Getting the true essence of branding

By Star Online: Business
30 June 2012

BUILDING a successful brand is more than just having attractive symbols or smart catch phrases, which is apparently what many company heads and entrepreneurs limit their marketing efforts to.

“The first thing that needs to be understood is the connection between branding and business value. In our experience, far too many companies equate branding with a logo, tagline or advertising campaign,” says Interbrand client services director Jonathan Bernstein.

“They don't really understand the connection,” he adds.

High-dividend equities preferred

By Star Online: Business
30 June 2012

KUALA LUMPUR: In an environment where the global economy is expected to “muddle through,” high-dividend equities are the favoured option for better returns and to enhance investors' income.

According to Standard Chartered (StanChart) chief investment strategist for consumer banking Steve Brice, high-dividend equities tend to outperform in low-growth environment.

Brice:‘We have lowered the probability of a global recession to 20% from our earlier projection of 30%.’

“Dividends are inflation-protected, and historically, it has been proven that a significant part of equity returns come from dividends,” Brice said in a press briefing held in conjunction with StanChart's Second-Half Market Outlook 2012.

5 Economic Reports You Should Watch

By Investopedia
29 June 2012

If you watch financial television or if you read financial publications like The Wall Street Journal, Investor's Business Daily or the many financial blogs out there, you notice that there is a seemingly endless amount of economic reports being released.

The truth is that many of these reports have little value to the individual investor. Judging by the market reaction when the reports are released, even the most sophisticated investors don't see most of the data as something that would change their investing or trading actions in the near future.

However, there are some reports that are market movers. Good traders know which reports to watch and when the reports are released to the public. Here are five economic reports you should watch.

Analysts have mixed views on Top Glove’s plantation buy

Star Online: Business
27 June 2012

PETALING JAYA: Analysts have mixed views on Top Glove Corp Bhd's move to acquire greenfield rubber plantation in Indonesia.

On Monday, Top Glove announced that its wholly-owned sub-subsidiary, Best Advance Resources Ltd, would acquire 95% equity or 5,700 shares in PT Agro Pramata Sejahtera for RM22mil.

Agro Pratama holds a 60-year licence to operate a rubber forest plantation covering 30,000ha on two islands east of the southern Sumatra city of Palembang (around 20,000ha in Kabupaten Belitung and about 10,000ha in Kabupaten Bangka).

Top Glove said the proposed acquisition was expected to be completed within 15 months from the date of agreement or any later date as agreed by all parties.

Several research houses including Maybank Investment Bank Research and Affin Research view the acquisition positively.

“We are long-term positive on this latest development as it will reduce the volatility of its key input cost. Top Glove's operating environment remains conducive for now, amid declining latex prices and a strengthening US dollar,” Maybank Investment said.

Affin Research views the acquisition positively, as it is in line with Top Glove's aim of expanding upstream into the rubber plantation business.

“Previously, the company had focused on acquiring land in Cambodia, However, progress has been slow and there have been consistent delays in approvals. Consequently, we believe that management may abort its Cambodia plans, especially since it has been able to acquire land elsewhere.

“That said, the Indonesia land acquisition is a greenfield investment. Taking into account land acquisition (estimated at 15 months), planting and maturity requirements, we do not expect to see any earnings contribution within the next five to seven years,” Affin Research said.

CIMB Research has a contrarian view on this, saying Top Glove could be spending RM400mil, or RM50mil per annum over eight years, to clear land and fully cultivate the estate following its move to acquire Agro Pramata.

“We take a dim view of Top Glove's purchase of a 30,000ha greenfield rubber plantation in Indonesia's southern Sumatra, as the RM400mil that it may spend on developing it over the next eight years could be put to more efficient use to enhance manufacturing and brand equity,” CIMB Research said.

It added that hedging the variability of natural rubber prices, a financial instrument would be more prudent and less capital-intensive.

It said in the best-case scenario, the first planting could start by the second half of 2012, with first fruits by 2019 to 2020.

CIMB Research said the high capital expenditure was expected to be funded internally and the 30,000ha plantation could support a 12 billion-pieces-per-year glove-making facility.

“The acquisition is not a surprise as management has been talking about buying rubber plantation land for some time. Last quarter, it hinted that it may acquire land in Indonesia instead of Cambodia due to procedural difficulties there.

“We are negative on the acquisition as we believe that the capital allocated could be used to enhance Top Glove's manufacturing process and brand instead.

“Also, the rationale for diversifying upstream is to hedge the natural rubber price, which we believe is misguided. A less capital-intensive method would be to use the financial exchanges in Singapore and Japan,” CIMB Research said.

[Source]

Oil supply surge could risk price collapse: Harvard analysis

By Star Online: Business
27 June 2012

WASHINGTON: Global oil supplies are growing so fast that they could outstrip demand and lead to a collapse in world prices, a former energy executive who is now a Harvard research fellow said on Tuesday.

"Most analyses today are still marked by this obsession with oil running out," Leonardo Maugeri, formerly a senior manager at Italy-based oil and gas giant Eni SpA , said at a discussion at the Center for Strategic and International Studies think tank in Washington.

In analyzing capacity at more than 1,000 oil fields around the world, he found that depletion of oil supplies was occurring "much more slowly and gently than expected."

He estimated that world oil production capacity could go up by 17.6 million barrels per day between now and 2020.

"Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption," he wrote in his analysis, published as a policy brief by Harvard's Belfer Center for Science and International Affairs. "This could lead to a glut of overproduction and a steep dip in prices."

Production capacity is expected to grow the most in Iraq, the United States, Canada, Brazil and Venezuela, while it could decline in Norway, the United Kingdom, Mexico and Iran, his analysis found.

Much of the surge in U.S. capacity is due to the boom in shale oil.

Unless oil demand grows at a sustained yearly rate of 1.6 percent -- compared with a bit less than 1 percent now -- overproduction and price collapse are possible, Maugeri said.

Global oil output capacity is likely to grow from 93 million barrels per day currently to 110 million bpd by 2020. If oil prices stay above $70 a barrel, the increase in capacity can be sustained, according to the analysis.

"However, world demand is sluggish due to the lagging economy and focus on energy efficiency," Maugeri wrote. "If these trends continue, we could see a significant dip -- or even a temporary collapse -- of oil prices."

The boom in so-called unconventional oil, like that derived from hydraulic fracturing of oil and gas locked in underground shale formations, must trigger environmental action, he wrote.

"Without this balance between industry and environmental interests," the analysis said, "new oil production projects will be stymied or delayed." - Reuters

[Source]

Aviation - Airlines Rejoice as Jet Fuel Gets Cheaper

By OSK Research26 June 2012

Jet fuel price has been on a downtrend since early May, plunging by 20% to an 18-month low of USD106.5/barrel this week. As jet fuel is the biggest cost component at up to 70% of total costs, an airline with the least hedging exposure and a low earnings base will see the most meaningful impact on earnings. THAI and SIA will have the highest earnings sensitivity to receding crude oil prices due to their slim margins and conservative hedging position respectively. The share prices of the airline stocks under our coverage are currently at an attractive below mid-cycle valuations. We maintain our OVERWEIGHT call on the sector, with AirAsia (FV: RM4.57) and Thai Airways (THB35.4) as our top BUYS.

Dynamics of oil prices. Jet fuel price has been on a downward trend since early May, plunging by 20% to an 18-month low of USD106.5/barrel. YTD, the jet fuel price has averaged USD127/barrel (YTD 2011: USD126/barrel). The price drop is in tandem with the fall in crude oil prices due to high oil inventories amid weaker demand arising from renewed concerns over the protracted European debt crisis and the slower than expected economic growth in China and the US. The decline in crude oil price is also linked to the oversupply of oil from both Saudi Arabia and Iran, which is facing trade sanctions. Nevertheless, China and India continue to import oil from Iran despite the sanctions, while Saudi Arabia continues to supply more oil to fill the gap created by the anticipated shortage due to the sanctions.

Spreads get slimmer. The spread between WTI and Brent crude has been narrowing significantly of late due to a pipe reversal between the hub at Cushing in Oklahoma and the refineries in the Gulf of Mexico. This has allowed the previous glut of oil extracted from domestic oil production from shale deposits stored in Cushing (benchmarked by the WTI) to be transported by pipe (instead of rail) to the Gulf of Mexico for refining. As the supply glut eases, the spread between WTI and Brent has accordingly narrowed. In the US, the demand for oil imports is dropping as the country is extracting oil from shale deposits and becoming more energy independent, which in turn has put further downward pressure on Brent oil price. As the US is one of the key major oil importers, the lower oil imports into the country essentially leads to surging inventory globally amid weak demand, which is in turn favorable for jet fuel price. 

THAI, SIA reap the benefits of low jet fuel prices. Jet fuel is the biggest cost component, making up about 70% of an airline’s total costs. The downtrend in jet fuel price means that airlines with the least hedging exposure and a low earnings base would see the most earnings upside. Figure 1 overleaf suggests that THAI and SIA have the highest earnings sensitivity to the recent drop in crude oil due to their low earnings base and hedging positions respectively. AirAsia’s earnings, however, are the least sensitive to jet fuel price movement given its high hedging position (at 40% in 2Q and 20%-25% in 2H), as well as high-margin low cost model, which fetches a net profit margin of 20% vs the less than 5% among its peers under our coverage.

Best time to hedge. In a matter of a few weeks, the shape of the forward curve for jet fuel has shifted from a state of backwardation to that of a contango, meaning that future prices are anticipated to be higher than the current spot price in the longer term. This means that airlines will be in a favorable position to lock in hedging positions from 2H onwards.

Global headlines shake confidence. Recent global news headlines on Europe’s lingering debt crisis, a weakening US economy and the slowing manufacturing activities globally may have been cause for worry. Generally, things are worse than anticipated and central banks and policy makers globally are expected to do whatever it takes to spur growth.  As all eyes are now on Europe’s debt crisis, the region’s failure to support a bailout will negatively affect the global economy.

Passenger demand seems encouraging. Recent statistics from SIA and Thai Airways show that demand for air travel has been resilient across the board, including traffic from/to Europe. In the immediate term, we see passenger travel possibly picking up during the summer holidays as well as due to the on-going Euro football championship and upcoming Olympics. For instance, Thai Airways’ advance bookings indicate that as much as 75% of its seats may be filled in June, well above last year’s 65.7% and 72% in May 2012, while AirAsia’s advance bookings are 3ppt higher than last year’s load factor, suggesting that demand is very encouraging. Furthermore, a weaker Euro will draw long haul travellers to the European region. As such, we think that in the immediate to medium term, air travel demand will remain encouraging and continue to see growth. However, due to intense competition, notably from carriers from the Middle East, the upside on yields may be somewhat limited. All in, given the sharp drop in jet fuel price, we expect breakeven load factors across the airline industry to improve. 

But cargo may disappoint. The weaker than expected global manufacturing data is a source of worry for the air freight market. A recovery can only be expected as towards end-2012, provided that the European debt crisis is contained. SIA has the highest exposure in the cargo segment among the airlines we cover. Despite these concerns, yesterday’s announcement that SIA will commence joint freighter services with China Cargo Airlines between Shanghai and Singapore from 26 June 2012 will stimulate tonnage carried and load factor. These two cities will essentially function as hubs for SIA’s vast global network.  

OVERWEIGHT. We are of the view that the prices of the airline stocks under our coverage are currently at attractive levels. As such, this is an opportune time to accumulate as these counters are trading below their mid-cycle valuations. However, investors should take heed of the cautious global outlook as all eyes are now on how Europe will tackle its debt crisis. We have BUY calls on the stocks across our coverage, with AirAsia being our top pick at a FV of RM4.57, followed by THAI Airways, at a FV of THB35.40.

[Source]

Independent directors: Nine-year cap sensible?

By Star Online: Business
25 June 2012

The term limit seems to be an arbitrary cut-off point, only justified on the grounds other jurisdictions have settled on nine years

THE Malaysian Code on Corporate Governance 2012 (MCCG 2012) published in March stipulates that directors are deemed to cease being independent once they have been on a board for nine years. This brings Malaysia in line with other jurisdictions like the United Kingdom, Singapore and Hong Kong.

Clearly this makes sense when seen through the eyes of international investors who are comparing and contrasting Malaysia as investment destination with other markets. Having the same regulations make it easier for foreign investors to decide where to put their money.

However, the question remains whether it makes the same amount of sense from a company perspective.

Case for term limits

The case for term limits is based on three powerful ideas.

First, there is a general belief that when directors are involved for more than a certain amount of time with the same company, they lose their ability to keep the emotional distance needed to provide genuinely independent advice and counsel. This is because they have become too intimately involved in the strategy they helped formulate and review in the first place.

This school of thought argues that any constructive criticism of strategic execution becomes harder with the passage of time because the directors are increasingly “implicated” in what is going on.

So the first problem is how can independent directors preserve the necessary distance from execution to be able to monitor and supervise business performance appropriately when they have been involved in coaching and advising the CEO in the development of the strategy they are supposed to oversee?

Second, when directors work together for too long, the interpersonal dynamics tend to become so clubby that it becomes more difficult to challenge constructively. People don't want to upset their friends, and this is even more of an issue in cultures where group harmony is a prized asset.

This creates the second problem the dreaded “groupthink”. Groupthink undermines independence of thought in an invisible way because the interpersonal dynamics make it harder and harder over time to challenge the collective conventional wisdom of the group.

Third, there are some directors on boards who are no longer able to keep up with the ever greater demands being placed on them by regulators and society. The bar is raised year by year by new court rulings around the world and regulatory reactions to crises like the Asian financial crisis in 1997-98 or the global financial crisis of 2007-08.

I have heard it argued that Malaysians are too forgiving of poor performance; so having a fixed, defined time limit is an effective way of getting poor performers off boards while saving face for all concerned.

Whether that is special pleading or not, it is true that having a fixed term limit does mean directors can be removed without unpleasantness or loss of face.

Case against term limits

The case against term limits is based on equally powerful ideas.

First, there is the argument that independence is the result of a director's state of mind and integrity. Directors either think independently or they don't.

Those that do will continue to do so regardless of the time they spend on a board because it is in their nature. I know many directors of listed companies who have been on their boards for more than nine years and who continue to be scrupulously independent in their thinking and in their effectiveness as constructive challengers of the CEO.

They have learnt how to reconcile the fact they are involved in the formulation of the strategy and in advising the CEO in its development with the need to keep their distance to oversee and monitor its execution.

Second, some would argue that the longer the directors have been on the board, the better they get for two related reasons:

● Independent directors are at a systemic disadvantage compared with executive directors; the former do not have access to the same amount or quality of information. So they need time to understand the drivers of the business at a detailed level, and if they only meet four times a year, it may take several years before they really are able to get under the skin of the business.

Some people say independent directors only become really useful after four or five years (it may take longer depending on the complexity of the business) and so to ask them to step down at nine years is to lose them when they are just at their peak; and

● This is perhaps even more the case when the company is closely controlled because it takes time for the independent director to learn what the controlling shareholder agenda is, and therefore how best to challenge constructively without being asked to step down in the words of Tan Sri Azman Yahya “rocking the boat without sinking it”.

Third, boards are required to report annually on the effectiveness and independence of their directors. On this basis, some people argue there is no need to have a fixed term limit.

Every year becomes the test for independence rather than waiting for nine years. After all, what is the point of keeping a compliant director on the board until nine years are up, if independence of mind is the key to adding value on a board?

Lastly, why nine years and not 12 or six? Nine years seem to be an arbitrary cut-off point, only justified on the grounds that other jurisdictions have settled on nine.

[Source]

MAS will need cash to turn around

By Star Online: Business
25 June 2012

Analyst: Privatisation an option to restore its position

KUALA LUMPUR: The question many people ask now is whether Malaysia Airlines (MAS) can undertake a turnaround within its targeted timeframe, and the options available to ensure the national carrier continues to fly without having to contend with a financial turbulence time and again.

If its latest turnaround plan goes according to plan and achieves the desired results, it is possible for the airline to return to the black, but this will require a lot of cash, according to MIDF Research analyst Imran Yassin Md Yusof.

“MAS needs cash in order to move forward to rebuild its brand name and consolidate its financial structure to ensure it remains competitive among other regional players,” he said in an interview.

Privatisation of MAS would be another way to restore the position of the national carrier, he said, adding, that now would be the best time to do so as its share price was cheap.

Imran says MAS’ top management needs to further bolster efforts to save the airline by focusing on its niche business — Bernama

MAS last week announced its target to return to profitability by 2014, which was an extension of a year from its turnaround plan announced in December last year.

Imran said further stability in the global economy would help the turnaround plan.

Despite its financial woes, he said MAS was still relevant as it played a major role in spurring growth in related activities such as aircraft maintenance, repair and operations businesses, leasing aircraft as well as the tourism industry.

He said that its top management needed to further bolster efforts to save the airline by focusing on its niche business.

He said MAS as a full services carrier should focus on attracting more passengers for its business and first class seats, which generate a higher yield compared to the economy class, which was more price sensitive.

“When we compare MAS with its peers, the cost structure is just about the same. However, in terms of revenue, MAS does not match them, and this is one main reason why it is still lagging behind,” he added.

MAS, he said, also lags in terms of services and products.

Citing an example, he said Emirates Airlines offered a very competitive fare, but at the same time the product offering was better than MAS, like flight entertainment with 100 television channels.

Comparing MAS and AirAsia, he said their business strategy was different and therefore any comparison would be unfair. “Although in terms of flights, some costs are about the same, their target market and pricing strategy are different,” he added.

Nevertheless, Imran said MAS could still learn from AirAsia which had performed well in areas such as cost control, mitigating high fuel costs as well as ways to attract customers.

He said the collaboration between MAS and Malaysia Airports Holdings Bhd (MAHB) should also be strengthened to offer extra services to the business and first class passengers. “They will not care much about the pricing if we can offer them extra when compared with others.

“MAS therefore needs to work closely with MAHB to upgrade its services and to offer extra services, especially for transit passengers at the airport,” he added.

On the idea of privatising MAS, he said this could be another way to save and help the airline.

By privatising MAS to any Malaysian conglomerate, it would be possible to do what is necessary for the turnaround and rebuild the airline out of the public eye, he added.

He also believes that now would the best time for any MAS privatisation, following the current lower share price. “In terms of ringgit and sen, the price of privatisation now can be cheaper, rather than later,” he said.

Imran added that if MAS made a recovery, the share would likely move up to between RM2 to RM3 per share.

On Friday, the share price of MAS closed a sen higher at RM1.14. - Bernama

[Source]

On top of the world - Favelle Favco

By Star Online: Business
23 June 2012

Favelle Favco makes cranes that sit atop the world's tallest structures

MAC Chung Hui's company does RM500mil worth of business every year, but he does not go out of his way to impress.

In fact, he is courteous and greets you with a warm smile.

Thing is, this CEO is only 33 years old, and has a habit of looking down on people.

Literally, I mean.

Because that is his business.

His company, Favelle Favco Bhd, manufactures cranes that sit atop some of the tallest structures in the world. Peering down at the rest of mankind from the top of these edifices is a sight he is familiar with.

Favelle Favco cranes built the Burj Khalifa in Dubai, Taipei 101, the Petronas Twin Towers, the Shanghai World Financial Centre and also the Jin Mao Tower in the city.

The company's cranes were also used in 1967 to build the World Trade Center twin towers in New York which were destroyed in 9/11. Favco cranes are now helping to build the replacement tower One World Trade Centre.

Favelle Favco cranes have been used to built the Jin Mao Tower (left), the Shanghai World Financial Centre (right) and the Shanghai Tower (foreground).

Home built

Favco cranes are made in the Senawang Industrial Estate, just south of Kuala Lumpur.

There, on a sprawling 17-acre site, all the pieces that make up a crane are fabricated, assembled, tested and then shipped overseas.

Some 35 engineers work on design, research and development. Another 15 do the same at a smaller plant in Batu Tiga, Selangor. An outfit of almost similar size works out of the company's Sydney office.

This Sydney office is the link to the company's history. Favelle Favco began as an Australian company and was bought over by Muhibbah Engineering (M) Bhd, a company controlled by Chung Hui's father, Mac Ngan Boon, in 1995.

“Muhibbah was looking to diversify its business at that time and it was thought this was an investment we could help build,” Chung Hui says.

Mac Senior had high expectations. The company he bought was not doing well. It had been around for some 30 years but had gone bankrupt several times in the course of a chequered history.

“So when we took over the company, the challenge was very clear: Make sure it doesn't go belly up! And make money!”

Much-needed break

“The first few years were very difficult,” Chung Hui says. “We had to learn the business from scratch, and it took us more than five years before we had a good grip over things.”

“There were ups and downs but two breaks helped us. In 1997, we were awarded pioneer status by the Ministry of International Trade and Industry, and that meant we didn't have to pay tax for a few years. That gave us some breathing space.

“We were also accepted as a vendor by Petronas and managed to win a few contracts to supply offshore cranes. We were still on the learning curve at that time, working hard to establish our reputation. So the Petronas support at a critical time was helpful.”

Chung Hui: ‘You cannot depend on today’s demand to determine tomorrow’s needs.’

Chung Hui himself joined the company in 1999 after graduating from Nottingham University with a civil engineering degree. In 2004, he became CEO.

How has the company fared since? In 2006, it was listed on the second board of Bursa Malaysia. The following year it transferred to the Main Board. Today it has a market capitalisation of RM250mil. Sales have averaged RM490mil annually and profits RM29mil over the last five years. Return on equity has been in the region of 16%.

“So, from a financial point of view, I think our performance has been respectable. We now contribute to about 30% of Muhibbah Engineering's turnover,” Chung Hui says.

Can he maintain this level of performance? “Our best year was 2007-2008, when the global construction industry and the oil and gas industry were at a height. Yes, we tend to do well when there is a building and investment boom.”

What about now, with parts of Europe sick and the US economy yet to fully recover?

“We are a global company and if one part of the world is in the doldrums, some other part may be very vibrant and that helps to even things out somewhat. In fact, our volumes are very close to pre-crisis levels again.”

“Asia generally is still going strong, and you can point to the Chinese market, for example, and see tremendous potential there,” Chung Hui adds.

“What we have to make sure is that we are at the right place at the right time.”

Heavy business

How does Favelle Favco differentiate itself from the competition?

“We are in a niche market. We specialise in the manufacture of specific types of tower and offshore cranes. We are not involved in the mass tower crane market or the mobile crane market, for example.

“Our specialty is the construction of “high speed high lift” tower cranes. We move heavy things up and down fast. Some people say we are No. 1 in this market segment.

What does “heavy lifting” mean in the crane business?

“In tower cranes, we are talking about moving 60 tonnes or more. In recent years, we have been delivering tower cranes that can lift more than 300 tonnes. That has become normal for us.

“But we are outdoing ourselves now. Just last month we shipped an offshore crane to a customer in Germany that will be used to build offshore wind turbines. The crane has the ability to lift 1,000 tonnes,” Chung Hui says proudly.

So technological improvements are important to maintaining the company's competitiveness.

“Yes, and that is why we have a good research and development team. We have a good mix of Malaysian and non-Malaysian engineers, with most of them based here. We believe it is good to have people with different skills and ideas and from different backgrounds working together.

“What is important is that our engineers should be able to deliver what our customers want,” Chung Hui says.

Staying ahead

“But you cannot depend on today's demand to determine tomorrow's needs,” he says. He has to anticipate future trends and his team is working on a number of projects to ensure the company stays ahead of the curve.

“The crane we just shipped to Germany represents a new benchmark for Favelle Favco in terms of what we can do.

“But the market is demanding more. It wants cranes that can move still heavier loads. So we have started working on that and investing in new technology again.

“We are using in-house skills to introduce some innovation to the design of cranes. For example, a standard crane has a fixed straight arm which is swivelled around carrying a load. But you cannot move the arm around too much if you have to work in a confined space.

“So the solution is to build an arm with an elbow (or knuckle). You can then bend the arm while carrying your load and manoeuvre within the limited space.

“Only a few companies have the technology to build these knuckle-boom cranes. We are investing millions of dollars to develop this technology and we are targeting to come up with a prototype before the end of the year.”

Chung Hui gets most excited when he talks about his current pet project, to build a sub-sea crane. This involves developing the technology to handle loads located below the surface of the sea.

“We are in new territory here. The science involved is different. You must be able to compensate for vessel motion caused by wave movement.

“But if you want to be part of the oil and gas industry, which is where the demand is going to come from, you have to ask yourself whether you want to check this out.

He clearly knows what he wants. His engineers are hard at work.

Note: Research for this article has been supported by the International Trade and Industry Ministry to promote discussion of how companies can change and innovate to become more competitive.

A two-pronged strategy for growth

Mac Chung Hui on Favelle Favco's growth strategy:

● We have a two-pronged strategy. The first is to establish a presence in the Chinese market. The potential there is huge. Many of our suppliers and competitors are also there. So this is a priority.

● We have just established a small operation in Shanghai. We need to add capacity, and our target is to sell about 10 to 12 cranes a year for a start.

● We also want to expand our rental business for tower cranes in China. We currently have a fleet of seven cranes, and our target is to rent out at least 50 medium to large-sized cranes within five years.

● The second prong of our growth strategy is to ramp up our service business. The life of a crane is between 20 and 30 years, so servicing and maintaining them can be a sizeable business on its own.

● Our servicing revenue has grown over the years. It now makes up about 20% to 25% of total revenue. Our target is to develop our service business to be as large as our manufacturing business. That will give us a steady cash flow. It will also reduce our exposure to the ups and downs in the manufacturing side of the business.

[Source]

How to know when is the right time to quit your job

By Star Online: Business
19 June 2012Talking HR with Roshan Thiran

ASHINI was frustrated with her job. Low pay, long hours and a horrible boss that was pushing her to the brink of collapse. She started wondering if she should quit.

You also may be at a point in life where you are thinking, “Maybe I too should quit and move on.” But are you sure quitting is the best option? Sometimes, it may be better to stay on and grow. I stayed at General Electric for more than 12 years, growing significantly each year. So, how do we know when is the right time for us to quit a job or move on?

Two-year rule

When you ask, “Should I quit my job?” My first question back would be, “Have you served at least two years in this current role?” Ideally, it would be three years.

My two year rule is rationale on it taking at least six months before you understand the new culture, process and be able to make sense of the company. Then it will take you at least another six months to start identifying areas where you can improve and drive change.

It will take another six months before you start to execute, making changes and an impact. And you need another six months to see the results of your execution and to see if the changes you implemented worked and to rework it if necessary.

Chef Gordon Ramsay is known to put competing chefs through the terrors and triumphs of running a restaurant in TV’s ‘Hell’s Kitchen’ and participants are often at the brink of quitting. Quitting, however, should be an exception, not the rule, in your career. Bear in mind that once one has learnt to quit, it becomes a habit

According to research by Anders Ericson, you will learn your job and be extremely competent after 10,000 hours. Based on a 12 hour work day, you will hit 10,000 hours of work after you spend three years in a role.

So, if you want to maximise your learning, spend three years in a role. At a minimum, two years. If you have at least served that long, it's fair to ask “Should I quit my job?” and consider quitting when there is a trigger for that thought.

But there are some exceptions to the rule. My old boss got a dream job he craved and quit our company and moved to this new company. Within three months, his dream job turned out to be a nightmare. Instead of slogging on for another two years, he immediately quit.

If you find yourself marginalised, or you dread the work, cut the loss and move on. Your job should bring out your passion and should not be dreary and energy-sapping. But I never recommend leaving a job before two years unless you are extremely clear this role or company is not for you.

When you have feelings of restlessness and discontent you may believe that it is a sign to move on and quit. But don't bail at the first glimmer of dissatisfaction. Just as you should not quit your marriage after a spat with your husband and start dating again, likewise, it should be the same with your job.

Staying can be good

If you plan to quit your job because of conflicts you are facing at work today, remember that these problems will reappear in the next job if you don't take the time to at least examine what's wrong at your current role. Leaving your current role without resolving this conflict is bound to create the same issues in your next role. So, resolve these conflicts before you leave.

When I worked at NBC, a TV company in New York City, I was extremely frustrated with my boss. I thought she hated me as she gave me meaningless work and made me work on trivial matters. I was so frustrated; I started sending out my resume to other media organisations. I even went for interviews. But I had a great mentor at NBC who advised me to have a frank discussion with my boss.

I began an open, non-confrontational dialogue with her. Things improved vastly as she had made some wrong assumptions about me. I was not only able to stop a problem that persisted for a couple of months, but I ended up doing some impressive work at NBC and winning a number of awards in the process. I ended up staying and it did my career a world of good.

Staying in your role may have some practical benefits too. For example, seniority has its merits: it's harder for an employer to let go of someone trained with deep job knowledge. That's not to say you should stay at all costs.

I do believe that movement is good especially if it enables you to grow and be outside your comfort zone. But quit for the right reasons. Remember, most people who succeed in the face of seemingly impossible conditions are people who simply don't know how to quit.

When I should quit

How do you know exactly when to quit? Here are some possible reasons to consider quitting:

1. Your company has lost its purpose and you are no longer proud to be an employee there. Quit as you will be doing both yourself and the company a favour

2. Your relationship with your manager is damaged beyond repair. You have tried really hard to mend the relationship but to no avail. Leave quickly but if possible, leave in good terms.

3. Your life situation has changed. Perhaps you just had a baby, and the work culture does not suit your new lifestyle. Or perhaps your aspirations have changed.

4. Your values are at odds with the company's values and culture. Or if you are being ethically challenged. Whatever the issue, don't stay in an organisation where your values or integrity is compromised.

5. For whatever reason, you have behaved improperly at work. Or you've burnt bridges with peers. Or missed too many days of work, slacked off on the job, or developed the reputation of a loser. That reputation, once earned, is unlikely to change, so you might as well move on, while you have the opportunity.

6. Your stress level is so high at work that it affects your health and relationships. If you are feeling burnt-out, find out first if the demands of your job have increased with fewer resources. You may just be drained out. In which case, it's an issue of managing resources, not finding a new job.

7. You find yourself marginalised. Your manager, for reasons unbeknownst to you, treats you like an invisible person, not including you in important consultations or decisions. Don't do anything until you talk to your boss to find out what's going on. Your boss may also be silently urging you to leave, so if that's the case, maybe you need to take the hint.

8. You've stopped having fun at work. You dread going to work in the morning. Find out what the real reason you dread work. Is it boredom? Is it lack of challenge? Or have you changed? Don't leave just because you are bored. Try re-inventing your role. Leaving should be your last resort. But if you still cannot rediscover your love for the job, quit!

Quitting your job over unhappiness is a big no-no. If you are unhappy with other aspects of your life, it is easy to blame it on work. Do not expect work to bring you happiness if other aspects of your life are just calamitous.

Again, sort out the real reason for your unhappiness and your job may turn great again. If it is really true that your happiness is caused by one of eight reasons I outlined above, then quit. Otherwise, fix the real issue. There is a saying: “Age wrinkles the body but quitting wrinkles the soul.”

If you do work for a boss that provides toxic leadership and is a tyrant, and you are drained by the cut-throat and back-stabbing environment caused by his lack of leadership, then it is one big reason to quit. Business isn't a democracy and you cannot change your boss. Quitting then is probably the right response.

That said, quitting should be an exception, not the rule, in your career. Gaps on your resume are a red flag to employers. First, try meeting with a career mentor, talking to HR, or transferring to another position at your company. Bear in mind that once you learn to quit, it becomes a habit.

Final thoughts

At the end of the day, the key to a successful career is constantly learning and growing. So, whenever you make decisions to quit, make sure the new role will provide you significantly bigger challenges for growth and learning. If it's the same role and you are just leaving for money, beware the pitfalls.

Remember, whenever you face problems at work, your first response should not be to quit. First ask yourself if this is a situation that might possibly reoccur whether it's a bad boss, intolerable colleagues, lack of communication or your under-utilised talents. You don't want to go to the trouble of changing jobs only to experience the workplace equivalent of the film, Groundhog Day.

Finally, when you do quit, don't burn bridges. As good as it would feel to re-enact The Devil Wears Prada scene in which Anne Hathaway's character chucks her phone with her boss still on the line, it's a small world and you should try to leave on good terms.

Address your reason for leaving professionally and be sure to thank your boss for the opportunities you've received and to help transition your responsibilities.

Roshan Thiran is CEO of Leaderonomics, a social enterprise. Roshan believes there is a time for everything, including quitting. Roshan laments the fact that most people give up just when they're about to achieve success. They give up at the last minute of the game, one shot away from a winning goal.

[Source]

Berjaya Sports Toto: Maintain Buy - Steadily Regaining Market Share

By Maybank IB Research
19 June 2012

Earnings in line.  BST’s results were very much within expectations.
However, FY4/12 net DPS of 27sen was 29% or 4sen above our
expectations. Operations wise, it regained market share thanks to 4D
Toto Jackpot. All else being equal, FY4/13 earnings should be higher
YoY due to full year effect of 4D Toto Jackpot (FY4/12: 10½ months).
Maintain BUY call and DCF-based TP of MYR5.00.
Dividends outperformed.  4QFY4/12 net profit of MYR91.2m (-12%
YoY, -19% QoQ) brought FY4/12 net profit to MYR401.7m (+15% YoY),
making up 99% of our full-year estimate. FY4/12 revenue of MYR3.6b
(+5% YoY) was also within expectations at 101% of our estimate.
4QFY4/12 net DPS of 5sen brought FY4/12 net DPS to 27sen (+29%
YoY), 4sen above our expectations. This reflected a net DPR of 90%
(assumption: 75%).
Boosted by 4D Toto Jackpot. FY4/12 net profit was 15% higher YoY
as Sports Toto Malaysia’s (STM) revenue/draw grew 5% YoY, driven by
4D Toto Jackpot.  We estimate that its prize payout ratio eased 1ppt
YoY to 63%. 4QFY4/12 net profit was 19% lower QoQ due to
seasonally slower post-Chinese New Year sales, two less draws QoQ
and an estimated 3ppt QoQ increase in its prize payout ratio, to 65%.
4QFY4/12 stronger than it seems. 4QFY4/12 net profit was 12%
lower YoY; we estimate that prize payout ratio rose 3ppts YoY to 65%.
Encouragingly, 4QFY4/12 revenue was flattish YoY despite Chinese
New Year falling in 3QFY4/12 this year vs. 4Q in FY4/11, and there
being one less draw YoY. This was obviously due to its lotto games led
by 4D Toto Jackpot regaining market share at Magnum’s and Pan
Malaysia Pool’s expense.
Maintain BUY call. We leave our earnings estimates and DCF-based
TP of MYR5.00 unchanged, although we roll forward our valuation from
end-FY4/12 to end-FY4/13. It is obvious that 4D Toto Jackpot has
helped BST regain market share and its earnings recover. A full year
effect will be felt in FY4/13 (FY4/12: 10½ months). Meanwhile,
attractive net dividend yields of 5.7-6% (based on 75% net DPR) will
help limit downside risk.


Share price: MYR4.23
Target price: MYR5.00

[Source]


BJCORP Corporate Chart- BJCORP owns 51.05% of Berjaya Sports Toto Berhad(BJTOTO)

Top Glove Corporation - OUTPERFORM - 15 JUNE 2012

By Kenanga Research

15 June 2012

Period   3QFY12/9MFY12

Actual vs.  Expectations

Above ours and the consensus’ expectations. 

The 9MFY12 net profit already made up 91% and 85% of ours and the consensus’ forecasts of RM152.3m and RM164.2m respectively.

Dividends   A first single tier interim dividend of 7 sen was declared. This was 40% higher than last year’s interim dividend of 5 sen, translating into a net interim dividend yield of 1.1%. 

Key Result Highlights

QoQ, the EBITDA margin fell slightly from 14% to 13% while earnings increased also slightly by 1%. This was mainly attributable to the higher average latex cost, which increased by 10% QoQ to RM7.52/kg. 

YoY, the turnover increased by 13%. Apart from the higher average selling price (“ASP”) YoY, the sales volume has also increased by 8% due to stronger demand from customers. 

The strong demand is mainly due to customers taking advantage of the lower ASP as compared to last year, where it peaked at USD39 per thousand pieces as opposed to low USD30’s per thousand pieces during the quarter. 

Earnings almost doubled as the EBITDA margin improved from 9% to 13%. The higher margins were mainly due to lower latex costs, which had dropped by 14% YoY (from RM10.11/kg in 9MFY11). 

Outlook  We are in the midst of reviewing our Neutral call on the overall sector as we are looking to upgrade it in view of the likely lower latex price going forward as well as the potential appreciation of the USD/MYR, which would significantly improve the industry’s margins. 

With that in mind, coupled with the company’s stronger-than-expected results performance, we are raising our estimates as well as rating and target price on Topglove (see below). 

Change to Forecasts

We have boosted our FY12-13E earnings by 33-34% to RM202.5-229.8m as we revised our USD/MYR assumption from RM2.85/MYR to RM3.09/MYR.

Rating  UPGRADE to OUTPERFORM

We are upgrading our rating to OUTPERFORM from MARKET PERFORM as the current share price now offers a 24% upside for the stock as measured against our TP of RM5.80.

Valuation   We have raised our target price (TP) for the stock to RM5.80 from RM4.66 in tandem with the rise in our earnings forecasts. The TP is based on an unchanged targeted PER valuation of 17.7x on FY12 EPS.

Risks  Higher latex price and a stronger ringgit against the US dollars.

Price: RM4.66 

Target Price: RM5.80

[Source]

The potential of business trust listings

By Star Online: Business
13 June 2012

BY the fourth quarter of this year, the listing rules for business trusts would have been published and this would pave the way for a new listing mechanism for companies as well as affording investors with a new type of product. It will be interesting to see what asset will take the honours of becoming the first business trust listed on Bursa Malaysia.

On that score, the jury is still out on whether the local bourse has lost out big time from the choice of Berjaya Sports Toto Bhd (BToto) to list its business trust in Singapore. On the one hand, there is one theory that the local regulators have been slow to come up with the rules to faciliate the listing of such trusts in Malaysia. Hence BToto could not wait.

On the other hand, industry players say local investment banks have already been briefed by the Malaysian regulators on the outline of the various business trust models they are considering and expected timelines for the rules to come out.

Then again, there could be more reasons why BToto is looking offshore, such as making the Singapore listing its beachhead for growing its gaming businesses internationally.

In any case, BToto has clarified that it is keen to have a secondary listing of its business trust in Malaysia once the rules are firmed up here.

Significantly, the process of allowing new listing mechanisms should be done with the right levels of checks and balances in place. For example, assets that don't meet the usual qualitative listing requirements should not be allowed to easily get listed via business trusts or SPACS (special purpose acquisition companies) for that matter.

On a positive note, business trusts will certainly have an appeal both to issuers and investors.

A business trust uses most of the underlying asset's cash flow to pay dividends, making the stock more attractive to long-term investors seeking steady income. It is also a way for companies, typically large ones, to raise money from putting some of their hard assets into a business trust.

For example, airline companies could put their planes into a business trust and sign a lease agreement with the trust for use of those planes. The trust in turn will be focused on owning planes and distributing to shareholders the cash flow it gets from the lease agreements.

Similarly, a conglomerate with power generation assets may wish to spin off those assets into a business trust.

However, in many of these scenarios, there are likely to be significant related party transactions. Hence business trusts need to have sufficient protection mechanisms to ensure those who are managing the assets are working in the best interests of all the unit holders of the trusts.

Just like SPACs and real estate investment trusts, business trusts are bound to add some excitement to the market.

[Source]