Regional Notes 2018.03.30

China’s push for tech self-sufficiency threatens Asia’s exporters

But at the same time, there’s been a spike in sales to China of precision metal working machines and equipment for making chips from firms like Japan’s Yaskawa Electric Corp. With a Chinese state-backed fund gearing up to pour as much as $31.5 billion into homegrown semiconductor manufacturing, there’s potential for trade flows to start to shift.

Yet the direction is clear: Beijing is aiming higher and it has the resources to reach its destination. And that will mean difficulties for many companies around the region. “China, in a very short period of time, is rapidly going up the value chain,” said Gary Hufbauer, senior fellow and trade specialist at the Peterson Institute for International Economics in Washington, speaking from Taos, New Mexico. “They will produce the things that Korea and Japan are now producing, and Korean and Japanese firms have a big challenge to try to keep ahead on the technology.”


Uber pulls out of Southeast Asia, selling operation to rival Grab

The cease-fire marks a victory for Grab as well as SoftBank Group Corp., the biggest shareholder in both companies. Masayoshi Son’s firm is pushing to reduce competition in a Southeast Asian ride-hailing market forecast to reach $20.1 billion by 2025. Uber and Grab, together with two other SoftBank-backed ride-hailing firms — India’s Ola and China’s Didi Chuxing — provide about 45 million rides a day, according to SoftBank presentation material in February.


Regulators to ensure Grab-Uber deal will not erode competition

“We will ensure that no one single market player dominates the sector to the detriment of commuters and drivers,” an LTA spokesman said. The LTA added that it was reviewing a regulatory framework to license private-hire car operators “to keep the private-hire car and taxi industries open and contestable”.

The CCS said Singapore’s competition laws prohibit mergers that may result in a “substantial lessening of competition”, and indicated that it could “require the merger to be unwound or modified” to prevent an erosion of competition. It said it could also issue “interim measures” before it made up its mind.

The taxi company agreed in December to pay some $640 million for a 51 per cent stake in Uber’s Singapore rental car fleet. ComfortDelGro spokesman Tammy Tan said: “We are reviewing all aspects of the proposed tie-up with Uber Technologies, which is currently under review by the CCS.”

Pentamaster plans dividend in two years

“Currently, 50% of our exports go to mainland China, including to US-based multinational corporations located there. We expect the exports to rise to 60% in the near future. The business opportunity is great which is why we are expanding our facilities.”

“I think KWAP is seeing the potential in the future of technology we are in — 3D sensing. It is going to be used a lot in autonomous cars and electric vehicles. We have developed a 3D sensor testing capability to test the component that can be used in telco, automotive and smartphones.”

He said five years ago, PCB only focused on automotive handlers without test solutions, which “anyone could do”, so he built the handler with tester as a complete ecosystem to reduce competition.

“We are also looking to secure more IARM business from the US. We have secured a few now. This segment has a lot of growth potential because of Industry 4.0 where factories look to becoming fully automised. Our technical sales unit in Sunnyvale, US, would be able to discuss with clients regarding requests for quotations and proposals. Proximity to our clients is key, hence we see our US business growing. More so now with the US placing 30% tariff on raw materials which would make manufacturing in US expensive.”


US tariffs may hurt Malaysian technology firms

However, a report last Friday by Nomura highlighted US trade protectionism and a sharper-than-expected slowdown in China as bigger risks to the Malaysian economy, as exports account for 71% of GDP. “We estimated Malaysia’s ultimate exposure to the US — including via intermediate goods to China for assembly into final products destined for the US — at 10% of GDP, about half of which is in electronics products,” the research house said, adding that another 8% is exposed to China’s final demand.


Minimal impact on M’sia from US tariffs

This is because Malaysia’s trade exposure to both China and the US accounted for 25% of its total trade, she said, pointing out that Malaysia was impacted by Washington’s earlier move to impose tariffs on solar panels.

Malaysia is the largest exporter of solar cells and panels to the US, accounting for 24% of total US imports of the products last year. Meanwhile, the country’s steel and aluminium exports to the US of US$300 million in 2016 accounted for only 1.8% of total exports to the US.

In 2017, China was Malaysia’s second-largest export destination, constituting 13.5% or RM126.2 billion of total exports, while the US was the third-largest export destination, accounting for 9.5% or RM88 billion of Malaysia’s total exports.

Bank Negara cautions of severe property market imbalances

“Such (the purchase of non-residential properties) financing accounted for 26.1% of banks’ exposures to the property market or 13.5% of banks’ total outstanding loans. End-financing for the purchase of shops accounted for the bulk (40%) of banks’ exposures to non-residential properties or 5.4% of banks’ total outstanding loans. Exposures (via end-financing) to the office space and shopping complex segments, where oversupply is particularly acute, accounted for 3.2% of banks’ total outstanding loans,” it said.

Based on Bank Negara’s analysis, the incoming supply of 38 million square feet of new office space in Klang Valley is expected to drive vacancy rates to an all-time high of 32% by 2021 (1997: 5.1%; historical high in 2001: 25.3%), far surpassing levels recorded during the Asian Financial Crisis (AFC).

The incoming supply of 140 new shopping complexes by 2021 across Klang Valley, Penang and Johor is expected to worsen the oversupply condition in this segment. In 2016, major states such as Penang, Klang Valley and Johor already had higher retail space per capita (10.5, 8.2 and 5.1 square feet per person, respectively) relative to regional cities such as Hong Kong and Singapore (3.6 and 1.5 square feet per person, respectively). This will continue to exert downward pressure on occupancy rates and rentals.


Malaysians’ income weighed down by low-wage foreign workers

“In Malaysia, our salaries and wages are low, as half of the working Malaysians earn less than RM1,700 per month and the average starting salary of a diploma graduate is only about RM350 above the minimum wage. The low-income segment of Malaysian households face many challenges with regard to their income level. Since 2014, the bottom 40% (B40) population’s income expanded by 5.8% on an annual basis. However, expenditure grew at a faster pace of 6%, reflecting the rising cost of living. It is high time to reform our labour market by creating high-quality, good-paying jobs for Malaysians,” he said at a media briefing after the release of the central bank’s 2017 annual report here yesterday.

From 2011 to 2017, the share of low-skilled jobs in Malaysia increased significantly to 16% compared with only 8% in the period of 2002 to 2010. Apart from that, local economic sectors that rely on foreign workers such as agriculture, construction and manufacturing also suffer from low productivity.

Curated Insights 2018.03.25

What’s next for humanity: Automation, new morality and a ‘global useless class’

“Time is accelerating,” Mr. Harari said. The long term may no longer be defined in centuries or millenniums — but in terms of 20 years. “It’s the first time in history when we’ll have no idea how human society will be like in a couple of decades,” he said.

“We’re in an unprecedented situation in history in the sense that nobody knows what the basics about how the world will look like in 20 or 30 years. Not just the basics of geopolitics but what the job market would look like, what kind of skills people will need, what family structures will look like, what gender relations will look like. This means that for the first time in history we have no idea what to teach in schools.”

Leaders and political parties are still stuck in the 20th century, in the ideological battles pitting the right against the left, capitalism versus socialism. They don’t even have realistic ideas of what the job market looks like in a mere two decades, Mr. Harari said, “because they can’t see.” “Instead of formulating meaningful visions for where humankind will be in 2050, they repackage nostalgic fantasies about the past,” he said.

Investing is hard

On April 1st 1976, Steve Jobs, Steve Wozniak, and Ronald Wayne founded Apple. Wayne drew the first Apple logo, wrote the three men’s original partnership agreement, and wrote the Apple 1 manual. Jobs and Wozniak each owned 45% and Wayne 10%. Two weeks later, he sold his 10% interest for $800. This 10% interest would be worth $90 billion today. He was closer than anyone to the visionaries of Apple, and he still sold.

The Cambridge Analytica scandal, in 3 paragraphs

In June 2014, a researcher named Aleksandr Kogan developed a personality-quiz app for Facebook. It was heavily influenced by a similar personality-quiz app made by the Psychometrics Centre, a Cambridge University laboratory where Kogan worked. About 270,000 people installed Kogan’s app on their Facebook account. But as with any Facebook developer at the time, Kogan could access data about those users or their friends. And when Kogan’s app asked for that data, it saved that information into a private database instead of immediately deleting it. Kogan provided that private database, containing information about 50 million Facebook users, to the voter-profiling company Cambridge Analytica. Cambridge Analytica used it to make 30 million “psychographic” profiles about voters.

Cambridge Analytica has significant ties to some of President Trump’s most prominent supporters and advisers. Rebekah Mercer, a Republican donor and a co-owner of Breitbart News, sits on the board of Cambridge Analytica. Her father, Robert Mercer, invested $15 million in Cambridge Analytica on the recommendation of his political adviser, Steve Bannon, according to the Times. On Monday, hidden-camera footage appeared to show Alexander Nix, Cambridge Analytica’s CEO, offering to bribe and blackmail public officials around the world. If Nix did so, it would violate U.K. law. Cambridge Analytica suspended Nix on Tuesday.

Cambridge Analytica also used its “psychographic” tools to make targeted online ad buys for the Brexit “Leave” campaign, the 2016 presidential campaign of Ted Cruz, and the 2016 Trump campaign. If any British Cambridge Analytica employees without a green card worked on those two U.S. campaigns, they did so in violation of federal law.


Facebook and the endless string of worst-case scenarios

“I have more fear in my life that we aren’t going to maximize the opportunity that we have than that we mess something up” Zuckerberg said at a Facebook’s Social Good Forum event in November. Perhaps it’s time for that fear to shift more towards ‘what could go wrong’, not just for Zuck, but the leaders of all of today’s tech titans.

Most recently, Facebook has found its trust in app developers misplaced. For years it offered an API that allowed app makers to pull robust profile data on their users and somewhat limited info about their friends to make personalized products. But Facebook lacked strong enforcement mechanisms for its policy that prevented developers from sharing or selling that data to others. It’s quite likely that other developers have violated Facebook’s flimsy policies against storing, selling, or sharing user data they’ve collected, and more reports of misuse will emerge.


The Facebook brand

This episode is a perfect example: an unintended casualty of this weekend’s firestorm is the idea of data portability: I have argued that social networks like Facebook should make it trivial to export your network; it seems far more likely that most social networks will respond to this Cambridge Analytica scandal by locking down data even further. That may be good for privacy, but it’s not so good for competition. Everything is a trade-off.


Inside Apple’s secret plan to develop and build its own screens

Controlling MicroLED technology would help Apple stand out in a maturing smartphone market and outgun rivals like Samsung that have been able to tout superior screens. Ray Soneira, who runs screen tester DisplayMate Technologies, says bringing the design in-house is a “golden opportunity” for Apple. “Everyone can buy an OLED or LCD screen,” he says. “But Apple could own MicroLED.”

Creating MicroLED screens is extraordinarily complex. Depending on screen size, they can contain millions of individual pixels. Each has three sub-pixels: red, green and blue LEDs. Each of these tiny LEDs must be individually created and calibrated. Each piece comes from what is known as a “donor wafer” and then are mass-transferred to the MicroLED screen. Early in the process, Apple bought these wafers from third-party manufacturers like Epistar Corp. and Osram Licht AG but has since begun “growing” its own LEDs to make in-house donor wafers. The growing process is done inside a clean room at the Santa Clara facility.

The secretive company that pours America’s coffee

Keurig is offering distribution services to an increasingly broad network of outside brands through its Dr Pepper Snapple deal. It will also be able to sell its coffee, part of an armada of 125 beverage brands, to new customers. Peet’s distribution system is a regional one that doesn’t cover certain retailers such as convenience stores, popular stops for consumers who don’t want to wait in line at larger stores. Dr Pepper’s larger fleet will enable Peet’s ready-to-drink beverages to get into more stores.

Drake and Fortnite create a “crossing the chasm” moment for gaming

While the gaming market is large, generating $100 billion in revenue globally, it reaches relatively few people compared to the music market. Interestingly, music touches almost everyone on earth but generates only $16 billion in revenue per year.

Twitch is the other beneficiary, of course. Twitch is cementing its position as a modern-day ESPN with 15 million daily viewers who spend on average almost two hours per day on the platform.


Oasis hedge fund boss bets on Japan’s professional gaming scene

Strict anti-gambling laws had prevented paid competitions for years, but the industry’s move this month to issue professional gamer licenses is allowing them to sidestep the regulations. Fischer says that lays the groundwork for publishers to grow audiences, sell more games and begin generating new revenue from broadcasting rights and advertising.

Worldwide esports revenue, including media rights, advertising, ticket sales and merchandising, will reach about $5 billion annually by 2020, almost as much as the world’s biggest soccer league today, according to market researcher Activate. The total audience for competitive gaming will grow to 557 million people by 2021 from 380 million this year, according to researcher Newzoo.


Why watch other people play video games? What you need to know about esports

Competitive video game playing, more commonly known as esports, drew 258 million unique viewers globally last year, according to research firm SuperData. For perspective, the National Football League said 204 million unique viewers tuned into the 2016 NFL regular season in the U.S., based on Nielsen data. Just like “real” sports, esports makes money off of investments, branding, advertising and media deals, raking in $1.5 billion in revenue last year, said SuperData. The firm expects the esports industry to hit 299 million viewers this year and top $2 billion in revenue by 2021.

The two things we look for in a management team

As the slide mentions, Verisk decides on buybacks or M&A depending on the available opportunities. Even if they don’t always make the correct assessment in hindsight, we like that there’s a process in place. We were further impressed that Verisk followed the above slide with IRR results from their capital allocation decisions. Again, this level of transparency is rare, but we welcome it and would like more companies to follow suit.

Samsonite wants to spend up on handbags

Parker said Samsonite isn’t actively approaching potential buyers, and the company will likely spend the next year or two consolidating after its $1.8 billion acquisition of luxury bag maker Tumi Holdings Inc. in 2016 and the $105 million purchase of online retailer eBags Inc. last year. The non-travel products market could be a potential space for deals in the future, he said in a separate interview with Bloomberg TV on Thursday.


How one investor turned a bet on the Swiss Central Bank into millions

Still, the root of the gains for Mr. Siegert and the SNB’s other 2,191 private investors is a bit of a mystery. The SNB isn’t like other stocks and pays a tiny dividend. It is governed under laws for both public and private institutions, and owned primarily by individual Swiss states, known as cantons, and cantonal banks. Public-sector bodies own almost 80% of voting shares.

Shareholders have no say in the SNB’s monetary policy or how it manages its massive 790 billion franc war chest of foreign-currency stocks and bonds, built up through years of interventions to weaken the franc.

On the plus side, the SNB is ultrasafe. It prints its own currency—and the franc is among the world’s strongest—which it uses to buy assets. When the SNB loses money, it can always print more. Recently, its profit has been on a tear, aided by rising global stock markets, low bond yields and a weaker franc. The SNB earned a record 54 billion francs in profit last year.


Tencent’s 60,000% runup leads to one of the biggest VC payoffs ever

The stake Naspers bought for just $32 million in 2001 — when Tencent was an obscure Web firm in a nation where few people used the Internet — is now worth $175 billion.

The sale of 190 million shares, worth $10.6 billion based on Tencent’s closing price in Hong Kong on Thursday, will cut the stake held by Naspers to 31.2 percent from 33.2 percent. It’s the first time Naspers has reduced its holdings in Tencent since investing in the company. Naspers won’t sell more shares in the company for at least three years, it said.

Has China overtaken the U.S. in terms of innovation?

In 1996, China invested 0.56 percent of its GDP in R&D, while the U.S. invested 2.44 percent of its GDP. In 2015, China invested 2.06 percent of its GDP, whereas the U.S. invested 2.79 percent. That is, the R&D intensity in China increased by 1.5 percentage points and in the U.S. by only 0.3 percentage points.


Harvard’s nutty idea: Cracking into the almond market

Around 80% of the world’s almonds are currently produced in California, whose almond plantations in its Central Valley have generated strong returns for investors for many years. Volatile weather in recent months, including frost and storms, have hurt estimates for the state’s almond harvest this summer, helping to push wholesale export prices for U.S. almonds to near a two-year high of $6,807 a metric ton.

Consumption of almonds grew 15% from 2012 to 2017, according to estimates from Euromonitor International, which forecasts 4% annual growth through 2021.

In Australia, nuts generate gross revenue of 8,097 to 12,146 Australian dollars (US$6,314 to US$9,471) per acre, roughly 40 times that of grains for the same area, according to the Australian Nut Industry Council. At current wholesale prices of about US$7 per kilogram in Australia, almonds offer a gross margin of around 45% before overhead costs and other expenses, according to Tim McGavin, chief executive of Laguna Bay Pastoral Co., an agricultural asset manager in Brisbane.


Elderly in U.S. are projected to outnumber children for first time

The Census Bureau projects the country would grow to 355 million by 2030, five million fewer than it had estimated three years ago. That is an annual average growth rate of just 0.7%, in line with recent rates but well below historical levels.

Lower population growth could drag on economic growth. This year’s prime-age workforce—ages 25 to 54—is about 630,000 smaller than the Census Bureau projected it would be just three years ago. The bureau projects the prime-age workforce will grow 0.5% a year through 2030, down from a 2014 projected annual rate of 0.58% for the same period.

The share of Americans who are foreign-born, now about 13%, is expected to reach a record 14.9% by 2028, topping a mark set in 1890. That share would rise to 17.2% by 2060.

Does indexing threaten the market?

But from the above results and others, it does not appear that the current level of indexing is a significant problem. This assumes the 24.9% figure for index equity mutual funds and indexed ETFs as a fraction of all U.S. equity mutual funds. As mentioned above, there are no firm figures for institutional indexing or international markets, but it seems unlikely that overall indexed investments exceed the level of roughly 25%.

Along this line, we remain concerned about the fact that many new index ETFs might not be truly independent of the creation of the index, as mentioned above. Even more importantly, given that many of these ETFs and indices are designed via a process of computer exploration of many different component weightings, these ETFs are highly vulnerable to backtest overfitting. As mentioned above, a 2012 Vanguard report found that while 87% of newly published indexes outperformed the broad U.S. stock market over the time period used for the backtest, only 51% outperformed the broad market after inception of the ETF tied to the index.


“I hope for Goldman Sachs’ bankruptcy”: Nassim Nicholas Taleb on Skin in the Game

Our conversation concludes on an optimistic note: “We’ve survived 200,000 years as humans,” says Taleb. “Don’t you think there’s a reason why we survived? We’re good at risk management. And what’s our risk management? Paranoia. Optimism is not a good thing.” Is the paradox, I ask, that human pessimism offers grounds for optimism? “Exactly,” Taleb replies. “Provided psychologists don’t fuck with it.”


What your fund management job will look like in a decade

Asset managers are being squeezed as increased regulation drives up costs and investors shift more money into lower-cost investment products. The solution? The greater use of technology and data-mining to defend margins, reduce expenses and win more client business.

While alternatives still only account for about a tenth of assets, they contribute about 30 percent of revenue, and Oliver Wyman sees that growing to about 40 percent by 2025. That trend will continue to benefit the bigger players able to offer a wider range of investment strategies.

Asset managers that analyze their customer relationship information in conjunction with the asset allocation preferences of both existing and potential customers will gain an advantage. The bigger the firm, the more data it will have available and the more resources it can throw at improving its analytic capabilities.


NASA study: Astronaut’s DNA no longer identical to his identical twin’s after year in space

Though most of Kelly’s biological changes returned to baseline levels after returning to Earth, seven percent of his genes point to possible long-term changes, according to the study. NASA’s preliminary findings were validated this week, according to Space.com. “The Twins Study has benefited NASA by providing the first application of genomics to evaluate potential risks to the human body in space,” according to a release from the agency.

Company Notes 2018.03.23

AirAsia in talks to set up Myanmar airline

…in talks with a potential partner to open an airline serving Myanmar, in a move that would help the low-cost carrier cover up to 95% of the Southeast Asian travel market.

“Once you’ve covered Vietnam and Myanmar, you’ve got all the big (Southeast Asian) populations. Vietnam — we’re talking about October, we’ve had great support from the Vietnam government and we have a great partner. My team are very bullish. It’s not going to be a big airline there, because the airport infrastructure is not there. But it is 50 million people and it will develop over time.”

“The biggest asset is our data,” Fernandes said. “While southeast Asian companies like (Indonesian ride-hailing company) Grab have to go out and spend a fortune to build that brand and data, we have 89 million customers travelling with us every year and we have data going back 18 years. We’re more than an airline — that’s the message for 2018. (Like) Amazon is more than a bookseller.”


Apex Healthcare goes into e-commerce

“[At full capacity,] SPP Novo is designed to increase our solid production capacity by up to three times, but we will be fitting out with approximately double the capacity upon commissioning by [the] end of 2018,” said Kee.

He added that about RM130 million of its revenue is derived from the manufacturing segment, and about half of this is from solid products. A back-of-the-envelope calculation suggests that if Apex doubles its solid product capacity, the group may see an increase in its solid product sales to RM130 million.

“For Europe, we are working on contract manufacturing opportunities,” said Kee, noting that the group is in the midst of evaluating merger and acquisition targets, as well as joint-venture opportunities in Europe and other developed markets. “The EU GMP certification will enable the group to stay ahead of the game, ensuring the best quality of its products,” he added.

Are REITs a good buy now?

According to Bloomberg data, the average dividend yield for the 18 listed REITs on Bursa Malaysia, as of yesterday, stood at 6.14%. In comparison, the 10-year Malaysian Government Securities’ (MGS) yield has been held at 3.9% to 4% since Bank Negara Malaysia’s key rate hike in January. MGS is the typical benchmark to which investors use to compare REITs, which are seen as a comparatively riskier investment.

But analysts told The Edge Financial Daily the rising average REIT yield is more reflective of a decline in share prices, rather than being driven by growth in distribution per unit (DPU). Hence, investors seeking to buy on weakness should consider REITs on a case-by-case basis.


Airbnb collaboration with Malaysia previews taxes on Internet economy

The San Francisco-based home-sharing company is moving to finalize a deal with tax authorities, which will apply a new tourism tax of RM10 ($2.55) per night to Airbnb members who rent out five rooms or more. The tourism levy presages an agreement on goods and services taxes.

But Southeast Asia’s third-biggest economy will start collecting tax from Airbnb hosts with at least five rooms, whether in one or multiple properties. Airbnb typically signs what it calls voluntary collection agreements with governments to transfer hotel and tourism tax payments from its members to the authorities. The decade-old company said it has transmitted half a billion dollars’ worth of such taxes to more than 340 jurisdictions globally.


Divestment appetite in Southeast Asia more than doubles, says EY survey

“More than two-thirds (68%) said that their decision to divest was directly influenced by the evolving technological landscape. About half (51%) of Southeast Asian companies said that the need to fund new technology investments will make them more likely to divest — using the proceeds to improve operating efficiency (79%), and address changing customer needs (87%) in their core businesses,” said EY in a statement today.


Malaysia tells tech entrepreneurs to give it a second look

Still, Malaysia lags behind its neighbors in drawing investments. Singapore attracted $7.2 billion in tech startup capital from 2012 through September 2017, the most in Southeast Asia, according to CB Insights. Indonesia pulled in $4.6 billion, while Malaysia got $1.3 billion during the same period.

Curated Insights 2018.03.18

Remember to look up at the stars and not down at your feet. Try to make sense of what you see, and wonder about what makes the universe exist. Be curious. And however difficult life may seem, there is always something you can do, and succeed at. It matters that you don't just give up. -- Steven Hawking (1942-2018)

An Apple R&D bonanza

Much of this focus mantra is driven by the fact that Jony Ive and his Industrial Design group oversee Apple’s product vision and the user experience found with Apple products. With only 20 or so members, Jony and team can only do so much at any given moment. In a way, Apple’s organizational and leadership structure serve as safeguards preventing Apple from spreading itself too thin and doing too much. Instead of trying to expand the design team in order to work on more products, Apple’s strategy appears to be to do the opposite and place bigger bets on a few products.

These bigger bets come in the form of owning the core technologies powering Apple devices. Apple wants to reduce dependency on others. We are quickly moving to the point at which every Apple product will be powered by core technologies developed in-house. Such a reality would have been a pipe dream just a few years ago. Apple believes this strategy will give them an advantage in the marketplace. It’s a new twist to the Alan Kay line about “people who are really serious about software should make their own hardware.” We are moving to the point at which companies serious about software should design their own silicon. Having $285 billion of cash on the balance sheet gives Apple the freedom to pursue this ambitious goal. It is this motivation to control more of the user experience while pursuing new industries to enter that is driving the remarkable increase in Apple R&D expenditures.


Apple goes from villain to coveted client with this Finnish firm

Created through a merger of Sweden’s Stora AB and Finland’s Enso Oyj in 1998, the company has spent billions shifting from the declining paper business — as people increasingly switched to digital from printed newspapers — to focusing on innovative wrappings made from tree and plant fibers. More than a third of its sales now come from consumer board and packaging solutions, up from a fifth two decades ago.

Apple has undergone its own shift, away from plastic packaging. For its recent iPhone 8 launch, Apple used a fiber-alternative instead of the polypropylene wrap around the power adapter. The packaging for the iPhone 7 used 84 percent less plastic than the previous version.


Intel fights for its future

“…Broadcom is already an Apple parts supplier, and it wouldn’t want to jeopardize a good relationship with a negotiation over royalties. The exact percentage that Qualcomm charges in royalties is of the utmost importance to a standalone Qualcomm…But for a merged Broadcom-Qualcomm, the exact amount of the royalty would be less important than a good working relationship with Apple.”

If the dispute is settled, Intel loses its wireless modems deal with Apple. No mobile CPUs + no modems = nothing of substance. Broadcom would be in charge — they would hold all the cards.


Google wants to impose order on India’s street address chaos

Google is tackling the project as part of its own search for the next billion users. Non-standard addresses now increase the costs of running all types of commerce from ride-hailing to online retailing and food delivery. Plus Codes — in a ‘6-character + city’ format — can be generated and shared by anyone on Google Maps, while apps that use location services can incorporate those codes on their own platforms. And a user can enter the Plus Code into searches to call up a location. Google Maps is also adding voice navigation in six more Indian languages, after introducing Hindi three years ago.

WhatsApp could shake up digital payments in India

At stake is an Indian digital payments market that Credit Suisse Group AG estimates could be worth $1 trillion within five years and has homegrown and global players jostling for dominance. WhatsApp joins Google, Alibaba-backed Paytm, a unit of local e-commerce leader Flipkart and dozens of others already vying for customers as smartphone adoption surges. Mobile payments caught fire at the end of 2016 when the government’s demonetization temporarily took 86 percent of all paper currency out of circulation to tackle corruption.

“WhatsApp is likely to change the digital payments scenario by cannibalizing other wallets’ users and adding new converts,” said Satish Meena, an analyst at Forrester Inc. “Its base of 200 million users, a daily active usage that’s about 20 times higher than Paytm’s, and the fact that Indian users spend a lot more time on WhatsApp than even on parent Facebook has huge advantages,” said Meena.


Amazon turbocharged Audible’s domination of audiobooks

Audible accounts for about 41 percent of all audiobooks sold, including digital and physical formats, according to researcher Codex Group LLC. Amazon also sells audiobooks directly through its website and, with Audible, accounts for more than half the market. Audible doesn’t disclose financial information, but says its annual subscriber growth is in double digits. Most customers pay $15 for a monthly subscription that comes with a single audiobook. (A la carte, they often cost more than $20.) The company’s library includes 400,000 titles.


How Amazon’s bottomless appetite became corporate America’s nightmare

For many companies, perhaps what’s scariest is that Amazon has lots of room to grow, even in retail. In the U.S., more than 90 percent of all retail sales still happen in physical stores. In some big categories, including home furnishings, ­personal-care products, toys, and food, the brick-and-­mortar numbers are even higher. As the share of online shopping continues to increase, Amazon seems likely to benefit the most. It’s responsible for roughly 44¢ of every dollar Americans spend online, and it’s now mixing in retail stores.

Amazon is far from invulnerable. All the same old red flags are there—a puny 2.7 percent e-commerce profit in North America, massive outlays to establish delivery routes abroad—but few are paying attention. Anyone buying a share of Amazon stock today is agreeing to pay upfront for the next 180 years of profit. By one measure, it’s generating far less cash than investors believe. And its biggest risk may be the fear of its power in Washington, New York, and Brussels, a possible prelude to regulatory crackdown.


Netflix’s secrets to success: Six cell towers, dubbing and more

Why Netflix almost never goes down. The company’s service achieved an availability rate of 99.97% in 2017, according to Netflix engineering director Katharina Probst. Part of that is due to the fact that Netflix learned from outages early on, and now uses Amazon’s AWS data centers across three regions. When one of those regions does go down, Netflix automatically redirects all of its traffic to the two other regions.

In fact, the company even tests this fall-back regularly by just taking a region offline itself — something the company calls chaos engineering. “We intentionally introduce chaos into our systems,” explained Probst. Up until recently, it took Netflix up to an hour to successfully redirect all requests in case of such a massive failure. More recently, the company was able to bring that time down to less than 10 minutes.

Amex to woo retailers with biggest fee cut in 20 years

At a presentation for investors in New York last week, the company said the global average of the fees it charges merchants — known as its discount rate — would decline five or six basis points this year, to about 2.37 per cent. Each basis point is equivalent to about 11 cents of earnings per share, said Don Fandetti of Wells Fargo Securities.

The fee cuts for 2018, which are about double previous guidance, are the latest sign of competitive and regulatory pressures on the biggest US consumer finance company by market value. American Express is facing questions from Wall Street about competition from US banks, which use the rival payment networks Visa or MasterCard. Big-spending Americans have flocked to premium cards issued by banks.


SoftBank looks to invade Wall Street’s turf

Until recently, SoftBank’s fledgling investment arm was little more than a group of analysts in Tokyo and London sifting through possible deals. Buying Fortress provided the group with a template to use as it moved to becoming an actual institution, with a formal investment committee, compliance department, trading desk and investor relations unit. The new entity is now 1,000 people strong.


How China’s Huawei killed $117 billion Broadcom deal

Huawei uses Broadcom’s chips in networking products such as switches that direct data traffic between connected computers. Qualcomm also works with Huawei. The two said on Feb. 21 they completed testing on technology that advances faster 5G mobile services. Under one envisioned scenario, wireless carriers may be forced to turn to Huawei or other Chinese companies for cutting-edge telecoms gear. That’s unacceptable for a U.S. government that, concerned about the security of Huawei’s gear, has already blocked the sale of the Chinese company’s smartphones on American carriers’ networks.

Government officials and industry executives have long harbored suspicions that the closely held Huawei works primarily for Chinese government interests, especially as it sells increasing amounts of critical telecoms infrastructure to Europe, Africa and the Middle East.

WordPress is now 30 per cent of the web

Public data recorded that WordPress’s share of the top 10 million websites had ticked over from 29.9 per cent to 30 per cent. The firm put some context on that data by noting that 50.2 per cent of the world’s websites don’t run a content management system (CMS) at all. That means WordPress has over 60 per cent share among websites that do run a CMS. That’s a dominance few products in any category can claim. It’s also notable that WordPress has nearly ten times the market share of its nearest competitor, Joomla, which has 3.1 per cent share of all websites and 6.3 per cent of the CMS-using population.

Share buybacks work better in theory than in practice

The top 20 companies in terms of buybacks accounted for almost 50 percent of total expenditures.

The main problem with buybacks is that effects of bad decision-making don’t become clear until much later. To paraphrase Jeff Macke, stock buybacks are an allocation decision that has a hypothetical value to shareholders, but a real explicit value to option-holding executives. These people are supposed to be managing companies for the long term but get compensated over the short term. This misalignment if incentives should be a concern. It does seem like those with a vested short-term interest in stock prices put a thumb on the scale away from investments or dividends and towards buybacks.

Diving into the detail, the top culprit was Biotech companies, with 97% of biotech IPOs in the loss making camp. Second place, no prizes for guessing, was Technology companies at 83%. But interestingly enough that left 'all other companies' at 57% - which is actually a record high.

What’s the biggest trade on the New York Stock Exchange? The last one

Last year, 26% of all trading activity on the NYSE’s flagship exchange took place in the last trade of the day, up from 17% in 2012, exchange data shows. Last year, trades at the close accounted for more than 8% of trading volume in S&P 500 stocks, nearly four times what it was in 2004, according to Credit Suisse .

At least $10 billion worth of shares are traded in the NYSE’s closing auction on an average day, with a final tally of stock prices typically listed by 4:05 p.m.

A fund manager such as Vanguard, for instance, might need to buy millions of shares at a time. Making such a big purchase in the middle of the day could dry up supply, causing the price of the stock to jump—bad for Vanguard. By waiting to trade at a time when there are millions of shares being bought and sold, the risk of moving the price is reduced, saving Vanguard money.

Last year, the NYSE collected $87 million—45% of its net revenue from the exchange’s core stocks-trading business—from trading at the close, according to the research firm Equity Research Desk. The NYSE’s maximum fees for trading at the close have gone up 16% over three years, according to regulatory filings.


Is the US stock market overvalued? Depends on which model you ask

The Fed model was valid during the period from 1958 to 2010. Since after 2010 there has been no relationship between the stock’s earnings yield and the bond yield, the Fed model cannot be used to judge whether the US stock market is overvalued. In other words, the Fed model cannot support the high current CAPE ratio on the grounds of the low-rate environment.

The Shiller model is over-simplistic. It is justified only on the grounds that there is an empirical inverse relationship between the CAPE value and the subsequent stock market return over horizons ranging from 10 to 15 years. What is less known about the validity of the Shiller model is that it has forecasting power only for real returns.

The other serious problem with the Shiller model is that it cannot be successfully used to time the market. If the investor believes in the validity of the Shiller model, this investor should buy the stocks in the early 1970s. However, in this case, the investor would be highly disappointed because the stock prices had been decreasing till the early 1980s. Similarly, if the investor uses the Shiller model, this investor would sell stocks in the early 1990s, missing out on huge net gains over the full bull/bear cycle.

Pozen Priorities

“The common practice we found among the highest-ranked performers in our study wasn’t at all what we expected. It wasn’t a better ability to organize or delegate. Instead, top performers mastered selectivity. Whenever they could, they carefully selected which priorities, tasks, meetings, customers, ideas or steps to undertake and which to let go. They then applied intense, targeted effort on those few priorities in order to excel.”


Ironies of luck

If risk is what happens when you make good decisions but end up with a bad outcome, luck is what happens when you make bad or mediocre decisions but end up with a great outcome. They both happen because the world is too complex to allow 100% of your actions dictate 100% of your outcomes. They are mirrored cousins, driven by the same thing: You are one person in a 7 billion player game, and the accidental impact of other people’s actions can be more consequential than your own.

In investing, a huge amount of effort goes into identifying and managing risk. But so little effort goes into doing the same for luck. Investors hire risk managers; no one wants a luck consultant. Companies are required to disclose risks in their annual reports; they’re not required to disclose lucky breaks that may have led to previous success. There are risk-adjusted returns, never luck-adjusted returns.

Here’s why Stephen Hawking never won the Nobel prize in physics

It takes decades to build the scientific equipment to test theoretical discoveries; to put this into context, Einstein’s theory of gravitational waves in space, which he first proposed in the 1920s, was only recently proven in 2016.

One of Hawking’s most important finds was “Hawkings Radiation,” the theory that black holes are not completely black after all, but emit radiations that ultimately cause them to disappear. The issue is, the technology needed to observe this radiation will take years and cost millions before Hawking’s theory can ever be verified.

Company Notes 2018.03.16

UMW to takeover MBM Resources and raise its stake in Perodua

MBM Resources is involved in the distribution and dealership of major international and local vehicle brands in Malaysia such as Perodua, Daihatsu, Hino, Mitsubishi, Volkswagen and Volvo, as well as the manufacturing of automotive parts.

Assuming full acceptance of UMW Holdings’ proposed mandatory offer for MBM Resources, the company’s effective interest in Perodua will increase from 38% to 60.6%. The completion of the deal with PNB Equity Resources will increase its stake in Perodua to 70.6%.

“The proposed acquisitions are consistent with the company’s strategy to enhance its core businesses in the automotive, equipment and manufacturing and engineering segments. It will allow the company to further improve its prospects in the automotive segment via leveraging on Perodua’s strength in the national car segment, coupled with the company’s existing presence in the non-national car segment via the Toyota marque,” it added.


GDEx to grow C2C business

Teong elaborated that plans earmarked for MBE Malaysia will revolve around increasing efficiencies of the company, which include forming a digitised platform, improving accessibilities, and potentially become package drop points for GDEx.

“Following the completion of MBE’s acquisition, which is expected to be by the end of this quarter or early next quarter, we intend to roll out one new MBE outlet per month. As for GDEx, we have targeted to open 20 new branches this year, and are considering to market our products through re-sellers,” said Teong.

The retail delivery services or C2C segment remians a relatively untapped segment in the local logistics industry. For illustration purposes, the C2C segment in Japan, considered a mature market, makes up an estimated 15% of the nation’s logistics market. Currently, the retail delivery operations in GDEx contribute less than 2% of total turnover.


Hartalega focuses on organic growth, adds new plant

“No M&A and no targets have been identified at this moment. We are purely on organic growth and our focus is to grow our business as there are plenty of opportunities in the glove manufacturing distribution.”

“We plan to sell our antimicrobial gloves globally but the first launch will be in Europe in May this year, while we prepare the document for submission to the FDA. The FDA submission is a milestone for us because it gives credibility to our products. Once we get FDA approval and certification, it will be a good testimony for our products.”


Proton taps into Geely’s advanced auto technology

Geely is targeting to ramp up production to a whopping 400,000 cars in 10 years to penetrate the domestic, regional and global markets.

Bumiputera vendors, salespersons as well service centre operators should take cognizance of the intense competition in the global automotive industry. It is imperative that they upgrade to sales, service, spare parts and spray painting (4S) service centres so as to benefit from Geely’s endeavour to create the infrastructure for the supply of competitively-priced auto components.

Malaysian companies should develop strategies now to reap CPTPP benefits, says HSBC

“Perhaps the biggest benefit, the deal will eliminate most tariffs between member countries, and where tariffs are maintained, cuts will be significant. For instance, the tariff on New Zealand beef exports to Japan will fall to 9% from 38.5% today, when the deal enters into force,” Sill said quoting studies.

Collectively, the improvements meant some 500 million people in 11 countries would have access to greater and cheaper choice of goods and services. “Combining over US$10 trillion of economic output — about 13.5% of the world’s GDP — these nations offer bright prospects to the business community too,” he added.

Curated Insights 2018.03.11

Warren Buffett is even better than you think

What makes Buffett special, however, is that he has outpaced the market by a huge margin, even after accounting for those profitability and value premiums. The per-share market value of Berkshire has returned 20.9 percent annually from October 1964 through 2017, according to the company. That’s an astounding 9 percentage points a year better than a 50/50 portfolio of the Fama/French profitability and value indexes for more than five decades.

It’s a feat that can’t be dismissed as mere luck. For one thing, Buffett has been shockingly consistent, beating the 50/50 profitability/value portfolio during 40 of 44 rolling 10-year periods since 1974, or 91 percent of the time. Also, Buffett’s margin of victory is “statistically significant,” as finance aficionados would say, with a t-statistic of 3.1. That’s a fancy way of saying that there’s an exceedingly low likelihood that his outperformance is a result of chance.

How Amazon can blow up asset management

In addition to its home page, Amazon is rich with the most important resource in asset management: trust.

Amazon’s hidden advantage is its ruthless commitment to per customer profitability. I’m willing to bet that the firm has our number. It knows our lifetime value as customers and how we stack up against our cohorts by age, zip code, film preference, etc. Similarly, Amazon has shown that it doesn’t hesitate to fire unprofitable customers who abuse the return privilege. If it exercises the same discernment in avoiding the worst clients, incumbent asset managers stand to lose. Amazon has no legacy costs and no legacy relationships in asset management. Furthermore, it will not plead for such relationships. If you’re a 3rd party fund manager, for instance, getting on Amazon’s platform will be like the Godfather’s offer you can’t refuse. To me, asset management is the type of utility business that Amazon could easily disintermediate, for both its own benefit and the benefit of average investors worldwide. If you thought the overbuilt status of bricks and mortar retailing provided the kindling to the Amazon explosion in retail, the abundance of asset managers (especially active asset managers) provides the uranium for an apocalypse that could be much worse.


Lloyd Blankfein’s big, tricky, game-changing bet

Blankfein insists such pessimism is unwarranted in the long run. Within five years, he thinks, Marcus has the potential to dominate the refinancing of credit card debt by offering clients interest rates that are half of the penalties charged by card issuers. “The big banks have no incentive to do this — to offer a product that competes directly with their credit cards,” he says.

Blankfein insists investors will once again favor Goldman because the market forces behind its model are timeless. “We buy things from people who want to sell and sell things to people who want to buy, when in the real world, those buyers and sellers don’t usually match up,” he says. “Those things have been going on since the Phoenicians.”

Why Spotify won’t be the Netflix of music

Licensing deals are negotiated every couple of years, so investors will have to wait for the next chance to strike a new bargain. Growing bigger should help Spotify cut incrementally better deals, but won’t resolve the basic problem that ownership of must-have content is concentrated in so few hands. The big three plus Merlin accounted for 87% of songs streamed on Spotify last year.

But music is different: Apart from the concentration of rights ownership, new albums don’t have the same marketing pull as a new TV series. Spotify’s prospectus argues that “personalization, not exclusivity, is key to our continued success.” Competing with the record labels to get a better deal just doesn’t seem a viable option.

Why software is the ultimate business model (and the data to prove it)

The Demand for Software is very strong and stable — Spend on software has grown at ~9% for about a decade. Looking forward Gartner estimates show that the Software category is expected to grow 8–11% versus the U.S. economy at 2–3% and broader technology spending at 3–4%. Software is a GOOD neighborhood to live in.

Signals from the Stock Market: “In the short term the market is a popularity contest; in the long term it is a weighing machine.” — Warren Buffett. Over many years, the market reflects the true substance of a business — here you can see that over the last 15 years, a broad basket of software companies has created meaningfully more value than a broad basket of businesses.


Analysing software businesses

Business models are increasingly moving to SaaS business models because it benefits the customer. Even though the total cost of ownership of the software between the two is similar, the cash flow profile for the customer is different. SaaS shifts laying out cash for a license (capex) to an ongoing pay-as-you-go model (opex).

Investors also prefer SaaS models for two main reasons: 1. Higher predictability of future cash flow – SaaS has higher recurring revenue than license model. This provides a more consistent stream of cash flow with less ‘renewal’ risk at the end of every license. 2. Cost structure – the larger the upfront license cost, the larger the sales team required. SaaS models usually have a lower sales and distribution expense than license models.

Another reason SaaS businesses are popular with PE is because software economics match the return profile of of both VC and PE investors. Firstly, the original product with a fixed cost base plus increasing returns to scale earns a high ROIC and can scale with little capital. This matches the low-hit / high multiple return rate VC crave as they can pick the correct product and then sale with little marginal cost. PE then acquires from VC and provide the capital to acquire new products to bundle with the original offering. This strategy also matches the return profile of PE as they can acquire and add various products to the platform over the 5-7 average holding period of PE portfolio companies. Although the economics are not as good as VC stage due to the capital required, the risk is relatively lower as you have product-market fit and sticky customers.

‘Success’ on YouTube still means a life of poverty

Breaking into the top 3 percent of most-viewed [YouTube] channels could bring in advertising revenue of about $16,800 a year. That’s a bit more than the U.S. federal poverty line of $12,140 for a single person. (The guideline for a two-person household is $16,460.) The top 3 percent of video creators of all time attracted more than 1.4 million views per month.

Ideas that changed my life

Room for error is underappreciated and misunderstood. It’s usually viewed as a conservative hedge, used by those who don’t want to take much risk. But when used appropriately it’s the opposite. Room for error lets you stick around long enough to let the odds of benefiting from a low-probability outcome fall in your favor. Since the biggest gains occur the most infrequently – either because they don’t happen often or because they take time to compound – the person with enough room for error in part of their strategy to let them endure hardship in the other part of their strategy has an edge over the person who gets wiped out, game over, insert more tokens, at the first hiccup.

Your personal experiences make up maybe 0.00000001% of what’s happened in the world but maybe 80% of how you think the world works. People believe what they’ve seen happen exponentially more than what they read about has happened to other people, if they read about other people at all. We’re all biased to our own personal history. Everyone. If you’ve lived through hyperinflation, or a 50% bear market, or were born to rich parents, or have been discriminated against, you both understand something that people who haven’t experienced those things never will, but you’ll also likely overestimate the prevalence of those things happening again, or happening to other people.

Company Notes 2018.03.09

Pentamaster targets two sectors

“The powertrain system of automobiles is generating the demand for semiconductor test equipment. The improvements in advanced safety, convenience and comfort systems are the other factors driving the growth of the semiconductor content in automobiles. The Asia-Oceania region has the most market share of vehicle production and sales due to the growth of the Chinese automotive market. We are spending RM45mil on two manufacturing facilities this year. About RM35mil is for the Batu Kawan facility that would also produce IARM solutions on top of test equipment for the medical equipment and automotive industries. The remaining RM10mil is for the extension of our current plant in Bayan Lepas that would serve as a research and development centre and warehouse.”


Infrastructure jobs, exports set to lift Eita’s growth

“Part of the reason for this is that the MRT1 (Klang Valley mass rapid transit’s Sungai Buloh-Kajang line) project was completed last year. We’ve just got (contracts for) the MRT2 (Sungai Buloh-Serdang-Putrajaya line) but we think contributions will only come in for FY19.”

“We still aim to achieve 50% of the total revenue in our export markets but it depends on some of the projects that we are getting as the infrastructure projects could be lumpy. What’s more important is the growth seen in the export numbers over the last few years.”

In the longer term, Eita sees the lift and escalator maintenance services as an important segment. Currently, the group does maintenance work for over 90% of the lifts and escalators supplied, and the job only contributes about RM20 million or less than 10% of Eita’s topline.


PIE seeks to penetrate medical, auto, aerospace sectors

“We try not to be in the 3C industry — consumer electronic, communication such as smartphones, and computer because these are high-volume products with short life cycles. We cannot cope with that [type of business]. On the other hand, models for barcode scanners [of which PIE does testing under its contract EMS segment] do not change much. The volume is also not high, but they command a reasonably good profit margin — higher than the 3C products.”

Some 98% of PIE’s revenue comes from manufacturing, which consists of contract EMS for box-build, semi box-build and barcode scanners, raw wire and cable, and cable assembly and wire harness. The remaining 2% is from its trading segment.

“More workers would be needed when more orders come in later this year, but I will think about it then. Labour shortage is a constant problem, but for now I have managed to overcome the severe shortage. Also, because we increased the capacity at our Thailand plant, we hope to circumvent labour issues in Malaysia because there is no worker shortage problem there. As for raw material shortage, the impact is not so great now because the situation has recovered slightly.”


Top Glove wants to trim dependency on foreign workers

The world’s largest glove maker aims to reduce the ratio of foreign workers to locals to 50%, from 75% presently, over the medium term, according to Top Glove information technology general manager Chee Yih Tzuen. “Our total workforce is about 14,000 currently and the industry is competitive, so we have to do it (cut foreign workers) immediately,” he said on the sideline during the group’s factory tour yesterday.

Top Glove managing director Datuk Lee Kim Meow said labour traditionally constitutes about 10% of the group’s cost of production.

Asia’s online shopping boom is making it harder to track inflation

Malaysia’s statistics department estimates 87% of Malaysians use internet daily; 80% of those users seek information on goods, services.

“Big data” initiative created to explore online pricing and inflation.

Statistics department also now has unit dedicated to compiling indicators to measure e-commerce.


Malaysia disagrees with IMF over currency management, once again

“We continue to have strong concern on the Fund’s inflexibility to be receptive and open to new approaches and policy instruments needed to maintain stability and promote financial market development,” Juda Agung, an IMF executive director representing Malaysia along with other Southeast Asian countries, said in the report. Our authorities are also deeply concerned with staff’s lack of understanding of the domestic context which can diminish the Fund’s role as trusted adviser.”

Malaysia has a well-documented history of turning down the fund’s assistance during the 1997 crisis. The government implemented capital controls at the time, which were first panned, but much later acknowledged by IMF officials as being ahead of the curve.

Curated Insights 2018.03.04

The #1 reason Facebook won’t ever change

Google’s core DNA is search and engineering, though some would say engineering that is driven by the economics of search, which makes it hard for the company to see the world through any other lens. Apple’s lens is that of product, design, and experience. This allows it to make great phones and to put emphasis on privacy, but makes it hard for them to build data-informed services.

Facebook’s DNA is that of a social platform addicted to growth and engagement. At its very core, every policy, every decision, every strategy is based on growth (at any cost) and engagement (at any cost). More growth and more engagement means more data — which means the company can make more advertising dollars, which gives it a nosebleed valuation on the stock market, which in turn allows it to remain competitive and stay ahead of its rivals.

Facebook’s challenge is that their most lucrative market — the US and Canada — are saturated. And to keep making money in these markets — already a ridiculous $27 in ARPU for the last three months of 2017 — they need us to give more time and attention to them. This is a crisis situation for Facebook because it doesn’t make as much money from markets outside of the US and Canada. For the same three months, it made $2.54 in ARPU in Asia-Pacific, $1.86 in rest of the world, and $8.86 in Europe.


Netflix

And if you’re dependent upon advertising you’re done. The public will not sit for it, only the cheapest individuals will endure ads, and then the ads don’t work on them, because they’re so damn tight. No, the people advertisers want to reach are the spenders, which is why everybody’s now advertising on Amazon, check it out, that’s where the dollars change hands.

So the networks and other ad-supported channels are on life support. They’re dependent upon hits, which come and go, and what do I always say…DISTRIBUTION IS KING!

So, just having good content is not enough, you’re reinventing the wheel every season, you’re only as good as your last hit.

As for HBO… That’s a dying model. If the outlet were smart, they’d band together with Hulu or another player and release all episodes on the same day. People don’t like to wait, appointment viewing is passe. We want it all and we want it NOW!

As for Hulu, forget about it, it doesn’t have critical mass, and unlike Netflix, it’s only in America. Sure, the “Handmaid’s Tale” burnished the outlet’s image, but Netflix has more than that, “Narcos,” Stranger Things,” 13 Reasons Why,” “Wormwood”… A record company can’t survive on one act, you need a steady flow of product, which Netflix has. And it’s a virtuous circle, they keep adding subscribers to the point they’ve got more money and they spend it on the best creators! So they end up with the lion’s share of the viewers. Which is why Fox wanted out, why it sold to Disney.

Nobody wants to let Google win the war for maps all over again

The companies working on maps for autonomous vehicles are taking two different approaches. One aims to create complete high-definition maps that will let the driverless cars of the future navigate all on their own; another creates maps piece-by-piece, using sensors in today’s vehicles that will allow cars to gradually automate more and more parts of driving.

Alphabet is trying both approaches. A team inside Google is working on a 3-D mapping project that it may license to automakers, according to four people familiar with its plans, which have not previously been reported. This mapping service is different than the high-definition maps that Waymo, another Alphabet unit, is creating for its autonomous vehicles.

Mobileye argues that it’s more efficient and cost-effective to let the cars we’re driving today see what’s ahead. In January, the Intel Corp. unit announced a “low-bandwidth” mapping effort, with its front-facing camera and chip sensor that it plans to place in 2 million cars this year. The idea is to get cars to view such things as lane markers, traffic signals and road boundaries, letting them automate some driving. Mobileye says this will take less computing horsepower than building a comprehensive HD map of the roads would.

Hidden profits in the prescription drug supply chain

Analysts at Bernstein tried to get a better picture of how profitable these companies are by excluding the cost of the drugs that are included in their revenue. The analysts compared the rate at which gross profit converts into earnings before interest, taxes, depreciation and amortization for pharmacy-benefits managers and other pieces of the drug supply chain, including drug distributors, insurers and pharmacies.

By this analysis, pharmacy-benefit managers are exceptionally profitable; 85% of their gross profit converted into Ebitda over the past two years. Drug distributors converted 46% of their gross profit, while health insurers and pharmacies achieved about 30%.


Sergio Marchionne’s final lap

Few people in automotive history have as impressive a legacy of wealth creation as the 65-year-old Marchionne: Henry Ford, Billy Durant, Karl Benz and Kiichiro Toyoda among them. But those titans were like the industry’s farmers — cultivating businesses from scratch and nurturing them into today’s automaking giants. Marchionne, in contrast, has been the fireman — running into the ruins of once-great companies, putting out the flames and rebuilding something better than before.

“In 2004, when you were first introduced to the auto industry, a lot of people were thinking, ‘Who the hell is this guy?’ Right? I was one of them, frankly,” Morgan Stanley analyst Adam Jonas told Marchionne during FCA’s Jan. 25 quarterly call with analysts. “We hadn’t seen anything like you. You took $2 billion, roughly, and you’ve turned it into around $72 billion, and more important than that, there are many hundreds of thousands of families across many nations that are better off because of you and your team.”

In 2009, Marchionne inherited a mess. Daimler and later Cerberus Capital had largely failed to invest in necessary product improvements or modernize the company’s industrial footprint. Morale among employees who had survived constant cost-cutting, including several rounds of layoffs, and then the bankruptcy could not have been lower. Marchionne offered the automaker’s disheartened employees a path back to potential health — one that demanded long hours, hard work, humility and sacrifice. The employees accepted the challenge. They set to work fixing many of the things that had gone so wrong with Chrysler and its products — improving quality, overhauling 16 vehicles in 19 months, banning rat-gray interiors and fixing manufacturing plants. Their level of commitment and dedication to restore the company to some semblance of health continually surprised Marchionne.


Didi Chuxing took on Uber and won. Now it’s taking on the world

With 400m registered customers in more than 400 Chinese cities, it delivers 25m rides a day, roughly twice as many as Uber and all the other global sharing apps combined. In the future, Liu imagines an even larger purpose, as Didi uses big data and machine learning to fix the many problems that snarl-up urban areas. “When you redesign the transportation system, you basically redesign the whole city,” Liu says. “You redefine how people should live.”

AI currently matches thousands of riders and drivers each minute, as part of a decision-making platform the company calls “Didi Brain”. This already predicts where riders are likely to want cars 15 minutes ahead of time, guessing right 85 per cent of the time. As it seeks out more patterns, Zhang says, the system will see forward an hour, or even a full day, using reinforcement learning, a powerful AI technique in which computers learn via experimentation, much as a child might use trial and error.

But for Didi, machine learning helps solve more basic problems, like traffic signals. “They’re sometimes manually operated every 90 seconds by someone sitting in a room,” Liu says. In the eastern city of Jinan, Didi algorithms now power “smart” traffic lights, which optimise patterns based on real-time car data, cutting congestion by ten per cent. Similar projects are under way in dozens of cities, along with plans to improve traffic lane management and bus systems.


Dyson bets on electric cars to shake up industry

Dyson has worked extensively on lightweight materials, leading several people to speculate the first vehicle may be substantially comprised of plastics rather than metals, something usually reserved for high-end supercars. This would make the cars lighter — important because of the weight of electric batteries — but also allowing for more inventive designs. When announcing the project last September, Sir James said the first car would look “quite different” to any currently on the market.

Dyson aims to lean less heavily on suppliers than traditional carmakers, partly because of a penchant for making components in house, and partly because electric cars contain substantially fewer bits than their combustion engine counterparts. The group already produces electric motors, which turn the wheels, as well as battery cells in-house, and is investing heavily in software development, an increasingly important part of modern cars.


SpaceX joins race to make web truly worldwide

If successful, however, SpaceX has said it plans to start launching its first commercial satellites next year, with a constellation of more than 11,000 circling the earth in low-earth orbit by the time the network is complete in 2024.

The satellite trial points to an impending space race that has drawn in powerful backers. Google, which once looked at developing its own satellite-based network, became one of SpaceX’s biggest backers when it led a $1bn investment round three years ago. Meanwhile, SoftBank and Richard Branson are among the backers of OneWeb, a European rival that hopes to start providing broadband internet next year.


Driverless cars: mapping the trouble ahead

“Everyone is trying to develop their own in-house HD map solution to meet their self-driving needs, and that doesn’t scale,” says Mr Wu of DeepMap. “It’s all reinventing the wheel, and that’s wasting a lot of resources. That will probably be one of the reasons to block self-driving cars from becoming a commodity.” Because companies do not share mapping data and use different standards, they must create new maps for each new city that they plan to enter. “It will delay the deployment in certain geographies,” Mr Wang says.

Willem Strijbosch, head of autonomous driving at TomTom, says the maps needed for driverless cars are different from the current map applications because they will need to “serve a safety critical function”, rather than just being used for navigation. “Another change is that you can no longer use GPS as your only means of localisation in the map,” he adds, because the global positioning system is not precise enough for self-driving cars.


Eyes in the sky: a revolution in satellite technology

Farmers can use the imagery to estimate crop yields around the world, investors are counting the number of oil storage tanks in China and estimating consumption trends, while human rights campaigners have used it to map the flight of the Rohingya population from Myanmar. On a daily basis, we can now study the shrinkage of glaciers, the expansion of cities, the deforestation of remote wildernesses and the devastation of armed conflict in intense detail.

“Seeing the whole Earth as a single entity is not new,” says Martin Rees, Britain’s astronomer royal. “But what is happening now is that we are monitoring it on a daily basis at high resolution. Satellites have enough resolution to observe every big tree in the world every day.”

Planet now has a fleet of 190 satellites in orbit, including 13 SkySat satellites. That network provides a steady feed of imagery — more than 1.3 million photographs a day — that can be combined with other data streams to create a comprehensive “space data processing platform”. The company includes feeds from the Sentinel satellites, which operate as part of the EU’s Copernicus programme, and the US Landsat 8 satellite, adding infrared and radar capability.

Over the past two years, Planet has sold its data services to hundreds of customers in about 100 different countries, including the US, UK and German governments and big companies such as Bayer, Monsanto and Wilbur-Ellis. Planet says it has strict ethical guidelines and vets its customers as best it can to ensure that sensitive images do not end up in the wrong hands.

The number

Dr. Edward Deming once said that the numbers that best define a company are two factors that do not appear on any financial statement. These factors are the value of a satisfied customer and the value of a dissatisfied customer. These factors must be multiplied by every other number in a financial statement in order to assess the prospects of the business. A high satisfaction leads to repeat purchases and referrals, growing the business; while a low satisfaction leads to ending relationships and a repulsion of potential new customers. These numbers determine everything about the future and nobody quite knows what they are.

Stocks are more similar to bonds than you think

The table demonstrates that stocks have done an admirable job diversifying negative returns in bonds over time, showing losses only in three out of the 16 different times that bonds had down years. The spread between the two averaged more than 16 percent. It should also be comforting to those who practice diversification that even when both have fallen in the same year, bonds typically don’t get crushed like stocks do and instead tend to only show minor losses.

Companies pay workers to get savvier with money

Carrie Leana, a professor of organizations and management at University of Pittsburgh, said participants reported significant declines in their financial worry and increases in both their physical and psychological health.

To tackle this, companies are using incentives to boost participation in financial-wellness programs. These typically combine financial education with customized advice delivered by mobile apps and human advisers. The goal: to teach employees basic money-management skills and remind them—via text messages, emails or one-on-one meetings—to stick to budgets, pay bills and save more for everything from emergencies to retirement.

“We know that stress is the No. 1 cause of health-related issues, and the No. 1 cause of stress is money,” said SunTrust CEO William Rogers Jr. “If we can attack financial stress, we can improve our employees’ physical well-being as well.”

Company Notes 2018.03.02

Techfast Q4 FY2017 Results

All the machines that have been purchased for the military and aerospace projects have been commissioned and are operational. Current work-in-progress are on track and the machines are expected to contribute positively to the sales turnover and hence the bottomline of the SCF business segment for the financial year ending 31 December 2018.

Following on the announcement of the agreement signed with Tecore Synchem, Inc. on 19 December 2017 for the supply and sale of Tecore’s products, the project has now commenced. Samples of Tecore’s products have already been submitted to two of Cape and Oriem’s customers, which are multinational companies, for evaluation and testing.


Thong Guan Industries Q4 FY2017

For the financial year 2018, the group has planned to commission more stretch film production line as well as PVC food wrap lines, two more production lines. With the additional capacity coming on stream in year 2018, the Group is optimistic to continue its upward trend in sales volume and profitability.


IQ Group Q3 FY2018 Results

As explained in the previous quarter’s Commentary on Prospects, we anticipate that similar performance conditions will remain throughout the remainder of this financial year, i.e. with reduced sales due to some delays in new product launches. However, as previously explained, going forward thereafter we anticipate positive performance as various new product launches roll out in FY18/19. Relationships with our global customer base remain very strong and we are blessed with considerable current and future
opportunity from both established and new business relations.

As stated in our prior report, the current volume of product development requirements is good from a new business perspective, but challenging from a resource and timing standpoint. However, following the structural changes within IQ’s R&D resources we are facilitating an acceleration of our new product development capabilities as we go forward.

This FY has proved to be very much a transitional year for IQ, but the future prospects and opportunities are positive from both an ODM and Own Brand perspective and we remain excited about the future.

Bonanza returns for AirAsia co-founders

“The special dividends will always continue because we have many [non-core] assets that can [be] monetised,” said Fernandes, adding that these assets include a 25% stake in online travel agency AAE Travel Pte Ltd, a joint venture with Expedia Southeast Asia Pte Ltd, logistics, cargo and food businesses.

On the back of envelope calculation, the low-cost carrier is getting some RM4.32 billion in cash from all the divestments. Excluding the sum for debt repayment, AirAsia has a sizeable cash pile for dividend payment.

Fernandes and Kamarudin are deemed to have interest in AirAsia through Tune Live and Tune Air Sdn Bhd. Tune Live, equally owned by the duo, holds a 16.73% stake in AirAsia, while Tune Air owns a 15.45% stake. Fernandes controls 48.33% equity interest in Tune Air, while Kamarudin 40.23%, and Abdel Aziz @ Abdul Aziz Abu Bakar holds the remaining 10.94% stake. Tune Live and Tune Air are the largest shareholders of AirAsia.


GDex buys retail postal firm MBE for RM5.5mil

GDex believes that the proposed acquisition is a very strategic move for the group to venture into the retail delivery service sector. MBE Malaysia’s 92 outlets would strengthen GDex’s current network of 79 branches nationwide. MBE Malaysia’s outlets are mainly operating in business districts and shopping malls, which provide great accessibility to business, retail and e-commerce customers.


Fresh growth driver of SKP Resources

With the in-house PCBA capability, SKP Resources is expected to enjoy a wider profit margin and earnings growth will be broadly in line with other EMS players. SKP Resources currently sources PCB parts from other EMS players.

SKP Resources’ in-house PCBA capability could eventually turn into an integrated one-stop EMS service provider and enhance the group’s chances of bagging more contracts from its major customers, commented Kenanga Investment Bank Bhd analyst Desmond Chong in his latest financial result review last Friday.


Notion VTec optimistic about 20% revenue growth

Notion VTec executive chairman Thoo Chow Fah told The Edge Financial Daily that he hopes to see the automotive segment grow by 30% to 40%, and the HDD segment to grow by 5% to 10% this year. Besides that, he said Notion VTec is currently working to secure at least two new clients from Singapore, to provide parts for the contract manufacturers, involving the production of scanners. “We hope to sign the deal with these two potential clients within the next two months,” he said.

In its filing with Bursa Malaysia last Friday, the company said the fall in revenue was mainly attributable to reduction in sale orders following the fire, where HDD, auto and engineered products posted lower sales of 4%, 26% and 14% compared with the preceding quarters respectively. The Oct 20 fire broke out, apparently from a ventilation fan, spreading to the roofing, at its manufacturing plant in Jalan Haji Salleh in Klang. The company said the fire affected more than 552 computer numerical control (CNC) machines and work-in-progress goods, and also the quality control building. Instantly, Notion VTec’s production capacity was down by 40%.

“We have torn down the building, and are currently in the phase of rebuilding a new factory, which should take us to another nine months or so. In the meantime, we have rented four factories nearby as well as utilising all the space we have in our other factories in Johor and Thailand to reach our production level,” Thoo said, adding that the new plant is expected to be fully operational by 2019.


Labour shortage weighs on earnings of HeveaBoard

“During the quarter under review, we had as low as 1,500 workers and this had impacted us as we needed more workers to start our new factory [which was completed in August last year]. This resulted in a backlog of orders to fulfil, which impacted our production efficiencies,” Yoong told The Edge Financial Daily via an email response. Currently, HeveaBoard has about 1,900 workers.

“The management highlighted that the group hedges its 40% sales proceeds to mitigate the risk of forex fluctuations. With the recent sharp rally in the ringgit against the US dollar, that is, from as high as 4.40 in the fourth quarter of 2017 to the current 3.90, the management acknowledged that the negative impacts on the group are unavoidable with the time lag of about two to three months for the group to partially price in the forex factor to customers,” said Lee.