MiiF Shareholder EGM (A Personal Glimpse)

Attended the MiiF EGM shareholder meeting yesterday. The main objectives are to increase number of directors to 9 and to vote on the nomination of three directors put forward by the two requisitioing shareholders owning close to 10% of the MiiF shares. The current board is advising shareholders to vote AGAINST the nomination of the three additional shareholders.

The end result is that the three nomintations were voted down in the ratio of about 40:60 while the resolution to increase the number of directorships to 9 was carried. However, I read from the SGX report that the actual number of keypad votes are quite different. In fact, if we go by keypad counts which reflect the proportion of people in the room, then the resolutions to nominate the three additional directors is greater than 50%. If we allow the people in the room to be representative of the number of shareholders out there in related proportion to the keypad votes, then it actually suggest that more people are unhappy with the way the current MiiF is running the show and wanted a change.

I was there and you could  that the level of unhappiness with the board is quite pulsating.One shareholder virtually gave the chairman Heng Chiang Meng, an ex-PAP MP is dressing down. I find the board argument on keeping the dynamics of the board unchanged by having four independent directors and one nominated by the fund manager totally unconvincing. Independent directors exist to check on the bias of non-independent directors who repersented significant interests in the company. However, in MiiF case, non-independent directors are totally missing except for one nominated by the manager. Non-independent directors are needed because they represent substantial interests in the company and will have greater urgency to improve on the operating conditions of the company and share price. This is totally missing in MiiF. Whereas, independent directors tend to have too many directorships or even hold fulltime jobs, so they tend to devote only a small portion of their time to the company and lack genuine interest in the improvement of the company beyong collecting their directors fees and adding an extra line to their resume.
A composition of the board make up almost entirely by independent directors is in my opinion not good for the trust. A fine balance is needed and I do not find that in the current board which explain its underperformance.

I am disappointed the resolutions to add 3 non-indepndent directors were not carried.

Olam Bonds cum Warrants Rights Issue

Olam announced a renounceable bonds cum warrants right issue. It will offer 313 bonds at US$1 and 162 warrants with a execrcisable price of US$1.291 for every 1000 shares. The warrants are not exercisable fo the first three years. The bonds mature in 2018 and carry a interest rate of 6.75% with an initial issue price of 95%. Most importantly, Temasek undertake to take up 100% of any unsubscribed rights.

This means that olam will raise immediately US$750m in bond with a further US$500m if and when warrants are converted.

This exercise make Muddy Water offer to get Olam Debt rated meaningless as Olam can raise debt in double quick time even in time of stress. It also show that Olam has the 100% backing of Temasek.

For small shareholders, even if you do not take up the rights, it will not hurt you at this stage as the warrants are priced at $1.575 which is the current price. However, you may miss up on the upside later on.

By leveraging on Temasek, Olam share and bond price will be supported and shortist will most likely leave the market quietly. What is left for Olam is execution, execution and still execution.

Olam Spat with Muddy Water

The above hog the headlines for the last one week. I am vested in Olam and remain to be so. The incident actually give me a lot of opportunity to know and understand the business of Olam in greater detail than in the past.

There is no doubt that Muddy Water is acting in concert with some hedge funds to make monies out of their short positions in Olam. I think they might have made some but not significant as Olam has manage quite well to contain the crisis.

I read both Muddy Water report and Olam subsequent reply. Most of Muddy Water so called evidence are rather sporadic and incomplete. They tend to highlight certain discrepancies without being able to give the complete picture. It is often easy to pick out a piece of information to support your case but leaving out other equally information that can also invalidate your statement.

However, having said the above, I think Olam would do well to think and recalibrate its aggressive target of reaching $1b Net Profit by 2016. It may be worth the while to go slower and focus more tightly on ongoing projects.

The understanding I gain from reading both reports is that Olam typically like to pick underperforming assets at what they deem attractive prices. The assets are underperforming maybe due to bad management, lack of capital, etc. Then they wll bring in their expertise and try to turn it around. It will take some effort. If they succeed, the gains are tremendous but require hard work and a little bit of luck. Success is often not immediate or even guaranteed.

I also think Olam would need to convey more info on the 35+ initiatives a bit more clearly to investors. I do not expect all the initatives to succeed. I just need more to succeed than fail on the balance so that the overall profit objectives can be met. Among all the cases that Muddy Water bring out in their report, I would think Olam has not replied satisfactory on the Gabon Urea initiative.I like Olam to give detailed statistics on the NZ-URUGUAY diary project regularly as this is one of the project performing below plan.
I like to see EBIT numbers for Olam Tomatoes aka SK Foods.

Also, here is no need to give detailed info on all initiatives but the 'big' ones do matter. For investors, my advice is do not panic too easily. Try to understand the company as well as you can and in some cases, a crisis may be excellent an opportunity.

The stock price is not a major problem. A credit freeze would be more painful as Olam need huge capital to function being in the commodity business where they hold large liquid inventories.

Finally, I believe the worst is over between Olam and Muddy Water saga. Carson will move on to look for new targets.

SingTel Q2FY2013

Revenue                                           = $4,572m
Underlying Profit                             = $886m
Singapore (EBITDA)                      = $541m
Optus(EBITDA)                              = $560m
Regional Mobile                              = $549m
Net Debt                                           = $8.2b
Net Gearing                                      = 26%
Net Debt/EBITDA+Assoc Profits    = 1.1x
EBITDA+Assoc Profits/Int Exp       = 23.2x
EPS                                                   = 5.45 cents
FCF                                                   = $1,102m

Note : Optus revenue declined by 4% to $2,239m

Sembcorp Q3FY2013

Revenue                       = $2,274M
Net Profit                     = $181M
EPS                             =  10.1 cents

Profit From Operations
Utilities                         = $155.2M
Marine                         = $138.6M
Urban Dev                   = $7.7M
Other Businesses          = $11.5M
Corporate                    = ($3.0M)
Total                            = $310.0M

NAV                            = 2.40
Interest Cover               = 11
ROE                             = 17.0%
Gearing Ratio                = 0.09
Free Cash Flow            = $244M (9MFY2012)

LMIR Q3FY2012

Results released on 9/11/2012.

Gross Revenue                                    = $30,553K
NPI                                                    =$29,521K
Distributable Amount                           =$15,848K
EPS                                                   =0.97 cents
DPU                                                   = 0.73 cents
Total Assets                                        =$1,752,584K
Total Liabilities                                    =$57,196K
NAV                                                   = 52.83cents
Gearing                                                = 22.7%

US Presidential Election 332 vs 206

I highlighted an article previously that argue analytically that the just concluded US Presidential Election will not be as close as what the frantic media painted. Looking at the end result of Obama trouncing Romney with a 332 to 206 advantage in electoral votes, the author is vindicated. Nate Silver uses a dispassionate methodology that goes through all the numbers meticulously. Beat the hell out of instinct and gut feel employe by a lot of journalists and writers.

I hope to likewise to evaluate my portfolio and future stock prospects using a similar approach by looking dispassionately at the numbers, quality of the management etc rather then depening on emotions, hearsay, market opinion etc.