Legoland Malaysia is coming up in the Iskandar Development Region in Johor. Some 30 million Lego bricks will reportedly be used in the RM750 million theme park, which will boast more than 30 rides, shows and attractions, from roller coasters and boat rides to adventure walks.
Developer Iskandar Investment Berhad (IIB), says the entrance fee will be “affordable for a family of six”. It is so is convinced that Malaysia's first theme park will do well that it has revised projected visitors numbers upwards — from 1 million a year to 1.4 million. Malaysians are expected to make up half of these, with foreigners — mostly Indonesians and Singaporeans — making up the other half.
There is also some good news for adults: The theme park is reportedly expected to create some 5,000 jobs. Production director Tim Burnell of Merlin Entertainments, which will manage the park, was in Johor in July to recruit for some of the jobs. The company was looking to hire model makers, who can earn anywhere between RM1,400 and RM5,000 each.
Sounds well and good. But the financials don’t quite add up:
1. MYR 750 million project cost. Say it is funded 50-50 with equity and debt, ie RM375m each.
2. If they reach the targeted 1.4m visitors a year, and assuming RM100 per person, that is RM114m revenue per year.
3. Interest and salary costs alone will be RM119m! This is based on: Interest RM19m (assuming 5% interest on RM375m borrowings); salaries RM120m (5,000 employees * RM2000 per month * 12 months).
4. That leaves nothing to pay back the borrowings, and we have not even incorporated depreciation, maintenance, utilities ….and what about profits for the shareholders who have put up RM375m?
5. Note that RM100 per person = RM600 for a family of 6. Which is probably too high too be “affordable”. So revenues will be even lower than RM114m.
Showing posts with label EPF Khazanah .... Show all posts
Showing posts with label EPF Khazanah .... Show all posts
Wednesday, August 12, 2009
Thursday, July 2, 2009
Economic reforms – One step forward, one step back .. and watch the implementation
The mainstream media has been trumpeting liberalization measures announced by Prime Minister Datuk Seri Najib Razak at the InvestMalaysia Conference on Tuesday.
Amid the plethora of measures, the one that stands out is removal of the 30% bumiputera quota for companies seeking listing in Malaysia. It is a bold political move indeed, to eliminate this “something for nothing” crutch.
Having said that, the actual impact to bumiputeras is minimal. The pipeline of new listings has hardly been inspiring in recent years. I challenge you to name even one recently-listed prominent company. Also, the policy had been a huge failure in terms of its intention to build bumiputera wealth. PM Najib said RM54bn had been allocated to bumiputeras (I think it is a lot more), but only RM2bn remains. So, bumiputeras kept less than 5% of the amounts allocated to them!
But it is good news, in that it removes a huge impediment to listing. Many owners of successful businesses shied away when told they had to offer 30% of their company to a new “partner” at a large discount. Let’s hope this results in more and better quality listings on Bursa, which would make the stock exchange more attractive and help fuel trading volume.
I am dismayed though, that replacing this 30% quota is another new fund. The RM10bn Ekuinas fund is supposed to invest in “bumiputera companies and entrepreneurs, based on merit”. Such government-run funds have awful records. And what is Ekuinas going to do that existing institutions do not?
A better approach would be to work with the private sector. For example, the government could offer to share the risks of such loans and investments with banks and venture capitalists. It could agree to bear, say, half the losses if the entrepreneurs fail. That way, the process of credit allocation is still primarily private sector driven, which should be more efficient and it saves the government having to build a duplicate infrastructure of officers to administer and monitor the investments.
As for “watch the implementation”, I am referring to the “stern” directives to:
1. Government-investment corporations (GICs) to reduce their stakes in the government-linked corporations (GLCs), in the name of raising free-floats and market liquidity; and
2. The GLCs to divest non-core businesses.
All sensible reasons, and if properly done, will be good for the economy. “Properly” is of course the crucial word. In particular, I want to see:
1. Transparency in the appointments of the brokers and the fees and commissions paid when the GICs reduce their stakes; and
2. Similarly, transparency when the GLCS sell their non-core businesses. Valuations must be fair – the businesses must not be sold at unduly cheap prices to influential parties – and all the costs, including commissions and advisory fees disclosed.
Amid the plethora of measures, the one that stands out is removal of the 30% bumiputera quota for companies seeking listing in Malaysia. It is a bold political move indeed, to eliminate this “something for nothing” crutch.
Having said that, the actual impact to bumiputeras is minimal. The pipeline of new listings has hardly been inspiring in recent years. I challenge you to name even one recently-listed prominent company. Also, the policy had been a huge failure in terms of its intention to build bumiputera wealth. PM Najib said RM54bn had been allocated to bumiputeras (I think it is a lot more), but only RM2bn remains. So, bumiputeras kept less than 5% of the amounts allocated to them!
But it is good news, in that it removes a huge impediment to listing. Many owners of successful businesses shied away when told they had to offer 30% of their company to a new “partner” at a large discount. Let’s hope this results in more and better quality listings on Bursa, which would make the stock exchange more attractive and help fuel trading volume.
I am dismayed though, that replacing this 30% quota is another new fund. The RM10bn Ekuinas fund is supposed to invest in “bumiputera companies and entrepreneurs, based on merit”. Such government-run funds have awful records. And what is Ekuinas going to do that existing institutions do not?
A better approach would be to work with the private sector. For example, the government could offer to share the risks of such loans and investments with banks and venture capitalists. It could agree to bear, say, half the losses if the entrepreneurs fail. That way, the process of credit allocation is still primarily private sector driven, which should be more efficient and it saves the government having to build a duplicate infrastructure of officers to administer and monitor the investments.
As for “watch the implementation”, I am referring to the “stern” directives to:
1. Government-investment corporations (GICs) to reduce their stakes in the government-linked corporations (GLCs), in the name of raising free-floats and market liquidity; and
2. The GLCs to divest non-core businesses.
All sensible reasons, and if properly done, will be good for the economy. “Properly” is of course the crucial word. In particular, I want to see:
1. Transparency in the appointments of the brokers and the fees and commissions paid when the GICs reduce their stakes; and
2. Similarly, transparency when the GLCS sell their non-core businesses. Valuations must be fair – the businesses must not be sold at unduly cheap prices to influential parties – and all the costs, including commissions and advisory fees disclosed.
Thursday, June 25, 2009
Top leaders engrossed in child’s play as economy wanes
Deputy prime minister Tan Sri Muhyiddin Yassin and Khazanah Nasional managing director Tan Sri Azman Mokhtar took time out from their busy schedules on Tuesday to launch Kidzania, a RM50 million “educational theme park from Mexico” that will create 400 jobs, reported the Business Times.
Strip away the usual marketing hyperbole and Kidzania appears to be just a glorified play centre and property development project.
“Theme park” for me conjures visions of acres and acres of space a’la Disneyland and Universal Studios. The Kidzania “theme park” will take up merely 60,000 square feet of space in a new mall. That’s equivalent to about 40 modest terrace (link) houses. Not 40 bungalows or mansions, just normal terrace houses.
Also, the project entails
the construction of a seven-storey new building. Khazanah is in an 80:20 joint-venture with Boustead Holdings to develop this project. Boustead, developer of the Mutiara Damansara area and owner of the Curve mall in Selangor, will build a seven-storey structure to house KidZania (Picture from Malaysia Insider). KidZania needs only two floors of space, Petaling Jaya really does not need another mall. So why build a completely new property?
Furthermore, I am sure the bulk of the 400 jobs will likely be low-skilled and low-paid. Those who have been to Disneyland, whether at your own or taxpayer expense, know most of the jobs are routine, menial and fulfilled by young people on a temporary basis. Hardly highly-skilled and certainly not creatively or intellectually challenging nor highly-paid.
Still, a job is a job, But, in this case, does it warrant the attentions of not one, but two luminaries? None less than our deputy prime minister himself and the MD of Khazanah, who presides over TENS of billions of investments saw it fit to launch this project. In the meantime, tens of thousands of Malaysians are being thrown out of work, the government deficit is expected to hit a high 10% and sorely-needed capital is fleeing Malaysia, just to name a few items of great import.
On the subject of Khazanah and its multi-billion portfolio, I have three key questions:
1) Khazanah, in its own words, is “committed to building a globally competitive Malaysia by developing the right human capital”. What human capital does Kidzania really develop?
2) Why is Khazanah taking such a large 80% stake in this project? I doubt whether children’s play-centres can be considered among the “sectors that are deemed strategic to the nation's economy” that are supposed to be Khazanah’s focus.
3) What is Khazanah’s expected investment return on this project?
Strip away the usual marketing hyperbole and Kidzania appears to be just a glorified play centre and property development project.
“Theme park” for me conjures visions of acres and acres of space a’la Disneyland and Universal Studios. The Kidzania “theme park” will take up merely 60,000 square feet of space in a new mall. That’s equivalent to about 40 modest terrace (link) houses. Not 40 bungalows or mansions, just normal terrace houses.
Also, the project entails
the construction of a seven-storey new building. Khazanah is in an 80:20 joint-venture with Boustead Holdings to develop this project. Boustead, developer of the Mutiara Damansara area and owner of the Curve mall in Selangor, will build a seven-storey structure to house KidZania (Picture from Malaysia Insider). KidZania needs only two floors of space, Petaling Jaya really does not need another mall. So why build a completely new property?Furthermore, I am sure the bulk of the 400 jobs will likely be low-skilled and low-paid. Those who have been to Disneyland, whether at your own or taxpayer expense, know most of the jobs are routine, menial and fulfilled by young people on a temporary basis. Hardly highly-skilled and certainly not creatively or intellectually challenging nor highly-paid.
Still, a job is a job, But, in this case, does it warrant the attentions of not one, but two luminaries? None less than our deputy prime minister himself and the MD of Khazanah, who presides over TENS of billions of investments saw it fit to launch this project. In the meantime, tens of thousands of Malaysians are being thrown out of work, the government deficit is expected to hit a high 10% and sorely-needed capital is fleeing Malaysia, just to name a few items of great import.
On the subject of Khazanah and its multi-billion portfolio, I have three key questions:
1) Khazanah, in its own words, is “committed to building a globally competitive Malaysia by developing the right human capital”. What human capital does Kidzania really develop?
2) Why is Khazanah taking such a large 80% stake in this project? I doubt whether children’s play-centres can be considered among the “sectors that are deemed strategic to the nation's economy” that are supposed to be Khazanah’s focus.
3) What is Khazanah’s expected investment return on this project?
Wednesday, June 24, 2009
The startling lack of integrity at the very top
Should a scholarship defaulter even be considered for the position of director of Petronas, our national oil company?
PM Datuk Seri Najib Razak seems to see no problem. He is reportedly seeking to appoint his special officer, Omar Mustapha, to the board of Petronas. But, the appointment hit a snag when the board of Petronas raised reservations as Omar had reneged on his scholarship obligations.
Omar apparently graduated from Oxford on a scholarship from Petronas in the mid-1990s and worked briefly with the national oil corporation and another government-linked corporation before moving on to join prestigious global consultants McKinsey & Co.
Malaysia Insider carries the article.
Not fulfilling scholarship obligations betrays a lack of integrity and ethics. The scholar owes his fancy degree to contributions from the rakyat. The least he can do is repay that obligation, making good on his debt to the people of Malaysia. Instead, he gallivants of to more lucrative pastures.
Omar can hardly plead financial constraints for reneging on his scholarship commitments. McKinsey consultants are famously well-paid. So, what can the reason be? A misplaced sense of entitlement? Such is the quality of people advising our very top leadership …
PM Datuk Seri Najib Razak seems to see no problem. He is reportedly seeking to appoint his special officer, Omar Mustapha, to the board of Petronas. But, the appointment hit a snag when the board of Petronas raised reservations as Omar had reneged on his scholarship obligations.
Omar apparently graduated from Oxford on a scholarship from Petronas in the mid-1990s and worked briefly with the national oil corporation and another government-linked corporation before moving on to join prestigious global consultants McKinsey & Co.
Malaysia Insider carries the article.
Not fulfilling scholarship obligations betrays a lack of integrity and ethics. The scholar owes his fancy degree to contributions from the rakyat. The least he can do is repay that obligation, making good on his debt to the people of Malaysia. Instead, he gallivants of to more lucrative pastures.
Omar can hardly plead financial constraints for reneging on his scholarship commitments. McKinsey consultants are famously well-paid. So, what can the reason be? A misplaced sense of entitlement? Such is the quality of people advising our very top leadership …
Friday, May 29, 2009
How TIA can make a lasting impact
Here’s my prediction: By 2012, three years after the launch of the Terengganu Investment Authority (TIA), the average Terengganu citizen will be pretty much unaffected by the billions of ringgit spent. Ultimately, when the projects are completed, when the land-flippers and contractors have collected their millions and hundreds of thousands or ringgit, the rakyat will be left with only poorly-constructed, under-utilised buildings which start falling apart very quickly.
TIA is perpetuating the myth that all it takes to develop a nation is infrastructure. Just build fancy new buildings and we’ll achieve developed status! It’s not that simple. It has already been proven in Malaysia – building first-world infrastructure WILL NOT take us to first-world status. Developed status is also about the soft issues – education, culture, civil society ….
Putrajaya, KLIA and the KLCC Twin Towers are the best case studies. These were supposed to be icons of a developed Malaysia. Now, after barely ten years, Putrajaya is already crumbling and KLIA is beset with the same taxi touts and illegal parking problems that plagued Subang. The KLCC Twin Towers area, in an ironic way, has turned out to symbolize Malaysia. Within KLCC itself, swanky stores cater to rich tourists and the professional Malaysians engendered by the NEP, but just 50 metres outside, rogue taxi drivers over-charge with impunity and across the road along Jalan Ampang, poor itinerant traders set up shop in the evenings, cooking on make-shift stoves.
But perhaps I am wrong, and TIA will not just be a mega-project play. Let’s say TIA does attract serious oil and gas specialists to set up shop in Terengganu, spending billions on capital investment. How many Terengganu folk are actually qualified to work in those specialized, highly-technical fields? Households in Terengganu are the second-poorest in Malaysia. It will look a lot like the British days, when foreigners held the senior positions and locals had to be content with the low-level jobs.
TIA would make a much more meaningful and lasting impact on Terengganu if it starts from the ground up. Let’s start with education. Use the money to fund the best teachers and offer good facilities. Build the proficiency of Terengganu children in English, Math and Science. Educate the next generation of Terengganu. Only then, seek the high-value, highly-specialised industries, when Terengganu people themselves can take full advantage of the employment opportunities
More to come. I’m off now to Port Klang to view the report on the Port Klang Free Zone (PKFZ) debacle with your hard-working DAP MPs. This time, I hope I’m not again forced to go back to pen-and-paper.
TIA is perpetuating the myth that all it takes to develop a nation is infrastructure. Just build fancy new buildings and we’ll achieve developed status! It’s not that simple. It has already been proven in Malaysia – building first-world infrastructure WILL NOT take us to first-world status. Developed status is also about the soft issues – education, culture, civil society ….
Putrajaya, KLIA and the KLCC Twin Towers are the best case studies. These were supposed to be icons of a developed Malaysia. Now, after barely ten years, Putrajaya is already crumbling and KLIA is beset with the same taxi touts and illegal parking problems that plagued Subang. The KLCC Twin Towers area, in an ironic way, has turned out to symbolize Malaysia. Within KLCC itself, swanky stores cater to rich tourists and the professional Malaysians engendered by the NEP, but just 50 metres outside, rogue taxi drivers over-charge with impunity and across the road along Jalan Ampang, poor itinerant traders set up shop in the evenings, cooking on make-shift stoves.
But perhaps I am wrong, and TIA will not just be a mega-project play. Let’s say TIA does attract serious oil and gas specialists to set up shop in Terengganu, spending billions on capital investment. How many Terengganu folk are actually qualified to work in those specialized, highly-technical fields? Households in Terengganu are the second-poorest in Malaysia. It will look a lot like the British days, when foreigners held the senior positions and locals had to be content with the low-level jobs.
TIA would make a much more meaningful and lasting impact on Terengganu if it starts from the ground up. Let’s start with education. Use the money to fund the best teachers and offer good facilities. Build the proficiency of Terengganu children in English, Math and Science. Educate the next generation of Terengganu. Only then, seek the high-value, highly-specialised industries, when Terengganu people themselves can take full advantage of the employment opportunities
More to come. I’m off now to Port Klang to view the report on the Port Klang Free Zone (PKFZ) debacle with your hard-working DAP MPs. This time, I hope I’m not again forced to go back to pen-and-paper.
Wednesday, May 27, 2009
TIA shaping up to be another mega-project ploy
The Terengganu Investment Authority (TIA) was well-covered by the weekend press, including the Star and the Edge Weekly. “Well-covered” in the sense of plenty of news pages being devoted to this RM11bn fund, which, by the way, is equivalent to ladening RM11,000 of debt on every single one of the 1million Terengganu folk!
Not surprisingly, hard, penetrating questions were rare. Like, “How exactly will the average Terengganu citizen benefit from all this?”
Based on the reported comments by CEO Sharol Azral Ibrahim Halmi and executive director of business development Casey Tan, TIA will be yet another launch pad for huge construction mega-projects that will benefit a few cronies, a few hundred Class-F contractors (want to bet they’ll mainly be UMNO-related?) and a few thousand, mainly foreign, construction workers.
Consider just two examples:
1) CEO Sharol said TIA is “taking a masterplan approach to build a resort with private villas and other amenities as well as retirement homes”. TIA will invest US$1.8bn and expects a foreign investor to match this sum. That works out to nearly RM13bn, which coincidentally is about the same sum reportedly frittered away in the Port Klang Free Zone debacle;
2) An even worse idea comes from Tang: “It will be a tourism play. The land will be acquired from the state and sold at a higher price to the master developer.” Hello? Land-flipping was a major issue at PKFZ. Influential private parties acquired land cheaply from the state and subsequently resold it at far higher prices. What the private party gains, the state loses – why can’t the state sell it at the higher price in the first place, and use the proceeds to fund state development. Why is TIA, a sovereign fund which aspires to best-practices, even considering this approach?
Coming full circle to my original question, after the land is bought and sold, after the spanking new buildings are constructed … how will the average Terengganu resident be better off?
More to come …
Not surprisingly, hard, penetrating questions were rare. Like, “How exactly will the average Terengganu citizen benefit from all this?”
Based on the reported comments by CEO Sharol Azral Ibrahim Halmi and executive director of business development Casey Tan, TIA will be yet another launch pad for huge construction mega-projects that will benefit a few cronies, a few hundred Class-F contractors (want to bet they’ll mainly be UMNO-related?) and a few thousand, mainly foreign, construction workers.
Consider just two examples:
1) CEO Sharol said TIA is “taking a masterplan approach to build a resort with private villas and other amenities as well as retirement homes”. TIA will invest US$1.8bn and expects a foreign investor to match this sum. That works out to nearly RM13bn, which coincidentally is about the same sum reportedly frittered away in the Port Klang Free Zone debacle;
2) An even worse idea comes from Tang: “It will be a tourism play. The land will be acquired from the state and sold at a higher price to the master developer.” Hello? Land-flipping was a major issue at PKFZ. Influential private parties acquired land cheaply from the state and subsequently resold it at far higher prices. What the private party gains, the state loses – why can’t the state sell it at the higher price in the first place, and use the proceeds to fund state development. Why is TIA, a sovereign fund which aspires to best-practices, even considering this approach?
Coming full circle to my original question, after the land is bought and sold, after the spanking new buildings are constructed … how will the average Terengganu resident be better off?
More to come …
Tuesday, May 19, 2009
Terengganu’s ‘Sovereign Wealth Fund’ is anything but
“The country’s first state-established sovereign wealth fund, Terengganu Investment Authority (TIA), with an initial fund of RM11bil, has identified several high-impact investment projects in the tourism, energy and agriculture sectors in the state and around the country,” reports the Star today, Tuesday May 19.
Unfortunately, as with most financial-related topics associated with the Barisan Nasional (BN) government, there are far more questions than answers. Here are just three big ones, to start off with:
1) First, funding. TIA will reportedly raise RM5bn in bonds backed by a federal government guarantee. PM Najib reportedly said “There’s no money involved” (The Edge Daily, May 19). Hello? Has he been keeping up to-date on the multi-billion ringgit Klang Port scandal which involved dubiously granted government guarantees?
The bigger question though, is why TIA needs a government guarantee in the first place. TIA will also reportedly have RM6bn ‘raised through the assignment to TIA of some of the future oil royalties due to the state.” RM6bn is already a huge some of money to start off with. Why the rush to add RM5bn of federal government-guaranteed debt on top of that?
2) Second, objectives. TIA chief executive officer and former executive partner at Accenture, Shahrol Halmi said, “The key objectives of TIA’s investment strategy are … ensure the development of long-term sustainable economic and social programmes for the state.”
Elsewhere in the world, the whole point of sovereign wealth funds (SWFs) is to invest windfall gains from high resource prices wisely, OUTSIDE the home country. SWFs came about because resource-rich countries found that their own economies were too small to effectively deploy all the income coming in from their trade surpluses. Rather than have too much money chasing to few goods, leading to unproductive investments and domestic property price inflation, countries such as Norway chose to set up SWFs in order to effectively invest the money overseas for a rainy day.
Over here, TIA is proposing to invest within Terengganu. Yes, a major political issue is the people of oil-rich Terengganu do not appear to have reaped any benefits from record-high oil prices. But, that’s an issue with the BN federal and state government delivery mechanism. How does TIA fit in with the local government? In fact, the presence of TIA could actually deter investment by private investors, as it could be perceived that TIA will be given undue advantages. SWFs should have no business in their home countries!
3) Third, accountability. Media reports say TIA will have a “triple-tier check and balance system comprising the board of directors, a board of advisers and a senior management team.” I say a system is only as good as its people. Note that the board of advisers will include the Prime Minister or the Finance Minister, in his stead. Far better if politicians stay out completely and leave it to professionals.
Also, the best accountability is via public disclosure. Dare we hope that TIA will adopt best practices as per the Government Pension Fund of Norway? (Contrary to its name, this fund is entirely funded by surplus wealth from Norwegian petroleum income – no government guarantees! – and is professionally managed). I invite you to check their website. Information including ALL the shares held by the fund are available for quick and easy download!
I have other issues, including the so-called “experienced personnel” involved in running the fund. Right now, the list is very narrow and, by accident or design, seems to consist primarily of one ethnic group only. I know for a fact, having worked for MNCs, that financial services talent encompasses the entire globe from Caucasians to sub-continent Indians to mainland Chinese. If TIA truly intends to be world-class, its hiring policies need to be world-class too.
Unfortunately, as with most financial-related topics associated with the Barisan Nasional (BN) government, there are far more questions than answers. Here are just three big ones, to start off with:
1) First, funding. TIA will reportedly raise RM5bn in bonds backed by a federal government guarantee. PM Najib reportedly said “There’s no money involved” (The Edge Daily, May 19). Hello? Has he been keeping up to-date on the multi-billion ringgit Klang Port scandal which involved dubiously granted government guarantees?
The bigger question though, is why TIA needs a government guarantee in the first place. TIA will also reportedly have RM6bn ‘raised through the assignment to TIA of some of the future oil royalties due to the state.” RM6bn is already a huge some of money to start off with. Why the rush to add RM5bn of federal government-guaranteed debt on top of that?
2) Second, objectives. TIA chief executive officer and former executive partner at Accenture, Shahrol Halmi said, “The key objectives of TIA’s investment strategy are … ensure the development of long-term sustainable economic and social programmes for the state.”
Elsewhere in the world, the whole point of sovereign wealth funds (SWFs) is to invest windfall gains from high resource prices wisely, OUTSIDE the home country. SWFs came about because resource-rich countries found that their own economies were too small to effectively deploy all the income coming in from their trade surpluses. Rather than have too much money chasing to few goods, leading to unproductive investments and domestic property price inflation, countries such as Norway chose to set up SWFs in order to effectively invest the money overseas for a rainy day.
Over here, TIA is proposing to invest within Terengganu. Yes, a major political issue is the people of oil-rich Terengganu do not appear to have reaped any benefits from record-high oil prices. But, that’s an issue with the BN federal and state government delivery mechanism. How does TIA fit in with the local government? In fact, the presence of TIA could actually deter investment by private investors, as it could be perceived that TIA will be given undue advantages. SWFs should have no business in their home countries!
3) Third, accountability. Media reports say TIA will have a “triple-tier check and balance system comprising the board of directors, a board of advisers and a senior management team.” I say a system is only as good as its people. Note that the board of advisers will include the Prime Minister or the Finance Minister, in his stead. Far better if politicians stay out completely and leave it to professionals.
Also, the best accountability is via public disclosure. Dare we hope that TIA will adopt best practices as per the Government Pension Fund of Norway? (Contrary to its name, this fund is entirely funded by surplus wealth from Norwegian petroleum income – no government guarantees! – and is professionally managed). I invite you to check their website. Information including ALL the shares held by the fund are available for quick and easy download!
I have other issues, including the so-called “experienced personnel” involved in running the fund. Right now, the list is very narrow and, by accident or design, seems to consist primarily of one ethnic group only. I know for a fact, having worked for MNCs, that financial services talent encompasses the entire globe from Caucasians to sub-continent Indians to mainland Chinese. If TIA truly intends to be world-class, its hiring policies need to be world-class too.
Tuesday, April 14, 2009
When competition is bad ...
Watch out! Your weekly dose of English Premier League (EPL) could get a lot more expensive next year.
The rights to broadcast EPL are auctioned off every few years. Right now Astro holds the Malaysian broadcast rights until 2010. Bidding for the 2010-2013 EPL rights will commence later this year.
The Edge last week reported that Telekom Malaysia may decide to bid for these rights. Telekom is looking to launch broadband tv. Securing the hugely popular EPL franchise will almost certainly mean a few hundred thousand new subscribers, giving its service a substantial boost.
Conversely, Telekom's gain would be Astro's loss. Astro without EPL would not be very attractive to many.
Which means we could see a very intense bidding war between Astro and Telekom.
Competition is usually good. It is normally the best way to better products and services and lower prices for consumers. But in this case, the winner of any Astro-Telekom competition is not the Malaysian consumer. It is the multi-millionaire EPL footballers, managers and hangers-on. They will enjoy the benefits of whatever expensive price that Astro or Telekom pays. Malaysian consumers will foot the ultimate bill.
Regular readers will know I am all for free markets, competition and transparency. However, sometimes, markets do fail. This is a clear case of market failure, when a few hundred EPL magnates make more millions, paid for by millions of Malaysians who earn just a few hundred ringgit a week.
We have already experienced one round. Astro subscribers may remember sports became a lot more costly in 2007. Prior to that, Astro had a comfortable lock on the rights to televise EPL in Malaysia. That changed in 2007, when Astro suddenly found competition while it was bidding for the EPL rights for 2007-2010. It bid very high to secure the rights, and then raised subscription fees to cover its costs.
When markets fail, higher authorities must step in. Khazanah could play a role, as it is a shareholder in both Telekom and Astro. Could it prevail on the two companies to cooperate instead of compete? In the first place, I don't see how Telekom is going to deliver broadband tv on its decrepit Streamyx platform. Rather than pay so much and giving WAGS even more to splurge on frivolous luxuries, it should use the money to improve its services.
Or if it is too much to ask for Khazanah to arbitrate between two competing companies, the government should set up one umbrella organisation to bid for EPL rights for Malaysia. Since there will be only one bidder from Malaysia, the price should be much lower. This organisation can then sell the rights to Telekom, Astro and any other interested party. Any profits can be deployed to good use – whether charity, public transport, sports development ...
The rights to broadcast EPL are auctioned off every few years. Right now Astro holds the Malaysian broadcast rights until 2010. Bidding for the 2010-2013 EPL rights will commence later this year.
The Edge last week reported that Telekom Malaysia may decide to bid for these rights. Telekom is looking to launch broadband tv. Securing the hugely popular EPL franchise will almost certainly mean a few hundred thousand new subscribers, giving its service a substantial boost.
Conversely, Telekom's gain would be Astro's loss. Astro without EPL would not be very attractive to many.
Which means we could see a very intense bidding war between Astro and Telekom.
Competition is usually good. It is normally the best way to better products and services and lower prices for consumers. But in this case, the winner of any Astro-Telekom competition is not the Malaysian consumer. It is the multi-millionaire EPL footballers, managers and hangers-on. They will enjoy the benefits of whatever expensive price that Astro or Telekom pays. Malaysian consumers will foot the ultimate bill.
Regular readers will know I am all for free markets, competition and transparency. However, sometimes, markets do fail. This is a clear case of market failure, when a few hundred EPL magnates make more millions, paid for by millions of Malaysians who earn just a few hundred ringgit a week.
We have already experienced one round. Astro subscribers may remember sports became a lot more costly in 2007. Prior to that, Astro had a comfortable lock on the rights to televise EPL in Malaysia. That changed in 2007, when Astro suddenly found competition while it was bidding for the EPL rights for 2007-2010. It bid very high to secure the rights, and then raised subscription fees to cover its costs.
When markets fail, higher authorities must step in. Khazanah could play a role, as it is a shareholder in both Telekom and Astro. Could it prevail on the two companies to cooperate instead of compete? In the first place, I don't see how Telekom is going to deliver broadband tv on its decrepit Streamyx platform. Rather than pay so much and giving WAGS even more to splurge on frivolous luxuries, it should use the money to improve its services.
Or if it is too much to ask for Khazanah to arbitrate between two competing companies, the government should set up one umbrella organisation to bid for EPL rights for Malaysia. Since there will be only one bidder from Malaysia, the price should be much lower. This organisation can then sell the rights to Telekom, Astro and any other interested party. Any profits can be deployed to good use – whether charity, public transport, sports development ...
Wednesday, April 8, 2009
Lower toll rates can boost the economy
The MCA has jumped on the bandwagon for a toll-free PLUS.
Their proposal is in many ways similar to the DAP’s proposal - I noticed they even used the same KL-Penang toll rate example ☺. But there is a crucial difference – the DAP proposes that the government/Khazanah general offer extends to all minority shareholders of PLUS, including Employees Provident Fund (EPF). The MCA, on the other hand, considers EPF as part of the government. I completely disagree with that. EPF is the custodian of the rakyat’s hard-earned retirement money. It MUST NOT be treated as yet another source of funds for the government to fritter away.
Still, I am glad there is more support for bringing toll rates down. Cheap and efficient transport can do wonders for the local economy. The most recent proof – Japan’s dramatic toll rate cuts last month. Japanese expressway users now pay just ¥1,000 for unlimited travel on weekends and holidays.
It had a tremendous positive impact on the local economies. Weekend traffic on local highways soared 18% yoy! The boost is even more pronounced when compared to two weeks before – traffic was up 40%! All these means more income for local hotels, shops, restaurants and services – a key ingredient in keeping the domestic economy afloat as exports plunge.
Dare we hope for the same in Malaysia? Y1000 just ¥1,000 is equivalent to RM38. That’s incredibly cheap for the average Japanese who earns far more than the average Malaysian. So how about, say, RM20 for unlimited travel in Malaysia? I’ll bet that will encourage more Malaysians to take their families away for a weekend in Port Dickson, Melaka, Ipoh, Pangkor, Penang, Kuantan, Cherating …… boosting sales of everything from keropok lekor to assam laksa ☺
Their proposal is in many ways similar to the DAP’s proposal - I noticed they even used the same KL-Penang toll rate example ☺. But there is a crucial difference – the DAP proposes that the government/Khazanah general offer extends to all minority shareholders of PLUS, including Employees Provident Fund (EPF). The MCA, on the other hand, considers EPF as part of the government. I completely disagree with that. EPF is the custodian of the rakyat’s hard-earned retirement money. It MUST NOT be treated as yet another source of funds for the government to fritter away.
Still, I am glad there is more support for bringing toll rates down. Cheap and efficient transport can do wonders for the local economy. The most recent proof – Japan’s dramatic toll rate cuts last month. Japanese expressway users now pay just ¥1,000 for unlimited travel on weekends and holidays.
It had a tremendous positive impact on the local economies. Weekend traffic on local highways soared 18% yoy! The boost is even more pronounced when compared to two weeks before – traffic was up 40%! All these means more income for local hotels, shops, restaurants and services – a key ingredient in keeping the domestic economy afloat as exports plunge.
Dare we hope for the same in Malaysia? Y1000 just ¥1,000 is equivalent to RM38. That’s incredibly cheap for the average Japanese who earns far more than the average Malaysian. So how about, say, RM20 for unlimited travel in Malaysia? I’ll bet that will encourage more Malaysians to take their families away for a weekend in Port Dickson, Melaka, Ipoh, Pangkor, Penang, Kuantan, Cherating …… boosting sales of everything from keropok lekor to assam laksa ☺
Wednesday, April 1, 2009
EPF – please exercise better governance
Shareholders of MMC Corporation Berhad (MMC) recently approved its proposal to acquire Senai Airport Terminal Services Sdn Bhd (SATS). MMC will pay RM1,700,000,000 CASH to parties related to its substantial shareholder. This deal had attracted substantial criticism from the start. Here are some facts and figures from a very unhappy fund manager with a large chunk of retirement money under EPF’s stewardship:
1) SATS’ main asset is Senai Airport and 2,718 acres of land held under Enigma Harmoni Sdn Bhd (EHSB).
2) The airport operations, which have made losses for the past 5 years, are being bought for RM580m CASH, based on discounted cash flow. Of course, I agree that discounted cash flow is a relevant metric, but the RM420-620m discounted cash flow valuation by Ernst & Young (EY) beggars belief:
a. The airport operations have been loss-making for the past five years. To arrive at its very high discounted cash flow valuation, EY makes some heroic assumptions, including forecasting passenger traffic growth more than 30 years away – up to 2053!
b. By that time, it assumes Senai Airport will handle almost 22 flights per hour, or one flight every 3 minutes and 21m passengers! Do you consider that achievable?
3) MMC is paying RM1.12bn CASH for 2,718 acres of land valued at RM2.0-2.2bn by valuers Knight Frank Ooi & Zaharin Sdn Bhd and IPC Island Property Consultants Sdn Bhd (IPC). A bargain? Hmmm … For a start, consider that EHSB itself acquired the land for just RM332m in December 2007.
a. Now, barely two years later, Knight Frank and IPC say the land value has gone up 6-7x! Again, discounted cash flow (in the guise of potential development value) is brought in to justify the valuation.
b. Note that SATS, as of June 2008, had already booked in a RM264m revaluation surplus, and its total net book value (including the airport) was RM185m. The assumptions Knight Frank and IPC used to come up with such a massive gain over SATS previous valuation is a very good question.
c. Using this RM2.0-2.2bn valuation, MMC claims the land is being bought at 0.83-0.95x net asset value. This is utter rubbish. The standard method when evaluating listed companies is based on the net asset value of the land bank as it is today, not on prospective profits from the future development of that landbank.
d. Using SATS own RM185m book value, MMC is paying 9x the book value based on normal valuation methodology. Over on Bursa Malaysia, the listed companies are in fact trading at 0.4-1.6x book. MMC is paying well over the range.
4) Finally, MMC is advancing RM417m to EHSB to repay advances made by its outgoing shareholders. No mention here is made of when and how MMC will get back that RM417m, nor the interest rate that MMC is charging. Is MMC offering an interest-free loan?
EPF owns about 7% of MMC, and while EPF has not disclosed whether it voted for or against the deal, I also note it has not taken a public stance either way. In the meantime, MMC’s share price tanked as investors hated the deal. Its share price fell 61 sen on 5 Aug 2008 when the deal was first announced, wiping out RM2.6bn of market capitalization in one day. Since then, the share price has collapsed further to about RM1.40, wiping out RM4.05bn of market capitalization – our EPFs share of that loss is RM0.3bn! True, markets overall have fallen – the KLCI itself was down 26% in that period, but MMC’s share price collapsed by nearly half (49%)!
Let’s see what happens with the new, incoming CIO (Chief Investment Officer), now that no-nonsense Johari Muid has been moved to other duties. Dare we hope for a more activist EPF that will protect our retirement money?
1) SATS’ main asset is Senai Airport and 2,718 acres of land held under Enigma Harmoni Sdn Bhd (EHSB).
2) The airport operations, which have made losses for the past 5 years, are being bought for RM580m CASH, based on discounted cash flow. Of course, I agree that discounted cash flow is a relevant metric, but the RM420-620m discounted cash flow valuation by Ernst & Young (EY) beggars belief:
a. The airport operations have been loss-making for the past five years. To arrive at its very high discounted cash flow valuation, EY makes some heroic assumptions, including forecasting passenger traffic growth more than 30 years away – up to 2053!
b. By that time, it assumes Senai Airport will handle almost 22 flights per hour, or one flight every 3 minutes and 21m passengers! Do you consider that achievable?
3) MMC is paying RM1.12bn CASH for 2,718 acres of land valued at RM2.0-2.2bn by valuers Knight Frank Ooi & Zaharin Sdn Bhd and IPC Island Property Consultants Sdn Bhd (IPC). A bargain? Hmmm … For a start, consider that EHSB itself acquired the land for just RM332m in December 2007.
a. Now, barely two years later, Knight Frank and IPC say the land value has gone up 6-7x! Again, discounted cash flow (in the guise of potential development value) is brought in to justify the valuation.
b. Note that SATS, as of June 2008, had already booked in a RM264m revaluation surplus, and its total net book value (including the airport) was RM185m. The assumptions Knight Frank and IPC used to come up with such a massive gain over SATS previous valuation is a very good question.
c. Using this RM2.0-2.2bn valuation, MMC claims the land is being bought at 0.83-0.95x net asset value. This is utter rubbish. The standard method when evaluating listed companies is based on the net asset value of the land bank as it is today, not on prospective profits from the future development of that landbank.
d. Using SATS own RM185m book value, MMC is paying 9x the book value based on normal valuation methodology. Over on Bursa Malaysia, the listed companies are in fact trading at 0.4-1.6x book. MMC is paying well over the range.
4) Finally, MMC is advancing RM417m to EHSB to repay advances made by its outgoing shareholders. No mention here is made of when and how MMC will get back that RM417m, nor the interest rate that MMC is charging. Is MMC offering an interest-free loan?
EPF owns about 7% of MMC, and while EPF has not disclosed whether it voted for or against the deal, I also note it has not taken a public stance either way. In the meantime, MMC’s share price tanked as investors hated the deal. Its share price fell 61 sen on 5 Aug 2008 when the deal was first announced, wiping out RM2.6bn of market capitalization in one day. Since then, the share price has collapsed further to about RM1.40, wiping out RM4.05bn of market capitalization – our EPFs share of that loss is RM0.3bn! True, markets overall have fallen – the KLCI itself was down 26% in that period, but MMC’s share price collapsed by nearly half (49%)!
Let’s see what happens with the new, incoming CIO (Chief Investment Officer), now that no-nonsense Johari Muid has been moved to other duties. Dare we hope for a more activist EPF that will protect our retirement money?
Wednesday, March 25, 2009
Keep a close eye on your EPF money
So, after months of waiting and speculation, including the tantalizing prospect of getting our dividend in cash, EPF (Employees’ Provident Fund) has finally declared a 4.5% dividend for 2008, to be credited into our accounts as usual. The small amount will disappoint many while others will suggest it is fair given the horrendous equity market performance last year. What is an appropriate benchmark for EPF can be the subject of a long piece at another time.
There are more pressing immediate issues. I was in Penang last week, with a contingent of fund managers and analysts there to see for themselves what the economic situation is like. For me, it was a good opportunity to catch up on goings on in the investment world, and the news on stewardship of my retirement money was extremely disconcerting:
1) EPF now has no Chief Investment Officer (CIO);
2) The RM10bn for Khazanah to deploy under the 2nd stimulus plan will come from EPF.
I am told Mr Johari Muid, CIO, has been redeployed to other duties within EPF. I have met Johari during my investment analyst days. I am sure his brusque, abrupt manner has made him many enemies, but I believe he is intelligent, competent and capable. The personality aspects are immaterial – what is important is I felt my retirement money was in good hands under Johari’s stewardship. Now, just month before his contract expires, he has been moved to other duties.
Why the rush? And why now when there is no immediate successor? Surely these turbulent times call for a smooth transition, if one is necessary in the first place. We contributors are owed an explanation.
Correlation is not causation is a principle drummed into me by my statistics teacher. But coinciding with Johari’s removal is widespread speculation that EPF will be lending RM10bn to Khazanah to fund investments under the 2nd stimulus package. This comes on top of EPF lending RM5bn to Valuecap to invest in stocks.
I’ve already blogged on how irrational it is for EPF to lend money to a competitor, Valuecap. Now we find EPF potentially lending money to another competitor with a chequered record, Khazanah.
Watch the news flow!
There are more pressing immediate issues. I was in Penang last week, with a contingent of fund managers and analysts there to see for themselves what the economic situation is like. For me, it was a good opportunity to catch up on goings on in the investment world, and the news on stewardship of my retirement money was extremely disconcerting:
1) EPF now has no Chief Investment Officer (CIO);
2) The RM10bn for Khazanah to deploy under the 2nd stimulus plan will come from EPF.
I am told Mr Johari Muid, CIO, has been redeployed to other duties within EPF. I have met Johari during my investment analyst days. I am sure his brusque, abrupt manner has made him many enemies, but I believe he is intelligent, competent and capable. The personality aspects are immaterial – what is important is I felt my retirement money was in good hands under Johari’s stewardship. Now, just month before his contract expires, he has been moved to other duties.
Why the rush? And why now when there is no immediate successor? Surely these turbulent times call for a smooth transition, if one is necessary in the first place. We contributors are owed an explanation.
Correlation is not causation is a principle drummed into me by my statistics teacher. But coinciding with Johari’s removal is widespread speculation that EPF will be lending RM10bn to Khazanah to fund investments under the 2nd stimulus package. This comes on top of EPF lending RM5bn to Valuecap to invest in stocks.
I’ve already blogged on how irrational it is for EPF to lend money to a competitor, Valuecap. Now we find EPF potentially lending money to another competitor with a chequered record, Khazanah.
Watch the news flow!
Wednesday, March 11, 2009
RM60bn stimulus – includes RM0.5bn for toll concessionaires!
Extract from Point 32 of the speech by Finance Minister YAB Dato' Sri Najib yesterday:
“The Government will also provide RM480 million to ensure that toll rates are not increased.”
Bear in mind this is just the additional amount of compensation to avert further increases in toll rates. The government is already compensating the concessionaires for past toll rate hikes which were not implemented. I estimate compensation to PLUS alone is RM700m per year. That will go up to RM1.5bn in 2011, if PLUS is not allowed to increase rates.
There is no need for this. The DAP has presented a concrete, viable proposal for a toll-free PLUS by 2016, at no additional cost to the government.
Hmm. Here's a thought. Khazanah has a RM10bn allocation, and a chequered execution record. I'd be very happy if it spent that RM10bn on buying out the rest of PLUS and making it toll-free even earlier!
“The Government will also provide RM480 million to ensure that toll rates are not increased.”
Bear in mind this is just the additional amount of compensation to avert further increases in toll rates. The government is already compensating the concessionaires for past toll rate hikes which were not implemented. I estimate compensation to PLUS alone is RM700m per year. That will go up to RM1.5bn in 2011, if PLUS is not allowed to increase rates.
There is no need for this. The DAP has presented a concrete, viable proposal for a toll-free PLUS by 2016, at no additional cost to the government.
Hmm. Here's a thought. Khazanah has a RM10bn allocation, and a chequered execution record. I'd be very happy if it spent that RM10bn on buying out the rest of PLUS and making it toll-free even earlier!
RM60bn? Not!
The newspapers today headline the RM60bn total 'package'.
It's not really that big. First of all, RM7bn of that RM60bn is due to “off-budget projects” and private finance initiatives (PFIs). “Off-budget” projects by definition are not undertaken by the government. What it did was corral certain projects done by GLCs (government-linked corporations), such as the RM2bn LCCT, into this package to help create the nice big headline number. Similarly, PFIs are led by the private sector. They are not new spending.
That leaves us with RM53bn. Still a fairly large number. But really, only a small fraction of that is likely to benefit the rakyat directly and immediately. Here's where the big money goes:
1)RM10bn to Khazanah to fund investments “over a two year period”. This is not going to help the rakyat today. Khazanah's record, by the way, is hardly exemplary. I challenge you to name 3 successes at Khazanah under its much-vaunted new leadership since 2004. Telekom continues to burn money overseas while providing Malaysians with sub-par services; Proton is still dependent on protectionist policies, consider the losses at Silterra; Malaysia Airports' LCCT is a disgrace …
2)RM25bn for guarantee funds, under which the government guarantees loans to encourage banks to lend. A good idea, which I had blogged on. But here is the rub. SME (small and medium-scale enterprises) get only RM5bn worth of guarantees. That's not even 4% of the total c. RM130bn loans outstanding. Bonds, ie debt issued by large corporations, get the largest chunk - RM15bn in total. And the balance RM5bn goes to loans for “Industry Restructuring”. Also, bear in mind this is not real spending – the government is liable only if the borrowers default.
Which takes us down to the real, direct government spend totalling RM18b (60-7-10-25=18). Bear in mind though – that's over two years. So it's only RM9bn per year. A drop in the ocean. But we're in trouble and we'll take whatever there is. Transparent and fast execution will help.
But the government did did not break down in detail how the monies will be spent. The record isn't comforting. As of to-date, just RM1bn of the RM7bn first stimulus package announced in Nov has been spent, according to our Finance Minister.
We are in a recession. Speed is of the essence. And so is maximising the effectiveness of government spending. How hard can it be for the BN government to put on a website the details of the various projects? For example, if it is a bridge project, please name the description of the bridge, the location, the person awarded to, the contract sum, the contract period and henceforth ...
Click here for more from Tony Pua and Jeff Ooi.
It's not really that big. First of all, RM7bn of that RM60bn is due to “off-budget projects” and private finance initiatives (PFIs). “Off-budget” projects by definition are not undertaken by the government. What it did was corral certain projects done by GLCs (government-linked corporations), such as the RM2bn LCCT, into this package to help create the nice big headline number. Similarly, PFIs are led by the private sector. They are not new spending.
That leaves us with RM53bn. Still a fairly large number. But really, only a small fraction of that is likely to benefit the rakyat directly and immediately. Here's where the big money goes:
1)RM10bn to Khazanah to fund investments “over a two year period”. This is not going to help the rakyat today. Khazanah's record, by the way, is hardly exemplary. I challenge you to name 3 successes at Khazanah under its much-vaunted new leadership since 2004. Telekom continues to burn money overseas while providing Malaysians with sub-par services; Proton is still dependent on protectionist policies, consider the losses at Silterra; Malaysia Airports' LCCT is a disgrace …
2)RM25bn for guarantee funds, under which the government guarantees loans to encourage banks to lend. A good idea, which I had blogged on. But here is the rub. SME (small and medium-scale enterprises) get only RM5bn worth of guarantees. That's not even 4% of the total c. RM130bn loans outstanding. Bonds, ie debt issued by large corporations, get the largest chunk - RM15bn in total. And the balance RM5bn goes to loans for “Industry Restructuring”. Also, bear in mind this is not real spending – the government is liable only if the borrowers default.
Which takes us down to the real, direct government spend totalling RM18b (60-7-10-25=18). Bear in mind though – that's over two years. So it's only RM9bn per year. A drop in the ocean. But we're in trouble and we'll take whatever there is. Transparent and fast execution will help.
But the government did did not break down in detail how the monies will be spent. The record isn't comforting. As of to-date, just RM1bn of the RM7bn first stimulus package announced in Nov has been spent, according to our Finance Minister.
We are in a recession. Speed is of the essence. And so is maximising the effectiveness of government spending. How hard can it be for the BN government to put on a website the details of the various projects? For example, if it is a bridge project, please name the description of the bridge, the location, the person awarded to, the contract sum, the contract period and henceforth ...
Click here for more from Tony Pua and Jeff Ooi.
Monday, March 2, 2009
Kudos to EPF operations
February is over. All listed companies have reported their results for last year ended 2008, including their dividend plans. EPF, custodian of our retirement money, is still maintaining an ominous silence. The Malaysian stock market fell by nearly 40% last year, as measured by the KLCI. It would be unfair to expect EPF to do well in those market conditions, but we have a right to know what is happening.
While EPF's investment division may be having a bad time, the operations department is delivering excellent service to contributors. I went over twice in the last week to execute a transaction. Both times I waited for less than 5 minutes; and both times the officers were polite and efficient. I also used the phone enquiry line – my call was quickly picked up, and the officer on the line answered my queries competently and politely.
Credit where credit is due: SYABAS, EPF! If only other government agencies would deign to learn from your experience. No need to go for expensive lawatan-sambil-belajar to exotic overseas locations. Malaysia Boleh!
While EPF's investment division may be having a bad time, the operations department is delivering excellent service to contributors. I went over twice in the last week to execute a transaction. Both times I waited for less than 5 minutes; and both times the officers were polite and efficient. I also used the phone enquiry line – my call was quickly picked up, and the officer on the line answered my queries competently and politely.
Credit where credit is due: SYABAS, EPF! If only other government agencies would deign to learn from your experience. No need to go for expensive lawatan-sambil-belajar to exotic overseas locations. Malaysia Boleh!
Wednesday, February 25, 2009
Call on the Works and Finance Ministers for a Toll-free North-South Expressway by 2016 and to save taxpayers’ RM14 billion
I joined our MPs Tony Pua (PJ Utara), Teo Nie Ching (Serdang) and Lim Lip Eng (Segambut) at a press conference this morning to publicise our proposal:
“The DAP Ops RESTORE (Restructure Toll Rates & Equity) Team would like to congratulate the Works Minister for first having declassified most of the highway toll concession agreements, and followed up with the removal of two toll plazas at the New Pantai Expressway (NPE) and the Sungei Besi Highway in the past two weeks.
We call upon the Works Minister to declare the compensation promised to these concessionaires for the abolition of the toll, for if the compensation involved is equivalent to the toll that would have been collected, then the joy for Malaysians will be shortlived.
In addition and more importantly, DAP Ops RESTORE Team calls upon both the Works and Finance Ministers to make the entire North-South Highway and its related concessions such as the ELITE, Butterworth-Kulim (BKE) and the Second Link Highways under PLUS Expressways Berhad completely toll free by 2016.
Following our team's consultations to date with legal experts, investment bankers as well as the general public, we have developed a comprehensive, practicable and creative programme to return the highways to the people at the least possible cost, and shortest possible time without compromising the integrity of the financial markets.
Our proposal will:
1) Impose no further increase in North-South Highway toll rates.
For example, a return KL-Penang journey will remain at RM86.60 today instead of RM115.30 in 2015 and RM168.80 by 2030.
2) Create RM14 billion savings for Malaysians from 2009-2015
This will be the amount saved either (i) by Malaysians using the highway because of no further toll rate increases or (ii) in terms of compensation which would have to be paid by the Government to PLUS Expressways.
3) Continue to collect toll only until 2015
4) Incur no additional cost for the Malaysian Government or Malaysian tax-payers
Background information:
1) PLUS is listed on Bursa Malaysia at a price of RM2.88 per share and a market capitalisation of RM14.4 billion (24th February).
2) The Government of Malaysia, via Khazanah owns 65% of PLUS.
3) PLUS has outstanding net debt amounting to RM8.5 billion.
We call upon the Government to take the following actions:
1. The Government should make a General Offer (GO) to acquire all minority shareholders of PLUS with a generous 15% premium at RM3.30 per share, costing RM5.25 billion thus ensuring that minority shareholders are protected.
2. The cost of acquisition, added to the RM8.5 billion net debt of PLUS will amount to RM13.75 billion.
3. This cost will be funded by issuing Malaysian Government Securities (MGS) at 3% interest (or less), costing RM413 million per annum. Total repayment will amount to RM16.2 billion over 6 years.
4. At the same time, PLUS should generate at least RM20b in net positive cashflow the 6 years to 2015 without further toll rate hikes and assuming a conservative 3% pa traffic growth.
5. Therefore by 2015, the government can completely repay the MGS and still have RM3.8 billion excess which could be used to build a better public transportation system throughout the country.
Not only will the execution of the above proposal bring joy to all Malaysians with a toll-free North South Expressway, the exercise will fit perfectly with the upcoming “mini-Budget” by the Finance Minister:
Keen readers will note the toll-free target is now earlier at 2016 instead of 2020. The main difference between this and the proposal we presented at the public forum is we now assume 3% pa traffic growth, compared to zero before.
“The DAP Ops RESTORE (Restructure Toll Rates & Equity) Team would like to congratulate the Works Minister for first having declassified most of the highway toll concession agreements, and followed up with the removal of two toll plazas at the New Pantai Expressway (NPE) and the Sungei Besi Highway in the past two weeks.
We call upon the Works Minister to declare the compensation promised to these concessionaires for the abolition of the toll, for if the compensation involved is equivalent to the toll that would have been collected, then the joy for Malaysians will be shortlived.
In addition and more importantly, DAP Ops RESTORE Team calls upon both the Works and Finance Ministers to make the entire North-South Highway and its related concessions such as the ELITE, Butterworth-Kulim (BKE) and the Second Link Highways under PLUS Expressways Berhad completely toll free by 2016.
Following our team's consultations to date with legal experts, investment bankers as well as the general public, we have developed a comprehensive, practicable and creative programme to return the highways to the people at the least possible cost, and shortest possible time without compromising the integrity of the financial markets.
Our proposal will:
1) Impose no further increase in North-South Highway toll rates.
For example, a return KL-Penang journey will remain at RM86.60 today instead of RM115.30 in 2015 and RM168.80 by 2030.
2) Create RM14 billion savings for Malaysians from 2009-2015
This will be the amount saved either (i) by Malaysians using the highway because of no further toll rate increases or (ii) in terms of compensation which would have to be paid by the Government to PLUS Expressways.
3) Continue to collect toll only until 2015
4) Incur no additional cost for the Malaysian Government or Malaysian tax-payers
Background information:
1) PLUS is listed on Bursa Malaysia at a price of RM2.88 per share and a market capitalisation of RM14.4 billion (24th February).
2) The Government of Malaysia, via Khazanah owns 65% of PLUS.
3) PLUS has outstanding net debt amounting to RM8.5 billion.
We call upon the Government to take the following actions:
1. The Government should make a General Offer (GO) to acquire all minority shareholders of PLUS with a generous 15% premium at RM3.30 per share, costing RM5.25 billion thus ensuring that minority shareholders are protected.
2. The cost of acquisition, added to the RM8.5 billion net debt of PLUS will amount to RM13.75 billion.
3. This cost will be funded by issuing Malaysian Government Securities (MGS) at 3% interest (or less), costing RM413 million per annum. Total repayment will amount to RM16.2 billion over 6 years.
4. At the same time, PLUS should generate at least RM20b in net positive cashflow the 6 years to 2015 without further toll rate hikes and assuming a conservative 3% pa traffic growth.
5. Therefore by 2015, the government can completely repay the MGS and still have RM3.8 billion excess which could be used to build a better public transportation system throughout the country.
Not only will the execution of the above proposal bring joy to all Malaysians with a toll-free North South Expressway, the exercise will fit perfectly with the upcoming “mini-Budget” by the Finance Minister:
- RM14 billion saved by Malaysian consumers will reduce the cost of living for the average Malaysian in times of economic difficulties we face today.
- RM14 billion saved will also redirect expenditure to other more productive sectors of our economy by increasing domestic consumer demand.
- The reduced toll rates and its subsequent abolition will substantially reduce the cost of doing business in Malaysia, increase logistical efficiencies and ultimately make Malaysian companies more globally competitive.
- Best of all, the plan will stimulate demand and make available substantial funds for public infrastructure development without the Government having to increase the precarious budget deficit further.
Keen readers will note the toll-free target is now earlier at 2016 instead of 2020. The main difference between this and the proposal we presented at the public forum is we now assume 3% pa traffic growth, compared to zero before.
Wednesday, February 18, 2009
EPF – where's my dividend?
The Employees Provident Fund (EPF) and mainstream media has been ominously quiet on this subject. Last year, the dividend was announced on 22 Jan, and the year before on 5 Feb 07. We're well into February now, listed companies are already actively reporting results for the year-ended Dec 08 but there's still no news from EPF. I actually popped by the Jalan Gasing, PJ, EPF office but the staff members there couldn't tell me when either. For the record, we received 5.8% for 2007 and 5.15% for 2006. Being unemployed now, I'm looking forward to the dividend to grow my account balance.
Over to EPF. I hope no news is good news ...
Over to EPF. I hope no news is good news ...
Thursday, November 20, 2008
Cut your EPF to 8%; pay more taxes!
If your pay is about RM4,500/month, and you have no life insurance, you will actually pay more taxes if you decide to reduce your EPF contribution to 8%.
That's because up to RM6,000 of EPF contributions and life insurance premiums are tax-deductible. Here is the calculation:
Is that why the BN government made the 8% option automatic? Perhaps you'd better head over to EPF and insist you want to keep paying 11%.
That's because up to RM6,000 of EPF contributions and life insurance premiums are tax-deductible. Here is the calculation:
- You earn RM54,000 per year. 11% EPF = RM5,940, which is tax-deductible. There is also RM8,000 of personal relief. So your net taxable income is RM40,060. The tax on that will be RM2,183 (tax rate is RM1,525 on the first RM35k and 13% on the next RM15k).
- The EPF contribution is reduced to 8% = RM4,320. That is equal to RM1,620 extra in your pocket every year. Very nice? Did you realise that's not all yours? That extra is now taxable income! So your net taxable income is RM41,680 and you will be paying RM2,393 of federal income tax.
- The BN federal government will be taking an RM210 (RM2,393 vs RM2,183) of taxes from you ie 13% of that extra which you thought was all yours.
Is that why the BN government made the 8% option automatic? Perhaps you'd better head over to EPF and insist you want to keep paying 11%.
Friday, October 24, 2008
Why is EPF lending my retirement money to Valuecap?
One question from my RM5bn for Valuecap post has been answered. Datuk Seri Najib Tun Razak has said that the RM5bn additional investment in Valuecap will be provided by the Employees Provident Fund (EPF). But that answer creates even more questions:
- EPF is actually making a competitor stronger! Valuecap is going to take the money and buy shares. EPF also buys shares. What if Valuecap wants to buy the same shares as EPF? Both will end up competing and paying a higher price than necessary. The result? A very happy seller, but less profit for EPF which means smaller dividends for all us contributors.
- “The value of shares can go up as well as down.” The standard disclaimer in all prospectuses. Will that RM5bn sum extended to Valuecap be guaranteed? If not, EPF should be charging a very high interest rate to compensate for the risk. Which brings me to the last question:
- What interest rate will Valuecap be charged and how long will the loan be for?
Wednesday, October 22, 2008
RM5bn for Valuecap – 2 questions
Deputy Prime Minister and newly-minted Finance Minister Datuk Seri Najib Tun Razak announced the government will provide an additional RM5bn to Valuecap Sdn Bhd. This will double its size to R10bn. Valuecap is to use the money to invest in undervalued stocks and protect investments in government-owned companies.
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