Saturday, July 3, 2010

Berkowitz Still Sees Value in Financials

Bruce Berkowitz, whose Fairholme fund has returned close to 13% per year over the past decade while the S&P 500 has been in the red, says he’s still finding a good deal of value in one of the market’s unloved areas — financial stocks.
“Investors have lost much of their wealth from financial institutions over the past couple of years and are not prepared to risk more,” Berkowitz tells Investment News. “Meanwhile, the Great Recession has forced our surviving institutions to fortify their balance sheets and practices in preparation for continued stress. Thus, they are priced for more stress and prepared for more stress. We try to protect against the downside and let the upside take care of itself. Such is the case with our holdings in large banks and brokers.”

Berkowitz also offered advice for financial advisors, which would seem to apply to individual investors as well. “Invest with managers that have superior long-term track records during tough times and invest most of their money alongside their clients’ money — under the same terms and conditions as their clients,” he says. In addition, they should invest with those who have an “understandable strategy, one that will keep clients sane during the inevitable difficult times”.
Berkowitz says he doesn’t try to predict the future of a particular company or industry, let alone the economy as a whole. He says he instead tries to price securities and their underlying businesses “for difficult times so that we can survive those one-in-100-year catastrophes that appear to happen every decade, and prosper during more-normal times.”

Friday, July 2, 2010

Genting Singapore : Hiving off Genting UK Casino

The group announced that it has entered into a sale and purchase agreement for the disposal of its entire equity stake in its UK casino operations to Genting Worldwide (UK) Limited, a wholly owned subsidiary of its sister company Genting Malaysia, for a cash consideration of GBP340m, or SGD688.8m. Maintain BUY.
 
 
We view the disposal positively for Genting Singapore as
 1) the transacted valuation at  11.2x FY11 EV/EBITDA is attractive compared with the peer valuation in UK for Rank Group PLC, which although being a larger company is trading at only 6.3x FY11 EV/EBITDA,
2) the UK casino assets are considered non-core as they contribute less than 5% of group earnings, whereby the EBITDA margin of 15% is significantly lower than Resorts World at Sentosa casino’s 30%,
3) the sales proceeds can be channeled into higher yielding future strategic growth opportunities, and
4) unlocking of resources that can be channeled into improving the operations of RWS

Marginal immediate term impact on core earnings. The group’s net debt to EBITDA is expected to decline to 0.8x from 1.4x upon completion of the disposal. Assuming that the entire proceeds were to yield an average return of 2% from a combination of fixed deposits and other money market instruments, we estimate the net impact on earnings post disposal of the UK operation at a marginal 2.6% decline as the ultra low returns of fixed deposits and money market instruments would be insufficient to fully offset the loss in earnings from the disposal. The disposal will, however, give rise to a one off non-recurring gain of SGD103.6m. Focus on larger scale future ventures. More importantly, the disposal of its UK operation signals management’s focus on leveraging on its expertise to develop future large scale integrated casino projects which provide more compelling growth for the group, in our view.

(Source: Company Flash by OSK Research Group)

Monday, June 28, 2010

Hai-O - 4QFY10 - Sell

Business :
Hai-O is involved in wholesaling, retailing, multi-level marketing and pharmaceuticals, and also operates modern Chinese Medicinal Clinics.

Hai-O's FY10 net profit of RM70.9m (+35.6% y-o-y) was spot on versus our FY10 earnings forecast of RM71.7 despite the fact that the 4QFY10 top and PBT contracted by 25.6% and 32.3% y-o-y respectively given our conservative forecasts.
The poor 4Q performance was mainly attributed to its MLM division because the more stringent rules on new member recruitment set by the authorities and reduced appetite for loans following the rise in interest rates recently.


Stock Catalyst :
Technology Venture, which could come in as soon as this year. More parties have shown interest in its newly invented heat transfer technology.

Quick valuation:-
Haio is now trading at a PER of 12 times (based on last 4 quarters EPS 35 cents). With declining top-line and bottom-line, Haio might trade @PE <10 until it stablilize.



Technical Analysis:-
MACD cross signals the downtrend in short term. The RSI is heading to 30.

We would like to call Sell Into Strength on HAI-O

Technical Chart :-
http://i48.tinypic.com/ixbo0k.jpg


Author: Peter Lee

Hai-O Results : SELL

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Hai-O : Sell into Strength

Business Description:-
Hai-O Enterprise Berhad is a Malaysia-based company. The principal business of the Company involves wholesaling, retailing, multi-level marketing, pharmaceutical factory and modern Chinese medicinal clinics. The business segments of the Company include wholesale, multi level marketing, retail, manufacturing and others. The wholesale segment includes wholesaling and trading in herbal medicines and healthcare products, herbs and tea. The multi level marketing segment includes operating multi level direct marketing of healthcare and beauty products. The retail segment includes retail chain stores. The manufacturing segment includes manufacturing, producing and distributing pharmaceutical products, alcoholic and non-alcoholic drinks. The others segment includes businesses involving leasing of machinery and equipment, licensed money lender, insurance agent, advertising services, rental income, trading of clocks and investment holding.

Result Updates :-

Singapore May 2010 : tourist arrivals

The year-on-year growth in tourist arrivals accelerated further to 30.3% in May, with 946,000 visitors registered.



Visitor              % increase
Hong Kong       48.8%
Taiwan              48.7%
Malaysia            47.8%

The visitors recorded the highest increases.


Hotel Accupancy rate increase 17.1% from May 2009 to May 2010. Hotel Room revenue surge 45.2% (year on year).