Sunday 7 September 2014

Idol Series - Cheah Cheng Hye


Dubbed the "Warren Buffet of the East", Malaysia-borned Cheah Cheng Hye is reckoned as the most successful investor in the China market.

Having started out his career as a journalist in Wall Street Journal, Mr Cheah will go on to become the most successful value investor in his generation.

His company, Value Partners, was listed in 2007 ( stock ticker: 806 HK) and became the first Asia ex-Japan listed asset management firm.

Below link is one of the most comprehensive speech Mr Cheah has provided and it detailed what is the investment process of his company.

Titled "Value-investing: Making it work in China and Asia" , it was Columbia University Keynote Speech in 2010 for tje renowned Graham & Dodd Breakfast in New York

http://www7.gsb.columbia.edu/video/v/node/989

Below provide a quick summary of the video:

Value Partners 7 steps of investing:

1) Ability to find under-valued company

2) Finding the 3Rs - The Right company, managed by the Right people, with the Right strategy

3) Ability to make Decision - One should remove him/herself from the analysis

*4) Deal structuring

5) Execution

6) Maintenance

7) Exit - When the known company has become common knowledge, the is no more value to be played out

Supplementary Skills:

a) Leadership
b) Marco understanding
c) Asset allocation & Portfolio Construction


Always remember - You shouldn't buy if seller knows more than you

Tuesday 26 August 2014

SGX Penny Stock- In Focus : Sincap Group Limited (Sincap)

Sincap, which is listed on the Catalist, is the most actively-traded stock today (26Aug14). The stock was up ~12.5% before the company requested for a trading halt, pending an announcement.

To be honest, I have also been a skeptic of S-Chips and believed that more should be done on all frontiers(investment banks, regulators & etc)  to ensure better end investor protection.

Below I will provide a quick thought on this company:

From Company's Website

1. Business Description

Trading of alumina & thermal coal, as well as the mining & sale of gypsum in PRC. Sincap is engaged in the trading of alumina & thermal coal as well as mining & sales of gypsum in the PRC.

Below provides a more detailed summary of each business segments:

(a) Alumina Trading
  • Alumina is sourced from suppliers in Shanxi Province and  Shandong Province - used in construction, automobile, transportation and aeronautical  industries
  • Wide customer base of aluminium manufacturers and traders  across Henan, Qinghai, Gansu and Xinjiang Provinces and Inner Mongolia

(b) Coal Trading
  • Commenced thermal coal trading business in June 2011
  • Customers are mainly Shandong-based chemical factories and power plants
  • Products are sourced from upstream suppliers in Shanxi Province based on customer specifications and quotations for use in power and chemical industries

(c) Gypsum Mining & Sale
  • Access to one of the largest gypsum reserves in Dawenkou Gypsum District, Shandong Province - sole and exclusive mining rights to approximately 2.92 km 2mining concession area in Tai’an City, Shandong Province
  • Total production capacity of 600,000 tons p.a. (as of July 2012 IPO Prospectus)
  • Exploratory rights to further area of approximately 2.4 km-squared at Xia Jia Ma Zhuang Mineralised Block
  • Sale of both gypsum ores and gypsum powder of various grades

From Company's Website

2. Potential Red Flag 

PS: Below details some of the potential red flags I see which I hope investors can look deeper before they dived into the stock. Do note that I am not saying that the company is a fraud but I just want to highlight some red flags that I hope all investors can be aware of. 

Red Flag 1 - Proposed diversification of business to include property development & property investment within 2 years of listing

The company was listed in mid-2012. A quick search on the IPO prospectus back then did not include any forward statement regarding the diversification into property development & property investment.

According to the company official announcement, the company expects revenue and profit from the sale of gypsum in its core businesses to be adversely affected in the current financial year ending 31 December 2014 as some of its customers have stopped purchasing Grade 4 gypsum from the Group by substituting it with synthetic gypsum. 

Grade 4 gypsum represented approximately 26.9% of the Group's revenue from sales of gypsum products for FY2013. In addition, the company is of the view that its alumina and coal trading  business are expected to be directly affected by the soft commodities trading market in the PRC arising on the back of a slowdown in the domestic economic environment and uncertainties in the global economy. As such, the company has been looking at diversifying its business. 

This make me asks further questions - 

(a) Does the management have the necessary capability & expertise to venture into the property segment? 
(b) What is the competitive advantage they have in this new segment?
(c) During the IPO of Sincap, the company prided that they have a good reputation as a gypsum mining and supply company with almost 20 years’ track record. If the company is so experienced, why aren't they prepared to ride through this cycle, and instead diversify into other business? What experience are we talking here?

Red Flag 2 - Lack of minority investor protection

The IPO price was S$0.20. Instead of protecting the investor interest and working hard to protect shareholder value, the company decides to go ahead with issuing new issue at S$0.07. This represent a 60% discount to the original IPO price. This shows obvious lack of interest in minority investor protection.

Red Flag 3 - Related party transaction with CEO & Executive Chairman

The recent Australian property acquisition was an investment that the CEO and Executive Charirman, Ng Hong Whee, had. He holds 18% shareholding interest in that Australian investment. 

Questions:
- Why did they actually invested into something that Mr Ng had? 
- Or I should asked, if the investment is so good why did Mr Ng such a "willing" seller?

3. Conclusion 

Fool me once, shy of you. Fool me twice, shy on me. Personally, Sincap's management has disappointed investor since their IPO. Now they are trying to restructure and hope that investors can buy their new story? I'm skeptical and I hope all investor can keep their eye wide before entering into this counter.

Sunday 17 August 2014

The Wealth List (Series 2) - Indonesian Top 50 Richest

Taken from Forbes-compiled Indonesia 50 richest (as of Nov 2013), below details the 50 richest person in Indonesia (for exact URL refer - http://www.forbes.com/indonesia-billionaires/ )

1) R. Budi & Michael Hartono - Net worth $15billion/Banking, Tabacco

Brothers R. Budi and Michael Hartono are the richest in Indonesia for the fifth year in a row, despite not adding to their fortune in the past 12 months. Their biggest holding is in Bank Central Asia, Indonesia's largest private bank, with over 20,000 employees. Budi's youngest son, Armand has been a director since 2009. His other son Martin invests in Internet outfits. Brothers also own kretek maker Djarum and have a stake in telecom outfit Sarana Menara Nusantara.

2) Eka Tjipta Widjaja & family - Net worth $7billion/Palm oil, self made

Eka Tjipta Widjaja and family's Asia Pulp & Paper, long criticized for its role in deforestation, announced recently it would stop cutting down natural forests. Meanwhile, moneymaker Golden Agri-Resources, one of the world's largest palm oil plantation companies, has lost some of its value as commodity prices have weakened.

3) Anthoni Salim & family - Net worth $6.3billion/Diversified, self made

Anthoni Salim, head of Salim Group, a conglomerate with interests in food, telecom, retail, property and banking, had a busy year. In May, the group's Singapore arm Gallant Venture inked an $809 million deal to acquire a majority stake in automaker Indomobil Sukses Internasional a decade after it was forced to cede control. In ongoing overseas expansion, its Indofood Sukses Makmur, the world's largest instant-noodle producer, expanded into Brazil, picking up a 50% stake in a sugar producer. In June it consolidated the group's retail businesses in Indonesia in a backdoor listing through Internet provider Dyviacom Intrabumi, under listed outfit Indoritel Makmur Internasional. All the moves paid off as his fortune rose more than $1 billion. He was the year's biggest gainer and moves into the top three of Indonesia's richest for the first time. The anniversary of the death of his father, Liem Sioe Liong, was commemorated in July in Fuzhou, attended by prominent Chinese government officials.

4) Susilo Wonowidjojo & family - Net worth $5.3billion/Tabacco

The year's biggest loser, Susilo Wonowidjojo, lost $2.1 billion since 2012 and more than $5 billion in 2 years. Shares of his family's clove cigarette maker, Gudang Garam, dropped by a third in the past year as profits took a hit due to rising cost of cloves caused by a poor harvest. The company, which has one-fifth of country's cigarette market, was forced to hike its prices. He has a new entertainment outfit Graha Surya Media.

5)  Chairul Tanjung - Net worth $4billion/Diversified, self made

Media baron Chairul Tanjung's Trans Corp which operates two of Indonesia's top five TV stations, cemented its hold by acquiring 80% of state-owned pay TV company TelkomVison. His CT Corp also has interests in Bank Mega, Carrefour Indonesia and franchises of Mango, Versace. A trained dentist, Tanjung got his start making footwear and roof tiles.
6) Sri Prakash Lohia - Net worth $3.7billion/Polyester

Indian-born plastics king Sri Prakash Lohia chairs Indorama Ventures, among the world's biggest makers of polyethylene terephthalate (PET) resin used in plastic bottles. Indorama paid $270 million for a stake in Malaysian disposable glove maker YTY Industry. He invested $6 million to launch Politeknik Enjinering Indorama, a school in West Java. His son, Amit, runs the Indonesian and African businesses from Singapore, while his younger brother, Aloke, also a billionaire operates from Thailand. Lohia, who is Indian steel billionaire Lakshmi Mittal's brother-in-law, claims to have the world's second largest collection of colored lithographs.

7) Boenjamin Setiawan & family - Net worth $3billion/ Pharma, self made

Boenjamin Setiawan's Kalbe Farma, Indonesia's largest pharma company, is expanding into Myanmar and Vietnam. It also has started an oncology facility in Jakarta. "Dr. Boen," who owns a chain of private hospitals, believes stem cells are the future of medicine. He shares this fortune with 4 siblings.

8) Peter Sondakh - Net worth $2.7billion/ Investment, self made

Peter Sondakh, head of Rajawali Group, a conglomerate with interests in mining, plantations, hotels and transportation services, took his coal mining business public through the backdoor listing of Eatertainment International in 2010. Renamed as Golden Eagle Energy, its valuation has risen 18-fold since. He also has a 49% stake in Express, a taxi company listed in Indonesia. He's restructuring Archipelago Resources, owner of a gold mine in Sulawasi. Other assets include St. Regis Bali, toll road operator Nusantara Infrastructure.

9) Mochtar Riady & family - Net worth $2.5billion/ Diversified, self made

Lippo Group chairman Mochtar Riady returns to Forbes billionaires list after more than a decade on new information about his assets and better understanding of holdings. Unfazed by Indonesia's slowdown and weaker currency, Riady, through his two sons - Stephen, who heads operations in Singapore, and James, who's in charge of Indonesian businesses - pressed ahead with an ambitious expansion both at home and overseas. After losing a much-publicized battle to acquire control of Singapore firm Fraser & Neave to Thai billionaire Charoen Sirivadhanabhakdi Riady snatched the U.S. Bank Tower in Los Angeles, the tallest building in California, for $368 million last year. The deal was inked by Singapore-listed property arm Overseas Union Enterprise. Last July, OUE raised $476 million in an IPO of its hospitality trust, followed by the listing of a commercial REIT in January. Lippo is also expanding in healthcare, retail and is setting up a chain of cinemas. Riady started his career running a bicycle shop in East Java.

10) Sukanto Tanoto - Net worth $2.3billion/ Diversified, self made

Sukanto Tanoto's net worth has fallen by $700 million from a year ago mostly due to lower estimated profit margin at his forestry and paper company, Asia Pacific Resources International Limited (APRIL). His RGE Group also controls pulpmaker Sateri and palm oil producer Apical Group. His Asian Agri is contesting a demand of over $200 million in back taxes and fines.Tanoto launched the Tanoto Initiative last July, a program to promote ASEAN studies and research, in collaboration with faculty at the Wharton School of the University of Pennsylvania.

11) Putera Sampoerna & family/ Net worth $2.2billion, investment

Putera Sampoerna's Sampoerna Group celebrated its 100th anniversary this past year. It has moved well beyond its roots as a clove cigarette maker, a business that Putera sold in 2005 to Philip Morris. Now run by his son Michael, it has interests in plantations, telecom and banking; it recently partnered with Djoko Susanto's Alfa Group. Michael is a former professional poker player. Putera's daughter Michelle runs his foundation, which launched a new university in June.

12) Tahir/ Net Worth $2.1billion, Diversified, self made

Indonesian tycoon Tahir had to quit medical school in Taiwan because of his father's ill health. He went on to make a fortune in banking and real estate through his Mayapada Group, and recently opened luxury beachside hotel Regent Bali and a second Mayapada Hospital in Jakarta. Last April, The Bill & Melinda Gates Foundation announced plans to work with Tahir in Indonesia, its first major private donor partnership there. Tahir's foundation is putting up $100 million to focus initially on polio eradication, then TB, malaria, HIV/AIDS and family planning. Tahir who is co-owner of the licensee that publishes FORBES INDONESIA, recently became the first biliionaire from his country to sign the Giving Pledge. His wife Rosy is the daughter of billionaire Mochtar Riady.

13) Bachtiar Karim/ Net worth $2 billion, Manufacturing

Bachtiar Karim runs Musim Mas, an oleochemical producer and palm oil firm in Indonesia. The company also owns ships, tankers, a grain terminal and one of the world's largest palm oil refineries. His late father Anwar founded Nam Cheong Soap Factory in 1972; the company is still a leading maker of soaps and margarine. The family has funded an entrepreneur center at the University of North Sumatra in Medan. Karim is also a regular donor to the National University of Singapore, his alma mater.

14) Theodore Rachmat/ Net Worth $1.9 billion, Diversified

Theodore Rachmat's fortune is up thanks to his Triputra Group's holding in motorcycle dealer Daya Adicipta Mustika, plus a handful of other newly revealed private holdings in apparel, coal and plantations, which helped offset the ongoing drop in the value of shares in coal producer Adaro Energy, which sank more than 40% in the past 12 months. Rachmat took his palm oil producer, Dharma Satya Nusantara, public in June 2013. He started his career as a salesman for a heavy equipment maker. Fellow billionaire Edwin Soeryadjaya is his cousin.

15) Martua Sitorus/ $1.9 billion, Palm oil, self made  

Martua Sitorus, who traded fish as a teenager and went on to become the cofounder of Wilmar International, the world's largest producer of palm oil, stepped down as COO after 7 years last July to become executive chairman. He indicated that he will spend more time on his family business, which bought a stake in Australian coal company Whitehaven. Along with Singapore billionaire and Wilmar cofounder Kuok Khoon Hong he also owns London skyscraper Aviva Tower.

16) Murdaya Poo/ $1.8 billion, Diversified

It was a difficult year fro Murdaya Poo whose well-connected wife, Hartati, received a prison sentence last year for bribery to secure land concessions. Other executives of his company Hardaya Inti Plantations, including the president director, were also sentenced subsequently. Meanwhile, through his Central Cipta Murdaya, Poo, who got his start selling newspaper, continues to manage his diverse interests in timber, real estate, exhibition space, and plantations. He most recently entered the cellphone business, launching WIGO WiMAX.

17) Ciliandra Fangiono & family/ $1.7 billion, Palm oil

Cambridge-educated former investment banker, Ciliandra Fangiono, directs First Resources, one of the world's top palm oil producers; his brother Cik Sigih is deputy chief. In the first quarter of 2013 it added 3,700 hectares of new planting area, and plans to add up to 20,000 more by year-end. Ciliandra is the youngest tycoon among Indonesia's 50 Richest.

18) Achmad Hamami & family/ $1.5 billion, Heavy equipment, self made

Most of Achmad Hamami's fortune comes from Trakindo Utama, Caterpillar's Indonesia distributor. But he's increasingly moving into finance, with Chandra Sakti Utama Leasing, acquired from Standard Chartered, and recently bought HD Finance, which provides financing for leasing cars. He turned over the reins to his son Muki after he lost his sight to glaucoma in 1999. Hamami was a former Navy jet pilot and the youngest colonel in the Indonesian military. He got start as a private math tutor before getting a job with a state investment fund which brought him in touch with Caterpillar.

19) Kartini Muljadi & family/ $1.5billion, Pharma

The only woman among Indonesia's richest, Kartini Muljadi still practices law at her firm, Kartini Muljadi & Rekan. She and her family derive their fortune from shares in drugmaker Tempo Scan, run by her son Handojo, which celebrated its 60th anniversary this year. She likes to read religious and professional books.

20) Eddy Katuari & family/ $1.4billion, Consumer goods

Eddy Katuari runs 65-year-old Wings Group, whose range of household, personal care and food products competes with heavyweights such as Unilever and Anthoni Salim-owned Indofood. Its new snack-food venture, a 3-way partnership with Japan's Itochu and Calbee, is due to start operations next year. Eddy's other interests include chemicals, packaging, ceramics and real estate.

21) Low Tuck Kwong/ $1.4 billion, Coal, self made

Singapore-born Low Tuck Kwong's net worth is down $400 million in the past year, as shares of his coal miner Bayan Resources slid. His company, which gets 40% of sales from Japanese and Indian customers, is trying to adjust by lowering costs and improving efficiencies. In November, a Singapore court ruled in that Low was entitled to damages in a defamation case he had filed against a former friend who had claimed that Low had reneged on a business deal that had deprived him of half stake in Bayan. Low also owns a private zoo with 750 animals and a fish farm .

22) Hary Tanoesoedibjo/ $1.4 billion, Media

Media mogul Hary Tanoesoedibjo who owns the MNC Group, the country's biggest media company, was busy dealmaking this past year with Aburizal Bakrie, head of politically connected Bakrie clan. He paid $200 million for 5 Bakrie-owned toll-road concessions, plus $143 million for 2,500 acres from Bali Nirwana Resort. His $427 million offer to buy Bakrie's TV station, ANTV, is on hold. In February, The Indonesian Broadcasting Commission pulled two television shows from his broadcaster off the air for favoring the People's Conscience Party (Hanura) which has nominated Tanoesoedibjo as its vice presidential candidate for the upcoming presidential election in July.

23) Ciputra & family/ $1.3 billion, Real Estate

Indonesian real estate developer, Ciputra is a trained architect who founded his Ciputra Group more than three decades ago. Property baron plans to duplicate Singapore's Orchard Road in Jalan Satrio, one of the busiest roads in Jakarta. That is where his company has just opened a 123,000-square-meter complex of malls, offices and apartments. His Ciputra Entrepreneurship Foundation, offers English classes to migrant workers.

24) Edwin Soeryadjaya/ $1.2 billion, Coal, investment

US-educated Edwin Soeryadjaya took his Saratoga Investama Sedaya public in June, offering a 17% stake to the public. Saratoga has 44 affiliated companies, including coal company Adaro Energy and plantation outfit Provident Agro. Son of a former billionaire who founded automotive group Astra but eventually lost most of his wealth, Soeryadjaya has been working to restore the family fortune.

25) Djoko Susanto/ $1.2 billion, Retail, self made

Djoko Susanto's minimart chain, Alfamart, now has 7,714 outlets, up from 7,063 a year ago. The sixth of 10 siblings, he dropped out after one year of high school. At age 17 he began managing his parents' 170-square-foot food stall, then started peddling cigarettes and opening more stalls. His success attracted the attention of fellow billionaire Putera Sampoerna, who worked with Susanto to open more stalls and later, a discount supermarket chain. When Sampoerna sold his cigarette business to Philip Morris (now Altria), Djoko bought out the retail business and developed the minimart chain, which has a bee as its mascot.

26) Eka Tjandranegara/ $1.2 billion, Real Estate

Eka Tjandranegara returns to the ranks of Indonesia's richest as property values rose by as much as 30% in Indonesia this past year, benefiting his privately held property developer Mulia Land and his publicly traded Mulia Industrindo, maker of building materials. He has built iconic properties such as the 57-story Wisma Mulia office tower in Jakarta and the Taman Anggrek Mall & Condominium. Eka opened a new resort in Bali last year.

27) Harjo Sutanto/ $1.1 billion, Consumer goods
Harjo Sutanto cofounded Wings Group, as a maker of laundry soap that he sold door-to-door and built it into one of Indonesia's largest consumer goods companies. It also has the franchise for Japan's FamilyMart for a chain of convenience stores. Sutanto's children work at Wings.

28) Soegiarto Adikoesoemo/ $1 billion, Chemical

Soegiarto Adikoesoemo established AKR Corporindo 36 years ago in Surabaya as a chemical trading business. Now the group, a distributor of diesel and marine fuel oil to companies in mining and power generation, is run by his son, Haryanto.

29) Kusnan & Rusdi Kirana/ $1 billion, Aviation, self made

Siblings Kusnan and Rusdi Kirana cofounded Lion Air in 2000 with one plane. Now Indonesia's largest budget carrier, it is expanding. In March its Malindo Airways, a JV with Malaysia's National Aerospace & Defence Industries, started operations. Two months later its subsidiary, premium airline Batik Air, started operations. Its newest venture is Thai Lion, a low-cost airline in Thailand. The company recently took delivery of its 100th Boeing aircraft and placed a $24 billion order with Airbus for 234 planes earlier this year.

30) Garibaldi Thohir/ $960 million, Coal

Garibaldi Thohir, head of coal mining firm Adaro Energy, which he and 4 others purchased in 2005, falls out of the billionaire ranks for the first time since 2009, as coal prices drop. He listed Surya Esa Perkasa, the country's second-largest private liquefied petroleum gas refinery company, which he also heads, in February 2012. Through the family's Trinugraha Thohir, his brother Erick bought a stake in soccer club Inter Milan in September; he also has stakes in U.S. soccer team DC United and NBA's Philadelphia 76ers. His father was the highest ranking Indonesian in Union Carbide's country office before cofounding what became country's largest car dealer.

31) Sjamsul Nursalim/ $950 million, Tires

Sjamsul Nursalim's 2 biggest holdings, Mitra Adiperkasa, which has licenses to Burger King, Starbucks and Zara, and tiremaker Gajah Tunggal, both had lackluster years as their shares trended down. Nursalim also has stakes in Polychem Indonesia, KMI Wire and property outfit Tuan Sing Holdings.

32) Lim Hariyanto Wijaya Sarwono/ $940 million, Palm oil, self made

Lim Hariyanto Wijaya Sarwono took his palm oil plantation company, Bumitama Agri, public in Singapore in April 2012. The company, which has featured on Forbes Asia's list of 200 Best Under A Billion Companies, is planning to tap Malaysia's sukuk market, raising $152 million from a 5-year Islamic bond. He also has interests in a coal mine and a securities firm. Lim's father, a Chinese immigrant from Fujian Province, set up a small grocery shop in Indonesia nearly a century ago. Lim transformed the business by expanding into mining and timber. His plywood-product manufacturing firm, Tirta Mahakam, has been listed in Jakarta since 1999.

33) Kuncoro Wibowo & family/ $910 million, Tools

Kuncoro Wibowo runs Kawan Lama Group with the help of his 5 siblings. In December 2012, one of its companies, Home Center Indonesia (Informa), partnered with U.S. furniture manufacturer Ashley to open a store in Indonesia; partners now have 3 stores. The group has its own mall, in which its subsidiaries take up to 70% of the 140,000-square-meter building. Its best-known subsidiary is publicly traded hardware retailer Ace Hardware.

34) Husain Djojonegoro & family/ $875 million, Consumer goods

Husain Djojonegoro and his brother Pudjiono run Indonesia's biggest local battery producer Intercallin, with 60% of the market. Another brother Hamid oversees family's consumer products business, Orang Tua, known for such popular brands as You C1000, Vitacharm, and Formula toothbrush. A cousin is in charge of ABC Food. Husain's father started the business selling herbal wine.

35) Sudhamek/ $830 million, Consumer goods

Sudhamek is chairman of GarudaFood, his family's consumer goods business, known for its Kacang Garuda roasted peanuts and children's snack brand Gery. Through a joint venture with Japan's beverage giant Suntory, it opened a new factory to produce beverages. It launched new bottled tea branded Mirai at the end of last year.

36) Eddy Kusnadi Sariaatmadja/ $820 million, Media, Tech

Shares of Eddy Kusnadi Sariaatmadja's broadcaster Emtek are up nearly 40% this year. The firm completed the takeover of Indosiar in May, part of consolidation in the industry ahead of a shift from analog to digital broadcasting in the next few years. The upcoming national elections are expected to boost ad spending as well, benefiting TV stations. He used to have exclusive rights to distribute Compaq computers in 1980s.

37) Benny Subianto, $790 million, Coal, self made

While the value of Benny Subianto's holdings in his private Triputra Group and coal company Adaro Energy both fell 30% or more in the past year, Subianto had better luck with his rubber producer Kirana Megatara. His fortune was also buffered by the discovery of other assets.

38) Aksa Mahmud/ $780 million, Cement

Aksa Mahmud is the owner of the biggest cement company in East Indonesia, Semen Bosowa, which has 8 factories. He runs diversified a business with interests in infrastructure, automotive, property, energy and finance; he also has stakes in national bank Bukopin and Bank QNB Kesawan. His brother-in-law Jusuf Kalla is a former Indonesian vice president.

39) Jogi Hendra Atmadja/ $760 million, Consumer goods, self made

Jogi Hendra Atmadja is head of Mayora Group, Indonesia's largest food processor, making everything from coffee and cereal to candy and biscuits. It exports its brands to 54 countries. With his family, including brothers and cousins, Hendra makes his debut among Indonesia's richest thanks to a 50% jump in his company's shares in the past year. The family is third-generation Chinese immigrants who started making biscuits in 1970.

40) Santosa Handojo/ $750 million, Poultry

Handojo Santosa was briefly a billionaire earlier this year, but shares of his Japfa Comfeed, Indonesia's second-largest poultry feed producer, have fallen more than a third since their May peak. He is still worth enough for him to return to the ranks after a year absence. His company is also involved in aquaculture and beef cattle. He inherited the firm's predecessor, Ometraco, from his father. Handojo is based in Singapore and spends one month a year in Britain. He supports national chess players through Japfa Chess Club.

41) Prajogo Pangestu/ $745 million, Diversified

From a small start in timber in 1977, Prajogo Pangestu built his listed Barito Pacific into a petrochemicals conglomerate with interests in mining and energy. Amid rising prices of raw materials, mainly naphtha, it reported a $93 million loss last year. Petrochemicals arm Chandra Asri, 30% owned by Siam Cement, is spending $380 million in the next 2 years to expand its naphtha cracker unit. Prajogo's privately held Star Energy is investing $350 million to expand its Wayang Windu geothermal unit, in which Mitsubishi owns 20% stake.

42) Hashim Djojohadikusumo/ $700 million, Oil

After cashing out of his oil interests 6 years ago, Hashim Djojohadikusumo now controls Arsari Group, the name of which is coined from the syllables of his 3 children's names. Its interests include paper, palm oil, mining and logistics. In June the animal-loving tycoon was installed as head of the supervisory board of Jakarta's Ragunan Zoo with a mandate to revitalize and bring it on par with Singapore's. Older brother Prabowo Subianto is a presidential candidate for the 2014 general elections.

43) Kiki Barki/ $680 million, Coal, self made

Kiki Barki is no longer a billionaire as his fortune slid $400 million, as shares of his publicly listed coal producer Harum Energy stumbled 45% in the past year, even as it sold more tons of coal. The company says it has $470 million that it will use to acquire a coal mine somewhere in Kalimantan

44) Alexander Tedja/ $670 million, Real estate self made

King of Surabaya shopping, Alexander Tedja, operates 4 malls through his listed Pakuwon Jati company and is planning to open more. Tedja claims his malls, including the largest one in East Java, attract 20 million visitors a year. He also has a major waterfront development in Surabaya called Pakuwon City. His daughter Irene is married to Indonesian billionaire Murdaya Poo's son.

45) The Nin King/ $650 million, Real estate, self made

The son of an immigrant from Fujian Province in China, The Ning King started a textile factory in Salatiga (Central Java) in 1961, handling the entire textile production chain, from yarn to finished fabric clothing. He then set up Argo Pantes as the umbrella of his textile company. Today he runs his property business under Alam Sutera Realty. He also has a hospital in Jakarta and steel mills.

46) Winato Kartono/ $590 million
Winato Kartono is the former head of investment banking for Citigroup Global Markets in Indonesia. He founded Provident Capital Indonesia 9 years ago. He has invested alongside Saratoga Investema Sedaya in various projects such as Tower Bersama and recently listed Provident Agro.

47) Sandiaga Salahuddin Uno/ $460 million, Coal, self made

Sandiaga Salahuddin Uno is Indonesian billionaire Edwin Soeryadjaya's partner in newly listed Saratoga Investama Sedaya. Uno was recently questioned by the anticorruption agency KPK regarding alleged money laundering. A year earlier, the avid marathon runner was a torchbearer in Manchester for the London Olympics.

48) Trihatma Haliman/ US$450 million, Real estate

A trained architect, Trihatma Haliman runs property developer Agung Podomoro, which developed more than a third of all new apartments in Indonesia last year. He's currently investing $1 billion on another 13 projects. He keeps fit by swimming every day.

49) Arifin Panigoro/ $420 million, Oil

Arifin Panigoro is founder of Medco Group, with interests in finance, coal and plantations. His brother Hilmi runs its flagship Medco Energi International.

50) Sutjipto Nagaria/ $390 million

It is Sutjipto Nagaria's first time on the list since 2006. He earns the last spot among Indonesia's 50 Richest thanks to a nearly 100% jump in the value of his property developer Summarecon. Shares are up more than fivefold since 2008. He initially made a fortune turning swamp in North Jakarta into one of the city's top residential neighborhoods.

Tuesday 12 August 2014

New IPO Coverage - Japfa Limited

From Company's Prospectus

1. Business Description

Agri-food company that produces multiple protein foods, with operation in 5 high growth emerging Asian markets. Indonesia Japfa Limited (Japfa) is a agri-food company that produces multiple protein food, with operation in 5 high growth emerging Asian Markets.




From Company's Prospectus


Vertically integrated business model that covers the entire value chain for protein products. Japfa has a vertically integrated business model that covers the entire value chain for many its protein products, for feed production and breeding to commercial farming and processing, In addition, they also expand its downstream into consumer food business.

From Company's Prospectus

Animal protein contributes the highest revenue  and profit after tax. Japfa is divided into 3 operating segments - (1) Dairy, (2) Animal Protein & (3) Consumer Food. Below provides summarize this 3 operating segments:

From Company's Prospectus

Indonesia Handojo Santosa is the ultimate shareholders of the company. Indonesia Handojo Santosa is the ultimate shareholders of the company.

Who is Handojo Santosa?

According to Forbes, Handojo Santosa is the 40th richest man in Indonesia. He inherited Ometraco Group from his father and managed to turn Japfa Comfeed into the second-largest poultry feed producer in the country. Age 47, he is currently worth approximately US$670m.

Japfa Comfeed Debt Restructuring?

During the early 2000s, due to the financial crisis, Japfa Comfeed did enter into a debt restructuring with its creditors before. Thus, this is something that I wished to highlight to investor. 

See Japfa Comfeed: 
Annual Report 2000 - http://www.japfacomfeed.co.id/profile/annualreport/JapfaAnnualReport2000.pdf
Annual Report 2001 - http://www.japfacomfeed.co.id/profile/annualreport/JapfaAnnualReport2001.pdf

2. Use of Proceed

Table below summarizes the use of proceed, 44% will be used to pay off debt while the other 44% will be used for its China farm expansion:

From Company's Prospectus

3a. Financial Highlights

Low Margin Business. Despite the big revenue and profit contribution from the Animal Protein business, it is largely a low margin business. I see growth opportunity in the Dairy business which should be of higher margin.

Corn is the biggest cost driver. As of FY13, corn accounts for approx 84.5% of the cost of good sold. Thus corn will be a good leading indicator for how the stock/result will perform.

Leverage seems high. With a net debt-to-equity (net gearing) of 108%, the company leverage seems high. Even after the repayment of the US$70m from the IPO proceed, the net gearing will still remain at approx 100%. This is pretty aggressive for a low margin business like Japfa because the margin of error have to be very low.   

From Company's Prospectus

Below provides a more detailed financial statement:

From Company's Prospectus - Income Statement

From Company's Prospectus - Balance Sheet

3b. Valuation

Based on price multiple, you are paying approx 22x P/E for the IPO. This compares favorably to other regional and global competitors:

From Company's Prospectus

4. Investment Highlight

Growing affluence = Higher protein consumption. Japfa will benefit from a growing affluence in its core market, Indonesia (>80% of revenue). As the country grows, the population will be more affluence and this will result to more consumption for meat/protein as they seek improvement in their quality of life.

Diary is a key growth driver. I see the Diary segment as one of the most important growth segment for the company. Given the food safety concern in China, good and reputable diary sources is a key going forward. Japfa premium raw milk in China is consistently at the top of the market in terms of quality, consistently exceeding Chinese and international standards for nutrition and safety. The quality of our raw milk is also reflected in its selling price. In 2013, the average selling price of our milk was RMB 4.51 per kilogram, which was approximately 25% higher than the average price of milk from ten major milk production regions in China, according to the China Ministry of Agriculture. 

5. Investment Weakness

Concern over animal diseases? Naturally, investors will be concerned about the outbreak of avian flu or any cow/swine related diseases.

Mitigating Factor - The company has been in the industry for more than 40 years and their ability to grow into today size is a testimony of its good & established operating track record. Thus although I recognized this risk, I reckon that the company is experience enough to prevent and handle, in the event of any outbreak.

6. Conclusion

I think this will be a decent bet for the long term and given the small public tranche, the short term IPO performance might be good. 

Sunday 10 August 2014

New IPO Coverage - IREIT Global

From Company's Prospectus

1. Business Description

First European-focused REIT; initial focus on Germany & UK. IREIT is a Singapore real estate investment trust established with the investment strategy of principally investing, directly or indirectly, in a portfolio of income-producing real estate in Europe which is used primarily for office purposes, as well as real estate-related assets. IREIT is expected to have an initial primary focus on Germany and the United Kingdom.

IPO portfolio comprise four office properties in Germany. The IPO Portfolio will comprise four office properties in Germany, strategically located in Bonn, Darmstadt, Münster and Munich, with an aggregate net lettable area (“Net Lettable Area” or “NLA”) of 121,506 sq m (1,307,878 sq ft).

From Company's Prospectus

Bonn Campus, which is wholly-leased to GMG Generalmietgesellschaft mbH (“GMG”), a
wholly-owned subsidiary of Deutsche Telekom AG (“Deutsche Telekom”), and which
comprises four linked modern office buildings of two, four or six storeys. The property is
located in proximity to a key motorway of Bonn and is located in one of the prime office areas
of Bonn, where the headquarters for Deutsche Telekom are located

Darmstadt Campus, which is wholly-leased to GMG and comprises six connected office
buildings with seven and five storey sections, and a multi-storey car park, located at the main
cluster of technology companies. The property is part of one of the largest clusters of
Deutsche Telekom offices outside of Bonn and is located adjacent to a number of other
offices occupied by Deutsche Telekom, including the cellular division of Deutsche Telekom,
T-Mobile Deutschland GmbH (“T-Mobile”)

Münster Campus, which is wholly-leased to GMG, houses offices occupied by Deutsche
Telekom and comprises two six-storey modern office buildings and a six-storey external car
park structure. The buildings are located in a main business park housing leading financial
institutions and global technology firms

Concor Park, which is a multi-tenanted property comprising three linked, recently fully
refurbished five-storey office buildings with a separate car park and is located in the Munich
suburb of Aschheim-Dornach. The property is adjacent to urban and inter-urban rail stations
serving Munich and the surrounding area. The tenants include Allianz Handwerker Services
GmbH (“Allianz”), European Bank for Fund Services GmbH (“Ebase”), ST Microelectronics
GmbH (“ST Microelectronics”) and other leading companies

Below summarize the properties key terms:

From Company's Prospectus

Mr Itzhak Sella is the ultimate sponsor of the REIT; Mr Tong Jinquan is the Strategic Partner. Mr Itzhak Sella is the ultimate sponsor of the REIT while Mr Tong Jinquan is its strategic partner.

However after the IPO, Mr Tong will be the biggest shareholders of IREIT:

From Company's Prospectus

This 2 characters might be unfamiliar for fellow investors, below provide a quick summary on them:

Itzhak Sella - Refer to his Linkedin Profile (Link: https://www.linkedin.com/pub/itzhak-sella/3/b68/60a)
Tong Jinquan - Refer to Forbes (Link: http://www.forbes.com/profile/tong-jinquan/)

2. Financial Highlights

IPO price of S$0.88, represents 12.8% premium over NAV. The actual NAV is S$0.78. Thus by subscribing at IPO price you are effectively paying 12.8% premium.

From Company's Prospectus

Annualized 7.6% yield based on projection. Based on the IPO projection, the annualized yield is 7.6% for FY14.

3. Investment Highlights

Favourable dynamics of Germany’s real estate market. According to the Independent Market Research Consultant, the German property market is seeing increased demand as a global safe haven with growing participation from nondomestic investors attracted by the stability, liquidity and the steady growth potential of the German real estate market as well as the return of some German institutional and private investors and lenders choosing to focus on their own country rather than riskier foreign
markets.

In addition, the broad German office market is expected to respond favourably to the improving economic backdrop with stronger business sentiment boosting both take-up and investment volumes. According to the Independent Market Research Consultant, Germany is currently in a position in the rental cycle where landlords are expected to benefit from an increase in the growth of rental rates.

From Company's Prospectus

100% occupancy with Free hold status. The IPO portfolio is currently 100% occupied and the free hold status of the property represent one of the biggest highlight.

Strong tenants anchored by a wholly-owned subsidiary of Deutsche Telekom with long-term leases. Deutsche Telekom Properties via GMG is one their biggest tenant.  Deutsche Telekom, as the holding company of GMG, has entered into a profit and loss transfer agreement with GMG2, providing IREIT an avenue for a claim against Deutsche Telekom, should the assets of GMG be insufficient to cover the claims of IREIT. This ensure low credit risk for the REIT.

In addition, Concor Park is a multi-tenanted property with large, international and reputable corporate
tenants including Allianz, ST Microelectronics and Ebase, and has a WALE of 5.9 years.

4. Investment Risks

Chinese + Israeli -- Marriage from Heaven OR Disaster in the making???? I fear misalignment of interest here. On one hand, you have an Israeli sponsor. On the other, you have a majority shareholder being Chinese. I question the communication between the 2 and who will be the actual one making the strategic plan for IREIT.

As a minority shareholders, we are always at the mercy of the boardroom fight, that is simply out of our control. Thus, this potential strategy misalignment is one of my biggest worry.

Rental escalation based on CPI increase???? Based on the IPO projection, there will be a rental escalation triggered by CPI changes. (see projected table below) I am personally pretty susceptible on this. I am no economist expect back I am not so sure if the CPI increment is enough to achieve the stipulated trigger. Currently the base CPI is projected at 1.2%.


Weak market sentiment - Gaza+Ebola+Iraq & many more. Market has been trading poorly recently and there is a lot of geo-political risks that exist around us. In addition, there is still this Ebola disease which may significantly shift the overall market sentiment.

5. Conclusion

As much as I see value in the European property sector, I will stay caution on the IPO. I will not go ALL-IN on this one and might just buy some at IPO level and see how it perform before I add-on my position.