CitySpring Trust - Bushing, Bush or Is it George Bush?

We got pulled by our barber (not by the hair..)to attend the CitySpring Investor seminar held today 15 Nov 2008 at Marina Mandarine. He is excited cos he says he has 100,000 shares in it and would like us to go listen and ask the management some questions on his behalf as he was shy. The questions he had was :

1)How come in the lastest results, the net income is negative? And this is not the first time.
2)What's with the outages at Basslink and how does Cityspring mitigate operational risk of the subsea cables?
3) Are there any acquisitions in the pipeline?

Being the ever obliging people, we decided to follow him on his quest for "nirvanic" answers but told him we were not going to ask questions on his behalf. At most, we would just follow him to the microphone and stand beside him while he asked. (That's what we call friendship..you see) .See below for some pics.

Susanna Cher, Au Yeung Fai, Tong Yew Heng ( Pretty honest management who answers the questions straight to the point. No hint of "smoke" screen)

An investor who bought at 79 cts and when it dropped to 59 cents bought somemore and when it dropped lower to 50cts he is still buying. He followed with a chant buy ah buy...yo ah yo cityspring...strange dude!

Au Yeung Fai ( Spending sometime after the briefing to answer investors queries)

Anyway, the barber was lucky as his questions were posed by other investors before he had the chance to do so.

For the question1: The management explained that given the capital intensive nature of the 3 underlying assets ( Basslink, CityGas and SingSpring), the negative or generally low net profit in large part is due to the depreciation of the underlying assets which is non-cash and just an accounting concept. It is better to look at the Cash from Operations for such businesses. They further explained that the lower cash earnings was due to outages at the Basslink, the upfront fee paid to DBS bank for the corporate loan and also the sharp increase in fuel cost for City Gas in 2Q which was not adjusted by an increase in CityGas's tariffs. Fuel cost has since dropped below the tariffs, therefore in layman's terms, whats lost before will now be gained back going forward.( SGDiividends: Hmm, so we should use Price to Cash Flow From Operations to compare with similar businesses then!)

For the question 2: Regarding the outages, the management mentioned that it was due to a fault in the bushing( what the heck is this? Is it a bush ?) and a circuit breaker which historically, the probability of failures is very low, so this was unexpected. But they have since remedied the situation with Siemens. Regarding the subsea cables, the management let in on a suite of comprehensive risk management processes in place:

1)Something to do with installing the location of the subsea cables in the GPS system of the fishing trawlers there so they wont "trawl" the cables

2) Swaping the anchors of the ships so that the anchors do not have to dig deep and thereby damage the cables

3) Insurance policies undertaken

4)contracting a ship with a consortium to patrol and detect any faults in the cables

5)Most of the undersea cables are entrenched below the seabed so as to reduce the probability of damage from ships or Singapore Zoo White Tigers.

For the question 3: The management did let in that on the trust level, they have about $25 million cash balance but on a whole, together with Citygas, Singspring and Basslink, they have $100 million cash balance and that they are currently on the negotiation tables.

Anyway, the general feeling of the whole briefing was pretty good and we think the management is frank. Our Barber went back relieved and we heard he slept well that night!

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Headwinds for SingTel's Expansionary Plans in the Region

In DBS Vickers securities' SingTel Report released recently in Nov 08, it wrote the following:

Quote: Regional associates below our expectations. Associate contribution was down 25.5% y-o-y compared to our estimate of single digit decline. Assuming no forex change from 2QFY08, associate contribution would have been flat. What surprised us was Bharti’s pre-tax earnings contribution, down 5.1% y-o-y, against our expectations of 10% growth. SingTel has attributed the decline to S$57m fair value loss on Bharti’s foreign borrowings. We did not see this item in Bharti’s results and need to check with management on the disparity. The other associates were more or less in line with our expectations.Unquote .

In addition, don't forget that SingTel is still facing some legal issues with its 35% stake in Indonesian Telkomsel. In our SingTel article sometime back, we also mentioned that Terria, a consortium led by Optus, which is bidding to build a part government-funded broadband network in Australia,has also recently lost a partner, Australian Capital Territory-based Internet provider, TransACT. And Ooops, it seems SingTel has a lower current asset base than its current liabilities.... It will be interesting to see how Group CEO Chua Sock Koong will navigate this company through these times

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Wilmar - Taboo subject at Investor Briefing

At the Wilmar Investment Briefing today, a CLSA analyst asked Mr Kuok which banks were pulling the credit lines from Wilmar. Mr Kuok "Tai-Chi-ed" to his CFO who said that one bank had withdrawn its credit line because its top management had decided to stop commodities financing.So why did Mr Kuok mention first about some banks pulling the plug in his presentation?Isn't it taboo to mention it in such a briefing, like how the "retrenchment" word is taboo in the workplace now? A Straits Times Market Correspondence praised Mr Kuok for his candourness in nipping any suspicion in the bud and Mr Kuok being a role model for others to follow. Definitely, we agree this is admirable.( Just to side-track a bit, the above clearly shows how serious this credit mess is...)

But then again,we, being ones who are highly imaginative and bizarre in thought at times, thought of another possible reason for this candourness..... maybe he wanted to highlight about this so that people would scrutinise extra careful the debt profile of his competitors, and possibly punishing those companies who are weak.( low share price then acquire??) So we, being the curious type, decided to take a look at the current assets(CA) vs the current liabilities(CL) of their competitors. OK, all of them seem to have CA larger than CL. So maybe we really have a bizarre brain.We will leave it at that.

Anyway, the new kid on the block, Kencana Agri Ltd who just IPO-ed this year don't seem to have a good cash flow compared with its more established peers.Don't even mention about Free Cash Flow..just look at cash flow from operations which is already negative.

(just added)And, DBS Vickers just released a report and it shows Wilmar having a higher Net Gearing compared with her peers. (Wonder why they didn't include Golden Agri, like, huh....don't they know Golden Agri is an important competitor??).

Citigroup - Should we follow Abu Dhabi Investment Authority and GIC?

Our barber told us today that he recently bought 16 shares of Citigroup. He just said he felt inspired to buy Citigroup after watching their advertisements and that he just hope that this bank will not fail or else that chio eurasian girl he has been bioing would be out of job. We just love this barber for his cute way of thinking. Anyway, we decided to check it out. Let's use the GIC and Abu Dhabi Investment Authority (ADIA)'s investment as the basis of analysis, and not ratios, balance sheet, tier one ratio and stuff.

From Citigroups 2007 statements (Above)
From GIC's press release (Above)

Comparison (Above)

From the comparison table above, both ADIA and GIC would have the option to convert the Citigroup ( Citibank) share to a common stock at the price of around $31.83 - $37.24 ( around 2010 - 2011) and $31.2 respectively, given the assumptions and assuming no adjustments.

Therefore from the above, an inference can be made that GIC or ADIA could be expecting Citigroup's share price to be roughly at least $31-$37 by late 2010. The price of Citigroup share now is hovering around $11-$12. So, is this a good buy now since GIC and ADIA has already invested in it?

Well, having seen the saga of ABC Learning, it might be wise not to follow these entities blindly since who knows what their real motives are. "Transformers, more than meets the eye...doh da di da da...autobots..." Furthermore, ADIA and GIC made these investments in Jan 08 and Dec 07, where the full seriousness of the crisis was still not widely known. So do you think its a good buy? Sharing is caring!

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team

Is There A Possible Reason For Golden Agri to be trading Cheaper than their peers?

3 articles back, we mentioned that Golden Agri was on our radar for its darn cheap valuations as compared with their peers. On 9 October 2008, Money Mind on Channel News Asia featured an analyst from Royal Bank of Scotland who commented on a SELL on Palm Oil counters (think he also said palm oil prices have bottomed....then why sell?????Damn Bazaar!) but he mentioned that Golden Agri was a BUY due to its relative valuation. Today, our hot sexy "oracle" gave us the latest issue of THEEDGE magazine to read. In it, there was an article write-up on Indo Agri and a short little comparison on the players in the Agri field.( Reproduced here for your benefit) So what is the reason for this stock to be so undervalued relative to its peers. We decided to investigate and could only think of a possible reason, that investors were pricing in a cheaper stock due to the not so favourable history of its management. Read here here to find out more.

Anyway, based on some simplistic technical analysis, this stock has been trading very heavily and their bolliger bands are narrowing, which could mean a possible larger price movement in the coming days.

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team