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kotmj

Gloriously off-topic

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https://paultan.org/2018/05/04/geely-design-chief-peter-horbury-on-creating-an-image-for-the-rising-brand-and-his-vision-for-proton-design/

^ I really don't think the share price reflects the stuff coming to Proton. It's a mistake to think of Proton as Proton, only better. There is no more Proton. There is only Geely. How much would you pay for Geely?

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I'm writing this from a Starbucks at Awana Genting. It's the first time I'm here. Three things struck me. First, there are more people at this Starbucks than the mamak shop nearby. Second, a cup of hot chocolate is RM15.30, which is a big premium over other locations. Third, two of those who served me tried really hard to get me to order food with my drink. "Would you like something to go with your drink?" asked a young Chinese worker. Nah, I said. Then, his Malay supervisor asked, "Tak lapar ke? Have some finger food." I told them I had eaten before I came.

Upselling customers on other menu items is a good way to get a revenue boost towards the end of the year in order to make the next annual report have more aesthetic revenue and profit growth charts. I expect Berjaya Food to end the year with triumphant glory. In fact, the insiders are banking on it. Vincent Tan has been buying shares on the open market with his own money to the tune of millions. It's what's proping up the share price in a bearish market. The CEO, Lawrence Quays, who makes in total RM1.4million/year, which works out to a bit more than RM100k/month, spent a fifth of his monthly income buying shares in his own company the last month.

In recent weeks I added WCT and Malton to my portfolio, but in relatively small amounts. WCT is selling at a better price than free. If one were to liquidate the company a day after you bought the stock, you'd get twice the money you invested. At the very end of 2016, two of the founders of WCT divested their 20% to Desmond Lim at RM2.50/share. Today, it sells for RM0.80. Balance sheet is recession-proof. Land bank is RM1 billion. It owns Aeon Bukit Tinggi, Paradigm PJ and Paradigm Johor. It's about to spin off its properties into a listed REIT. People are not buying the stock because the government is not spending on infastructure, and retail, residential and commercial properties are experiencing oversupply. In five or six years, I think the situation will look a lot better. But by then, WCT will be far from RM0.80/share.

Malton I bought because the company is valued by the market at RM256 million, but just its land bank and cash amount to RM200 million. It sits on RM 1.7 billion of unsold property, which includes Pavilion Bukit Jalil. It does owe the bank some half a billion, but that's fine.

Both WCT and Malton are tainted by being owned by Desmond Lim. Who cares. Too cheap. In a couple of years, the property glut will be over and people will barely recall that the apartment in which Rosmah stashed her billions in handbangs and jewelry belongs to Desmond Lim.

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Since its IPO in 2004, Airasia's profit went from 50 million to 1.6 billion --- a 30X increase.

Airasia is a magnificent growth stock. It is also a very volatile stock. Much of the volatility has to do with the volatility in jet fuel price. But volatility is fantastic if you are buying for the long term. It means you can buy when its low. Some stocks experience very little volatility (Nestle, Heineken, Carlsberg, etc.). There's not much opportunity to buy them at a large discount. But right now, Airasia is selling at a very good price. I bought so much.

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One of the great enigmas for me is how Vincent Tan amassed his wealth while the companies he spawns do so poorly. He gets richer and richer (one would assume, since he started off from nil), but most of his companies go nowhere. (Some go somehwere---they go bust.) I've always wondered how the great capitalists get so unbelievably rich, while practically all those who work for them remain broke. Those who invest alongside them (those who own the "floating" shares), too, would have seen very little income.

A recent transaction Starbucks went into sheds some light onto the mystery. I've been thinking about this transaction for the past two weeks, the way one would reflect on the profound and counterintuitive moves of a chess grandmaster. Capitalism is not my field; it took me a while to understand this move of Vincent's.

In August this year, Vincent instructed Starbucks (a company he controls) to buy a unit adjacent to its current outlet location at Berjaya Times Square from a certain Deru Klasik, a shell company owned by Vincent's daughter and relatives. Deru Klasik purchased the property 15 years ago from presumably another Vincent-controlled company for RM3.83 million. Starbucks engaged a property valuator who valued the property at the price Starbucks purchased it for --- RM12.43 million. An incredible value appreciation for a property that pretty much belongs to the "distressed" category. (Berjaya Times Square is loss-making.)

That's it. That's the transaction. When I read about it, I felt there was something profound here I need to unravel.

It's Vincent's way of very assymetrically benefitting from Starbucks' success while bypassing the other investors. It's his way of paying himself a very good dividend without sharing it with the other investors. Starbucks has accumulated some cash which it doesn't immediately need; so Vincent sold it a property he owns at an optimistic price. This way, that cash goes to Vincent's pocket. The other investors get nothing. The company gets a unit at a mall that is loss-making.

Starbucks could have done five thousand other things with that 12 million. The idea of a cafe chain BUYING an outlet instead of leasing it is ridiculous. Companies are all trying to be asset-light. For instance, AirAsia sold all the planes it owned to a company then leased them back. The planes are on that company's balance sheet, not AirAsia's. AA plans to invest some of that money into its digitalization initiatives (growing new businesses) and paying the remainder back to investors in the form of a special dividend. It is laughable for Starbucks to fucking buy the shop it is in. RM12mil is a very significant sum for Starbucks. The last four quarters, Berjaya Food (whose earnings are more than 100% attributable to Starbucks since the other divisions are loss making) only made RM2mil net profit.

Of course, if that unit belonged to anyone else, Vincent would never think of getting Starbucks to buy it. The only reason Starbucks was asked to buy it is because it belongs to Vincent.

I think if you scrutinize Vincent's career as a capitalist, you'll see this pattern or some variant thereof, repeated everywhere.

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https://amp.scmp.com/lifestyle/fashion-beauty/article/2172974/instagram-star-and-daughter-vincent-tan-talks-about-work

So little self awareness. In reality, businesses impose their pace on you. This useless thing works maybe 2 months in a year. Because she does so little of it, she's like a competitive tennis player who practices 2 months per year. Which is to say, she's no competitive tennis player. Which means she's an amateur and dilettante at business.

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So Chryseis had ANOTHER wedding ceremony in Osaka yesterday. Useless thing.

IMG_20181123_133334.jpg?raw=1

 

You're looking at a magnificent piece of corporate art. It shows the earnings per share growth for Scientex, a diversified company that derives as much profits from plastic packaging as it does from property development. The CEO/owner is a very smart guy---he gave an interview on BFM a few weeks ago that was fascinating to me.

https://www.bfm.my/bg-lim-peng-jin-scientex-the-road-to-scientex-10-billion-ringgit-goal.html

It's the way he thinks that I find so remarkable. What makes his performance so superior to his peers is the paradigm through which he looks at his businesses, especially property development. He approaches making houses the way a factory of price-sensitive commodity items would approach manufacturing---incredible focus on cost and quick turnover of money. As a result, with Scientex, you get A LOT of house for remarkably little money. In case you haven't noticed, most developers try to make a luxury product at a luxury price. Scientex says, look, most Malaysians just want a big house at low cost.

A few weeks ago I took a meaningful position in Scientex (meaningful for me, not for Scientex). Then this morning, while re-examining whether this company is as impressive as I thought it was, I charted the EPS growth you see above. Cutting off the EPS for 2003 because it seems like an abnormally small base and starting from 2004, its CAGR is 19.5%. You can buy Scientex for a PER of 15.

As always, the share price (below) is dictated by earnings per share.

4731.KL_YahooFinanceChart%20(1).png?raw=

 

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I think I may have gone a little overboard with the Le Creuset pots. I bought the Soleil (French for "sun") a few weeks ago from Parkson. I used it, and totally understood the appeal of Le Creuset. Stupidly overpriced, but it works like all enduringly iconic products---Leica cameras and Rolex watches come to mind. When you use one, you fall in love with it. Seeing how my brother is having a housewarming party on Christmas day, I went and bought the Volcanique for his kitchen. I was hooked. I never thought pots could be so sensuous. So loveable. What makes the pots so satisfying is the perfect ratio of diameter to height. Secondarily, the perfect weight distribution.

Then, I saw the Coastal Blue being offered at an unbeatable price on mudah and met with the seller today at The Curve. She is a Le Creuset addict and refused to tell me how many pieces she has. She has too many. Her most-used piece is the Balti, but she also uses the Marmite all the time. She also uses the grill pan for bacon and vegetables. She plans to buy the tiny Le Creuset rice cooker "because it's so cute".

I'll probably give away the Coastal Blue.

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Managed to get to the golf course by 6:30 today. It could have been 5:30, but I wanted to lie down to rest before going.

I don't play golf. I go there with the dogs. Both dogs.

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My neighbor is a ginger farmer. He also grows bananas for personal consumption. He sometimes gives me bunches of bananas. It's the same variety of bananas sold everywhere (Cavendish?) but he allows his to ripen on the tree. That, and maybe the hillslope jungle soil make for a banana that is very intense in taste, being more sour and more sweet than store-bought variety, and orange in colour as opposed to pale yellow.

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After eating that banana, I went to Bentong for a vegan lunch. Thereafter, a hair cut and hair wash and abbreviated facial.

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Then, it was back to Janda Baik for a coffee brewed from beans grown on the premises and roasted in a pizza oven in the kitchen. I actually saw how they roasted them.

After this, I go home for a shower. Then I go to the shop where I meet with my dispatch boy, and after him, Julian's mother.

Then, I go to Desa Parkcity to meet with a bona fide interior designer who lectures on interior design in a local uni.

Then I go home---back to the cool, sweet mountain air.

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Such a varied schedule would not be possible if I did retail or became a mall rat. I would be stuck in a retail unit from morning till evening.

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Spent the last few days in Kuala Terenggganu, without an SD card reader, so posting photos from my camera wasn't possible. Here's a view from the gazebo of a bungalow we stayed in. 

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One of the most affectionate dogs captured on what is for me a pretty expensive lens, the Zeiss Distagon 1,4/35 ZM, bought a few days ago. Camera (Sony a7) is also brand new.

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Neighbour's dog. I think it is a border collie, supposedly one of the most intelligent dogs known to man. It is a beautiful thing---it looks very different from regular dogs. This one, however, is not personable. I tried touching it and it gave me a warning bite. That is, it tried to bite me, but missed. Dogs don't actually miss when biting---their survival depends on it. So it was a warning bite. It communicates: "Don't touch me!". It also lacks a sense of play that both my dogs have. In fact, in demeanour it is what I imagine a German shepherd to be. It's a serious dog---it doesn't frolic with other dogs. Its movements are slow and thoughtful.

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Neighbour's puppy. My taman perumahan is 100.0% Chinese, and nearly every house has a dog; some houses like mine have several. The violent dogs, of which there are several, are perpetually chained, while the non-aggressive ones are allowed to roam freely. This one came up to play with me this morning. It is good friends with my dogs.

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After all that has happened, after all the revelations...half of Semenyih voted for one of the most corrupt political parties in modern history. Corruption is not just a political thing. All of humanity is corrupt.

  • Haha 1

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I did a calculation of how my investing has turned out. When I first started in the fourth quarter of last year, the KLCI was at 1800 points. Today, it is at 1680; a drop of 6.67%.

In the same period, my investments went up 4.38% when I total all dividends, realised and unrealised profit and loss, and minus out transaction fees.

Interestingly, I now have about double the amount in my investments compared to when I started. This came about through additional savings and the value increase mentioned above.

My holdings currently:

AEONCR

GENM

SCIENTX

YOCB

DRBHCOM

ELKDESA

TIMECOM

STAR

Each is an interesting story. You have those with incredible growth like AEONCR , TIMECOM, SCIENTX, and ELKDESA. You have the severely and perpetually undervalued propositions like YOCB. There is the turnaround situation represented by DRBHCOM, which owns Proton, which is actually not Proton but rather Geely SEA which sold 7000 pieces of X70 since it was introduced in December last year. STAR is an asset play/turnaround: It's business model (print advertising) has been disrupted, and it is in search of a new business model. While it searches for a new CEO, it is facing steep declines in revenue. But it owns a lot of land. It is selling for a small fraction of the land it owns.

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I was awoken this morning by birds. But not by the usual chirping. There was a persistent and uncommon bird sound. I wondered why I've not heard this sound before. And then it came to me. These are cries, not chirps. The cries of vultures circling very close above the house. Max was dying.

I woke up, and went out. Max was shivering and couldn't stand up. He was very, very weak.

He has been lethargic for the past two days. My dogs sometimes get ill, but they bounce back. Last night, I could see that Max was quite ill, but he could still walk around. I tried to figure out how best to get him to the vet, but thought I'll leave that decision to tomorrow. They're all closed anyway.

I cancelled my morning appointment. Max still managed to climb into the car by himself, but he was very uncoordinated. At the vet in Batu Caves, the lady Malay doctor--- UPM trained---interrogated me as though I was an animal abuser. How was his appetite? she wanted to know. I said I don't know. My neighbour feeds my dogs, I told her. I don't know how much he ate. With what? she asked. Table scraps. No kibbles? she quizzed me. I said they no longer touch the kibbles since the neighbour started feeding them scraps. How are his droppings? she wanted to know. I said the dogs are free to wander around the housing area which has lots of greenery all around and I do not observe their droppings. She found my replies to be bizarre. Is this your dog or is he a stray? she wanted to know. It's my dog. She was disgusted with me.

They did a virus check to make sure he's not infected with it. It was clear. Then she did a liver and kidney function test. Max' kidneys have mostly failed. Sky-high urea levels.

In a situation like this, she told me, we have to determine if it's an acute or chronic kidney failure. An acute kidney failure normally comes about through poisoning. The poison, I told her, I know what it was.

So what was it? she asked. Taktic, I told her.

https://www.msd-animal-health.co.za/products/taktic_dip_for_dogs/020_product_details.aspx

Taktic is a ticks and lice killer for dogs produced by Bayer. Historically, Max has reacted very poorly to Taktic, and Taktic-like chemicals by other producers. In fact, it was the reason why he was the last of the litter to be sold: even as a puppy, he was very lethargic. But, I told her, that was due to the Thai-produced vials of Taktic-analogs the breeder applies to the skins of the dogs. Once I brought him home and the chemicals were not applied, Max became normal again. Other dogs have no such reaction to the chemical.

In the past, Max would lose his appetite for a few days after I bathed him with diluted Taktic. He always bounced back. Over time, I used a more and more dilute solution on him.

A week ago, I used a strong solution on both dogs (Max and Puppy). I bathed them with my bare hands. I have no problems. Puppy showed no adverse reaction. Max, on the other hand, is dying.

He's now on an IV drip at the vet. I hope he pulls through.

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