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Monday, March 20, 2006

Tenaga KPI too focus on financial performance

The Star bizweek interview of Tenaga chief Datuk Che Khalib Mohamad Noh reveal Tenaga's Key Performance Indicators (KPI)

Majority of the KPI reveal by CEO are mainly in financial term : recovery of debt, reduction in general expenses, value creation from land bank, SESB turnaround, recovery from delinquent accounts, average collection period, return on asset, procurement process time.

undeniable, he also reveal some technical KPIs like generation availability and productivity KPI like staff response time and number of kilowatt or megawatt produced per staff.

Datuk Che Khalid further reveal that for Senior Management. They have four quadrants of KPIs: Financials (45%), customers (25%), internal process (15%), and reduced total cost per unit (15%).

Based on the four quadrants. Does it balance?

With Financial cover 45%. It is hardly for me to said it is balance. Further, it is debatable whether reduced total cost per unit (15%) should be under Financial (45+15=65%) or Internal Process (15+15=30%)

Che Khalid is correct by mentioning that "we need the customer more than the customer needs us. Everything else will fall into place. If you take really good care of the customer than they will be willing to pay more for your really good service."

However, customers cover 25% is reasonable. However, Che Khalid never reveal what comprise customer KPI. It should included number of complaint received, number of compliment letter received or published on newspaper. Customer waiting time. Tenaga should follow EPF and Public Bank Bhd in reducing customer waiting time.

I feel that Financial should reduced to 25% to 30%.

One thing left out from the Balanced Scorecard system is Innovation. There is no KPI in Innovation. Like new method to read meter, new method to collect bill etc.

Too focus on financial KPI lead to management take an easy way out : tariff hike. More emphasis should be place on Customer, Internal Process and Innovation.

Instead, Tenaga should do what Che Khalid mentioned Take good care of the customer by tariff reduction to induced Foreign Direct Investment (FDI). Then Tenaga revenue would improved if a lot of foreigner set up factory here. Of course, they should minimise black out and other customer issue. Thus, I feel Customer KPI is more important.


Contradict reveal by Tenaga's chief and Energy Minister

Last Saturday, On The Star's Bizweek Cover feature on Tenaga National Bhd. TNB chief Datuk Che Khalib Mohamad Noh stated that : “We have already reached a critical level for survival ... For the last three years, we have been surviving on borrowed money,” Toss in an annual capital expenditure requirement of close to RM5bil, hefty debts of about RM30bil, and rising coal prices, and the push for a tariff restructuring becomes more compelling.

TNB Chief Datuk Che Khalid added in the interview by The Star : "At the moment, we have reached a level where every month, we are borrowing money to keep the company afloat because the total revenue that we collect is not even enough to cover the capex and servicing of debts. That's our situation today. "

On Sunday, Sin Chew Daily reported that Energy ,Water ancommunicationon Minister Datuk Seri Lim Keng Yaik Independent Power Producer (IPP) have 40% excess capacity of which the idealing cost has to babsorbeded by Tenaga. As there is 40% excess capacity of idealing power, there will be no new IPP in the next 10 years.

Thus, there is a contradict statement. If there is a 40% excess capacity, why is inecessaryry for further capital expenditure (CAPEX). Which TNB chief claim unable to cover by it revenue and stated as a reason for tariff hike. They should be no more CAPEX in the next 10 years as TNB has excess capacity.

For my knowledge, I only know there is only two possibility of CAPEX. One is for capacitexpansionon and the other is for replacement of existinassetsts.

If you have simple accounting knowledge. You would know that CAPEX on replacement of old machine should have been cover by it profit if TNB has depreciated iassetsts as required by accounting standards and the company make profit.

Based on Energy, Water and Communication Minister statement. CAPEX on capacity expansion is not required as it 40% excess capacity.

Even if TNB required expansion. Majority of the company used borrowing for capacity expansion. As a power analyst stated on The Star's bizweek that " “Utilities all over the world carry huge debts. For TNB, the option of refinancing its debts is available and this it has done and can continue to do, even if its debts are lumpy. TNB’s loans are sovereign guaranteed which significantly lowers its cost of borrowing. So that’s not so much of an issue to me.”

Thus, they is no basis for TNB tariff hike. Clearly, the purpose of tariff hike is for increase in shares price and gain on stock option by Tmanagementagment.

Either TNB chief or the Minister is wrong. Both of them own us an explanation. I do not oppose government recent fuel increase. However, I strongly opposed a tariff hike by TNB. My reader know that actually I hope TNB can be delisted from Bursa Malaysia.


Thursday, March 16, 2006

Would SBB become another Park May?

The star headline today reported that the Southern Bank Bhd (SBB) board of directors accepted yesterday the RM6.7bil offer by Bumiputra-Commerce Holdings Bhd (BCHB).

The Star Business Section also carried similar head lines .

After the acceptance. Southern Bank Berhad will be eliminated like Ban Hin Lee Bank, whereas Bumiputra-Commerce Bank will have more branch.

The Star commented that Merger will fit into BCHB scheme of things. It further reported that Three SBB members invited to boards of BCHB firms .

Obviously, for business community, loan from Bumiputra-Commerce Bank is much more easy than to get a loan from Southern Bank Berhad. However, in a time where Bank Negara Malaysia implement Deposit Insurance System and would not rescue any bank that collapse. A depositor in Southern Bank Berhad feel more secure to deposit money in SBB than in Bumiputra-Commerce, as Bank Bumiputra have a few record of unable to survive in recession.

CIMB have to borrow RM4 billion to acquired Southern Bank Berhad! Does this make the merged entity more stable financially?

A good managed public transport company Park May has been taken over by UEM Group 10 years ago to "restructure" the public transport system in Klang Valley. UEM group has to borrow to finance the acquisition and whereas Park May borrowed money to replace all old buses with new buses. Price hike immediately announced after the takeover. Bus fare has increase few time after that but Park May still in huge loss. Bus service become less frequent as the company try to cut cost by reducing the trip, but this also unable to save the company.

Eventually, government has to come in to to bail out Park May from UEM group and Intra-Kota from DRB-Hicom Group.

Now, Bumiputra-Commerce Bank choose to acquire and eliminated a good managed bank rather than a bank with more Non-performing loan(NPL) like Affin Bank. This is like a Park May take over that eliminate good managment from a good running company.

As a banker, CIMB group should know that using gearing to acquire another company is a risky move. Malaysian really pray that the merged BCB-SBB would not become another Park May. As government now do not have financial strength to bail out a fail company. A merged large group also difficult for government to swallow financially. Government should try every effort to prevent such thing happen as the bank might be acquired by foreigner after the liberalisation in banking industry if such incident occur.

Ex-shareholder of Park May. After spending many year of building up the company have force to dispose off and leave the company. They are happy now as they keep a huge money now paid by the acquirer. However, public and the consumer has to suffer as there do not have the service of such a experience and good managed operators.

Of course, like Park May, this unlikely to happen in next 6 years. However, according to history of Bank Bumiputra, to survive another 12 year is a real test.

Hope the management of Bumiputra-Commerce Bank would not make the SBB shareholder laughed after 12 years!!!

Updated: : southern bank another one bites dust


Wednesday, March 15, 2006

Does UEM shares price bull run sustainable?

Within one week of my blog post on UEM bull run. Share prices of companies under the UEM group attracted strong buying interest on Monday. Nanyang Daily also reported that there is a rumours in the market said that the government might take UEM World private.

However, the question is whether the shares price bull run is sustainable? Sustainability of shares price, of course will depend on whether the rumour on Ninth Malaysian Plan is truth.

One of my friend told me that during 1993 stock market bull run. He punt share counter of Renong and UEM. He start with very low capital....less than RM1,000. He play rotationally just two counter for the whole 1993. For a tiny RM1,000, he able to accumulated more than RM1 million. However, the RM1,000,000 he make during 1993 stock market bull run slowly depleted between 1994 to 1997 and has been completely wipe out after Asian financial crisis around 1998.

If he stop punting in the stock market after 1993. He must able to keep his wealth.

If market rumuor on Ninth Malaysian plan is truth, and you find it difficult to invest in stock market as you do not know which counter to buy, or you have difficulties in prediction of next concept play. You can just focus on two counter and play it rotationally. Would history repeated itself is any body guess?


Tuesday, March 07, 2006

The beginning of next UEM bull run

Current issue of The Edge reported that The government is planning to develop the Southern Corridor of the peninsula under the soon-to-be unveiled Ninth Malaysia Plan (9MP) .

The first prong of the plan, with the largest federal government allocation of RM6 billion, will develop vast areas between the two existing links to Singapore. Included in these plans are the developments of the Bandar Nusajaya township and the waterfront city of Danga Bay, a development owned by Ekovest.

Shares price of Ekovest Bhd has improved marginally on Monday.

The south Johor development will be complemented by the "bullet train" project from Kuala Lumpur to Johor. This proposal was initially believed to have been mooted by the YTL Group. However, it is understood that Khazanah may lead this project.

Another facet of the 9MP will be the construction of the long-awaited second Penang Bridge. While the second bridge will fall under the 9MP, it will eventually become part of plans to develop the Northern Corridor

Sources say other than the direct beneficiaries such as Ekovest, the other possible winners in the 9MP would be those government-linked companies such as the UEM Group. UEM, almost 100% owned by Khazanah, will most likely lead the development of the bullet train and parts of the SJDA project.

Of course, the Bandar Nusajaya township is already owned by UEM subsidiary Bandar Nusajaya Sdn Bhd (formerly known as Prolink Development Sdn Bhd). Bandar Nusajaya is the ambitious township development in Gelang Patah, near Johor Baru, adjacent to the second link between Singapore and Malaysia launched in the heyday of the 1990s.

A key player in the Southern Corridor could also be Tan Sri Syed Mokhtar Al-Bukhary who controls the Port of Tanjung Pelepas, Johor Port and also Senai Airport.

Another UEM subsidiary, UEM Builders Bhd (formerly known as Intria Bhd), already owns the existing Penang Bridge. UEM Builders also has some experience in the construction of railways — admittedly a somewhat less salubrious experience.

The Edge further reported that Syarikat Prasarana Negara Bhd (SPNB) will extend the Putra and Star LRT (light rail transits) lines as well as construct a new line.

Shares price of UEM Builders Bhd has improve marginally on Monday. However, shares price of it holding company UEM World Bhd remain stagnant. UEM world Bhd, which also control CEMENT Industries of Malaysia Bhd (CIMA). CIMA shares price has rise to 3 year high .

Thus, it just a matter of time for UEM World Bhd shares price to rise.

Punter would remember how Renong (Now UEM World) and UEM ( Now UEM Builder) shares price increase from a few sen to more than Ten Ringgit in 1993 stock market bull run. While Malaysia stock market was one year behind the regional stock market. It is just the beginning of another bull run for UEM group of company. A once in 13 years opportunity you unable to miss.

Update:Ninth Malaysia Plan to revive construction
Analysts’ pick of gainers
Interest ahead of 9MP-Ekovest


Wednesday, March 01, 2006

Which timber company on Bursa Malaysia affected by Pahang's timber freeze?

oOn 22 February 2006, Nanyang Siang Pao reported that about 100 timber factories are affected by the freeze on logging activities and the movement of logs in Pahang.

Today, 1 March 2006, Nanyang Siang Pao further reported that all timber sawn factory in west Pahang will run out of raw material and have to cease operation next week. More than 10 thousand people has been affected by the freeze including timber logging company, timber sawn miller factory, transporter, foreign factory worker etc. More than 10 thousand people became jobless because of the freeze.

Timber logging company from other state capitalize on the situation by charging higher price on timber log. However, this is on a willing buyer and willing seller basis.

A few sawn timber factory in the Pahang state have to cease operation today while the other are expected to cease operation next week.

Which listed company on Bursa Malaysia affected by the freeze? Pahang State Development Corporation only hold two public listed company: Pasdec Holding Berhad and Far East Holding Berhad, property development company and plantation company. No sawn timber company. No wonder the state government not hesitate on the freeze.

Timber log company from other state will be a gainer as there able to charge supernormal price. You might able to make some money if you able to guess one.

Link: The Star

Update: Pahang lifts logging freeze