Lottery strike for EPIC shareholders?

AZRB to sell 21.26% of EPIC for RM111.5m

Written by Joseph Chin

Monday, 08 November 2010 18:56

KUALA LUMPUR: AHMAD ZAKI RESOURCES BHD [] (AZRB) is selling its 21.26% stake in Eastern Pacific Industrial Corporation Bhd (EPIC) for RM111.5 million cash consideration. AZRB said on Monday, Nov 8 it was selling the stake, comprising of 35.97 million shares, to Lembaga Tabung Amanah Warisan Negeri Terengganu. “The proposed disposal will result in an estimated gain on disposal of approximately RM11.5 million at group level based on the financial results as at June 30, 2010,” it said. AZRB said the proceeds from the proposed disposal would be used to repay borrowings and for working capital purposes. Source: theedgedaily.com  The price work out to be 111.5million/35.97million = RM3.10 Current price (8th Nov 2010): RM2.09

The Tricycle

 

Photo taken from tinyfarmblog.com 

To be successful in stockmarket, the understanding macroeconomic factors is very important. For a start, we should understand three key cycles that shape the market. The explaination of the three key cycles below is taken from Malaysia Investor website ( alot of excellent articles there).

Business cycle
A business cycle is essentially a recurring and fluctuating levels of economic activity that is experienced by an economy over a long duration and typically encompasses the following:

• Recovery
  - This is where the economy starts to work its way up to better financial footing after the previous recession period
• Expansion  
  - Here, there would be increasing growth in demand resulting from increased customer confidence
• Peak(also known as the economic boom)
  - This is where demand surpasses the supply of goods and services in the market, unemployment is low and almost all the production capacity is fully utilised. During this period, we will see increasing inflation rate, which will later trigger central banks to raise interest rate when an economy is deemed to be overheated.
• Contraction
  - With higher interest rate, we will start to see slow down in capital purchases and inventory build up, followed by slow down in production. This subsequently leads to increasing layoff.
  - Depending on the severity, during the contraction period, there could be just a slow down in economic activities or a recession, which is generally defined as negative economic growth for more than two consecutive quarters.
  - At the trough of this, what is typically observed are businesses restructuring and consumers clearing off debts which they accumulated earlier. After going through a consolidation period, consumers would regain their confidence and start spending. Then, the cycle begins again.

However, very much like us human beings, no two business cycles are exactly the same. Even though all cycles might go through the phases described above, the length and width of the cycles are never the same but generally, the expansion period would be more gradual and longer compare to the contraction period.
Interest rate cycle
This is a cycle that is closely related to the economic activities. A typical interest rate cycle consists of 4 stages:

• A series of rate hikes
• A period of stabilisation
• A series of rate cuts
• A period of stabilisation

Usually, when a country’s inflation rate rises due to demand-pull pressures, its central bank will raise the interest rate to fight off inflation and cool down the economy. Here, the sectors hardest hit would be banking, automotive and housing, as higher interest rates make loans more expensive. As such, consumers would cut down on purchases from these sectors resulting in the earnings of companies in these industries taking a tumble. As the effect starts to take place with the economy slowing down, the interest rate will be held steady for a while up until a stage where by the economy slow down has gone into a more serious recession. This is when central banks react to lower interest rate to boost up its country’s economic activities. After the economy recovery is in sight, the interest rates would once again, be held steady until the next cycle comes.
However, there are certain times when the above does not happen. There are instances where, even though a country’s inflation goes up high, its central bank holds on to its current interest rate as the reason for the rising inflation was more due to cost-push effect,  resulting from sharp increase in fuel price for example, rather than demand-pull pressure.
Stock market cycle
A most prominent feature of a stock market cycle is that the stock market cycle moves in tandem with the business cycle, and the former is always ahead of the latter. Why is that so? A very simple reason really - the stock market cycle reflects the overall market expectation on the business performance. Hence, when the market expects an economic boom is coming, before it actually hits, the stock market is already on its way up. The reverse happens before a recession. Therefore, if you trace a stock market cycle, you will see that its peak precedes the actual economic boom while stock market index hits the bottom before our economy goes to its trough. As such, the stock market index functions as an excellent leading indicator for the movements in a particular business cycle.
A typical stock market cycle goes through bull and bear periods. Within the bull period, it can be further classified into early bull, middle bull and late bull before reaching the peak. The same can be seen for the bear period; it consists of early bear, middle bear and late bear before hitting the bottom.

For the full articles, please go this link.

When you are not a prolific writer, what would you do? Just search around for a good article to be posted.. :)

Tough Times Never Last, But Tough People Do!

I sincerely apologize after performing David Copperfield's act for 5 months. As in any roller coaster ride, life is full for ups and downs as well but hopefully after some difficult 5 months, everything will be fine. Always reminding myself and hopefully to the readers as well that,

 'Tough Times Never Last, But Tough People Do!' - Robert Schuller

Back to my '5 months' interrupted journey to financial freedom, KLSE have been rallying to 1500. So if you are holding stocks that still stand like a rock (ex. Protasco), what would you do? 

For me, I will review back the stocks and if anything changed from the initial reason of buying it. Of course, always reviewing own stock picking is important as well as there are so much that we still need to learn. Learning is an endless journey.

For the time being, just enjoy as the bull charging.

Protasco - Updates

Protasco just declared a single tier final dividend of 5cents per share for the financial year ended 31 December 2009 bringing the total dividends to 9 cents for year 2009. Based on the current price, the dividend yield is around 9%. A good dividend yield will act as a good buffer and more importantly, putting less stress to your emotional well being if market retrace or come under pressure.

 New updates from the HCM Engineering (Protasco's main subsidiary) website below,

 HCM Arabia to Complete Libya's TBW Project Ahead of Schedule (source: HCM website) 

HCM Arabia (HCMA) is expected to complete its Tarhona-Ben Waled (TBW) road maintenance project ahead of schedule. It wants to hand it over to Libya’s Road and Bridges Authority (RBA) before the country’s 41st Al-Fatah Revolution Anniversary.

HCMA is wholly-owned by HCM Engineering Sdn Bhd.

In an interview, HCMA Director Dr Akram Agil said it is expected to be completed in early August 2010. The Anniversary falls on 1 September. He added that this would also put the company in a favourable position to secure a new tender to expand the 88km single carriageway to a dual carriageway.

Dr Akram’s smile has an unmistakable positive signal…

First, in respect of logistics, experience, base camp, staff, asphalt and quarry, HCMA is undoubtedly entrenched there. Second, it has the biggest fleet of machinery among the road players in Libya. Last count: 9 pavers, 1 CR 2200, 5 milling machines and 29 rollers.

The TBW project started mainly using the traditional mill and pave technique. However RBA was very pleased with a 10 km-trial using the Cold In Place Recycling (CIPR) method that they asked HCMA to subsequently do another 58 km stretch using CIPR which has now been completed.

Again it was a hit!

The client then asked HCMA to introduce CIPR at another ongoing project. Thus the upgrading of 40km of the 90km dual carriageway Tripoli Gharian (TPG) road maintenance project will be carried out using the CIPR technique. HCMA provides technical assistance for this project. Its main contractor is Libyan Malaysian Company for Road and Construction (LMCRC). The latter is 51% owned by Libya’s Real Estate Investment Company (REICO) and 49% owned by HCM Ikhtisas. TPG is scheduled to finish in March 2011.  

HCMA General Manager, En Mohd Nasir Hassan said he believes that TBW Phase 2 project augurs well for HCM Engineering and the friendly relationship between Libya and Malaysia. Concurs Dr Akram, “ Libyans love Malaysia. It is a Muslim country which they have heard a lot. They like (former premier) (Tun) Dr Mahathir Mohamad. Many of them have also been to Malaysia as tourists and for medical treatments.”   

Working in a foreign land is not without challenges.

 Even so, En Nasir said HCMA workers have generally managed to overcome the test in Libya. He said, “Sandstorms, rain, occasional machine breakdown and language barrier are no obstacles when we approach them positively. Through mutual understanding, teamwork, ingenuity, discussions and negotiations with the parties involved amid sound relationship with the Libyans, we are proud to be associated with useful road projects for the benefits of both countries.”

Dr Akram also attributed the workers’ adaptability to the family-like working environment which has been inculcated in Libya. Said he, “ We have regular gatherings with the site people. They have access to top management.” Besides, the Malaysian workers love Libyan food and they are also prepared to learn Arabic on-the-job.

Controlling the Controllable

Just a very short post.
Instead of focusing on when the market will have a correction, or will the rally last, we should focus on our own risk and expectation.
We could not control the direction of market but we can control our risk and our expectation.
It's all about Controlling the Controllable!

Mamee ! Double Decker, Double Decker

After scanning through the Putra Brand Awards 2010, I would like to announce my winner for Xabi Branded Stock Award 2010....

The winner is..... Mamee Double-Decker Bhd !

Reason 1 - Good Earnings vs Price

Reason 2 - Good Balance Sheet (almost zero borrowings) although not comfortable with the investment.

Reason 3 - Dividend policy of distributing 50% of net profit. (Calculate the DY yourself)

Reason 4 - Good Mission and Vision

Reason 5 - I really like their snacks and drinks... yummyyyy

Happy Investing!

Branding

A brand is a name, sign, symbol, slogan or anything that is used to identify and distinguish a specific product, service or business. (Wikipedia)

Branding is used in businesses and organizations of all sizes and types. Some companies allocate a large sum of money just for the branding purposes.
Why is it important? Because Branding separate one from their competitors.
When we (consumers) think of certain product, we will unconsciously associate it with certain brand and preference will  be definitely given to the brand.
Since branding is so important, I try to search for good businesses with good branding selling at fair price. From the below list of winners in Putra Brand Awards 2010, do we able to find it?

                                             Source: AAAA website

For full list, you can visit,
Putra Brand Awards 2010