Wednesday, December 17, 2014

Overhype Xiaomi?

Recently, I came across a report that says that Xiaomi net profit for 2013 is $56m on sales of $4.6b.This is a razor thin margin of 1.8% compared to APPLE (28.7%) and Samsung (18.7%).This probably explain why Xiaomi is able to price their phones so low in the market.

Recently Xiaomi expansion into its second most important market (India) stalled only after starting in July. Complaint by Ericsson that Xiaomi had infringed on its set of wireless patents which will see hearing in Feb 2015.Meanwhile, sales activity in India has to be halted until the outcome become clearer. Xiaomi had only a handful of patents (as it is a startup) compared to the likes of Apple, Samsung,Ericsson and even locals rivals like Huawei, Lenovo etc.I do not forsee how Xiaomi is going to be able to sell in Europe and US. Even its foray into markets like India and Indonesia will prove to be difficult (due to patents suits being lodge by competitors) despite the attractiveness of its price points.I was in Indonesia recently and was surprised to see OPPO quite visible in the local market.In India, there is also the local version of Xiaomi in the form of Micromax.

Founder, Lei Jun is in the midst of trying to raise funds for the company at a valuation of $40b based on his vision of a digital ecosystem.

I am of the opinion that Xiaomi is more hype than substance till this point.

Monday, December 15, 2014

Olam - ADM Worldwide Cocoa Business Acquisition

Olam International to acquire ADM worldwide cocoa business for US$1.3b to create a worldwide platform for leading global integrated cocoa business.

Establishes Olam as one of the top 3 worldwide cocoa processors as well as the
deZaan® ,Joanes® and UNICAO® brands adding on top a strong franchise of 2150 customers globally.The expected synergies from the economies of scale is about US$35m-US$40m.

The transaction is expected to be earnings, returns and free cash flow accretive in the first full year closing (FY2016). It is also expected to have a substantial financial impact going forward with segmental EBITDA growth of between 86%-95%, overall company EBITDA growth of between 20%-22% and Net Income and EPS growth of between 25%-30% by FY2018 compared to FY2014.

The purchase consideration of US$1.3 billion will be financed through a combination of cash and existing debt facilities.



Wednesday, December 10, 2014

Some Weath Statistics in Singapore

Came across an article recently that states that 1395 super rich  individuals own about 17% of the country wealth which equate to be about US$180b. Do not know how accurate is the info but it surely tell a distinct story.Inequality is not between the top 10% and the rest but more about a small percentage of the top 1% versus the rest.Ditto with the US, based on what I know too.

Wednesday, December 3, 2014

Intuitive Explanation for Black-Scholes Pricing Formula.

Below is a link to a reasonable good, intuitive and easy to understand explanation of the Black-Scholes Pricing Formula for a European Call Option  that I come across. Enjoy!
Black-Scholes Call on European Stock
Black-Scholes d1 d2

Tuesday, December 2, 2014

SGX 24X7 Availability????

I am not a trader so it does not really bother me whether SGX delay trading today to 1230 hours or not. However, I am very puzzled that in these days of cheap availability of hardware redundancy, sophisticated software availability capabilities, SGX is still CONFRONTED WITH THE NEED to issue an unexpected outage of half a working day. This clearly is UNACCEPTABLE in my view.Remember, running an operation 24X7 is not a new concept or requirement. Already more than 25 years ago, it is already a key requirements in most major data centers.

If I am in charge of SGX, I would have fired the CIO on the spot.

Thursday, November 27, 2014

OPEC To Choke Off US Shale Producers?

The sharp drop in oil prices is probably going to choke off a lot of investments going into the US Shale producers.The oil cartel decision not to cut production in face of weaker prices is to claw back market share from US shale producers.A lot of drilling going on in the US is on borrowed money and that will be closely scrutinized or turn off following the recent OPEC decision.This would  a test to see what really is the breakeven point of US Shale producers.If we see sustained low oil prices, some higher cost shale producers will go under.The Saudi (the kingmaker in the OPEC) is not simply being magnanimous in this instance.Meanwhile, the rest of the world who are in the non oil producing camp will continue to benefit from the extra kick generated by low oil prices in this game of chicken being played out between OPEC and the US Shale industry.

Tuesday, November 18, 2014

CitySpringTrust And Keppel Infra Trust Merger

The proposed merger of CitySpring Infrastructure Trust (CIT) and Keppel Infrastructure Trust (KIT)has been announced.KIT also announced that it will acquire 51% of Keppel Merlimau Cogen (KMC) which own a 1300 megawatt combined gas turbine generation facility on Jurong Island for a cash consideration of $500m based on a enterprise value of $1,700m.The KMC acquisition will form an integral part of the merged entity.The combined entity will be Singapore largest infrastructure-focused business entity with a market cap of about $1.9b and assets of about $4b.

Each KIT shareholder will receive 2.106 units of CIT shares for every unit of KIT share held.Keppel Infrastructure Holdings and Temasek through its subsidiary will be the two largest shareholders at 22.9% and 19.97% respectively. CIT will be the surviving trust and be renamed as Keppel Infrastructure Trust and KIT will be dissolved following completion. Current trustee manager of CIT will resign and current trustee manager of KIT will be appointed the trustee manager of the combined trust. As saving of $3.6m of management fees is expected from this arrangement.

The purchase of KMC will be financed through  non-renounceable of preferential shares to existing shareholders and private placement to institutional investors to raise up to $525m in gross proceeds.The transaction is accretive to CIT unitholders and the proforma distribution will be 3.67 cents per CIT unit higher than the current 3.28 cents.