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Tuesday, February 28, 2006

Please keep OYL within Malaysia

In less than one month after I commented about Hong Leong Group and OYL. Recent issue of The Edge reported that Hong Leong Group and Tan Sri Quek Leng Chan is in negotiation to disposed off OYL Industrial Bhd. The Edge stated that believes it is Matsushita that is buying.

If OYL fall in the hand of foreigner like Matsushita. It would be a great loss to Malaysia industry. It does not appear that Hong Leong Group nor Tan Sri Quek Leng Chan required the money. No apparent politic pressure to dispose off the company like what happen to Hong Leong few years ago where it force to dispose off it print media arm Nanyang to Huaren Holdings. I really hope that Hong Leong would keep the company for national interest.

In the event that Hong Leong want to dispose off the company. I really hope it dispose it to a Malaysia's company than to a foreigner like Matsushita. It is a social responsibility for Malaysian entrepreneur to keep the company within Malaysia.

In the latest announcement by OYL in replied of query from Bursa Malaysia. OYL stated that:

O.Y.L. Industries Bhd ("OYL") informs that, from time to time, it has received approaches from various parties to explore business propositions. Currently, OYL is in discussion with a party (not Matsushita) who has expressed interest to purchase OYL but it has not led to an offer being made so far. The discussion may or may not lead to a definitive agreement. If a definitive agreement is reached, an appropriate announcement will be made.This announcement is dated 28 February 2006.

Oh, I hope the offer is not cause by my blog post!

Link : Nanyang


Monday, February 20, 2006

CNI unable to achieve revenue target

Main board listed direct selling company CNI was not expected to achieve its forecast revenue of RM317mil for financial year 2005. Reported The Star on 18 February 2006.

According to Executive Director Sam Cheon(pic), external factors such as rising oil prices and weaker buying sentiment dampen the company’s profits.

“Last year was very challenging for the industry and CNI,” Cheong said

This proved my analysis published on another blog is correct.


Sunday, February 19, 2006

Shares price of I-Power rises to record high

Shares price of I-Power Bhd, which feature by this blog on 15 January 2006 and by The Star on 16 February 2006 has surge to record high.

Another company that feature by this blog on 15 January 2005 is Online One Bhd. It shares price has rise to record high much earlier on 6 February 2006. However, if you never sold on 6 February 2006. Too bad. It share price has drop back to it normal level.

Similarly, shares price of Kannaltec also rise to record high on 15 February 2006. It has decrease from it record high but you still able to make a profit if you disposed off now. However, one of the mainstream chinese newspaper in Malaysia recently reported that Kannaltec has high cash in hand per shares compare to it shares price. I unable to retrieve that particular article now but will update you soon.

Update: Strong performance & cash flow, Kammaltec shares price under value

Excerpt translation: Kannaltec's have 0.12 cash in hand per shares. which is higher than it current share prices. It has total cash in hand of more than RM14 million


Wednesday, February 15, 2006

My analysis on cabinet reshuffle 1

1. Gerakan loss Deputy Internal Security Minister to MCA

Gerakan loss Deputy Internal Security Minister to MCA. Gerakan's Internal security Minister Chia Kwang Chye has been transfer as Deputy Information Minister. Whereas MCA's Deputy Higher Education Minister Datuk Fu Ah Kiow is now Deputy Internal Security Minister.

This cause MCA effective change Information Ministry portfolio with Gerakan's Internal Security Ministry portfolio. A gain to MCA and a loss to Gerakan as Internal Security Ministry, which control police and media, which is much more powerful than Information Ministry, which only control media.

Additionally, MCA also has one more portfolio. Deputy Information Minister Donald Lim has been transfer as Deputy Tourism Minister. Whereas, total portfolio control my Gerakan remain unchanged.

UMNO Deputy Internal Security Minister Datuk Noh Omar has been made Deputy Education Minister. Datuk Noh Omar was said to be the person follow Pak Lah instruction to against corruption. However, he recent poor skill in handling relation with China by asking foreigner to go home if they find the Malaysia Police cruel and blame media misquote him has cause him transfer to Education Ministry. May be corruption fighting has to be start from child via education!

2) Nazri responsibility increase. A promotion?

Minister in the Prime Minister Department Datuk Seri Mohd Nazri Abdul Razak responsibility has been expand to cover Datuk Seri Radzi Sheikh Ahmad portfolio after the later transfer as Home Minister.

Nazri did a good job as a Chairman of The Human Right Caucus.

Home Minister Datuk Seri Azmi Khalid, who said poorly handle the repatriations of Indonesian illegal worker which cause a mini recession has been transfer as Natural Resources and environment Minister. Azmi gear up with the new portfolio as he claim he is an environmentalists. In fact he should be happy as he able to remain as Minister. Two Minister that fail to elected as central committee of UMNO. Higher Education Minister Datuk Seri Shafie Mohd has been dropped whereas Tourism Minister Datuk Seri Abdul Kadir Sheikh Fadzir resigned.

The dropped of Shafie as Higher Education Minister might be cause by the drop of University Malaya in Times Higher Education Supplement (THES) World University Rankings.

New Home Minister is UMNO Secretary General.

3 Rafidah remain as International Trade and Industry Minister

That might be the reason why the Prime Minister never reshuffle the cabinet after the WTO meeting in Hong Kong. It is difficult for a new Minister to catch up as the next WTO meeting will be held at March. This also indicated that Prime Minister still do not have succession plan for this portfolio.

4 Effenddi reappointed as Minister after selling NTV7 to UMNO's TV3

Businessman and ex-Agricultural Minister Datuk Seri Dr Effenddi Norwawi reappointed as Minister in the Prime Minister Department after he dispose off NTV7 to Media Prima, which control TV3 and a company control by UMNO.

Effenddi was helping the Prime Minister in Ninth Malaysia plan recently and he was replacing Datuk Mustapha Mohamed, who has transfer to Higher Education Ministry. Mustapha, a Minister train by ex-Finance Minister Tun Daim was having a taught job ahead to make university in Malaysia more competitive and climb in international ranking.

In my opinion,Effenddi actually qualified to become Finance Minister but he is not from UMNO and his last business venture in NTV7 unable to make profit.

5 Berjaya group well connected with Tengku Adnan

New Tourism Minister and ex-Minister in Prime Minister Department was closely associate with Berjaya Group and Tan Seri Vincent Tan. However, Anti Corruption Agency (ACA) has made a clearance for all new Minister to Prime Minister before he made anouncement of cabinet reshuffle.


Friday, February 10, 2006

Fate of businessman turn politician

The recent case of controversial Thailand Prime Minister indicated that it is better for businessman to remain focus on it core rather than enter into politic.

The first example of businessman turn politician in Malaysia is Tan Koon Swan. He founded Supreme Coporation and Multi-Purpose Group. He was elected as the President of Malaysia Chinese Association (MCA), second largest political party in Malaysia. However, he was involved in the Pan-El crisis in Singapore which cause the closure of Malaysia and Singapore stock exchange for consecutive 3 days, a first time in history in Singapore & Malaysia. He then sentence to jail in Singapore and later in Malaysia for criminal breach of trust. His family now control a small property company listed on Bursa Malaysia, Crimson.

The second is Joseph Chong of Westmout Industries Bhd which control Sabah Shipyard Bhd at one point of time. He was Secretary General of Gerakan and a Member of Parliament of Batu division. He has benchmark himself against Tan Koon Swan at one point of time. Who has amass wealth in business and get high ranking in politic. What an inauspicious benchmarking. He later persuade by rival of Gerakan President to challenge his mentor, President of Gerakan Tan Sri Lim Keng Yeik. He has to dispose off Westmout Industries Bhd after he loss in a contest as Gerakan President. However, he able to cash out before Asia financial crisis. Thus, I believe he still maintain some wealth.

Update: The third is Soh Chee Wen. Soh Chee Wen started as a distributor of a direct selling company or multilevel marketing company, and later founded his own direct selling company. He nearly went bankrupt when recession hit Malaysia. He later take over Lake View in Subang Jaya and successfully make a come back in corporate sector. He then take over numerous golf club and make a name in leisure industry. After 1993 stock market bull run in Malaysia. Soh Chee Wen have control numerous public listed companies. He then become MCA Petaling Jaya Division Head and MCA Selangor State Liaison Commitee Chairman. He held son of ex-MCA President Datuk Seri Ling Leong Sik to gain control of several public listed companies. Share price of public listed company control by Soh Chee Wen and son of Ling has depleted substantially. His relationship with Ling turn sour. Now, Soh still have court case with Security Commision and Ling. Ling's son , however, has become Deputy President f MCA 's Youth Division.

Bumiputra entrepreneur, Tun Daim Zainuddin exist corporate sector to serve government as Finance Minister of Malaysia. He transfer an officer who "disappear" during office hour to "minum teh" out of Finance Ministry after being told he unable to remove a civil servant. His Ministry quickly become as efficient as private sector after that incident. However, his private sector style was unpopular among civil servant and UMNO member. He was recently involve in a controversial court case.

The fate of the above four persons must be difference if they remain in business and distance themselves from politic.

In Korea, Hyundai founder also joint politic at the age of 70. His sons, however, was charge by government on corruption. He pass away with disappointment and unhappiness.

What is the fate of Thailand Prime Minister Thaksin Shinawatra is yet to be see!

Update: Thai PM defends record after five years in power

Update: Global Voice Online


Wednesday, February 08, 2006

Tax benefit on brand building

I have stated that Malaysia's company do not have a single brand that make our company a world class company.

It indicated that Malaysia's company unaware of tax incentive provided by Malaysia government on brand building.

Malaysia's government provide double tax relief on Advertising & Promotion expenses on Malaysian brand. It might not substantial at a glance. Based on Malaysia tax rate at 28%, double tax relief is 56%. This is more that half of the Advertising & Promotion Expenses you spend. Thus, this is a powerdful leverage strategy you unable to ignore.

If you never do any brand building but your competitor did. what is the difference? Let illustrated if a company have RM2 million profit per year.

No brand building
Profit 2,000,000.00
Advertising & Promotion 0.00
Net Profit after A&P expenses 2,000,000.00
Taxable profit 2,000,000.00
Tax Paid 28% 560,000.00
Net Profit after Tax 1,440,000.00
Malaysian brand
Profit 2,000,000.00
Advertising & Promotion 1,000,000.00
Net Profit After A&P Expenses 1,000,000.00
Taxable Profit 0.00
Tax Paid 0.00
Profit After Tax 1,000,000.00

From the above illustration. Company with brand building pay RM0 tax wheareas company without any brand building expenses have to pay RM560,000.00.

Although Profit after tax for company without brand building expenses more RM440,000 than company with brand building expenses. However, in real life practise. Company with brand building expenses might generate more sales and thus more profit than company without brand building. Thus, usually company with brand building have more after tax profit than company that without any brand building expenses.

In theory, every RM1,o00,000 spend on advertising equivalent to RM440,000 on advertising expenses only. As government subsidise RM560,000. I rather pay the advertising company rather than pay to government. Amount pay to adversing company generate more sales than paying tax to government which generate RM0 additional sales.

If both company do pay advertising expenses but one with Malaysian brand that entitle to double tax relief but the other company pay advertising expenses but not Malaysian brand like OYL.

Non Malaysian brand
Advertising & Promotion 1,000,000.00
Net Profit After A&P Expenses 1,000,000.00
Taxable Profit 1,000,000.00
Tax Paid 280,000.00
Profit After Tax 720,000.00

Malaysian brand
Profit 2,000,000.00
Advertising & Promotion 1,000,000.00
Net Profit After A&P Expenses 1,000,000.00
Taxable Profit 0.00
Tax Paid 0.00
Profit After Tax 1,000,000.00

There is still a different of RM280,000. Thus , it is advisable to used Malaysian brand if this does not affect sales.

There is another method of performance measurement call Economic Value Added Mehtod. Which Advertising and Promotion does not classified as expenses but classified as non-tangible assets. Thus, I strongly advise Malaysia company spend A&P on Malaysian brand to improve competitiveness of Malaysia company.

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Sunday, February 05, 2006

Samsung of Malaysia, Hong Leong

In 14 Jun 2005, The Edge published an article written by V Sivapalan with title "World-class company still a dream". He stated that: Currently, there is no Malaysian "world-class company"........... We always cite Singapore's Creative Technologies as an example.........Sure, we have Petronas but that is a national oil company with an absolute monopoly over all our energy resources. We don't have a truly entrepreneurial Malaysian icon. South Korea has its Samsung, Hyundai and LG; China its Haier and Huawei Technologies; India its Infosys and Tata Consulting. Even the Philippines has San Miguel. Malaysia, well, unfortunately, we have nothing but a dream.

I disagree with him and I feel Malaysia have a few company. We have IOI group which has just acquired some business from Dutch's Unilevel Group. We have YTL Corporation which supply water to resident in UK etc.

South Korea icon is Samsung. Samsung started from Brevery, sugar refinery, textile, paper pulp and packaging, electrical appliance, Semiconductor and handphone.

While Robert Kwok in Malaysia start from sugar refinery, like Samsung. He later invest his wealth in leisure industry and not manufacturing like Samsung.

In Malaysia, one company that venture into paper pulp and packaging, electrical appliance and semiconductor industry is Hong Leong Group in Malaysia.

Hong Leong group first involve in packaging business when it acquired Malaysia Pacific Industry Bhd (MPI). Base on profit from the packaging. The company diversified into semiconductor business and renamed MPI. MPI later demerged the pakaging business from MPI to become Guolene Packaging Industries Bhd. In late 2004, Hong Leong Industries Bhd sell it packaging business to San Miguel Corp, the Philippines’ largest publicly listed food and beverage company, for RM133 million cash.

MPI operate it semiconductor business under Carsem and Dynacraft Industries Sdn Bhd. Not MPI nor Hong Leong. Thus, I feel Malaysia do not lack of world class company. The problem is branding. They do not operate under a single brand.

Malaysia is the largest air conditional manufacturer and exporter in the world. The leading player is Hong Leong's OYL Industries Berhad.

OYL Industries Berhad's CEO Liu Wan Min has been listed as one of the 20 CEO we admire at the year end issue of The Edge in end of 2005, together with his boss, Tan Sri Quek Leng Chan.

In Malaysia, OYL market it air-conditional under Acson and US's York Brand since 1978. Not Hong Leong nor OYL. In the 1990s, OYL acquired US-based SnyderGeneral, now renamed McQuay. It is not sure why Hong Leong never renamed it Acson nor Hong Leong but McQuay?

Again, we do not lack of world class company but it is an issue of branding.

If Hong Leong able to merge OYL and MPI under one company. It significant in Bursa Malaysia might be same as Samsung in Korea. OYL market capitalization is larger than Proton, a automobile manufacturing company.

OYL is more like LG in Korea rather than Samsung as it comprise mainly air-conditional and refrigerators and do not have audio division.

In Semiconductor, MPI is doing turnkey pakaging ,test services and manufacturers of lead frames and microelectronic packaging systems. This is still consider the low end of the vlue chain in semiconductor industry compare with Samsung Semiconductor.

The most important is Hong Leong do not have hanphone division.

Clearly, Malaysia have a lot of catch up to do. However, Hong Leong have the foundation which make the catch up much more easy compare with other group. Government should provide incentive for such group to merge, to venture to audio division, to take over loss making government semiconductor manufacturing division and to venture to cell phone manufacturing.

Please be reminded that Samsung mobile does not become competitive base on protection by Korea government but it own achivement.

Blog that link here: Amateur Zen Trader


Thursday, February 02, 2006

Global Voice feature Chinese New Year In Malaysia

After my previous posting. I get some search for "chinese new year preparation in malaysia" from Google search engine from my blog.

I unable to blog for the subject as this might reveal my identity. However, I discovered that Global Voices Online has cover the subject. Read it if you are interested.

Update : Miracle8