drivers of the company in the future.
Andrew is one entrepreneur who looks beyond the passion and mood of the moment. He didn’t become rich by being daunted by present-day obstacles and challenges.
Tan has partnered with a unit of Genting, the Malaysian gaming company, to build two mega resorts and casinos—one across the NAIA Terminal 3 and the other on reclaimed land along Manila Bay.
An Alliance Group subsidiary, Travellers International Hotel Group Inc. (Travellers), has ventured into tourism-oriented development. It will invest at least US$1.55 billion in two large-scale tourism projects to be developed in various phases over the next few years.
The project includes the building of 5,000 hotel rooms which will make Travellers the largest hotel owner in the country.
With the growth in the global tourism industry and the positioning of Travellers as a major player in this sector, it is expected that Travellers will be a major contributor to Alliance Group, the company says.
On June 2, 2008, the state Philippine Amusement and Gaming Corp. issued Travellers the first provisional license to participate in Pagcor’s ambitious project, a leisure and entertainment complex which includes the development of the Bagong Nayong Pilipino Entertainment City and Resort Complex on Manila’s famous reclaimed bay area.
Travellers has also set development in another tourism site—the Newport City Integrated Resort located across the Ninoy Aquino International Airport Terminal 3 in Pasay City—where it will build three hotels and a themed shopping and entertainment center.
Alliance Group has concluded a deal with Star Cruises Limited of Hong Kong whereby Star Cruises will eventually acquire 50-percent (direct and indirect) interest in Travellers.
Star Cruises, the third largest cruise operator in the world, is a member of Malaysia-based Genting Group, one of the largest leisure and entertainment companies in the world. This partnership will transform Travellers into a major growth driver for Alliance Global within the next few years, the company says.
For 2008, of the 17 new residential projects scheduled for launch, 16 have already been launched and substantially pre-sold. Total potential revenues from the 17 are P26 billion to be realized over time.
For BPO office, 50,000 square meters has been completed and over 90 percent leased. The remaining balance of 50,000 square meters of BPO office space schedule for completion this year is about 40 percent pre-leased.
On the retail side, 45,000 square meters of retail space was recently completed and is now about 80 percent pre-leased. These developments are expected to enhance RE (real estate) results.
Likewise, more McDonald’s restaurants will be opened during the year and a number of existing ones re-imaged to boost QSR income.
New alcoholic beverages have been pipelined plus a customer activation program put in place as well. In September, EDI launched a consumer promo, “Tagumpay Sa Negosyo,” that gives out enterprise fund for the winner to set up his own business. All these aim to achieve the profit goal for the year.
Tan is the first developer who saw the potential of once sleepy Libis in Quezon City as a prime property. He developed Eastwood City.
He predicted the huge demand for call centers considering the Philippines’ English language skills and strategic location. He put up call centers, becoming its biggest developer.
He sensed the strong demand for housing from cash-rich Filipino workers. He developed housing projects for them.
By so doing, Tan became big almost overnight, a stirring rags-to-riches story.
Gifted with visionary entrepreneurship—and the proverbial Midas touch—Andrew is at the top of his game, presiding over a business conglomerate with a workforce of more than 4,000, total assets of P111 billion and equity of P77.65 billion.
Alliance Group has three major operating units:
• Real estate, which includes Mega­world and Travellers International Hotel Group, Inc.,
• Food and beverage which includes the (1) distilled spirit manufacturing, marketing and distribution, presently with Emperador and Generoso brandy labels, (2) operations of the foreign-based subsidiaries that handle the manufacture and international distribution of food products, (3) glass container manufacturing business that produces flint glass containers primarily for internal requirements, and (4) distribution of consumer products under international labels
• Quick service restaurant business (QSR)—operates under the McDonald’s brand, in accordance with a master franchise agreement with McDonald’s USA. Golden Arches Development Corp. represents this segment.
Emperador is the world’s best-selling brandy. It helped that the Filipino aspirational taste shifted from gin to brandy.
Brandy actually financed Tan’s acquisition and expansion during the difficult years after the 1997 Asian Crisis. The business was giving him profits of P1 billion annually, enabling him to undertake feverish construction during the real estate slump and reaping the benefits of recovery.
Megaworld Corp. is the largest developer of space for business process outsourcing (BPO). It is the second biggest in the mid-income high-rise residential condominium development.
In less than 20 years, the Megaworld Group has developed and completed 50 residential, office and commercial projects.
Founded by Tan in 1989, Megaworld is one of the leading property development companies in the Philippines.
Friday, December 05, 2008
By Jessica Aldred and agencies

A scavenger collects valuable items from the polluted Citarum river in North Jakarta Photograph: Adek Berry/AFP/Getty Images
One of the world's most polluted rivers, the Citarum in Indonesia, is to get a major clean-up that is hoped to improve the lives of millions of people, the Asian Development Bank announced today.
The Manila-based lender has agreed to provide a $500m (£340m) loan package to the Indonesian government support the restoration of the river basin, which supports a population of 28 million people, delivers 20% of Indonesia's gross domestic product, and provides 80% of water supply to the capital, Jakarta.
Rapid urbanisation over the last 20 years has seen a rise in untreated household sewage, solid waste and industrial effluents, affecting public health and threatening the livelihood of poor fishing families, the bank said.
The loan package will be delivered over the next 15 years, and will support sanitation projects and construction of waste treatment plants in the river basin to provide safe water supply to poor families who use the polluted river for fishing, bathing and laundry.
"Rapid urbanisation, climate change, environmental degradation, public health and food security are all important issues challenging water resources management in Asia and the Pacific region," said Christopher Morris, an ADB senior water resources engineer.
The loan also will allow the cultivation of an additional 61,700 acres (25,000 hectares) of rice paddy, benefiting 25,000 farming families, he said.
The river management programme also aims to supply water to 200,000 more households in Jakarta. It will ultimately increase Jakarta's water supply by 2.5% yearly, and benefit millions by resolving critical water shortages in Bandung, Indonesia's fourth largest city, the bank said.
Last month new research found that severe pollution has made one-third of China's Yellow river unusable.
Known as the country's "mother river", it supplies water to millions of people in the north of China. But in recent years the quality has deteriorated due to factory discharges and sewage from fast-expanding cities.
Much of it is now unfit even for agricultural or industrial use, the study showed.
By Shakir Husain, Staff Reporter

Supplied Picture

Abdullah Al Shuraim, chairman of Gulf Navigation Holding, has spent many years in the shipping industry.

Dubai: Abdullah Al Shuraim, chairman of Gulf Navigation Holding, has spent many years in the shipping industry.

Prior to taking up his current position in 2006, Al Shuraim held top executive posts in Saudi Arabia.

These included posts as chief executive officer of the National Shipping Company for six years and a three-year stint as CEO of National Chemical Carriers. He was deputy CEO of the Saudi Arabian Public Transport Company for four years and regional manager of Saudi Telecom, where he spent eight years.

He has an engineering degree from Purdue University in the US.

In an exclusive interview with Gulf News, Al Shuraim talks about how his company, which owns oil and chemical tankers, wants to seize growth opportunities in these difficult times for the shipping business.

Gulf News: The shipping sector has slowed down. How has the current financial crisis affected your company?

Abdullah Al Shuraim: We delivered good financial results for the first nine months of this year. Our shareholders are happy. The company is showing continuous growth. We continue to grow in size with new ships coming on schedule. In total we have 19 ships [in operation and on order], five of them will be delivered next year and in 2010.

Gulf News: Now that cargo volumes are falling, are you worried about revenues?

Abdullah Al Shuraim: We see the slowdown hitting the dry cargo business the most. It is the type of business that does not require the same sophistication and technical operational requirements as the chemical and oil transportation business. We will see a reduction in petrochemicals pricing, and supply and demand will be affected.

We have done research about the future of the shipping market and what has been projected for 2009 and 2010. There is going to be an impact on rates. It will affect owners who have their [entire] fleet, or a good part of it, on the spot market.

Looking at Gulf navigation, we have a good percentage of our fleet on short, medium and long-term charter, where the rate has already been agreed. We have a 15-year charter contract with the Saudi Basic Industries Corporation (Sabic), so it is not going to be affected by a drop in rates. We have guaranteed business.

There is a positive side [to the downturn] as well. Gulf Navigation went for an IPO to raise cash to support its future projects, to acquire seven VLCCs (very large crude carriers) and six chemical tankers. That was the plan during the IPO, but because of the increase in prices of new ships we felt that the timing was not right. It was not economically good to buy those ships.

Now the company is sitting on good liquidity, which is held in the local Islamic banks here. We feel the price of new ships will drop because of many factors. One of them is that owners are going to be facing problems finding financing for their projects. There is a credit crunch.

Shipyards will be facing problems with refund guarantees. Also, steel prices have gone down. These factors will have an impact on the price of building new ships and will give us an opportunity to acquire ships.

Gulf News: So the crisis actually helps you in expanding your fleet?

Abdullah Al Shuraim: As ship owners, we are a long-term player. This company was established with long-term objectives, so the decision that we are making must be based on proper economics.

We felt that the prices of newly built and second-hand ships during the last two years were not justified, and we decided that we would keep an eye on the market in the future.

One of the opportunities is to buy from owners who have contracted with shipyards and their ships are ready but they cannot get financing. There are also shipyards facing problems with owners and if they have available space and are desperate for new projects then we can negotiate and give them new ship orders that can be finished in two to three years.

The third option is to acquire companies with a fleet that is compatible with the business we are in.

Gulf News: Are you saying that you would be looking for companies in distress?

Abdullah Al Shuraim: Yes, that is one of the strategies. If there are such companies and the numbers work right for us, we will take up such an opportunity. There will be opportunities for second hand VLCCs and chemical and product tankers. Their prices in the last couple of years were not justified, but because the prices of newly built ships were high, owners of old vessels were also asking for much higher prices. Now they might be reasonable because there may more ships available for sale.

Gulf News: How much ready cash do you have?

Abdullah Al Shuraim: We have about Dh700 million. In addition to that, we have built good relationships with international and local banks. They will be there to support the company in its growth.

Gulf News: In the current difficult conditions, you present a good picture of your company. What do you have in mind in terms of fleet size and the company's geographical presence?

Abdullah Al Shuraim: We are a Gulf company, but we are an international player. We will continue to seek business in the oil and chemical sectors with international companies in the Gulf. With our joint venture with Stolt Nielsen, our ships will be moving internationally.

Gulf News: Going forward, where do you see ship prices and charter rates?

Abdullah Al Shuraim: The price of VLCCs went up 30-40 per cent in two years since 2006. Time charter went up accordingly but now it is coming down. In the future, we will not see high time charter rates like before. We will see them adjusting but that is okay as long as the prices of building new ships and second-hand ships are adjusted.

Gulf News: When do you think there will be a new ship order from Gulf Navigation?

Abdullah Al Shuraim: I cannot predict that decision. We are monitoring shipbuilding contracts and second-hand prices. We are monitoring the companies that might be having problems with financing. We have been seeking this information from brokers, industry reports and from banks. We have done our home work, we are just waiting for an opportunity. We have an advantage that a lot of other companies may not have. We have access to liquidity and excellent relationship with banks.

Gulf News: Do you see an overcapacity building in the business you are in?

Abdullah Al Shuraim: We did predict that there could be an overcapacity. When transportation rates go very high, a lot of owners and speculators enter the market.

With all the orders that drove the prices of new shipbuilding high in all sectors, whether in bulk, containers, oil, chemical, or products, shipyards did not have the capacity to handle [the volumes]. It led to very high prices, in addition to the high cost of steel. That would have caused an over-capacity. This time what we are going to see is that the orders that we have seen in the past will end in cancellations, there will be defaults, there will be owners not able to bring financing and shipyards not being able to bring refund guarantees.

Owners will not exercise options on orders. You will see more ships being phased out because the rates will drop and it would not be economical to maintain old ships. Because of the economic slowdown, there will be a reduction in production and that will reduce goods to be transported.

Gulf News: Would you consider diversifying your business?

Abdullah Al Shuraim: We made a decision to concentrate on the liquid transportation business. Gas is something that we are considering, but mainly we are into the oil products and chemicals business.

We are not interested in dry cargo and containers. It was a smart decision from the beginning. We are in an area in which it is not going to be easy for people to compete with us; it needs liquidity, experience and technical expertise. Once you are specialised and focused, you are in a much better position even if the market is affected by a slowdown. You will be less impacted than easier businesses like bulk cargo.

Shipping is a long-term business. It is a very important business for the region. Oil, gas and chemicals are important. We are a company that is close to the market. We have relationships with clients and are in touch with their future expansion.

PETALING JAYA: Ten banks have reduced their fixed deposit (FD) rates following the recent 25 basis point cut in the key interest rate by Bank Negara, and more are expected to follow suit.

At the same time, some banks have yet to lower their base lending rate (BLR) in accordance with the cut.

A check at the The Association of Banks in Malaysia (ABM) toll-free service ABMConnect showed that the 10 banks that have submitted their revised FD rates are Affin Bank, AmBank, Alliance Bank, Bank of China, Bank of Tokyo, EON Bank, Hong Leong Bank, HSBC Bank, Public Bank and Royal Bank of Scotland.

"We expect more banks to submit their revised FD rates in the coming week," an official from ABMConnect told StarBiz.

According to the official, many of the revised rates were in accordance with the Bank Negara set rate known as the floor or minimum rate.

Effective Nov 25, the minimum rate set by the central bank for 12-month FD is 3.5% per annum. The minimum rate set for one-month FD remains at 3% per annum.

The official also said a handful of ABM's member banks had yet to notify the association of the cut in their BLR but she expected them to do so within a week. It was the practice of banks to notify the association of any reduction in the BLR on a periodic basis, she said.

A lower BLR means cheaper cost of borrowings and as such, the interest rates for all consumer loans that are pegged against the BLR would be reduced accordingly.

Bank Negara had on Nov 24 slashed the overnight policy rate (OPR) by 25 basis points to 3.25% in an effort to stimulate economic growth. It also lowered the statutory reserve requirement to 3.5% from 4% to inject more liquidity into the banking system.

Hong Leong Bank Bhd (HLB) group managing director Yvonne Chia said the bank had revised its BLR and FD rates since the OPR cut.

The BLR was reduced to 6.5% per annum while the 12-month FD rate was now lower at 3.5% per annum from 3.7% earlier, she said.

An official from another bank said he expected banks to embark on promotion campaigns to attract depositors.

The Alliance Financial Banking group has also reduced its BLR to 6.5% per annum from 6.75% previously.

Citibank Bhd head of wealth management products Aisyah Lam said the bank would maintain its board rates, taking into account the changes in market conditions and its strategic objectives.

Board rates refer to FD rates on deposit tenures of between one and 12 months. Lam said, however, the bank had revised its BLR downwards to 6.55%.

"As such, interest rates for all consumer loans that are pegged against the BLR have accordingly been reduced by the same quantum and we have also automatically revised the instalment amounts downwards for these loans,'' she noted.
Source : Business Times
Companies trying to sub-let excess space as they streamline operations


(SINGAPORE) As banks and other organisations look at scaling back their operations, some are trying to sub-let office space that they no longer need.

While subleasing has 'negative connotations in the short term, it's a good strategy in the medium to long term as it builds flexibility into office space management, allowing businesses to expand fast when the current slowdown turns around'.

- Jones Lang
LaSalle's regional director and head of markets Chris Archibold

Some 200,000 sq ft of such space may already be on the market, although part of it may be available only next year. The phenomenon - which some call shadow space - started to emerge in October, industry players say.

Knight Frank director of business space (office) Agnes Tay forecasts that about 400,000 to 500,000 sq ft of shadow office space may be introduced between Q4 2008 and end-2009, or an average of 80,000 sq ft to 100,000 sq ft per quarter.

However, another office leasing veteran said: 'It may be far easier to assess the situation in about half a year. By then, the right-sizing, job attrition and the office cycle would be far more advanced.'

Shadow space also emerged during the last office slump. According to CB Richard Ellis research reports, it amounted to more than one million sq ft as at the end of 2002.

Another consultant, Jones Lang LaSalle's regional director and head of markets Chris Archibold, says that while subleasing has 'negative connotations in the short term, it's a good strategy in the medium to long term, as it builds flexibility into office space management, allowing businesses to expand fast when the current slowdown turns around'.

'Given that Singapore is positioned as a regional hub, our view is that Singapore will be less impacted than other cities in Asia. However, we do expect to see some subleasing activity over the next few quarters, but it is impossible to pinpoint exactly how much space will be released,' he added.

HL Bank, Citibank and DBS are among the tenants known in the market to be looking to sublet excess space. Their ranks are expected to grow in the coming quarters as restructuring efforts at banks take effect.

Citibank is said to be considering subletting at least 60,000 sq ft of office space. More than half of this is understood to be at Tampines Plaza and the rest in the Central Business District, including Millenia and Centennial towers in the Marina area.

DBS is said to be looking for tenants for space occupied by its HR department at PWC Building and apparently has smaller pockets of space available at Equity Plaza, Raffles City, 6 Raffles Quay and Haw Par Centre.

The attraction to potential sub-tenants keen on taking over such shadow space is that they may be able to secure space at attractive rentals below current market rates from tenants who inked headleases with the building owners last year or earlier at rents below current values. The space may also come pre-fitted, saving the subtenant such costs.

Of course, the shadow space situation is not following any fixed template. HL Bank, for instance, is believed to be keen to sublet two floors at UIC Building at a discount. The bank is said to have inked its lease with the Shenton Way property's landlord, United Industrial Corporation (UIC), for about 20,000 sq ft earlier this year, when it had planned to move out of Tung Centre at Collyer Quay.

Industry watchers reckon HL Bank could be prepared to shave off around $2 psf in the monthly rentals of $8 psf and $10 psf it is paying UIC for its two floors.

Besides tenants wanting to sublet excess space, another reason shadow space emerges is when companies try to pre-terminate their leases with landlords, perhaps because they are shutting down or moving their operations to cheaper locations. Because such tenants are still liable to pay the agreed rental for the remaining duration of their leases, they sometimes try to sublet their space.

Property agents say subletting deals are best done with the knowledge and support of the building's owner. 'Sometimes the residual lease on the excess space a tenant is willing to sublet may be pretty short, say a year or even less; so the new tenant will want to negotiate a fresh follow-up lease with the landlord to dovetail with the expiry of the residual lease on the shadow space,' a property consultant said.
Updated: Thursday December 4, 2008 MYT 11:51:00 AM

KUALA LUMPUR: HwangDBS Vickers Research is maintaining its buy call on Public Bank as it is the top pick for the sector, even though is trading at a premium to its peers.

In a research note issued on Thursday, it said while it maintained its buy recommendation, it had lowered its target price to RM11.90 from RM13.20 as it reduced its dividend payout assumption.

It projected Public Bank's returns on equity (ROE) could be reduced to 27% from 28% due to the lower dividend payout assumption; 3% growth (from 5%) – to account for the slower GDP growth though the bank's growth would outpace the industry average. Another factor was the 10% cost of equity.

"We still like Public Bank for its strong earnings prospects, superior ROE, and high dividend yield. Coupled with that net dividend yields are attractive at 9% to 11%," it said.

On the earnings outlook, it said that taking into account the weaker contribution for non-interest income mainly from the softer capital markets which were expected to trickle down to Public Bank's asset management business, it lowered its FY09-10 earnings by 8%-11%.

However, it remained positive on Public Bank as it believed the bank's operating parameters remain strong despite a possible slowdown on the macro front. We expect Public Bank to continue holding up its asset quality, loan growth and earnings and ROE momentum, not forgetting attractive dividend yields.

HwangDBS Vickers Research raised its FY08 loan growth to 20% from 15%. Year-to-date up to Sept 30, Public Bank's loan growth stood at 17%.

The research house retained its loan growth assumptions for FY09-10 at 10% and 8% respectively. It expected the slowdown in loan growth to be built up from this quarter as loan applications were expected to moderate.

Its lower loan growth forecast took into account the potential slow down in car loans and slower property launches.

"Nevertheless, we expect Public Bank's loan growth to continue to outpace system's loan growth based on its historical track record. Public Bank remains very much a consumer bank largely exposed to mortgages and hire purchase.

"Positively, as loan growth contracts, it is positive to Public Bank's bottomline due to the attribution of general provisions. Comparatively, the higher the loan growth for Public Bank, the more general provisions it has to set aside in its reserves," it said.

It added Public Bank's asset quality was still the best compared to its peers. Not only was its non-performing loans (NPL) ratio the lowest, but that absolute NPLs are on a down trend.

Even should GDP growth turn out worse than expected and charge-off rates increase, it did not expect Public Bank's asset quality to deteriorate significantly. Similarly, this is also proven in Public Bank's historical track record.

On the dividends, the research house said in view of the weakening economic outlook, it seemed likely that Public Bank might preserve capital rather than paying out all its excess earnings.

"While we note that Public Bank is able to pay all its earnings as dividends, we believe it is likely to maintain a buffer. We are lowering our dividend payout assumption to 80-85% from 90-95% previously. These payout ratios are inline with historical payout ratios," it said.

HwangDBS Vickers Research's net dividend per share (DPS) forecasts were 66 sen for FY08 (22.2 sen interim had already been paid in the second quarter FY08), 69 sen for FY09 and 77 sen for FY10.

Despite its cut in DPS, dividend yields were still intact at 8% to 1% for FY08-10. It did not see risks in DPS for FY08.

In a worst case scenario, which it said was unlikely, dividends would at least match last year's absolute amount (FY07 DPS: 55 sen).

"We firmly believe that management has no intention to cut back on dividends. We also believe that should market stabilise from current conditions, management could increase dividend payout," it said.
Source: Ben Gan
Touted as the best managed company in the land, IOI has lost 73.3 million in deposit to buy Menara Citibank. It has also lost more than 200 million in forex.

In January 2008, IOI Properties (S'pore) Pte, Ltd in a joint venture with Ho Bee Investment Ltd bought a piece of land measuring 5.3 acres at Sentosa Cove for SGD1.1billion. The purchase was completed in April, 2008. Considering the timing of the purchase, this transaction is probably very much overpaid. Now that Singapore is in a recession, it was reported in the press, that IOI had decided to delay development of the land. How much has it lost here? Only IOI has the answer.

IOI Prop closed at 2.35 yesterday. Its high as at 09.10.2008 was 7.15.
As for IOI Corp, it closed at 3.18 yesterday. Its high was 8.60 in Jan 2008.

I believe the worst for the IOI Group is not over yet. The downtrend in its price is likely to continue.
By Craig Simons
SHANGHAI, China — It's hard to hold a living dinosaur in a concrete pool.

Yet the dozens of Chinese sturgeons swimming lazy circles at the Yangtze Estuarine Nature Reserve in Shanghai might be among the last survivors of a 130 million-year-old species, one of the oldest surviving animals in the world.
As recently as the 1970s, thousands of Chinese sturgeons — flat-headed fish that can live for 40 years and grow as long as a minivan — spawned each year in the Yangtze River, the world's third-longest waterway. Adults typically spent more than a decade in the Pacific Ocean, sometimes traveling as far as Japan and Korea, before swimming thousands of miles up the Yangtze to breed.

Today, a combination of dams, overfishing and heavy boat traffic has pushed the species to the brink of extinction. Last year, scientists documented only six adult sturgeons in their last known spawning ground.
The sturgeons' plight underscores the steep environmental costs of China's economic development. China has achieved growth of about 10 percent annually since the late 1970s.
But a lack of environmental controls has led to widespread pollution and habitat loss. China's cities are considered among the world's dirtiest. Almost half of China's rivers are so polluted that they cannot supply drinking water without prohibitively expensive treatment.
About 83 mammal species, 86 bird species and 60 fish species in China are endangered, according to the World Conservation Union, a network of hundreds of governments and nonprofit organizations.

Several other prominent Yangtze species might already be extinct. The Yangtze dolphin, in Chinese called the baiji, has been seen only once in the wild in the past decade. Yangtze paddlefish haven't been seen since 2003.
From its headwaters on the Tibetan Plateau to where it pours into the East China Sea just north of Shanghai, the Yangtze was once one of the world's richest ecosystems. Elephants, tigers and alligators roamed its banks.
Plants living along its shores sustained the bottom of a long food chain that supported some of the world's largest fish. Mature Chinese sturgeons can weigh more than 1,000 pounds.
"Very large fish developed in the Yangtze because it was one of the most fertile river systems in the world," said Ma Chaode, a scientist working for the World Wildlife Fund's Beijing office.
At the beginning of the 20th century, the Chinese sturgeon was among the oldest living animal species globally. Its spawning grounds stretched into a mountainous region of Sichuan province, about 2,000 miles from the sea.
As recently as the 1970s, fishermen prized sturgeons for their size and caught hundreds annually.
But China's massive population growth and rapid development have almost snuffed out the species.
Beijing listed Chinese sturgeons as endangered in 1988 and banned killing them, but many continued to be injured by fishing nets strung along long stretches of riverbank.
Hydroelectric dams have been the biggest challenge to the Chinese sturgeons' survival. The Gezhouba Dam was built across the Yangtze River in 1981 to test techniques later used in the larger Three Gorges Dam, which began controlling flow in the Yangtze in 2003.
All of the sturgeons' traditional breeding grounds lie upstream of the Gezhouba Dam. But some sturgeons made do with a habitat just east of its massive sluice gates.
In the late 1980s, several thousand mature Chinese sturgeons laid eggs each year in the habitat. But since then, the number of fish arriving has declined steadily. Female sturgeons increasingly lay defective eggs, a trend scientists blame on pollution and water temperature changes caused by the dam.
"There has been so much man-made damage to the river that I sometimes can't see how the Chinese sturgeon can recover," said Wei Qiwei, a biologist at the Yangtze River Fisheries Research Institute in Hubei.
The central government is trying to save the sturgeons. The government protected the Hubei spawning grounds in 1982. In 2005, it closed a section of river where young sturgeons rest before venturing to the ocean.
The Yangtze Estuarine Nature Reserve for Chinese Sturgeon in Shanghai has spent tens of thousands of dollars on conservation education. Scientists at the center are raising Chinese sturgeons in captivity and hope to establish new spawning grounds.
Still, many scientists think that after 130 million years, the Chinese sturgeon's days are numbered.
"The Yangtze ecosystem is in serious trouble," said a scientist at Shanghai Ocean University who asked to remain anonymous because he feared punishment for criticizing the government. "The biggest problem is that Chinese officials always put the economy ahead of the environment."
If the Chinese sturgeon does go extinct in the wild, the loss of a creature that has existed since the age of dinosaurs should ring alarms about the growing human impact on the natural world, biologist Wei said.
"It shows we need to live more sustainably," he said.


Green Anhui is an established non-governmental organization based in Hefei, and with projects also in Bengbu and Wuhu, in central China’s Anhui Province. The organization’s mission is to promote environmental protection in Anhui province with a particular focus on the Huai River, a major source of water for the region.

In early 2006, as a part of the Huai River Protection Project, a group of Green Anhui volunteers traversed the Huai River identifying sources of pollution. Near Bengbu City, in north central Anhui, they came across a section of the river that was so polluted the stagnant water was red and blue. The volunteers were quickly able to identify the sources of this pollution--three chemical factories located in Qiugang village that were discharging dirty waste-water directly into the river. The volunteers reported their finding to Green Anhui staff Long Haizheng and he returned to the village for an investigation.

Long began by talking to local villagers in Qiugang about their living condition, and people came pouring with grievances. There were complaints of bad odors and toxic waters that were presumed to be killing farmland and infecting livestock. Villagers had to cover their mouths when they passed by the river, and primary schools located nearby had students getting sick with nausea and nose bleeds. In a village of eighteen hundred people, more than 10 people in their prime years reportedly died from cancers or unidentified causes every year. Many villagers believed these deaths were in fact slow poisonings from the surrounding chemical factories. The villagers’ eagerness for attention and action inspired Long and Green Anhui to embark on a campaign that generated ripple effects far beyond what had imagined.

Bengbu is a port city on the Huai River and a major commercial center for Anhui province with double-digit GDP growth in 2007. When Green Anhui launched its Huai River Protection Project in 2003, water pollution in the region was already widespread. Anhui Province’s longest river, the Huai supports approximately 50 million people and countless industries. Its condition has worsened so dramatically over the years that people started calling it “the dead river”. In Bengbu, there was no organized voice to call for change; and this is where Green Anhui came into the picture.

Green Anhui brought their volunteers to the village and swept the place for information, photos and testimonies. They then pitched the story to journalists who had worked with them in the past. The story exposed three chemical factories, Jiucailuo Chemical Ltd, Haichuan Chemical Ltd and Zuguang Microchemical Ltd. They are the three largest chemical factories located in and around Qiugang Village, on the outskirts of Bengbu City. Of the three, Jiucailuo is the worst offender, with no waste treatment procedure at all. The other two companies have waste treatment facilities, but they are inadequate and well below Chinese Ministry of Environmental Affairs’ standards.

These three companies made the village literally unlivable by tainting the local water supply. Research done by Green Anhui found that the village’s drinking water had an excessive level of sediments and chemicals and that it was not suitable for consumption. With Green Anhui’s support in March of 2007, villagers submitted petitions to the local Environmental Protection Bureau and fingerprinted their names in red ink. As part of a writing assignment, forty students wrote letters to the EPB urging them to clean up the river.

Following this action by the villagers of Qiugang, several stories ran in the Xinan Evening News and on Xinhua Net on the incident. Meanwhile, the Bengbu Environmental Protection Bureau (EPB) went from denying any violations, to publically validating the villagers’ claims on television interviews. The EPB eventually sent investigators to conduct random inspections on the factories and confirmed that they were in violation of the law. Two factories were ordered to pay a fine of 100,000 RMB (15,000 USD), and one was told to reduce their waste. Unfortunately, the fine is a small price to pay for companies like Jiucailuo which has annual revenue of 6 billion dollars.

By the end of 2007, following the actions of the villagers and the flurry of press reports, the Qiugang Village incident garnered the attention of the Ministry of Environmental Protection (MEP). MEP ordered the three factories to shut down and clean up, but the order was ignored by the companies. At various points, MEP used the newly-enacted Green Credit Policy to suspend loans to these companies and the local government even cut off electricity in order to halt their operations. The EPB renewed an order that mandated these companies to shut down by December of 2008. However, an update from September 2008 on the Bengbu EPB website states that the agency has increased their monitoring of these factories and that the situation has improved.

It is still unclear whether or not these three polluters will in fact be shut down and forced to move by the end of the year. The community in Qiugang is not sure if their waterways and livelihoods will be restored. Green Anhui will continue to work on this campaign, supporting Qiugang and other communities impacted by pollution along China’s rivers.

I recently had someone ask me my thoughts on DSX. This is a stock I started purchasing in early January 2007 at around $16 a share. I sold some of my shares in October 2007 at $43 a share. I still own 130 shares of the stock and plan to keep the shares even after the dividend has been cut. I view DSX as a long term value play of commodity prices and the future growth of China and India.

Chief Executive Simeon Palios said the company was not pressured by banks to suspend its dividend. Instead it is looking to preserve cash to purchase assets at rock-bottom prices. “By suspending dividend we free up cash to make investments such as vessel acquisition, which would deliver significant returns over the next several years,” Palios said.

Cantor Fitzgerald analyst Natasha Boyden said she is encouraged by Diana’s dividend suspension because it allows the company to retain free cash flow in order to take advantage of opportunities. “Due to the company's low leverage, we believe the dividend suspension is not a reflection of any liquidity issues, but rather an indication of the company's financial strength and desire to grow the fleet,” she said.

Here is my review of the stock from 7/15/2007.

Company Profile
DSX is a Greek shipping company specializing in transporting dry bulk cargoes such as iron ore, coal, grains and other materials. DSX has 13 Panamax ships and 3 Capesize in current service. They have 3 Capesize on order with the first to be ready in November 2007 and the other two in 2Q of 2010. DSX completed an initial public offering of common stock on March 23, 2005.

Management Objectives
Managements objective is to manage and expand its fleet in a manner that will enable DSX to pay attractive dividends and enhance shareholder value. To accomplish this objective, DSX intends to pursue highly focused business strategies, including: continuing to operate a high quality fleet; strategically expanding the size of our fleet; pursuing an appropriate balance of short-term and long-term time charters; maintaining a strong balance sheet with low leverage; and maintaining low cost, highly efficient operations.

Fundamentals and Prospects
Sales for DSX have grown at 66% the past 3 years and Earnings Per Share (EPS) have grown by 30% for the past 3 years but slowed over the last two. The current dividend rate for DSX is 7.69%. One thing to note, DSX has a negative Free Cash Flow but looks like it will turning positive in the next couple of quarters.

The real measure to examine at is the Baltic Dry Index (BDI) which is an average of rates for shipping various dry goods on specified routes. The BDI average for Panamax ships went from 34,610 on January 2, 2007 to 59,050 on July 13, 2007. The big reason for the increase in the rates can be explained by China as it is importing huge amounts of grains and raw materials. This is a good sign for the economy as the BDI is a leading indicator but it also could signal higher interest rates and commodity prices. The Panamax BDI rate is on the DSX website under their Fleet Employment

This is a risky dividend stock but if the demand for raw material from China and the world keep increasing, the rate for hiring a dry bulk ship will keep increasing as well. I see the demand for raw materials increasing for the rest of the year so I rate DSX a buy but be very careful of the BDI.

Disclosure: The Div Guy owns shares of DSX at the time of this post.

Wednesday, December 03, 2008

Baby Isabel

Yling and I visited this baby and her parents last night. She sings very well. :)
By Liz Mak

The Singapore regulator is looking to facilitate the industry's expansion by tackling key issues such as a lack of sharia-compliant assets and conflicting codes on supervision and tax treatments.

Compared to the $3.7 trillion in global premiums collected by the conventional insurance industry, the global takaful (Islamic insurance) industry is still small and has not yet penetrated retail markets. It generates just $2 billion worth of premium income a year, says Teo Swee Lian, deputy managing director for prudential supervision at the Monetary Authority of Singapore (MAS).

However, with 133 takaful insurers already operating around the world, Teo notes the industry is set to experience rapid growth concurrent to ongoing development in global Islamic capital markets and banking services. Citing estimates produced by accountancy firm Ernst & Young earlier this year, she notes the global takaful industry will likely double in size by 2010. In two years time, she says premium income will likely double to $4 billion a year and potentially accelerate over the coming decade.

Speaking at a seminar on takaful regulations in Singapore last week, Teo says the MAS is working to put in place a suitable cross-regional framework that will facilitate the industry's growth, and is also developing solutions that will help the industry to tackle certain challenges.

Unlike conventional insurers, takaful operators are forbidden from profiting from riba (interest), gharar (uncertainty) and maysir (speculations) – three fundamental qualities that make up conventional insurance. Where conventional insurers can quite simply allocate investments between bond and cash assets, takaful insurers are in the difficult position where not enough sharia-compliant assets exist to invest in, Teo says.

In 2008, Singapore saw the launch of Daiwa FT Shariah Japan ETF, the conversion of a Reit by Cambridge Industrial Trust and a maiden MTN issue by City Development.

Teo says the MAS is looking for ways to help deepen and widen the availability of such assets that will fit takaful insurers' needs.

In particular, the MAS is working on a sukuk structure that is based on the Al-Ijarah structure, or the sale-and-leaseback of an underlying property, says Teo.

"Sukuks issued by the facility will be given equal regulatory treatment as Singapore Government Securities (SGS) and returns will be tied to the risk-free yield of SGS of equivalent tenor," she says, adding that a number of Islamic institutional investors have already expressed interest. A potential launch of these instruments could arrive in the market by 2009.

Furthermore, she says the MAS has exempted murabaha investments which involve banks undertaking the sale and purchase of commodities from the previous restriction against non-financial activities for banks. This is on a condition that such activities should have the same economic substance and risks as conventional equivalents.

Teo adds the MAS is ready to level the playing field for takaful operators to compete side-by-side with conventional insurers. One way of doing so is through looking at tax issues. Islamic financial products tend to attract more taxes because of their unique structures. Teo says the MAS is waiving the double stamp duties investors often incur under Islamic real estate transactions.

The regulator is also giving the same concessionary tax treatment on sukuk payouts as interest coming from conventional bonds. These measures are carried out so sharia-compliant products will not be disadvantaged in their regulatory and tax treatment, Teo adds.

The Singaporean regulator may be going out of its way to make Islamic insurers feel welcome this week. Teo's speech also details plans to develop cross-regional governance and solvency frameworks for takaful operators, along with plans to train suitable manpower for Islamic insurance through tie-ups with the local Securities & Investment Institute and Chartered Institute of Management Accountant last week.

At the seminar last week, it out-gunned promises delivered by other Islamic hub state regulators who are also vying for the number one spot in Islamic insurance.

For the whole year of 1929, Wall Street experienced a severe market correction due to a series of spectacular bank failure in the preceding year. Nervous bank depositors sparked frequent bank runs which led to a systemic failure in the US financial system. The collapse of the financial system, credit crunch and economic recession are deadly combinations for financial crisis which led to high unemployment. The lines of unemployment begin to grow as not only the working class was affected. They were later joined by ex-rich capitalists and investment bankers who lost all their fortunes in the stock market. Little did they know at that time that the deep recession will evolve into a Global Great Depression which lasted till 1932. One of the badly burnt investor was an investor by the name of Benjamin Graham. From that financial crisis, he would go on to write the classic Security Analysis book that pioneered the study on Value Investment. His most famous student is Warren Buffet, a multi billionaire investor sage from Omaha. Under the value investment principle, an investor buys value or business of the company. Market movement and swings are of no relevant to him. The trick here is to compute the intrinsic value or real value of the firm and wait for opportunities whereby, the current market price is trading below its intrinsic value. The difference between the market price and intrinsic value is what Graham called as the margin of safety or risk premium in technical financial terms. The margin of safety is only possible during financial crisis where stocks are sold down to basement price and it is eliminated during bullish time whereby stock prices are speculated up. Now the interesting part is which valuation to choose from. As we approach the 80th. anniversary of the Great Depression next year, I am going to suggest a series of techniques that might be useful if history were to repeat again. As for me, I see a lot semblance between the 1929 and 2009 crisis and it's very eerie. The first one, which is known as the net current asset value. The formula is:-

Step 1 : NCAV = Total Current Assets — Total Current Liabilities — Long-term liabilities = $ X
Step 2: $X is to be divided by the number of shares to arrive at NCAV/share.
Step 3: Less 33% from the obtained NCAV/share (this is known as the Graham discount) to obtain the intrinsic value of the company.
Step 4: Now you are ready to make an investment decision after making comparison between intrinsic value and market price. If market price is trading below its intrinsic value, is a clear signal of undervaluation.

Having said, one must understand the business model of the company. A company can only be considered if it has at least 10 years of profit track record. Now let's see whether we can observe undervalue blue chip companies in Malaysia. Column 2 shows the real tangible value of the company per share while column 3 gives a value less 30% discount.

Firstly, compare column (3) with (4). A company is considered relatively undervalue if column (3) exceed than column (4). At present, Telekom meets these criteria while Tenaga's market price is tracking near to its value. This is followed by Maybank, Genting and Resorts. As for Bursa and Public Bank, you can forget about it for the time being. Clearly, it is grossly overvalue.

Secondly, column (5) shows the multiple premium or discount. This is derived by dividing column (4) and (2). Higher premium companies are undesirable while discount companies are preferable. It appears again that Bursa and Public Bank commands high premium to shareholders. The best is Telekom, which is giving 46% discount to its shareholders. Tenaga is trading at its real value. This should serve as a food of thought to prospective investors.

NTA 30% discount Marketprice Multiple



Public Bank




Source: Reuters

By Dominic Whiting, Asia property correspondent

BEIJING - Suffering from a slumping housing market, Chinese developers are scrambling to find new ways to keep the cash flowing in and creditors at bay, with anything from factories to timeshares in their sights.

An oversupply of new apartments in an economic downturn, and the lingering effects of government steps to stamp out rampant property speculation have sent home sales and prices tumbling.

Capital markets are closed, and loans have dried up.

'Banks give you an umbrella when it's sunny and want it back when it's raining,' said Li Xiaodong, chairman of J&J Assets Management, whose $300 million fund invests with property firms.

'So you have to choose products that are more suitable for the market at the moment,' he advised developers at a conference in Beijing. 'There's money out there, but there's no confidence.'

In a five-year boom, China's developers grew quickly and notched up huge profit margins, often of as much as 50 percent, as they built on land accumulated cheaply and sold apartments in a fast rising market.

But many who bought land at a 2007 price peak are suffering now, with sales down by as much as half from last year. The country's biggest developer, China Vanke, has slashed prices by a third, and others have gone further. And now they are looking away from housing.

Beijing-based Antaeus Group is selling rooms at Hainan island resorts, giving buyers stays of 30 days each year and a share of room rates.

'A lot of movie stars and real estate developers are buying,' said the firm's chairman, Zhang Baoquan.

'We need to survive the winter,' he said of the market downturn. 'But once spring comes, demand will be released.'


Shanghai-listed developer Vantone Estate aims to spend 3 billion yuan ($435 million) on industrial property in the next couple of years, according to Dongwei Wu, general manager at the unit responsible for the venture.

His first deal, which is still being negotiated, is for a factory in Wuxi that will be bought and leased back to a television maker faced with slowing exports.

'We're trying to diversify,' Wu told Reuters. 'There are a lot of companies that bought a lot of land very cheaply, or for zero because local governments gave it to them,' he added.

'But now is a very bad time, so they're trying to get more cash in and divesting assets.'

Holding investment properties usually produces much lower returns on assets than building homes because equity is tied up for much longer.

But Hong Kong developers have used the tactic well to smooth earnings, in a volatile property market. Office and retail rents are typically renegotiated every three years, while industrial and warehouse property leases can last a decade.

Developers Soho China, Poly Real Estate and Shanghai Forte Land are among prominent office landlords in China. But even they might fall victim to sliding property prices, needing to inject more equity into their buildings as banks refuse to refinance loans at former levels.

'It's very risky,' said Zhao Bingdong, vice president for property finance at Credit Suisse in Shanghai.

'As 2006-2007 loans mature in the next two years, we'll find that the rental rate of commercial buildings has fallen and refinancing capabilities will be lower.'

Many firms have unsold apartment blocks or empty hotels that they want to sell as timeshares -- an industry that is only just catching on in China but could grow to as big as the U.S. market, worth $10 billion in sales last year, according to Gavin Cheong, Asia head of business development at timeshare firm RCI Group.

'Developers have approached us for our help and possible partnership,' Singapore-based Cheong said. 'In China, there's a very strong instinct of 'where's the money?,' he added.