Saturday November 27, 2010
PETALING JAYA: Syarikat Prasarana Negara Bhd (SPNB) has awarded contracts worth RM1.7bil for the first phase (Package A) of the RM7bil light rail transit (LRT) extension project involving the Kelana Jaya and Ampang lines.
In a statement yesterday, SPNB, which was established by the Finance Ministry to facilitate, undertake and expedite infrastructure projects for the Government, said the main contractor facilities job for Package A of the Kelana Jaya line, valued at RM950mil, was awarded to Trans Resources Corp Bhd. The work will take 30 months to complete.
UEM Builders Bhd and Intria Bina Sdn Bhd were jointly appointed the nominated sub-contractors for the fabrication and delivery of segmental box girder jobs worth RM93.16mil, which is expected to take 21 months to complete.
Package A of the Kelana Jaya line will be a 9.2km extension from the Kelana Jaya station to Summit (Station 7). Package B will involve a 7.8km extension from Station 7 to the Putra Heights station.
Meanwhile, the main contractor facilities job for Package A of the Ampang line was jointly awarded to Bina Puri Holdings Bhd and Tim Sekata. Valued at RM634.64mil, the work will take 27 months to complete.
Bina Puri and Tim Sekata were also jointly appointed the nominated sub-contractors for the fabrication and delivery of segmental box girder jobs, which is valued at RM67.70mil and expected to take 19 months to complete.
Package A of the Ampang line will be a new 7.4km stretch from the Seri Petaling station to Station No. 5, while Package B will see a 10.3km extension from Station No. 5 to the Putra Heights Station.
SPNB said recipients of the main contractor facilities jobs would be responsible for all guideway sub-structure and main structure works, foundation work for stations and traction power sub-stations (TPSS), to launch and install segmental box girders and to supply and install parapets and noise barriers.
In addition, within the total contract value, the main contractors will also manage the nominated sub-contractors for contracts worth RM469mil (Kelana Jaya line) and RM305mil (Ampang line).
SPNB said the selection of the contractors was done through an open-tender process starting from November 2009. A total of 119 applications were received, but one was rejected due to failure to comply with application guidelines.
The tender for the facilities works under Package B for both lines will be called upon approval of the final railway scheme, which is expected by mid-2011.
With the appointment of the main contractors, it is expected that work on the line extension projects will start as soon as possible, SPNB said.
Sunday, November 28, 2010
Intro Balance Sheet Analysis ~ Bruce Greenwald
The enduring value of Security Analysis rests on certain critical ideas that were then, and remain, fundamental to any well-conceived investment strategy. The first of these is the distintion between "investment" and "speculation" as defined by Graham and Dodd :
An investment operation is one which, upon thorough analysis,
promises safety of principal and a satisfactory return.
Operations not meeting these requirements are speculative.
The critical parts of this definition are "thorough analysis" and "safety of principal and a satisfactory return." Nothing about these requirements has changed since 1934.
A second related idea is that of focusing on the intrinsic of a security. It is according to Graham and Dodd,
that value which is justified by the facts,
eg., the assets, earnings, dividends, [and] definite prospects,
as distinct, let us say, from market quotations
established by market manipulation or distorted by psychological excesses.
.
An investment operation is one which, upon thorough analysis,
promises safety of principal and a satisfactory return.
Operations not meeting these requirements are speculative.
The critical parts of this definition are "thorough analysis" and "safety of principal and a satisfactory return." Nothing about these requirements has changed since 1934.
A second related idea is that of focusing on the intrinsic of a security. It is according to Graham and Dodd,
that value which is justified by the facts,
eg., the assets, earnings, dividends, [and] definite prospects,
as distinct, let us say, from market quotations
established by market manipulation or distorted by psychological excesses.
.
Saturday, November 27, 2010
Berkshire Chairman's Letter 1977
We select our marketable equity securities in much the same
way we would evaluate a business for acquisition in its entirety.
We want the business to be
(1) one that we can understand,
(2) with favorable long-term prospects,
(3) operated by honest and competent people, and
(4) available at a very attractive price.
We ordinarily make no attempt to buy equities for anticipated
favorable stock price behavior in the short term. In fact, if
their business experience continues to satisfy us, we welcome
lower market prices of stocks we own as an opportunity to acquire
even more of a good thing at a better price.
Our experience has been that pro-rata portions of truly
outstanding businesses sometimes sell in the securities markets
at very large discounts from the prices they would command in
negotiated transactions involving entire companies.
Consequently, bargains in business ownership, which simply are
not available directly through corporate acquisition, can be
obtained indirectly through stock ownership. When prices are
appropriate, we are willing to take very large positions in
selected companies, not with any intention of taking control and
not foreseeing sell-out or merger, but with the expectation that
excellent business results by corporations will translate over
the long term into correspondingly excellent market value and
dividend results for owners, minority as well as majority.
Such investments initially may have negligible impact on our
operating earnings. For example, we invested $10.9 million in
Capital Cities Communications during 1977. Earnings attributable
to the shares we purchased totaled about $1.3 million last year.
But only the cash dividend, which currently provides $40,000
annually, is reflected in our operating earnings figure.
Capital Cities possesses both extraordinary properties and
extraordinary management. And these management skills extend
equally to operations and employment of corporate capital. To
purchase, directly, properties such as Capital Cities owns would
cost in the area of twice our cost of purchase via the stock
market, and direct ownership would offer no important advantages
to us. While control would give us the opportunity - and the
responsibility - to manage operations and corporate resources, we
would not be able to provide management in either of those
respects equal to that now in place. In effect, we can obtain a
better management result through non-control than control. This
is an unorthodox view, but one we believe to be sound.
.
way we would evaluate a business for acquisition in its entirety.
We want the business to be
(1) one that we can understand,
(2) with favorable long-term prospects,
(3) operated by honest and competent people, and
(4) available at a very attractive price.
We ordinarily make no attempt to buy equities for anticipated
favorable stock price behavior in the short term. In fact, if
their business experience continues to satisfy us, we welcome
lower market prices of stocks we own as an opportunity to acquire
even more of a good thing at a better price.
Our experience has been that pro-rata portions of truly
outstanding businesses sometimes sell in the securities markets
at very large discounts from the prices they would command in
negotiated transactions involving entire companies.
Consequently, bargains in business ownership, which simply are
not available directly through corporate acquisition, can be
obtained indirectly through stock ownership. When prices are
appropriate, we are willing to take very large positions in
selected companies, not with any intention of taking control and
not foreseeing sell-out or merger, but with the expectation that
excellent business results by corporations will translate over
the long term into correspondingly excellent market value and
dividend results for owners, minority as well as majority.
Such investments initially may have negligible impact on our
operating earnings. For example, we invested $10.9 million in
Capital Cities Communications during 1977. Earnings attributable
to the shares we purchased totaled about $1.3 million last year.
But only the cash dividend, which currently provides $40,000
annually, is reflected in our operating earnings figure.
Capital Cities possesses both extraordinary properties and
extraordinary management. And these management skills extend
equally to operations and employment of corporate capital. To
purchase, directly, properties such as Capital Cities owns would
cost in the area of twice our cost of purchase via the stock
market, and direct ownership would offer no important advantages
to us. While control would give us the opportunity - and the
responsibility - to manage operations and corporate resources, we
would not be able to provide management in either of those
respects equal to that now in place. In effect, we can obtain a
better management result through non-control than control. This
is an unorthodox view, but one we believe to be sound.
.
Friday, November 26, 2010
Other requisites for common stocks of Investment Grade and a Corollary Therefrom
It should be pointed that if 20 times average earnings is taken as the upper limit of price for an investment purchase, then ordinarily the price paid should be substantially less than this maximum. This suggests that about 12 times earnings may be suitable for the typical case of a company with "neutral" prospects.
We must emphasis also that a reasonable ratio of market price to average earnings is "NOT the ONLY" requisite for a common stock investment. The company must be satisfactory also in its "financial set-up and management," and not unsastifactory in "its prospects."
From this principle there follows another important corollary, viz.: "An attractive Investment is An Attractive Speculation." This is true because, if a common stock can meet the demand of "conservative" investor that he get full value for his money 'plus' not unsatisfactory future prospects, then such an issue must also have a fair chance of appreciating in market value.
.
We must emphasis also that a reasonable ratio of market price to average earnings is "NOT the ONLY" requisite for a common stock investment. The company must be satisfactory also in its "financial set-up and management," and not unsastifactory in "its prospects."
From this principle there follows another important corollary, viz.: "An attractive Investment is An Attractive Speculation." This is true because, if a common stock can meet the demand of "conservative" investor that he get full value for his money 'plus' not unsatisfactory future prospects, then such an issue must also have a fair chance of appreciating in market value.
.
A suggested basis of "Maximum Appraisal" for Investment
The investor in common stocks, equally with the speculator, is dependent on future than past earnings. His fundamental basis of appraisal must be an intelligent and conservative "estimate" of the future earning power.
But his "measure" of future earnings can be conservative only if it is limited by "actual performances over a period of time." And in most instances he will derive the investment value of a common stock from the "average earnings of a period between 5 and 10 years."
This does not mean that all all common stocks with the same average earnings should have the same value.
The common-stock investor (@ the conservative buyer) will properly accord a "more liberal valuation" to those issues
> which have current earnings above the average or
> which may reasonably be considered to possess better than average prospects
> or possess an inherently stable earning power.
But it is essential that some moderate upper limit must "in every case" be placed on the multiplier in order to stay within the bounds of conservative valuation, suggested that "about 20 times average earnings" is as high a price as can be paid in an "investment" purchase of a common stock.
But his "measure" of future earnings can be conservative only if it is limited by "actual performances over a period of time." And in most instances he will derive the investment value of a common stock from the "average earnings of a period between 5 and 10 years."
This does not mean that all all common stocks with the same average earnings should have the same value.
The common-stock investor (@ the conservative buyer) will properly accord a "more liberal valuation" to those issues
> which have current earnings above the average or
> which may reasonably be considered to possess better than average prospects
> or possess an inherently stable earning power.
But it is essential that some moderate upper limit must "in every case" be placed on the multiplier in order to stay within the bounds of conservative valuation, suggested that "about 20 times average earnings" is as high a price as can be paid in an "investment" purchase of a common stock.
Limited Functions of Analyst in Field of Appraisal of Stock Prices
Confronted by the mixture of changing facts and fluctuating human fancies, the securities analyst is clearly incapable of passing judgement on common-stock prices "generally."
There are , however, some concrete, if limited, functions that he "may" carry on in this field, of which the following are representative :
1. He may set up a basis for "conservative or investment" valuation of common stocks, as distinguished from speculative valuations.
2. He may point out the significance of :
(a) the capitalization structure; and
(b) the source of income
as bearing upon the valuation of a given stock issue.
3. He may find unusual elements in the balance sheet which affect the implications of the earnings picture.
.
There are , however, some concrete, if limited, functions that he "may" carry on in this field, of which the following are representative :
1. He may set up a basis for "conservative or investment" valuation of common stocks, as distinguished from speculative valuations.
2. He may point out the significance of :
(a) the capitalization structure; and
(b) the source of income
as bearing upon the valuation of a given stock issue.
3. He may find unusual elements in the balance sheet which affect the implications of the earnings picture.
.
Exact Appraisal Impossible
Security analysis cannot presume to lay down general rules as to the "proper value" of any given common stock. Practically speaking, there is no such thing. The bases of value are too shifting to admit of any formulation that could claim to be even reasonably accurate. The whole idea of basing the value upon "current earnings" seems inherently absurd, since we know that the current earnings are constantly changing. And whether the multiplier should be 10 or 15 or 30 would seem at bottom a matter of purely arbitrary choice.
But the stock market itself has no time for such scientific scruples. It must make its values first and find its reason afterwards. Its position is much like that of a jury in a breach-of-promise suit; there is no way of measuring the values involved, and yet they must be measured somehow and a verdict rendered.
Hence the prices of common stocks are "not carefully thought out computations" but "the resultant of a welter of human reactions."
The stock market is a voting machine rather than a weighing machine.
It responds to factual data "not directly" but only as they "affect the decisions" of buyers and sellers.
.
But the stock market itself has no time for such scientific scruples. It must make its values first and find its reason afterwards. Its position is much like that of a jury in a breach-of-promise suit; there is no way of measuring the values involved, and yet they must be measured somehow and a verdict rendered.
Hence the prices of common stocks are "not carefully thought out computations" but "the resultant of a welter of human reactions."
The stock market is a voting machine rather than a weighing machine.
It responds to factual data "not directly" but only as they "affect the decisions" of buyers and sellers.
.
Leader Universal expects diversification to pay off by 2013
Monday, 25 October 2010 00:00
Leader Universal Holdings Bhd is expecting its diversification away from its core business into power transmission and distribution to bear fruit within three years.
Leader Universal, which has its mainstay in manufacturing wire and cables, made its foray into the power transmission and distribution business in 1994 by building electric transmission cables and power plants in Cambodia.
The company is currently building a 100MW coal-fired power plant near the port city of Sihanoukville, Cambodia, which is funded by a syndicated term-loan facility and internally generated funds.
It undertook a financing facility of US$140 million (RM436 million) for the project and has seven years to repay the loan, with an option to extend the repayment period by another two years, subject to its lenders’ approval.
Besides power generation, Leader Universal is also building a 230kV, 110km overhead transmission line linking two substations near Phnom Penh.
The transmission project is partly funded by bank borrowings of US$65 million, payable over 13 years commencing from 2010, from Export-Import Bank of Malaysia Bhd and by internally generated funds. The cost of the entire power transmission project is estimated to be US$107 million. It is targeted for completion by mid-2011, while the substations north of Phnom Penh are expected to be ready by early 2012.
Based on Leader Universal’s latest quarterly report, its long-term borrowings are RM130.38 million while short-term borrowings are RM224.33 million, on the back of total equity of RM667.78 million.
The company, which derives only 6.55% of its revenue from the power transmission segment, expects to see this figure grow to about 20% by FY2013 ending Dec 31.
“Yes, we will see both projects completed by 2013. Currently, over 90% of our revenue is contributed by the wire and cables division,” says Leader Universal’s investor relations official Albert Wong.
Indeed, the company’s revenue for 1HFY2010 was RM1.22 billion, a rise of 33.3% from the corresponding period a year ago. Net profit was RM25.1 million, compared with RM26.2 million for the same period last year.
Earnings per share for the six months stood at 5.75 sen, while net tangible assets per share was RM1.25 on the back of a market capitalisation of RM384.08 million.
On Leader Universal’s outlook for 2H2010, Wong says the company is expected to achieve “better results” compared with the same period last year, barring any unforeseen circumstances.
The company recorded revenue of RM918.76 million for the first six months of FY2009. If it is able to repeat its performance this year, its annualised revenue could hit RM2.45 billion. This is almost equal the RM2.54 billion recorded in 2008, before the US subprime crisis hit the world economy, and also 25.6% higher than the RM1.95 billion revenue achieved in FY2009.
However, it should be noted that Leader Universal saw a 33.5% drop in its cash and bank balances for 1HFY2010 to RM135.11 million, compared with the same period a year ago. Its net cash flow from operations also dropped to RM23.92 million, from RM205.91 million.
Wong attributes this to the company’s increased sales, which led to an increase in working capital requirements and resulted in increased debtor balances that were not due for collection yet.
Wong is confident that a steady stream of jobs coming in will keep the company busy over the next few years. Among the projects he cites are
1. the RM40 billion mass rapid transit,
2. RM26 billion KL International Financial District,
3. RM5 billion 100-storey Warisan Merdeka Tower,
4. six highways,
5. schools and
6. hospitals.
Leader Universal also expects to benefit from the Sarawak Corridor of Renewable Energy programme and the implementation of other projects under the Ninth Malaysia Plan worth RM7 billion.
Leader Universal’s associate, Sarawak Cable Bhd, is the front runner to land plump jobs to provide cables in the state. Among its shareholders are Sarawak Energy Bhd, the sole electricity supplier in the state.
Leader Universal’s optimism in Cambodia is premised on its young population hungry for power as the country develops further. It is not a new market for the Penang-based company, which has been looking at Cambodia for some years now.
Given its persistence and expanding power plant business in Cambodia, the company’s diversification is expected to pay off in the years to come.
This article appeared in Corporate, The Edge Malaysia, Issue 829, Oct 25-31, 2010
Leader Universal Holdings Bhd is expecting its diversification away from its core business into power transmission and distribution to bear fruit within three years.
Leader Universal, which has its mainstay in manufacturing wire and cables, made its foray into the power transmission and distribution business in 1994 by building electric transmission cables and power plants in Cambodia.
The company is currently building a 100MW coal-fired power plant near the port city of Sihanoukville, Cambodia, which is funded by a syndicated term-loan facility and internally generated funds.
It undertook a financing facility of US$140 million (RM436 million) for the project and has seven years to repay the loan, with an option to extend the repayment period by another two years, subject to its lenders’ approval.
Besides power generation, Leader Universal is also building a 230kV, 110km overhead transmission line linking two substations near Phnom Penh.
The transmission project is partly funded by bank borrowings of US$65 million, payable over 13 years commencing from 2010, from Export-Import Bank of Malaysia Bhd and by internally generated funds. The cost of the entire power transmission project is estimated to be US$107 million. It is targeted for completion by mid-2011, while the substations north of Phnom Penh are expected to be ready by early 2012.
Based on Leader Universal’s latest quarterly report, its long-term borrowings are RM130.38 million while short-term borrowings are RM224.33 million, on the back of total equity of RM667.78 million.
The company, which derives only 6.55% of its revenue from the power transmission segment, expects to see this figure grow to about 20% by FY2013 ending Dec 31.
“Yes, we will see both projects completed by 2013. Currently, over 90% of our revenue is contributed by the wire and cables division,” says Leader Universal’s investor relations official Albert Wong.
Indeed, the company’s revenue for 1HFY2010 was RM1.22 billion, a rise of 33.3% from the corresponding period a year ago. Net profit was RM25.1 million, compared with RM26.2 million for the same period last year.
Earnings per share for the six months stood at 5.75 sen, while net tangible assets per share was RM1.25 on the back of a market capitalisation of RM384.08 million.
On Leader Universal’s outlook for 2H2010, Wong says the company is expected to achieve “better results” compared with the same period last year, barring any unforeseen circumstances.
The company recorded revenue of RM918.76 million for the first six months of FY2009. If it is able to repeat its performance this year, its annualised revenue could hit RM2.45 billion. This is almost equal the RM2.54 billion recorded in 2008, before the US subprime crisis hit the world economy, and also 25.6% higher than the RM1.95 billion revenue achieved in FY2009.
However, it should be noted that Leader Universal saw a 33.5% drop in its cash and bank balances for 1HFY2010 to RM135.11 million, compared with the same period a year ago. Its net cash flow from operations also dropped to RM23.92 million, from RM205.91 million.
Wong attributes this to the company’s increased sales, which led to an increase in working capital requirements and resulted in increased debtor balances that were not due for collection yet.
Wong is confident that a steady stream of jobs coming in will keep the company busy over the next few years. Among the projects he cites are
1. the RM40 billion mass rapid transit,
2. RM26 billion KL International Financial District,
3. RM5 billion 100-storey Warisan Merdeka Tower,
4. six highways,
5. schools and
6. hospitals.
Leader Universal also expects to benefit from the Sarawak Corridor of Renewable Energy programme and the implementation of other projects under the Ninth Malaysia Plan worth RM7 billion.
Leader Universal’s associate, Sarawak Cable Bhd, is the front runner to land plump jobs to provide cables in the state. Among its shareholders are Sarawak Energy Bhd, the sole electricity supplier in the state.
Leader Universal’s optimism in Cambodia is premised on its young population hungry for power as the country develops further. It is not a new market for the Penang-based company, which has been looking at Cambodia for some years now.
Given its persistence and expanding power plant business in Cambodia, the company’s diversification is expected to pay off in the years to come.
This article appeared in Corporate, The Edge Malaysia, Issue 829, Oct 25-31, 2010
Perodua sees higher sales on strong demand
Friday November 26, 2010
KOTA KINABALU: Perusahaan Otomobil Kedua Sdn Bhd (Perodua) has revised upward its sales figure for the year, given the strong demand for its vehicles.
Managing director Datuk Aminar Rashid Salleh said the company was now expecting to sell 185,000 vehicles in 2010 compared with an initial projection of 176,000 units.
He said that MyVi remained the most popular of Perodua's range of vehicles, accounting for about 41% sales, while the Viva compact and Alza multi-purpose vehicle (MPV) made up 37% and 22% of sales respectively.
To us, the Viva will continue to be relevant for many years to come, Aminar said at the launch of the Viva Elite Exclusive here yesterday.
He said the Viva accounted for 10,500 of the 21,300 vehicles sold in Sabah and Sarawak so far this year.
Sabah contributed 46% to our sales in this region and I believe the market still has a lot of room to grow.
We aim to increase the sales contribution from this part of the country from 14% to 20% within five years, Aminar said, adding that this would be achieved through a concerted advertising campaign and various ground activities.
Asked about competition from foreign makers of compact cars, such as those from South Korea and China which were trying to make their presence felt in the country, he said Perodua had had a good headstart in terms of establishing its sales and service network nationwide.
We are an established brand as evident from the good resale value of our vehicles. This includes the Kancil which was introduced some 17 years ago, he said.
Aminar said Perodua also understood Malaysians' taste and that it designed its vehicles accordingly.
KOTA KINABALU: Perusahaan Otomobil Kedua Sdn Bhd (Perodua) has revised upward its sales figure for the year, given the strong demand for its vehicles.
Managing director Datuk Aminar Rashid Salleh said the company was now expecting to sell 185,000 vehicles in 2010 compared with an initial projection of 176,000 units.
He said that MyVi remained the most popular of Perodua's range of vehicles, accounting for about 41% sales, while the Viva compact and Alza multi-purpose vehicle (MPV) made up 37% and 22% of sales respectively.
To us, the Viva will continue to be relevant for many years to come, Aminar said at the launch of the Viva Elite Exclusive here yesterday.
He said the Viva accounted for 10,500 of the 21,300 vehicles sold in Sabah and Sarawak so far this year.
Sabah contributed 46% to our sales in this region and I believe the market still has a lot of room to grow.
We aim to increase the sales contribution from this part of the country from 14% to 20% within five years, Aminar said, adding that this would be achieved through a concerted advertising campaign and various ground activities.
Asked about competition from foreign makers of compact cars, such as those from South Korea and China which were trying to make their presence felt in the country, he said Perodua had had a good headstart in terms of establishing its sales and service network nationwide.
We are an established brand as evident from the good resale value of our vehicles. This includes the Kancil which was introduced some 17 years ago, he said.
Aminar said Perodua also understood Malaysians' taste and that it designed its vehicles accordingly.
Thursday, August 5, 2010
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