Curated Insights 2018.02.18

Amazon’s latest ambition: To be a major hospital supplier

The pilot is customized for the hospital system’s catalog of supplies, the official said, allowing employees to compare prices the system negotiates with its distributors against those in the Amazon Business marketplace. In response to questions about these efforts, Amazon said it is building technology to serve health-care customers, and seeking to sell hospitals on a “marketplace concept” that differs from typical hospital purchasing, which is conducted through contracts with distributors and manufacturers.

So far, some hospitals have been reluctant to buy supplies from Amazon Business, for reasons including lack of options and lack of control over purchases and shipping, which hospitals closely safeguard to ensure prompt arrival of goods.

Hospitals typically contract for assurances that products will be available and delivered securely, she said. “It’s a little different than being out of a size 6 dress. I can’t be out of a six French catheter,” said Ms. McCready, who oversees the hospital system’s $3 billion annual budget for supplies, contract services and pharmaceuticals. Ensuring continuity of product supply is also crucial, said Donna Drummond, Northwell’s senior vice president of consolidated business services. When doctors and nurses reach for a familiar product, they know its specifications. Jumping online to look for the best deal could disrupt that continuity, she said. Northwell is “not ready to move from our current model,” Ms. Drummond said, but added: “We are open to a competitive market.”

Fees and administration, marketing and shipping costs account for an estimated 20% to 30% of health-care supply costs, according to a November research report by Citigroup Global Markets Inc. “There’s a lot of people with fingers in the pie,” said Rob Austin, an associate director with Navigant Consulting Inc. and former hospital supply-chain executive. “There is a huge opportunity.”


Amazon threat has Maersk racing to stop clients becoming rivals

It’s not just a question of a smooth delivery, said Skou. Giant retailers like Amazon also want better information about shipments to manage supply chains as effectively as possible. Maersk is rolling out a new digitization strategy to modernize an industry in which bookings often still take place by phone. Last month, it formed a joint venture with IBM to develop the use of blockchain technology to manage and track cross-border trade.

“The ability of Maersk to understand the market and integrate with a big company like Amazon is very clever,” Benito said. “They realize that Amazon can be a disruptor, so it’s better to try and work together.”

How delivery apps like Seamless and Uber Eats may put your favorite restaurant out of business

In 2016, delivery transactions made up about seven per cent of total U.S. restaurant sales. In a research report published last June, analysts at Morgan Stanley predicted that that number could eventually reach forty per cent of all restaurant sales, and an even higher percentage in urban areas and among casual restaurants, where delivery is concentrated. Companies like GrubHub maintain that the revenue they bring restaurants is “incremental”—the cherry on top, so to speak, of whatever sales the place would have done on its own. They also argue that delivery orders are a form of marketing, exposing potential new customers who might convert to lucrative in-restaurant patrons. The problem is that as consumers use services like Uber Eats and Seamless for a greater share of their meals, delivery orders are beginning to replace some restaurants’ core business instead of complementing it. (In the Morgan Stanley survey, forty-three per cent of delivery patrons said that a meal they ordered in was replacing one they would have otherwise eaten at a restaurant.) And, as delivery orders replace profitable takeout or sit-down sales with less profitable ones—ostensibly giving restaurants business but effectively taking it away—the “incremental” argument no longer holds. “It’s total bullshit, and you can quote me on that,” Justin Rosenberg, the C.E.O. of the Philadelphia-based fast-casual chain Honeygrow, told me. “I’ve spoken to C.F.O.s of bigger fast-casuals, and they’ve said the same thing.”

It’s worth noting that, even while charging restaurants steep rates, most delivery platforms are not yet profitable, either. Their hope is that order volumes will one day become high enough—and couriers will deliver enough orders per hour—to push them into the black.


Airbnb reportedly built an internal hedge fund that makes $5 million per month

According to Bloomberg, Tosi “quietly built a hedge fund within the company’s finance department. He used a portion of capital from the balance sheet to buy stocks, currencies, and fixed-income securities, mimicking the treasury fund he ran at Blackstone. The side project represented 30 percent of the company’s cash flow last year and made about $5 million a month for Airbnb, the people said.”

New DNA nanorobots successfully target and kill off cancerous tumors

“Using tumor-bearing mouse models, we demonstrate that intravenously injected DNA nanorobots deliver thrombin specifically to tumor-associated blood vessels and induce intravascular thrombosis, resulting in tumor necrosis and inhibition of tumor growth,” the paper explains.

DNA nanorobots are a somewhat new concept for drug delivery. They work by getting programmed DNA to fold into itself like origami and then deploying it like a tiny machine, ready for action.

Saving for old age: the global story (part II)

This country for old men and women would have had 222m people in it, assuming it was launched at the end of 2015. Assume all Chinese move there on their 60th birthday, and by 2025 you would expect the population of Oldland to be 300m.

It is well known that savings rates in China are already high. If greater portions of these savings are shifted into a funded pensions infrastructure which looks anything like that of the US, this would boost demand for the kinds of assets pension funds usually buy: stocks and bonds.

It may already be happening. The Willis Towers Watson report states that China has the fastest compound annual growth rate of pension assets over the past five years, at 18 per cent. The second highest, at 13 per cent, is South Korea. The third is Hong Kong, at 10 per cent (HK also has the fastest 10 year growth rate — there is no such figure for China).

Audio boom: how podcasters make a living

The defining year for podcasting was perhaps 2014, when NPR launched Serial, a true-crime series that became a global phenomenon and the fastest podcast to reach 5m downloads on iTunes. It triggered a wave of wannabes. That year, Apple installed the podcast app into its operating system — suddenly iPhones had podcasts on the home screen. Today there are more than 500,000 active shows on iTunes, including content in more than 100 languages.

In 2006, only 22 per cent of Americans had heard the term “podcasting”, according to Edison Research and Triton Digital. Last year it was 60 per cent. Thirty-one per cent of 25- to 54-year-olds said they had listened to a podcast in the past month compared with 16 per cent four years earlier. Networks such as Gimlet, or the crowdfunded Radiotopia, have helped to professionalise podcasts by attracting large audiences and advertising revenues.


An ‘iceberg’ of unseen crimes: Many cyber offenses go unreported

To many criminologists, academics and law enforcement leaders, crimes like car theft are anachronisms in a modern era in which the internet’s virtual superhighways have supplanted brick-and-mortar streets as the scenes for muggings, prostitution rings or commercial burglaries. They see dips in traditional violence and larceny as offset by a twin phenomenon: A surge in the evolving crimes of the digital era, and the fact that they are not fully captured in law enforcement’s reporting systems.

The wealth of Sapiens

True wealth is not money. It’s the option to buy what you truly need. If money can’t buy what you need, you’re on even footing with the poorest person out there. Wealth is a society where you can trust complete strangers with your child’s life. Wealth is having friends, colleagues and family who support you. Who take care of the things you can’t, without hesitation. Wealthy is when strangers rent you cars for 1-way trips at 3am over the internet.

Company Notes 2018.02.16

CSC Steel Q4 FY2017 Results

Driven by increasing prices of steel making raw materials such as iron ores and coking cokes, coupled with China’s continued efforts in shutting down its rudimentary and polluting steel mills, steel prices are expected to remain firm at least until the first half of 2018. However, steel market for the second half of 2018 becomes less predictable and very much dependent on the actions to be taken by Trump Administration on the outcomes of section 232 investigation. The Group expects business volume for the first quarter of 2018 to be impacted by Chinese New Year festivities and the rest of 2018 to remain challenging as the Malaysia steel markets continue to be liberalized and new steel mills come on stream within ASEAN countries taking advantage of the unimpeded access to markets within ASEAN under
the ASEAN Free Trade Agreement.


Hexza Q2 FY2018 Results

Our resins segment is expected to continue to operate in a challenging environment due to higher raw material prices that may affect our profit margin. Nevertheless, we will work on passing on incremental cost to customers to cushion the impact of higher raw material prices.

Our ethanol segment will feel the full year impact of the excise duty hike in October 2016, which has affected sales of our potable alcohol. We will continue to intensify our marketing efforts and work on increasing sales of higher margin products.


Weida Q3 FY2018 Results

The Group’s polyethylene culverts are increasingly being accepted by both the government sector in road construction projects, and the private sector especially oil palm plantations for drainage infrastructure.

The growing emphasis on environmental sustainability and green technology also bodes well for the Group. Over the years, the Group has significantly grown and enhanced its human and engineering capital, via active involvement and collaboration with a network of established international organisations. The Group has been successfully playing, and will continue to play, the role as a provider of environmental engineering solutions; such as in the field of water and wastewater treatment, septic sludge treatment and renewable energy.

Elsoft to ship more test equipment in first half-year

“Most of the orders come from the smart device segment, followed by the automotive and general lighting industries. They will go to customers in the Asia-Pacific. For the first half of 2017, about 60% of the orders were for the automotive segment. The shipment for the first half of 2017 was about RM30mil. However, the first quarters of 2016, 2017, and 2018 had proven to be unusual.”


Wegmans aims to boost exports after doubling capacity

The completion of Wegmans’ new plant, slated for 4Q19, is projected to increase the group’s annual production capacity to 960,000 units of chairs and 380,000 units of tables for the dining room, living room and bedroom, according to the IPO prospectus.

Wegmans aims to start exporting its products to more European countries besides expanding its presence in existing markets following the increase in its capacity, said the group’s executive director Collin Law at the launch of the group’s prospectus yesterday.

“For FY16, approximately 98.42% of revenue and 9.53% of purchases were denominated in US dollars,” Wegmans said. The remaining sales and purchases were recorded in ringgit.

An 84.22% foreign composition of its workforce may also squeeze Wegmans’ margins going forward as it had to pay the new levy for foreign workers since Jan 1.


Ninja Van to use funds raised to boost Malaysian ops

“At present, we have 200 points which are all located in the Klang Valley,” said the group’s country head for Malaysia Adzim Halim. We plan to establish footholds in Johor Baru, Penang, Melaka, Negeri Sembilan and Kuantan. We’re looking to improve our sorting capacity by at least four times what it is now by investing in an automated parcel-sorting machine.”

A quick check on Ninja Logistics Sdn Bhd’s financial statements show that the company’s revenue for financial year 2016 (FY16) soared more than five times to RM6.77 million from RM913,589 in FY15. However, its loss after tax widened to RM6.09 million in FY16 versus RM1.07 million in FY15.

Singapore may start taxing Amazon and Lazada

BMI Research projects the region’s six biggest economies will boost e-commerce to $64.8 billion in 2021 from $37.7 billion last year, while Credit Suisse Group AG estimates that online shopping growth could outpace that of traditional retailers by six to 10 times over the next few years.

The Customs Department in Malaysia has been talking about plans around taxing foreign e-commerce players for months. While nothing is in hand yet, BMI Research’s Singh sees Malaysia following Singapore’s lead with a 6 percent levy on these online providers.


Chinese tourists are taking over the Earth, one selfie at a time

China already accounts for more than a fifth of the money spent by outbound tourists, twice as much as the next-biggest spender, the US, according to the United Nations World Tourism Organization. And the Chinese have barely started — only around 5% of them even have passports, and the government is issuing about 10 million new travel documents every year.

The shift is transforming the region, unleashing more than US$100 billion in infrastructure spending for bigger airports and jet fleets, new railways, hotels and theme parks. The effects of this boom include soaring property prices, stress on the environment and an avalanche of apps and innovations that reimagine the way we experience the world.


‘Home ownership is not for everyone’

“Home ownership is not for everyone. There’s not a single country in the world that has 100% home ownership. Usually, you have a home ownership penetration of about 75%, and the rest are rentals for various reasons. Some can afford to be homeowners but by choice want to be renters. Some cannot yet afford to be homeowners because they are at the start of their careers. We should, therefore, approach housing with a range of solutions rather than a specific one-size-fits-all policy that doesn’t help everyone equally.”

“If you start subsidising from the onset before fixing the way the housing system addresses factors such as access to financing, all you would be subsidising are the inefficiencies of the market. Fix the problem first. This would then enable governments to use the same amount of money typically used to subsidise housing to reach a much larger number of people.”

Curated Insights 2018.02.11

Why Expedia or Priceline might just be the next great hotel brand

“I think we [in online travel] have all innovated on the service layer, and most of the people in the room are working on the service layers, but the true innovation is going to be actually owning and operating the assets — the airplanes, the hotels, not so much the cars actually. But that aspect is hugely capital intensive, and it’s ripe for some new ideas, and someone will get there. I have a $100 billion, so it won’t be me. If you own and operate the hardware, you can do a lot more on the innovation side than from the service and software layer.”

“Online travel agencies are seeing their revenues go down and it costs them more to advertise on Google because the search criteria are going up. The search price is going up, and the online travel agencies had a tough third quarter. I think they see the writing on the wall. We’ve had overtures with online travel agencies reaching out to us and trying to find ways to partner more [with us].”

“They have to evolve because there are fundamental threats to their existence. They have to have a good relationship with hotels or they won’t have anything to sell.”

“The key point that we want to reinforce is that hotel commission rates are in the 10 to 15 percent range for the large chains and 15 to 25 percent for smaller brands that make up the bulk of Booking.com’s inventory. This compares to airline commission rates that are anywhere from zero to one or two percent in most developed markets. The rationale for the airline inventory is having a complete product to drive traffic, but the margins on those bookings themselves are much lower than for hotels. Booking.com has recently added airlines, but this is simply pushing traffic into its Kayak platform …”

“They were aggregating similar independent hotels with their own brands and it was a scale play. But they didn’t have access to every single hotel in a market. To compete with the online travel agencies who are spending several billion dollars a year in marketing is an expensive undertaking. Just because you have the capability of having content doesn’t mean you’ll be successful in bringing customers to your site, or doing it in a way that’s economically viable to run a business. I’m not surprised it didn’t work; AccorHotels at heart is a hotel brand company and hotel operator.”

What really matters most to consumers today, he said, isn’t the brand itself but the rankings and reviews associated with an individual hotel property. “The first thing a customer checks are the rankings and the commentary. That’s a much better quality assurance than a brand can provide. People choose to stay at an Airbnb based on social ratings and comments from users. They don’t need assurance that there’s a brand on it. That’s part of the dynamics and in essence, the brands are disappearing and what prevails is distribution. If I get the best distribution from an online travel agency, why would I sign up with another company?”

Tackling the internet’s central villain: The advertising business

And for all its power, the digital ad business has long been under-regulated and under-policed, both by the companies that run it and by the world’s governments. In the United States, the industry has been almost untouched by oversight, even though it forms the primary revenue stream of two of the planet’s most valuable companies, Google and Facebook.

The report chronicles just how efficient the online ad business has become at profiling, targeting, and persuading people. That’s good news for the companies that want to market to you — as the online ad machine gets better, marketing gets more efficient and effective, letting companies understand and influence consumer sentiment at a huge scale for little money.

But the same cheap and effective persuasion machine is also available to anyone with nefarious ends. The Internet Research Agency, the troll group at the center of Russian efforts to influence American politics, spent $46,000 on Facebook ads before the 2016 election. That’s not very much — Hillary Clinton’s and Donald J. Trump’s campaigns spent tens of millions online. And yet the Russian campaign seems to have had enormous reach; Facebook has said the I.R.A.’s messages — both its ads and its unpaid posts — were seen by nearly 150 million Americans.


Why JP Morgan, Daimler are testing quantum computers that aren’t useful yet

Chip experts say the phenomenon known as Moore’s Law that drove exponential gains in computing power for decades is now ending. Quantum computing could be a way to revive the rate of progress, at least in some areas. “If you can successfully apply it to problems it could give you an exponential increase in computing power that you can’t get” through traditional chip designs, says Bob Stolte, CTO for the equities division inside JPMorgan’s investment bank.

If and when they arrive, quantum computers won’t be good at everything. But physicists and computer scientists have proven, using theory, that even a relatively small quantum processor could do more than a phalanx of conventional supercomputers on some problems. Conventional computers work on data using bits that can be either 1 or 0. Quantum computers encode data into devices called qubits that can enter a “superposition” state in which they might be considered both 1 and 0 at the same time, allowing computational shortcuts.

The path to tackling other problems on the wish lists of Daimler and JPMorgan is less clear. Brecht says the automaker also hopes quantum computers could optimize routes for delivery vehicles, or the movement of parts through factories. Some problems in finance, such as adjusting portfolio risk, can boil down to similar math.


Why we didn’t invest in Ecolab

Integral to Ecolab’s moat in the Institutional segment is its direct sales force that provides customers with “high touch” relationships. Not only are these relationships hard to replicate, but no competitor is remotely close to matching Ecolab’s 26,000-plus salesforce. Ecolab estimates this figure is two-to-five times larger than any competitor’s.

Ecolab benefitted mightily over the last 10-20 years from inept competition. Its main competitor for North America institutional cleaning business is Diversey, which was most recently sold to Bain Capital in 2017 by Sealed Air. This was the fifth time Diversey had been sold in the previous 21 years. As a consequence of being passed around like a hot potato for two decades, Diversey’s strategy was inconsistent. Ecolab capitalized on many of Diversey’s mistakes.

We also had concerns about S.C. Johnson re-entering the institutional cleaning business, Bain Capital’s push into the European hygiene market, and potential impacts from food service automation.

We further concluded that the acquisitions of Nalco and Champion diluted Ecolab’s overall moat by diminishing the impact of the wide-moat Institutional operations. Indeed, we think the two deals were motivated by growth rather than by ROIC. If that’s the case, it would support our thesis that the Institutional business is a legacy moat with slower growth potential. Otherwise, we would have expected management to reinvest capital that was used in M&A back into the cleaning business.

An inventor of the VIX: ‘I don’t know why these products exist’

In my wildest imagination I don’t know why these products exist. Who do they benefit? No one, except if someone wants to gamble -– then, OK, just go gamble… And who exactly made money? The VXX from its inception in 2009 is down, what, 99%, even after this move… It’s kind of sad that these products exist in the first place, but it’s hard to stop it. If you stop this, something else will come up. Bitcoin will come up.


This physics breakthrough could help save the world

…the turbulence created when we pump air, water, oil, gas and other substances through countless miles of ducts and pipes. Thanks to its confounding effects, fully 10 percent of all the electrical energy produced on Earth gets wasted.

They investigated, for example, the effect of extra stirring from rotors placed inside a pipe, or by the injection of jets of fluid along the pipe walls. Intuition suggests that these would increase turbulence, and they do, but in both cases the flow downstream quickly returns to the smooth state. More important, the interventions can reduce the overall friction associated with turbulence by as much as 90 percent, something few researchers would have expected.


The magnetic field is shifting. The poles may flip. This could get bad.

The dangers: devastating streams of particles from the sun, galactic cosmic rays, and enhanced ultraviolet B rays from a radiation-damaged ozone layer, to name just a few of the invisible forces that could harm or kill living creatures.

Solar energetic particles can rip through the sensitive miniature electronics of the growing number of satellites circling the Earth, badly damaging them. The satellite timing systems that govern electric grids would be likely to fail. The grid’s transformers could be torched en masse. Because grids are so tightly coupled with each other, failure would race across the globe, causing a domino run of blackouts that could last for decades.

Company Notes 2018.02.09

Daibochi Plastic and Packaging Industry Q4 FY2017 Results

Daibochi is optimistic on achieving strong growth in the financial year ending 31 December 2018 as both Daibochi Malaysia and Daibochi Myanmar are expected to perform strongly. The Group is expecting several new export contracts to drive Daibochi Malaysia’s performance in 2018, comprising contracts to Indonesia as well as the Australia and New Zealand (ANZ) region.

In the first quarter of 2018 (1Q18), Daibochi Malaysia secured a new contract with a multinational customer (MNC) to supply flexible packaging to the ANZ region. The Group’s sales, technical and operations teams collaborated closely with the MNC particularly for its fast-moving consumer goods (FMCG) brand, and target to commence supply by the second quarter ending 30 June 2018. This marks the entry into a new product line for Daibochi Malaysia, thereby strengthening its value proposition to MNCs.

Daibochi Malaysia is also working towards commencement of flexible packaging supply to another two MNCs for their food and beverage and FMCG brands in Indonesia.

Meanwhile, Daibochi Myanmar is expected to deliver stellar growth in 2018, as it is actively pursuing new customers in Myanmar’s F&B and FMCG sectors. Additionally, Daibochi Myanmar aims to leverage its low-cost and geographical advantage to secure export contracts from costsensitive customers in various Southeast Asian countries.

Daibochi Myanmar will also tap into the Southeast Asia flexible packaging market. With our Myanmar operations securing the ISO 9001:2015 and Hazard Analysis and Critical Control Point food safety management system certifications since October 2017, together with the approval from the Myanmar Investment Commission in December 2017 to export out of the country, Daibochi Myanmar would now seek to enter qualification with MNCs to support their regional expansion programmes.


Bursa Malaysia Q4 FY2017 Results

The introduction of the stamp duty exemption for exchange-traded funds and structured warrants effective from 1 January 2018, is expected to enhance trading and vibrancy in the equity market. Bursa Malaysia will continue with its initiatives to enhance the breadth and depth of the ecosystem, amongst others, through the digitalisation of services, liberalisation of rules framework and greater diversification of the investor base to ensure that the Malaysian equity and derivatives markets are attractive and vibrant.

Datuk Seri Tajuddin added, “Our initiatives put in place over the years have built a strong foundation that has placed us on a firm footing to capitalise on new opportunities. In 2017 alone, the Exchange launched the Islamic Selling and Buying Negotiated Transaction and made a revision in the tick rule to provide market participants with greater price flexibility in performing regulated short selling. We will continue to work closely with our intermediaries to improve liquidity and increase trading activities. Similarly, we will expand our marketing efforts to build a strong IPO pipeline and look forward to rolling out our initiatives aimed at widening our products and services to create a conducive capital market
ecosystem for all market participants.”


Tasek Q4 FY2017 Results

The Board expects the intense pricing competition to continue to the next quarter and affect the Group’s performance. Construction works on the Government’s infrastructural projects of the MRT2 (SSP Line) and the LRT3 (Bandar Utama – Klang Line) are expected to improve demand for cement for this year. However, the soft property market is expected to continue to weigh down the demand for cement.


Focus Lumber Q4 FY2017 Results

We foresee the price of logs hovering at this level based on the current market supply and demand as well as our cost in securing logs supply. Operating environment is very challenging if the Ringgit Malaysia remains strong throughout the next financial year. However, selling price in US dollar which is increasing recently has partially offset these negative impacts.


Hartalega Q3 FY2018 Results

Nitrile glove now accounts for 61% of Malaysian rubber glove export.

Hartalega aims to launch its anti-microbial gloves in Europe by second quarter of 2018 and is working on securing Federal Drug Administration (FDA) approval to enter the US market. We will price this new product competitively to encourage better take up.


Scicom Q2 FY2018 Results

Over the course of the year, whilst the BPO division did not lose any major clients, the revenue contribution for some of these key clients decreased. The primary driver was an adverse change in market conditions for these multi-national clients. As a result, there has been a corresponding drop in customer interactions which led to a subsequent decrease in billable headcount. However Scicom does not expect this situation to deteriorate further with our current clients and the management further expects to increase revenues on the successful conversion of a healthy pipeline built over the last 12 months.


Hup Seng Industries Q4 FY2017 Results

Stronger market demand for biscuits mainly contributed to the positive growth in sales. Export sales of biscuits grew by 6% mainly from China market. Domestic sales grew by 5% mainly from modern channel.

Escalating input cost eroded margin growth of the Group despite an improvement in turnover. Higher promotional expenses and other operating costs including fuel costs also depressed the profit performance.


Salutica Q2 FY2018 Results

The touch enabling functionality application to other various industry segments such as automotive and electronic appliances will be one of the segment which our Group will continue to focus in order to generate additional revenue stream, albeit at a slower pace. Meanwhile, the development of healthcare related products under in-house brand FOBO is still ongoing.


Tasco Q3 FY2018 Results

However, as our recent acquisition of Gold Cold Transport was fully financed via bank borrowings, our bottom line was significantly impacted by higher finance costs. In that respect, the Group would be evaluating the various ways and available options, in order to mitigate this situation in the medium term. Going forward, the downside risks for the Group would continue to be rising operational costs (in particular, relating to manpower and fuel costs), higher interest costs due to aforesaid reason, and keen competition for cargo in our traditional core businesses. We will continue to maintain our strategy to focus on servicing our customers with innovative logistics solutions and expand our logistics capacity when it is beneficial to our shareholders’ value.

JHM anticipates boost from new orders in 2H18

JHM designs and develops MECs that are used in subsegments of the electronic component industry, and electronic devices like digital cameras, mobile phones, personal digital assistants and automobile lightings. In both the automotive and aerospace segments, it manufactures, among others, MECs for the production of high brightness light-emitting diodes (LEDs).

“Although we have orders to fulfil in the automotive segment, we are being hampered by the material shortage, including for passive components like resistors and capacitors, which are being bought up by big players. So, we have money to buy, but we are not able to do so. In any case, we expect the situation to recover in the second half of this year,” Tan said.

“We are also aggressively working to penetrate the Japanese and European markets. In Japan, we have met with one of the biggest automotive light makers there, who is satisfied with our capability and set-up. We are now waiting for them to give us the request for [a] quote. In March, we will be allowed to bid for two projects. If our price is good for them, we will go for maximum production, meaning FY18 would end on a very good note,” he said.

“Mace has a good customer base, including multinational corporations. We intend to tap and expand our printed circuit board and assembly (PCBA) business. Since we are already in the PCBA business, Mace’s contribution will help stabilise our business, instead of the group having to depend only on the LED automotive segment,” he said.

The PCBA business is part of the automotive segment (which generates 80% of its revenue). Meanwhile, some 12% of its turnover comes from industrial products, under which JHM makes box builds for vending machines and fan controllers. The remainder of the group’s turnover comes from its telecommunications segment.


Fernandes: India to be a big market for AirAsia X

“Super proud of the turnaround happening at AirAsia X. We need to finish off cleaning up the balance sheet in the fourth quarter, but we are going to have a good year in 2018. We are now taking the very good value (Airbus) 330 to fill our capacity before moving to the next generation of aircraft, either the (Airbus) 330 neo or (Boeing) 787. I am very, very bullish on AirAsia X.”

“Stars lining up, ringgit strengthening and oil going down as we predicted. There is just too much oil and with shale, fuel demand will continue to go down.”


Scicom to develop tourism management system for Cambodia

In a stock exchange filing today, the company said the project period is five years, with an option to extend for two more years. “The anticipated revenue from this contract is predicted on the number of air travellers to and from the Kingdom of Cambodia,” it said, but did not indicate the estimated value of the project. It expects the project to contribute positively to the earnings and net assets per share of the company going forward.

Curated Insights 2018.02.04

Ingvar Kamprad, Ikea’s Swedish billionaire founder, dies at 91

Kamprad was known for driving an old Volvo, recycling tea bags and taking home little packets of salt and pepper from restaurant visits. He was known as “Uncle Scrooge” and “The Miser” in the Swiss village of Epalinges, near Lausanne, where he moved in the 1970s before returning to Sweden a few years ago. He also avoided wearing suits and ties and traveled coach when flying.

Ikea’s corporate culture mirrors Kamprad’s celebration of frugality. Executives of the company travel on low-cost airlines and lodge in budget hotels. Its employees follow a basic pamphlet written by Kamprad in 1976, “The Testament of a Furniture Dealer,” which states that “wasting resources is a mortal sin,” and stipulates Ikea’s “duty to expand.”

The name Ikea is made up of the founder’s initials and the first letters of the Elmtaryd farm and Agunnaryd village where he was raised. His flat-pack furniture was invented by Ikea employee Gillis Lundgren in 1956 when he tried to fit a table into the back of a car. Realizing the table was too bulky, Lundgren removed the legs. Storing and selling Billy book shelves or entire kitchens in pieces has let Ikea cut storage space and fill its trucks with more goods. The concept of having customers pick up most of their own furniture in adjacent warehouses and transport it home for self-assembly also helped drive down costs.

How Amazon’s ad business could threaten Google and Facebook

But Amazon has a huge set of data that Facebook and Google can’t access—namely, its own. Already, more than half of all online searches for products start on Amazon, and of those a majority end there, according to various surveys. That figure has grown every year that pollsters have tracked it.

The Amazon Advertising Platform lets advertisers manage ad buys across multiple advertising exchanges, and it has quietly become as familiar to marketers as its equivalent from Google-owned DoubleClick.

Amazon also needs to expand the number of places it can sell advertisements, which is one reason the company bought videogame-streaming behemoth Twitch and is investing so heavily in its own streaming-video offerings.

How Apple built a chip powerhouse to threaten Qualcomm and Intel

…by designing its own chips, Apple cuts component costs, gets an early jump on future features because it controls research and development and keeps secrets away from frenemies such as Samsung…Those ultimately failed or stumbled because chip-making is the sport of kings: It’s brutally expensive and requires massive scale. Apple has wisely focused on designing its silicon (for its system on a chips, Apple uses reference designs from Arm Holdings Plc). Manufacturing is left to others, including Taiwan Semiconductor Manufacturing Co.

An investment pro who’s seen it all still sees upside for stocks

Over 40% of Standard & Poor’s 500 revenues now comes from abroad.

No other country is shrinking its equity base to the extent we are. We’re now in our ninth year of share buybacks equal to 3% of the market value of all S&P 500 stocks, based on Laszlo Birinyi’s work.

For 20 years, the average price/earnings ratio has been 19.3. If you go back 50 years, it’s 15.6 times. In periods where inflation grew 3% or less—which is 22 of the past 50 years—the P/E of the market was 19.7.

AlphaZero and the curse of human knowledge

Using self-play to recursively improve an agent’s ability to play a game isn’t new. Why hasn’t this method yielded a champion chess or Go engine until 2017? Historically, systems that improve via self-play have been very unstable. Previous attempts often ended up in cycles, forgetting and relearning strategies over and over rather than improving to superhuman levels. Or sometimes the agent would get stuck, failing to improve after achieving moderate success.

AlphaZero’s main contribution was solving these problems. After lots of experiments, DeepMind developed a series of new tricks and discovered a value function and tree search that reliably learned through self-play alone. They then leveraged their engineering talent and infrastructure resources to demonstrate that the system could work on the massive scale required to master complicated games such as chess and Go (the version that played Stockfish employed 5,000 custom machine learning chips).


Even if you knew the cards…

One of the (many) reasons I stopped heeding the macro forecasts of others and quit trying to come up with my own is that even if you knew what the future data would be, you’d still not be able to predict how people would react to it. You could certainly try, but markets are set up to confound us, not confirm our hypotheses.

Company Notes 2018.02.02

Lotte Chemical Titan Q4 FY2017 Results

The delivery of Polyolefin products in China and Malaysia is expected to be slightly reduced by the Lunar New Year festive holidays. However, the demand from other SEA countries is expected to remain stable. Olefins and Derivative is expected to be better in view of upcoming regional crackers turnaround from March 2018 and active restocking by China supported by higher derivative margins for Styrene Monomer and Ethylene Glycol.

Can a $1.2 Billion casino lure Asian tourists to the Catskills?

Empire Resorts is not technically part of the Genting group, a conglomerate that operates cruise ships, manufactures paper and runs palm oil plantations in addition to its hotel and casino businesses. Instead, a private investment company controlled by Lim owns more than 90 percent of Empire shares. Last year, Empire reached an agreement to use Genting’s Resorts World brand and participate in its Genting Rewards Alliance loyalty program in exchange for a single-digit percentage of net revenue, according to an Empire filing with the Securities and Exchange Commission.


Kim Teck Cheong is here to stay, says Lau

“I’m very positive [about our growth] as we are now in [the] consolidating stage and even though the profitability may not recover as fast as what I would want it to, at least I know I have a plan and direction for the company. I’m not running away, I’m still around, I’m still the same person and I’m still working on it and I think shareholders should ride with me,” said Lau. Our customers have demonstrated they are supportive of us [with the contracts offered].”

As of end-FY17, the group had 7,355 sale and distribution points covering over 84 districts, of which it distributes more than 200 third-party brands for 37 brand owners. The distribution of third-party brands contributes about 90% to the group’s revenue, while the remaining 10% is contributed by its own line of frozen, dry and bakery products under its Orie, Bamble and Creamos brands. The group’s revenue is contributed mostly from its Sabah operations at 68%, followed by Sarawak at 23%, Brunei 5% and Labuan 3%.


Better earnings visibility, prospects for Cypark

Listed on the Main Market of Bursa Malaysia in 2010, from a pure construction player, Cypark has today transformed itself into an integrated environmental engineering and technology provider, which Daud deemed it as “resilient to any other economic cycle”. Daud highlighted that the company had undergone a business transformation shortly after its listing. Cypark had diversified into environmental engineering and solutions, renewable energy — WTE and solar, as well as green technology.

“We have to stay competitive and be innovative with our products as even big companies such as Petronas, MRCB, and Malakoff want to enter this industry,” said Daud, adding that Cypark will be replicating the floating solar plant model, and it aims to bring down the cost of making it by 10%. Due to the scarce availability of land, Daud opined that Cypark wants to offer something that is very sustainable. “As a tropical country, we are blessed with a lot of reservoirs and they have no economic use,” said Daud. Hence, Cypark had offered to lease the space from the reservoirs, from the local authorities, and dams to place its floating solar plant.


PeterLabs aims to execute tech-based portfolio this year

“Fatfish Ventures is a technology venture group and it invested in PeterLabs to enhance our value through its network and resources. Fatfish Ventures is the master of adding value. Fatfish Ventures knows how it can identify the technology trend, the major consumer behaviour trend and invest in the major trend which could help the company.”


TMC Life Sciences on acquisition trail

TMC needs to grow in size in order to achieve greater economies of scale, and that an acquisition of a complementary business would better enable such a goal.

Quek said that the group is planning to finance between 30% and 40% of the RM1.2 billion Thomson Iskandar Medical Hub in Vantage Bay, Johor. The hospital, which will be equipped with an initial 500 beds, is expected to be completed in 2020.

With the expansion of its Tropicana Medical Centre in Kota Damansara from 200 beds to 600 beds, TMC hopes to see an increase in patients, especially as connectivity is improved to the hospital via the Kota Damansara mass rapid transit station and the completion of the Damansara-Shah Alam Elevated Expressway.

Malaysia’s capital will adopt ‘smart city’ platform from Alibaba

City Brain was first adopted by the government of Hangzhou, Alibaba’s home city, in 2016 to help run operations more efficiently. That’s quite a nebulous scope of work, but essentially the service pulls in all kinds of data — including video feeds, social media and traffic information — which is then processed to provide information that helps to manage daily activities. That could be responding to a traffic accident, or providing the data to redesign parts of the city to reduce vehicle congestion.

Curated Insights 2018.01.28

Amazon Go and the future

In every case a huge amount of fixed costs up front is overwhelmed by the ongoing ability to make money at scale; to put it another way, tech company combine fixed costs with marginal revenue opportunities, such that they make more money on additional customers without any corresponding rise in costs.

To be both horizontal and vertical is incredibly difficult: horizontal companies often betray their economic model by trying to differentiate their vertical offerings; vertical companies lose their differentiation by trying to reach everyone. That, though, gives a hint as to how Amazon is building out its juggernaut: economic models — that is, the constraint on horizontal companies going vertical — can be overcome if the priority is not short-term profit maximization.

Amazon, though, having started with a software-based horizontal model and network-based differentiation, has not only started to build out its vertical stack but has spent massive amounts of money to do so. That spending is painful in the short-term — which is why most software companies avoid it — but it provides a massive moat. That is why, contra most of the analysis I have seen, I don’t think Amazon will license out the Amazon Go technology. Make no mistake, that is exactly what a company like Google would do (and as I expect them to do with Waymo), and for good reason: the best way to get the greatest possible return on software R&D is to spread it as far and wide as possible, which means licensing. The best way to build a moat, though, is to actually put in the effort to dig it, i.e. spend the money.

As for Amazon, the company’s goal to effectively tax all economic activity continues apace. Surely the company is grateful about the attention Facebook is receiving from the public, even as it builds a monopoly with a triple moat. The lines outside Amazon Go, though, are a reminder of exactly why aggregator monopolies are something entirely new: these companies are dominant because people love them. Regulation may be as elusive as Marx’s revolution.

People are using Netflix, Hulu, and Amazon Prime in very different ways

Diet Coke’s moment of panic

A growing consumer focus on health has clearly dented soda’s dominion. Beyond widespread concerns of the dangers of artificial sweeteners, government research has found that daily drinkers of diet soda are at higher risk for strokes and other “vascular events.” While Diet Coke’s new can designs are tall and slender—a possible reference to the body type a diet-beverage drinker seeks—more of them simply don’t trust any kind of soda to be a part of a healthy diet. Between 2000 and 2015, switching from sodas to other beverages saved the country an estimated 64 trillion calories in total—that works out to 71 fewer calories per day, per drinker.

The role of hydration has been outsourced to bottled water and sports drinks, like Gatorade. Getting a jolt of energy has been outsourced to coffee and energy drinks, like 5-Hour Energy. And the satisfaction of a cold liquid fizzing on one’s tongue? That’s been outsourced to the trendy crop of flavored seltzers, like LaCroix.


Nvidia, Western Digital at chips’ frontier

At the same time, Mobley, interestingly, asked if the ISA itself could be an “alternative” to a GPU or a digital signal processor (DSP). O’Connor seemed to indicate that was the case, saying “As they exist today, if you start implementing that kind of functionality — such as vector instructions, for example — you can implement all that functionality using the set of RISC-V extensions, instead of a proprietary instruction set architectures that might have existed up until now.”

That raises an interesting question for Nvidia as it rolls RISC-V out in chips in its next iteration of Falcon. Will an open, shared, standard ISA erode any of the lock-in that Nvidia gets for its GPUs? Or is the “CUDA” programming environment really the important software layer that helps Nvidia maintain and extend its dominance in programming?

Big bets on A.I. open a new frontier for chip start-ups, too

The explosion is akin to the sudden proliferation of PC and hard-drive makers in the 1980s. While these are small companies, and not all will survive, they have the power to fuel a period of rapid technological change.

Nvidia was best known for making graphics processing units, or G.P.U.s, which were designed to help render complex images for games and other software — and it turned out they worked really well for neural networks, too. Nvidia sold $143 million in chips for the massive computer data centers run by companies like Google in the year leading up to that summer — double the year before.

By early 2018, according to a report by Forbes, Cerebras had raised more than $100 million in funding. So had four other firms: Graphcore; another Silicon Valley outfit, Wave Computing; and two Beijing companies, Horizon Robotics and Cambricon, which is backed by the Chinese government.

It is still unclear how well any of these new chips will work. Designing and building a chip takes about 24 months, which means even the first viable hardware relying on them won’t arrive until this year. And the chip start-ups will face competition from Nvidia, Intel, Google and other industry giants.

Sony falls as JPMorgan questions bull case for image sensors

Sony is the global leader in the production of image sensors, camera chips which convert light into digital pictures and videos. Despite a cooling in the smartphone industry, it has benefited from a trend to include multiple image sensors in each phone — a technique used to create better-looking pictures and to power simple augmented-reality functions.

Weak demand for the new iPhone X will hurt Sony, which gets half of its image sensor revenue from Apple, Park wrote. He also said the trend for adopting dual cameras is not as strong as first believed, including among Chinese phone makers, which will further hit Sony’s sales.

In Sony’s latest quarter, image sensors accounted for 9.4 percent of revenue and 22 percent of operating profit.

The biggest electric vehicle company you’ve never heard of

Though it operates in similar sectors as Tesla, the companies are very different strategically. For instance, as Elon Musk’s Boring Company tunnels under cities to address congestion, BYD eyes elevated transportation.

Chinese tariffs and taxes on imported electric vehicles also benefit domestic manufacturers, which capture 93% of the market. BYD has an estimated 30% share. Tesla has 6% share, delivering an estimated 10,000 to 12,000 vehicles to China in 2016. Overall, electric vehicles represent less than 2% of total auto sales in China. Officials, however, aim to phase out fossil-fuel vehicles. BYD chairman Wang Chuanfu was quoted as saying that all vehicles will be electrified by 2030.

Although President Donald Trump has threatened a trade war with China, automobile manufacturing is less susceptible than other industries. Owing to freight rates, manufacturing cars locally within distribution markets makes economic sense. Still, BYD doesn’t currently have plans to sell consumer cars in the U.S. Owing to governmental policies and low fuel prices, Li said the U.S. market isn’t as welcoming to new energy vehicles as China, India, and Europe are.


Electricity from all forms of renewables will be consistently cheaper than fossil fuels by 2020

Today, fossil-fuel power typically costs between $0.05 to $0.17 per kWh. By comparison, consider the global-weighted average cost of electricity generated by various forms of renewables in 2017, as calculated by Irena: hydropower ($0.05 per kWh), onshore wind ($0.06 per kWh), bioenergy and geothermal ($0.07 per kWh), and solar photovoltaics ($0.10 per kWh).

Offshore wind and solar thermal power aren’t yet competitive with fossil fuels, but that should change by 2020, Irena predicts, with the cost of solar thermal falling to $0.06 per kWh and offshore wind to $0.10 per kWh. The drivers will be technology development, competitive bidding systems, and large base of experienced project developers across the world.


Bigger, higher and floating — advances that make wind a better power source

It accounted for close to 40 per cent of Denmark’s electricity mix in 2016 and about 10 per cent across the EU. Wind farms were the leading source of new electricity generating capacity in Europe, the US and Canada in 2015, and the second largest in China.

Despite this, less than 4 per cent of the world’s electricity came from the wind in 2015. That is nowhere near enough to help shift the global economy away from the climate-warming fossil fuels that still supply most of the world’s energy.


The three stumbling blocks to a solar-powered nation

Every hour, our sun bombards the Earth with enough light to satisfy humanity’s energy needs for an entire year.

Cell cost: For solar power to meet 30% of the world’s electricity needs, it will need to fall from its current cost of a dollar per watt of electricity to 25 cents per watt…Perovskite cells can be made from materials that could be radically cheaper than conventional silicon. They can also take on novel forms, such as a tint on windows or thin printable sheets. But they still face significant barriers to commercialization: They tend to rapidly degrade when wet, and scientists can’t create large cells with the same efficiency as the small ones they can make in a lab.

Energy management: It isn’t hard to get to the point where solar is producing too much power at some times of day, and none at all when it’s needed most. The first solar panel added to the grid helps offset midday consumption, but the last one to be added might be completely unnecessary, because the grid might already be saturated when it’s capable of producing the most power.

Soft utility costs: The Energy Department estimates that soft costs contribute as much as 64% of the cost of a solar installation. The rest of the cost is split between mounting hardware for solar panels and the cells themselves.

Why 2017 was the best year in human history

Every day, the number of people around the world living in extreme poverty (less than about $2 a day) goes down by 217,000, according to calculations by Max Roser, an Oxford University economist who runs a website called Our World in Data. Every day, 325,000 more people gain access to electricity. And 300,000 more gain access to clean drinking water.

Company Notes 2018.01.26

iCapital.biz Q2 FY2018 Results

The KLCI only includes the 30 largest companies in the Malaysian stock market. The only criterion for a stock to be included in the KLCI is the company’s market capitalisation, with no consideration given to the company’s fundamentals. This selection methodology is totally different from icapital.biz Berhad’s value investing strategy. Besides, the KLCI is a 100% equity only index, but icapital.biz Berhad’s is permitted to be 100% invested in equities or to be 0% invested in equities. GIPS or the Global Investment Performance Standards recommends that an appropriate benchmark must reflect the investment mandate, objective, or strategy of the portfolio.

Based on this, there is no suitable benchmark for icapital.biz Berhad considering its long-term absolute return objective and eclectic value investing strategy. Considering the nature of icapital.biz Berhad and how KLCI is constructed, I am of the opinion that the most appropriate benchmark would be the yield of the 5-year Malaysian government bond.

For the quarter ended 30th November 2017, the cash holdings of icapital.biz Berhad have fallen further as we have bought some shares. Finding attractive stocks to invest with sufficient margin of safety remains our focus.


UCrest Q2 FY2018 Results

Palette has moved into the medtech space with the significant investment made over the past few years on the development of imedic, the mobile health system. imedic enable patients to have wireless medical devices at home or anywhere, to regularly make measurement and upload the vital sign data to the Cloud. This would allow doctors from anywhere in the world to have access to the patient’s data 24×7 to review and provide online consultation to the patients. More than 15 devices have been developed to connect to imedic including CPAP machines for sleep apnea patients. The Company will continue to invest in the innovation and development of its next generation of imedic with extensive artificial intelligence (AI) technologies performing analytic on the “Big Data” of the patients and make useful recommendation of diagnosis and treatment plan to the doctors and patients.

The Company has effectively combined the latest innovative technologies: medtech, AI and Big Data in imedic. The power to be unleashed from these 3 technologies could be enormous.


CapitaLand Malaysia Mall Trust Q4 FY2017 Results

The decrease was mainly due to negative rental reversions from Sungei Wang (SW), as SW continues to be affected by the closure of BB Plaza. Lower gross revenue was recorded for The Mines (TM) mainly due to lower rental rates and occupancy whilst lower gross revenue in Tropicana City Property (TCP) was mainly due to lower occupany at the office tower and softer demand for promotional space at the mall. The decrease was mitigated by better performance from Gurney Plaza (GP) and East Coast Mall (ECM) on the back of higher rental rates and gross turnover rent.


Pensonic Q2 FY2018 Results

The Group is developing our Digital Customer Relationship Management. The objective of the platform is to provide customers with direct after-sales service solutions with easier online service calls, marketing automation, e-commerce, royalty programme and smart appliance management.

The Group has also started our e-commerce and partnership with various reputable marketplaces, as well as TV shopping channels. We have seen significant improvement in revenue. However, it is still minimal comparing to the total group revenue. With the e-commerce platform, we will be developing our Online-To-Offline commerce with our existing dealers to create a win-win business solution in this trending e-commerce market. We are expecting a full force digital marketing by end of the 2018.

On top of that, the Group is in the process of securing 2 new distributorships of electrical appliances brands from United Kingdom. These distributorships cover Malaysia and Singapore and is anticipated to contribute to Group revenue in mid to long term.


Suiwah Q2 FY2018 Results

The Group will continue to seek further opportunities to embrace Retail 4.0 (Industrial Automation) by leveraging technology and reinventing value add offerings, which we expect the momentum to be sustained going into 2018.

Manufacturing revenue was slow this quarter due to delay in some customers’ product launch. The new expansion project at Batu Kawan is progressing well and is as per schedule to be completed by next quarter.

GHL to offer Alipay services in Philippines

“The company started with Alipay in 2016 in Thailand and Malaysia in April 2017 and now with the Philippine market, GHL looked to expanding further to the region as Alipay’s key Asean partner.”

To date, GHL Thailand has enabled over 900 merchant acceptance points and GHL Malaysia has enable 5,400 acceptance points in the hotels, retail chain stores, convenience stores and F&B space which has high Chinese tourist foot traffic.

GHL said 810,807 tourists from China visited the Philippines during the first 10 months of 2017, compared to the whole of 2016, which totalled 675,663.

“With the implementation of the visa upon arrival programme in the Philippines, it is expected to grow further. This bodes well for Philippine businesses and merchants as Chinese tourists generally carry the Alipay mobile wallet.”


Texchem to open 80 more Sushi King outlets by 2021

“This year, the capital expenditure of the group is planned to be around RM35mil, of which RM30mil is for the restaurant division while the remaining RM5mil will go to the industrial and polymer engineering divisions. There are presently 19 Yoshinoya and Hanamaru restaurants nationwide. Subsequently, there will be 20 new Sushi King restaurants opened each year until 2021.” Konishi said the group would also this year set up five new Yoshinoya and Hanamaru restaurants, costing about RM750,000 each.

“The polymer engineering division makes semiconductor trays and packaging for hard-disk drive. There are plans to diverse into manufacturing products to support the medical device and life science industries.”


Mexter’s healthcare business takes off

“The healthcare industry is a comparatively stable market and is anticipated to compensate for business cycle fluctuations. Mexter has chosen mother-and-child-related healthcare services as its maiden focus in the healthcare segment as Malaysia has a relatively young demographic, which makes this sub-segment an attractive business proposition with good long-term viability”

“This would make Mexter the first listed company in Malaysia (and globally to the best of our knowledge) to have postpartum care as its primary business,” CIMB Research stated.


IoT solution is Mikro MSC’s new growth driver

The new IoT solution would be a preventive solution for its consumers, as the real-time data and information collected could indicate if there are any possible defects. “For example, if the heat being released is more than usual, it could be an indicator that some parts have aged or need replacements. This helps avoid any disruption to our customers,” Fong added.

“It has taken longer than we expected to move to the new factory due to some approvals [that needed to be obtained]. Nonetheless, we are looking to complete the move by the first half of this year. Once all the new machines and automation are set in the new factory, they will also help enhance the efficiency of our operation. All these will eventually add to the bottom line moving forward.”


Saudee’s food service revamped

“We cannot keep operating a business-as-usual mode and expect to see changes in our earnings,” said Chong. Early last year, the group pulled up its underrated food service segment — involving the supply of ready-to-eat food products to restaurant chains — a non-core unit under the FPP sector, which was given a new lease of life. Chong said the measures were put in place in the second half of FY17.

“People tell us to sell cheap, but we don’t want to be branded in that category. We had no choice but to refocus on food service. The original equipment manufacturing (OEM) and exports under the FPP segment would remain. We want to do premium products only,” he added.

Saudee is also in discussions with a distributor in Japan to expand its food service business there. The group only supplies one OEM brand to Japan. Chong said more than 90% of its revenue is derived from Malaysia, with the FPP and trading segments contributing equally. Within the FPP, Saudee’s “own brand” product section makes up almost 80% of the business unit’s revenue.

“We are chopping the volume of trading tremendously because we don’t believe in that so much. It has incurred losses in the past. It gives revenue but not profit. We cannot control forex … it is unpredictable. We have to buy food products with cash. We have no time to react to forex [fluctuations]. It is like a hedging gambling business, which we don’t want to engage much in,” he said.


Perodua, Proton to be hit most by lending guidelines

“The continued high rejection rate for loan approvals will still be among the most difficult challenges not just for consumers but car companies,” MAA president Datuk Aishah Ahmad told a media briefing. “Excluding luxury vehicle sellers, as their markets have the money to easily buy their products, it’s the local players which will be affected the most.” Aishah pointed out two prevailing issues which could reinforce more stringent lending practices, namely the implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9) since Jan 1, 2018, as well as the high household debt levels.


Ireka joins China firms to explore driverless rail transit

CRRC UT president Gu Yifeng said the ART system, developed by China-based CRRC Group, is already operating in Zhuzhou, China and the company intends to make Malaysia a springboard to the rest of Southeast Asia. “Why we chose Ireka? From what we have seen, Ireka has been in the construction industry for the past 50 years and it has a strong technical capability, focusing on professionalism,” he told a news conference after the MoU signing ceremony yesterday. Our investment in Ireka was a good start for both companies to create a synergistic collaboration and investment. If the Malaysian market requires us to invest more, we will definitely do so.”

“Construction still accounts for almost 90% of our turnover and our outstanding order book currently stands at about RM400 million, which should keep us busy for two years.”


Stronger ringgit good for F&N as net importer

“A stronger ringgit is definitely good for the group and its overall business. For example, we import a lot of dairy products, especially raw materials, from several foreign countries and transactions are predominantly done in the US dollar.”

“The first quarter [ended Dec 31, 2016 or 1QFY17] was a bit tough for us as it was the peak [of raw material costs]. But now, we can breathe a little.”

“Our products are for the masses and for that reason, we believe increasing prices are the last thing will consider. As it is, sugar prices are moderating, so increasing prices is not on the cards.”


iPay88 online transactions hit RM6.6bil

“In the month of January 2017, we recorded a little less than two million mobile-type online payments. Moving onward to December 2017, in that month alone this number shot up to 3.5 million mobile online transactions.”

“More shoppers are now accessing the shopping sites using a mobile (device) than a desktop. iPay88 statistics show that the trend of m-Commerce has been changing since 2015. In the first quarter of 2015, desktop transactions doubled mobile transactions. Subsequently in the first quarter of 2016, mobile transactions were on par with desktop transactions.”

US tariffs to hit Malaysia PV exporters most

Malaysia has emerged as the largest exporter of PV cells and modules to the US with a market share of 25% by value and 30% by capacity in 2016, benefiting from the fall in China’s share from a peak of 59% in 2011 to 21% in 2016 after the US imposed anti-dumping and countervailing duties in 2012. The US government alleges that China’s PV manufacturers evaded these tariffs by subsequently shifting PV production to countries like Malaysia, Singapore, Germany and South Korea.

“UN Comtrade data shows outbound shipments of PV products to the US comprised 1.1% of Malaysia’s total exports in 2016. According to a Malaysia Investment Development Authority (MIDA) survey in 2016, 89% of Malaysia’s total PV production was exported.”

Curated Insights 2018.01.21

JD.com’s Richard Liu decodes the Chinese consumer

No one wants to take a bag, and put it on a table when a lot of ladies have the same bag with the same style. They want to find something special. Something you cannot find in your circle…But if you look at China, there are more and more young people, and their income is relatively very small, but they want to spend time to find fashion, maybe not as expensive as luxury brands, but still very fashionable. Maybe not big brands, [but rather] small brands, or niche brands.

Commerce platforms for them are the best way to convert their customers to buying. And at the same time, for JD, we are not just a sales platform; we are a brand-building platform. We spend more and more resources to help build the brand — to strengthen the brand is as important as the sales side.

We will use two different ways to cover the entire globe. The first is our South [East] Asian channel. We will set up [a] subsidiary there and copy the Chinese business model. Build a local team, buyer team, logistics system and last mile delivery team, everything the same as in China. In Indonesia we have been operating for almost two years, and we will go to Thailand very soon.

But for Europe and [the] US we will use a cross-border business model. We have been thinking about this for many years. If you just copy another model or local players do exactly the same thing as them, you cannot find an advantage. So we will cooperate with Chinese local brands and bring them to the US and Europe. They need us, and we also need them, because the brand quality is very good and price is not as high. We will choose them, pick them up and bring [them] to the US and Europe. I think people will love these kinds of Chinese brands.


Alibaba’s AI outguns humans in reading test

“That means objective questions such as ‘what causes rain’ can now be answered with high accuracy by machines,” Luo Si, chief scientist for natural language processing at the Alibaba institute, said in a statement. “The technology underneath can be gradually applied to numerous applications such as customer service, museum tutorials and online responses to medical inquiries from patients, decreasing the need for human input in an unprecedented way.”


Keyence: Leading Japan’s new wave of tech giants

Keyence is a beneficiary of the AI, robotics, and industrial-automation boom. Sales of its factory automation sensors have been particularly strong in China, where labor costs are rising. As manufacturing grows more data intensive, factories require more sensors and vision systems to collect data and become “smarter.” Plus, a large proportion of Internet of Things spending is on sensors and connectivity. “Keyence has the highest exposure to upgrade-and-innovation demand,” says Jay Huang of Sanford C. Bernstein. Keyence, with its diversified customer base, is one of least exposed to cycles of single trends like the iPhone, he says, and has more than half the global market share for 3-D vision systems —a market growing 30% a year—and rising sales in China.


Facebook’s motivations

The key thing to remember about Facebook — and Google’s — dominance in digital ads is that their advantages are multi-faceted. First and foremost are the attractiveness of their products to users; that attractiveness is rooted not only in technology but also in both data and people-based network effects. Second is the depth of information both companies have on their users, allowing advertisers to spend more efficiently on their platforms — particularly on mobile — than elsewhere. The third advantage, though, is perhaps the least appreciated: buying ads on Google and Facebook is just so much easier. They are one-stop shops for reaching anyone, which means competitors need to not have similar targeting capabilities and user engagement, but in fact need to be significantly better to justify the effort.


Adapt or die is Marchionne’s stark farewell message to carmakers

Carmakers have less than a decade to reinvent themselves or risk being commoditized amid a seismic shift in how vehicles are powered, driven and purchased. Auto companies need to quickly separate the stuff that will be swallowed by commodity from the brand stuff.

While the car industry has always been tough — Chrysler and GM both went bankrupt during the financial crisis — in the past the mistakes were self-induced, Marchionne said. Now the tumult is being driven by outside forces, and it’s coming faster than people expect, he said — a surprising view, given that Fiat is perceived to be behind some competitors in adapting. He said the company is positioned well, and rather than pour money into competing with Silicon Valley, the industry should try to identify the best solutions coming from tech companies and reduce its exposure to products that aren’t going to be easily defended.


Ensemble Capital: Prestige Brands update

Owning these strong brands, in small niche markets, results in Prestige generating the highest profit margins in their industry. While Procter & Gamble and Johnson & Johnson might be a lot more well known, Prestige Brands turns every dollar of revenue into 34 cents of profits while P&G and J&J manage to squeeze out just 26 cents of profits.

It is important to recognize that Prestige is a brand management company more than a product producer. They outsource most of the capital-intensive production aspects of the business. This capital light, outsourcing approach means the company only employs 520 people, generating an amazing $1.7 million per employee. In comparison, most health care and consumer staple companies do closer to $500k per employee and Apple, which has the highest revenue per employee in the technology industry does only slightly more at $1.9 million. Until their acquisition of Fleet a year ago, Prestige had only 259 employees and was doing an amazing $3.1 million per employee.


How Roku morphed from a quirky hardware startup to a TV streaming powerhouse

For about two years, Roku considered building its own TV set in-house. “Then we decided: No, that’s a way to lose a lot of money,” remembers Wood. Instead, the company teamed up with Chinese firms looking to enter the U.S. market and willing to undercut the competition with budget-priced TV models — a strategy Sappington calls “a very smart decision.” And with millions of active users and growing brand awareness, Roku was able to talk to TV makers eye-to-eye and demand that they not change a thing about its software. “We had a big enough brand that they were willing to do those kinds of deals,” Wood says.

But to really understand Roku, you have to look beyond the streaming boxes, sticks and even TVs. “People think of Roku as a hardware company,” says Martin. “It is not.” Rather, the firm is leveraging hardware to acquire users, which can then be monetized via advertising and licensing fees. “The goal was always to generate revenue by monetizing the platform,” says Wood. “As our scale started to approach 5 million active accounts, that’s when we said, ‘Now we can start focusing on monetization.’”

Still, his message to Hollywood is clear: Roku is already in the content business, and it wants to be top of mind as studios think about windowing their content. “We are a very viable outlet,” says Holmes. “We should be one of their first calls.”


China’s top movie ticketing app said to plan $1 billion IPO

China’s box-office receipts rose 15 percent last year to 52 billion yuan ($8 billion), making it the world’s second largest movie market after the U.S. Almost 80 percent of movie tickets in the country are sold through mobile apps, and Maoyan Weying is the largest ticketing provider with a 52.5 percent market share as of the third quarter 2017, according to researcher Analysys.


Didi has a brilliant plan to contain the threat of China’s bike-sharing services

Already, Ofo and arch rival Mobike have chipped away at Didi’s share of short journeys and struck deals with local governments with the aim of solving congestion problems. Now, they are looking to expand beyond that. Mobike, for example, has tested ride-sharing services. Mobike and Ofo both claim over 100 million registered users, so action is best taken sooner rather than later. The question is whether Didi’s move is too late.

This devilish strategy works because Ofo and Bluegogo have no choice but to be a part of the platform due to their ties with Didi. Ofo counts Didi as an investor and is already integrated into its app, while Didi swooped in to save Bluegogo after it went broke. It’s no surprise that Mobike, the other bike-sharing unicorn which no Didi connection, didn’t elect to be a part of the program.

Techmate: How AI rewrote the rules of chess

No top chess player would take such a big risk, he says. But this computer seems to have “such control over the board, it’s almost as though it has an intuition something good will happen”. His verdict on its overall game-playing ability: “It’s incredible. It’s hard for me to get my head around it.”

All computers before this, as he describes it, worked by brute force, using the intellectual equivalent of a steamroller to crack a nut. People don’t operate that way: “Humans are flexible because we know that sometimes we have to depart from the rules,” he says. In AlphaZero, he thinks he has seen the first computer in history to learn that very human trick.

Predictions about the imminent rise of the machines have always turned out to be wildly over-optimistic. Herbert Simon, one of the pioneers of AI, forecast in 1965 that computers would be able to do any work a human was capable of within 20 years. When today’s experts in the field were asked when that moment would come, only half picked a time within the next 30 years.


This army of AI robots will feed the world

If robots can prevent herbicides from having any contact with crops, it means that 18 classes of chemicals previously considered too damaging to be widely sprayed suddenly become viable. “We’re both ratcheting down the volume of chemicals that need to be used, but also expanding how many types can be used,” Heraud says. In other words, Blue River’s success might be the worst thing that could happen to the herbicide industry, or it could open up an avenue to sell new products.

His next step, with Deere’s backing, will be to move Blue River’s robots beyond herbicides to fertilizers, the culprits behind toxic algae blooms, which are killing fish and making lakes unswimmable. Farmers typically spend up to 10 times more annually on fertilizers than weed killers—about $150 billion a year. But the shift is a big leap for a robot. It must gather a range of visual signals—the colors, sizes, and textures of a plant’s leaves—and from this data extrapolate the plant’s health and how much nourishment it needs. “It’s a ton more processing power, but it’s doable,” Heraud says.

The next link in this technological chain could be a kind of agricultural Swiss Army knife: a robot that can apply not only herbicides and fertilizers but also insecticides, fungicides, and water all at once, delivering only as needed.

The implication of plant-by-plant—rather than field-by-field—farming is not just the prospect of vast reductions in chemical usage. It could also, in theory, end monocropping, which has become the new normal—cornfields and soybean fields as far as the eye can see—and has given rise to the kind of high-calorie, low-nutrient diets that are causing heart disease, obesity, and Type 2 diabetes. Monocrops also leach soil nutrients and put food supplies at risk, because single-crop fields are more susceptible to blight and catastrophe. Modern farmers have been segregating crops in part because our equipment can’t handle more complexity. Robots that can tend plants individually could support intercropping—planting corn in with complementary crops such as soybeans and other legumes.

Bright outlook for the economy and stocks

But I worry that this tax cut is happening at a time when the U.S. economy doesn’t need fiscal stimulus. And longer term, what will tax cuts do to the federal deficit? The deficit was going to be rising as a percentage of GDP anyway, partly for structural reasons relating to the aging of the baby boomers. A $1.5 trillion tax cut will add an additional $300 billion to $400 billion interest-rate burden in the next few years.

In the past 10 years, American companies made an inordinate effort to think about how to move people or structures outside the U.S. for nonproductive purposes—basically, to increase earnings per share. By moving toward a territorial system of taxation and bringing our corporate tax rate in line with the rest of the world’s, we can get back to having managers focus on productive investments, greater efficiency, and value creation. This will unlock the strength of America and drive GDP growth. Simply, the absence of a major negative is a positive. This is a generational change. While inflation potentially is a fear for the stock market, you have to be positive on the S&P 500, even though we are 102 months into an expansion.

Having covered the auto-parts industry for 50 years, I am seeing more companies announce that they are going to relocate to the U.S. And the U.S. is a magnet not only for American, but also for foreign companies locating here because the U.S. is a big market.

But now the Fed is starting to allow $30 billion of Treasuries, more or less, to mature into the market each month. There is a chance—I’d call it a base case—that the rhetoric and actions of the ECB will have to become more hawkish, given economic growth in Europe. That means the ECB might start to pull back on quantitative easing. Central-bank balance sheets could start to decline, in the aggregate, sometime during 2018. If that happens, the stock market will go down. Quantitative easing, cumulatively, has been highly correlated to the gains in the S&P 500 and global stock markets. Central-bank footings, or assets, went from $6 trillion pre-financial-crisis to $22 trillion subsequently. Bankers are talking about bringing that down to $16 trillion or $17 trillion. Maybe it drops more quickly. It is undeniable that central-bank asset buying has been a prop for the markets.


Some great thoughts on network effects from Anu Hariharan on Twitter:

Often misunderstood – Network Effects is not the same as scale

One simple way to test for that is ask this question – what is the “barrier to exit” for the user?

If the barrier to exit for the user is low, then there is no network effect. This implies it is easy for users to switch from your service

Ride sharing services (Uber, Lyft) don’t have a network effect (in other words demand side economies of scale). Users often switch apps if it takes longer than 5 mins ETA or if there is surge pricing on one

However ride sharing does have supply side economies of scale and therefore opportunity for select players to have monopolistic share in a market

On the other hand apps like Facebook, LinkedIn have very strong network effect – because the barrier to exit for the user is really high!

A user has invested time and effort in building a social graph on these platforms with connections, history of exchanges and in some cases even maintain them. It is not easy for customers/ users to switch easily and therefore the “barrier to exit” for the user is really high

What if everyone got a monthly check from the government?

Kela’s researchers originally envisioned the experiment as the first in a series that would help them understand the implications of expanding basic income nationwide. “With basic income, there will be a lot of winners, but there will be a lot of losers also,” Kangas says. “We have to study the losers.” For one thing, he points out, to provide Finns with the level of financial security they enjoy under their current system, basic income payments would have to be at least twice those of the trial. And to pay everyone, the country would have to change its tax structure.

The wealthiest would be relatively unaffected by such a change because their taxes are already high, but a swath of middle- and upper-middle-class Finns would pay more in taxes than they’d get back in basic income. In national polls, when the possibility of a 55 percent flat tax was raised, the percentage of Finns who supported basic income dropped from 70 to about 30. “We would need to implement another study for the whole population to understand it,” says Miska Simanainen, a tax specialist who was part of Kangas’s team. No such studies are planned.

Trust is perhaps the most radical aspect of basic income. Handing out money requires a government to have faith that people know what’s best for themselves—that, on the whole, they have enough intelligence and foresight to put their financial resources to good use. In almost every basic income study conducted so far, this faith has been borne out. The little money wasted on vices is more than offset by what is spent on groceries or child care. But trusting that this will hold true universally requires an even bigger leap of faith. In 2016, Switzerland’s citizens overwhelmingly voted down a proposal that would’ve given them each the equivalent of $2,555 a month. Surveys showed they didn’t think it was right for people to be given something for free.


Savvy Investor Awards 2017: The Best White Papers

Savvy Investor is the world’s leading research network for institutional investors. Since the site launched in 2015, the Savvy Investor research team has curated over 20,000 investment and pensions papers, placing it in a unique position to judge the best white papers of 2017. The official announcement of winners was made on December 5.

The accolade of “Best Investment Paper 2017” is awarded to the CFA Institute Research Foundation for the paper, “Financial Market History: Reflections on the Past for Investors Today.”


Why dolphins are deep thinkers

One day, when a gull flew into her pool, she grabbed it, waited for the trainers and then gave it to them. It was a large bird and so the trainers gave her lots of fish. This seemed to give Kelly a new idea. The next time she was fed, instead of eating the last fish, she took it to the bottom of the pool and hid it under the rock where she had been hiding the paper. When no trainers were present, she brought the fish to the surface and used it to lure the gulls, which she would catch to get even more fish. After mastering this lucrative strategy, she taught her calf, who taught other calves, and so gull-baiting has become a hot game among the dolphins.

How to guard against moat erosion

A wet moat, called a douve or wet ditch, formed a very efficient obstacle against the assaulting army. However, wet moats could be something of a mixed blessing; they were inconvenient in peacetime, which meant that unofficial bridges were often erected – with subsequent argument and indecision about the right moment to chop them down in an emergency. Besides, water might dangerously erode the base of the wall, and stagnant water might be a year ‘round health hazard for the inhabitants of the castle.

Company Notes 2018.01.19

Sasbadi Q1 FY2018 Results

The higher revenue recorded by the Digital & Network Marketing Division ws due to our network marketing/direct sales business continuing to gain momentum. The higher revenue recorded by the Print Publishing Division was due to better performance arising from more timely publishing and introduction of new titles to the market coupled with higher revenue from new textbook contracts with the MoE.

edotco Malaysia eyes higher market share

edotco, a 62.4%-owned subsidiary of Axiata Group Bhd, owns about 4,000 telecommunication towers and manages another 5,000 towers for its customers in Malaysia through its wholly-owned unit edotco Malaysia Sdn Bhd.

According to a 2016 industry report by TowerXchange, edotco Malaysia had the third-largest tower count in the country, at 3,600 as at end-2014, after YTL Communications Sdn Bhd’s 5,000 towers and Maxis Bhd’s 3,800 towers. DiGi.Com Bhd, which ranked fourth in the report at the time, had 3,400 towers, followed by the combined portfolio of 3,200 towers owned by 14 state-backed tower companies (towercos).

Suresh said the Malaysian telecom tower industry has been growing consistently at a pace of between 1,000 and 2,000 towers per year. “In the last few years, this pace of industry growth was probably okay. But given the increasing investment in 4G by [mobile network] operators, perhaps it can accelerate a little bit over the next one or two years. Data growth is really driving the change, basically customers want more and more what we call ‘infill’ to boost capacity on top of existing coverage. These infills or towers as we call them could be a lamp pole, a camouflaged structure or maybe a signboard. In Kuala Lumpur we can only [affix new small cell antennas] on lamp posts or street furniture now, and no longer build a tower,” he added.


BCM eyes earnings growth

Cypress supplies medical devices to 220 pharmacy retail outlets, 48 medical equipment dealers and two wholesale medical equipment dealers, with notable names like Caring Pharmacy, Multicare Health Pharmacy, and RedCap Pharmacy.

The acquisition of Cypress also comes with a profit guarantee of RM600,000 for the first year.

Being in the distribution space, BCM Alliance is subjected to risks of short-term contracts. For example, distribution agreements and service contracts generally have short tenures, averaging at one to two years. However, BCM Alliance banks on its track record, having been a long term distribution partner to several brands, with some partnerships established for 14 to 15 years, like Hitachi Medical.

Additionally, under the Medical Device Act 2012 (Act 737), clients who purchase medical devices from distributors are mandated to seek after sales services from the same distributor. Hence, BCM Alliance is further protected from competition by third party service providers and is ensured of renewed service contracts. “This act is enforced beginning January 2018, and also applies to the trade of certified and registered medical devices. This weeds out the sale of substandard and uncertified medical devices, particularly in the pharmacy market,” says Liaw.


Battersea Power Station stake sold as part of $2.2 billion deal

Surveys identified “significantly worse” asbestos risk in the power station building and the cost of removing it was “substantially higher than originally envisaged”, the developer said in a separate letter to the borough council last year. The complexity of restoring the chimneys and additional foundation works also increased costs, it said.

Construction work on the building is due for completion in 2020 and about a quarter of the space will be leased to Apple. Most of the 250 apartments included in the property have already been sold.

Stronger ringgit a boon to healthcare sector

The strengthening ringgit is also a boon. “For the past few quarters, the operating costs for healthcare providers have shot up due to the higher US dollar against the ringgit, which has left healthcare operators with higher cost for medical consumables. Therefore, with the improving ringgit, we opine this will help stabilise an otherwise increasing cost of operations for healthcare providers,” said MIDF Research.

Should this government-backed national health insurance system become a reality in Malaysia, private healthcare operators in the country are poised for a major step-up in revenues and profits, according to AmInvestment Bank Research’s Ng. “Under a national health insurance system, theoretically, citizens can choose between seeking treatments in a public or private hospital. While a patient seeking treatment in a private hospital will still incur a higher cost versus a public hospital, the general price differential between the two hospitals should narrow,” he said.

“The local private healthcare sector has an added catalyst, that is, medical tourism backed by its highly competitive medical charges and hospitalisation costs [versus those in developed countries], a generally English-speaking population as well as various incentives provided by the government,” it added.