Curated Insights 2017.10.08

Alibaba’s Cainiao fee potential huge, loss ‘negligible’?

Most investors know Cainiao for its data and software business. This has been a critical element behind the success of BABA and eCommerce adoption in China, addressing several friction points in the logistics supply chain. Key issues include China not having a reliable postal code system and the systems dependence on paper weigh bills. Data is scattered, non-standardized and assets are highly fragmented (over 90% of logistics vehicles in China are owned by individuals). Cainiao’s Data Intelligent Network was built to utilize data and technology to coordinate resources across a vast supply chain. In just a three year time frame, adoption of eShipping labels has grown from single digits to +70% and is approaching ubiquity. This is enabling real-time data and tracking across the entire delivery chain…”

“… While Cainiao is seeing tremendous growth providing fulfillment services to merchants, we see potential for an Fulfillment By Amazon (FBA)/Prime-like flywheel with closer alignment of Cainiao and Tmall. We estimate that Amazon.com charges merchants 16% of GMV [gross merchandise value] on average for FBA services, compared to Tmall commissions at 2.2% of reported GMV last year…”


Amazon’s war to the door

Even without mass purchases of jets, trucks and couriers, the package preparation and delivery process is growing more expensive for the company. Amazon’s fulfillment costs — the company’s spending on packaging-and-distribution centers and related expenses – were $8.87 billion in the nine months ended Sept. 30, or 12.4 percent of the company’s net sales in the period. In 2012, they were 10.5 percent of net sales. Amazon’s costs for shipping are also creeping up, from 8.4 percent of revenue in 2012 to 11.7 percent in the three months ended Sept. 30.


Why restaurants hate GrubHub Seamless

Seamless takes a percentage, not a flat fee, of the total food and beverage amount, even though its involvement is the same whether an order is for $10 or $250. When you search for restaurants on Seamless, you may have noticed that, in the default view, the results appear to be random, but they’re actually arranged by who paid what. The more results there are, the harder it is for a restaurant to stand out—which makes restaurants likelier to pay more to increase their exposure.

“Their sales rep makes it perfectly clear that you need to pay a minimum of 20% to exist, and the more you pay, the more you appear in the first pages. Even by paying over 30%, we’re only on the second or third page. So some restaurants pay even more than that! But we could feel the difference when we jumped from 15% to over 30%: We multiplied by 10 our orders from day 1. We don’t make money on Seamless, however. Thirty percent is our break-even point. But it’s helpful for marketing—maybe a customer will try us and then come back in person. I don’t know why anyone would pay anything other than the minimum, because what’s the point of paying 17% to get on the seventh page of results?”

Tech giants play the Game of Thrones

Facebook has pulled off this incredible hat trick with what is arguably the best acquisition in technology in the past 20 years, and that’s Instagram. At the time, people were saying that the child-CEO has really screwed up here and paid $1 billion for a company with only 19 people. By most standards, if you try to value Instagram now, it’s probably worth somewhere between $60 billion and $150 billion. So it has put an afterburner effect on the company, as has likely WhatsApp. They keep finding growth.

If we were to look at everything you have ever put in that search query box, we would probably come to the conclusion that you trust Google more than any priest, rabbi, boss, mentor, coach, professor. If something goes wrong with your kid, your whole world stops. You start praying and you look for some sort of divine intervention that sees everything and then sends you back an answer. Will my kid be all right? So you type “symptoms and treatment of croup” into Google. We trust Google more than any other entity. It is our god.

The way you identify an industry ripe for disruption is you look at whether the price increases are greater than inflation and justified with underlying innovation. The one industry that is most ripe for disruption is education. I think Apple’s roots in education give it unbelievable license to go into that business. I mean, my class generates $160,000 in tuition for each night I teach. They don’t pay me that much. My agent, NYU, takes a 97% commission on that. But when you think about that, it’s ridiculous, and it has some very negative outcomes for our society in the form of debt on young people. So what could Apple do to really change their role and to think different? Start the largest creatively driven low-cost university in the world.

Margrethe Vestager, the commissioner on competition in the European Union, seems to be the only regulator in the world who is levying real fines against these people. You are going to see the first $10 billion-plus fine against one of these four companies in the next 12 months, and it is going to come out of Europe. The real estate isn’t going up in Hamburg. It’s going up in Palo Alto. America gets a lot of the benefits of these four companies, with some of the downside. Europe gets all of the downside and not much upside. The war is going to start, as it has throughout history, on the continent of Europe.

 

Bulldozers can show you where the economy’s going before the official data do

It’s released around the tenth of each month, faster than almost any other economic data. For Japan, the figures have a good correlation with industrial production data, which shows the output and sales of the nation’s industrial giants like Toyota Motor Corp., Mitsubishi Heavy Industries Ltd., and Komatsu itself.

The company collects data from about 140,000 machines in operation in Japan, 110,000 in China, 50,000 in Europe and 70,000 in North America. Rival Caterpillar Inc collects the same kind of data but doesn’t disclose it due to its customer contracts, according to a company spokesperson in Japan.

“It does work as a reference point,” said Yoshikazu Shimada, an analyst at Tachibana Securities Co. in Tokyo who covers Komatsu. “It shows data on public sector works, and data on China especially affects the global economic overview. Komtrax is part of the data that shows you what state the world economy is in.”


Warren Buffett and truck stops are a perfect match

It was No. 15 on the Forbes list of America’s largest private companies, and the chain’s 750 locations across North America generate more than $20 billion of annual revenue.

In fact, gas-station chains are known to have the kind of stable, predictable earnings and business longevity (perhaps even in a self-driving-truck world) that Buffett seeks in takeover targets. Their margins on gas sales go up when oil prices drop. And as fuel margins became more volatile over the past year, the major chains have turned to acquisitions to gain scale and reduce that volatility, as well as spending to upgrade locations.

This is why it makes sense for Pilot Flying J to have the financial backing of Berkshire amid the competitive pressure. Alimentation Couche-Tard Inc., the owner of Circle K, has been scooping up convenience-store businesses in Europe and North America, such as CST Brands for $4.4 billion in a deal that closed in June. Earlier this year, Seven & i Holdings Co., owner of 7-Eleven, bought about 1,100 Sunoco shops and gas retailers to expand its U.S. footprint.

Will new tariffs dim the solar-power boom?

Solar power generates only a pittance of U.S. electricity—about 1%. But it’s growing at a furious rate, accounting for 39% of new electricity generation in the U.S. last year, more than any other source. From 2010 to mid-2017, the total installed solar capacity in the U.S. leaped from 2.3 gigawatts to 47.1 gigawatts, enough to power 9.1 million homes, according to the Solar Energy Industries Association, or SEIA, a trade group. That boom was fueled by government subsidies and a decline in the price of solar cells, which have dropped 40% since the start of 2015.

Petri says tariffs would do more harm than good because they will drive up cell prices. “Will that add jobs? Not likely,” he wrote. “High tariffs will just raise the prices of imported panels and kill installation jobs.” While the industry employs about 260,000 people, 65% of those are in installation or sales, according to a 2016 report issued by the nonprofit Solar Foundation. Only 38,000 work in manufacturing. Because of that imbalance, tariff opponents say it’s much more likely that tariffs will hurt overall U.S. employment than help it.

But couldn’t tariffs persuade Chinese manufacturers to shift production to the U.S., thus boosting employment? Petri is skeptical, particularly because the tariffs are temporary. Foreign manufacturers won’t spend money on building U.S. factories that will become obsolete so fast, he argues.

First Solar’s thin-film technology has always been cheaper than silicon, and the company is launching a new series of panels that will be even more cost-effective. If tariffs raise the price umbrella of competing silicon modules, First Solar can raise its own prices and still go to utility-scale developers and offer to rescue their stranded projects with its thin-film panels. Every penny of these price boosts would fall to its bottom line, and it could demand equity in those projects.


Europe hits Ireland over $15B in unpaid Apple taxes; Luxembourg liable for $294M in Amazon taxes

“Ireland has to recover up to 13 billion euros in illegal State aid from Apple,” she said, referring to this 2016 ruling on the tax issue for the most valuable tech company in the world, which Ireland had appealed. “However, more than one year after the Commission adopted this decision, Ireland has still not recovered the money, also not in part. We of course understand that recovery in certain cases may be more complex than in others, and we are always ready to assist. But Member States need to make sufficient progress to restore competition. That is why we have today decided to refer Ireland to the EU Court for failing to implement our decision.”

“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon’s profits were not taxed. In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules,” she said in a statement. “This is illegal under EU State aid rules. Member States cannot give selective tax benefits to multinational groups that are not available to others.”

Yes, You get wiser with age

Empirical studies have shown that older people are better than younger ones in terms of control over emotion, knowing themselves better, making better decisions that require experience, and having more compassion and empathy towards others.

There are quite a few strategies, and again, these are for successful physical aging, cognitive aging, psychosocial aging. There is strong evidence in favor of them. One is calorie restriction. Second is physical activity, exercise. Very important. Even people in wheelchairs can have some physical activity. Then there is keeping your brain active, do something that is somewhat challenging. Not too stressful, but somewhat challenging. There is socialization, an appropriate degree of socializing. Then comes attitude and behavior, resilience, optimism, compassion, doing things for others, volunteering activities. What they do is they give a purpose to life, and that makes you happier. And there are other strategies like meditation for reducing stress.

Company Notes 2017.10.06

iCapital.biz Q1 FY2018 Results

For top-down/market-timing investors, while Malaysia’s economic growth prospects for the next 12-18 months look bright, there are potential headwinds in the form of an elevated inflation rate, an uncertain political landscape and further US monetary tightening.

Bison ventures into food production

“There is increasing demand for convenient access to retail stores that offer a variety of quality products and services. Therefore, these JVs are in line with Bison’s growth and expansion strategy.”

Dang said some RM50 million worth of investment will be going into building the five-level food processing factory in Rawang, which is targeted to start operations in the first quarter of 2019. “[A selection] of products will be available on a trial and research basis, but the full scale of [offerings] will be rolled out in the first quarter of 2019, which is when the food processing facility will be fully operational.”

“This FY, we have grown our ready-to-eat food business from 8% to 11% of our revenue contribution. Upon the commencement of the first year of production, we expect it to grow to about 15% of our revenue.”


Bison ups the ante

A five-level factory with a built-up area of more than 130,000 sq ft will now be constructed. It is located 500 metres from Bison’s current distribution centre, which augurs well for management and logistics efficiencies. The 100% halal manufacturing facility is targeted to supply 150 stores in 2019, and will have a full supply capacity of up to 600 stores.

GK, a Tokyo Stock Exchange-listed company, is one of the largest in-flight meal caterers in Japan, supplying to 38 airlines, and also owns a restaurant chain operation with more than 400 stores in and out of Japan. On the other hand, Ryoyupan is one of the top-five players in the Japanese bakery industry and the biggest on Kyushu Island.


The rise and rise of JF Technology

“Demand for microchips is not only dependent on consumer spending, which drives the smartphones and computer sales. Now there is emerging demand from the automotive and IoT (internet of things) sectors.”

JF Technology is involved in the design and manufacture of test probes and test sockets for the semiconductor industry. For one, testing equipment such as test probes and sockets are wear-and-tear products that need to be changed frequently. For another, semiconductor giants such as Texas Instruments that designs chips would constantly develop new products regardless of market conditions. As a test socket design and manufacturer, JF Tech provides customised solutions for the chips developer to test their products. Once the chip prototype is acceptable, it will then goes into high volume manufacturing (HVM).

“We believe Zigma product would be a game changer for the company, as well as the testing industry. This is because Zigma product has a different approach, which it avoids wear on the board and make the testing process more efficient.” He says that the law suit has affected the company’s sales in the US and profitability. JF Tech generates about 65% of its sales from the overseas market. Foong says that the company is currently operating at 40% of its capacity, as such JF Tech is unlikely to pump any new capital expenditure for few years.


SunCon, WCT, Gabungan AQRS bag LRT3 contracts

SunCon announced to Bursa Malaysia yesterday that it had been awarded a RM2.18 billion contract, boosting its outstanding order book to RM6.5 billion — the highest ever since its inception. The contract is SunCon’s fourth elevated rail project, its largest single project in 36 years. The scope of work includes 9.2km of viaduct works, construction of six stations, and the design and building of an iconic cable-stayed bridge over the Klang River.


United Malacca confident of finalising Sulawesi land buy

“The first priority is to plant stevia and coconut, followed by cocoa and coffee, which are subject to the land topography and soil type.”

At the same time, Tan also said the development of the Central Sulawesi land is expected to incur higher capital expenditure, which could result in lower dividend payments compared with the previous years.


MAHB: Five new airlines coming to KLIA

“I just come back from the World Routes Forum 2017 in Barcelona, Spain where multiple discussion were had and I am hopeful that at least five more new airlines will join us next year. As you know, we are always actively looking for partners and new airlines to come join us, for 2017 we already saw eight new airlines joining us and since everything in aviation is seasonal, we are not expecting any more new airlines for the rest of the year.”

“Our original (growth) forecast (for passenger volume) was at six per cent this year but we have revised that to eight per cent, and I believe we may end up at some 90 million this year for Malaysia as a whole. For airports, we have the volume but we need more capacity (upgrading) for airports infrastructure and that’s something that the government has to look into.”


KLIA Aeropolis to see RM500m investment in next two years

The 60-acre (24.28ha) Aeropolis, which is part of the Digital Free Trade Zone (DFTZ) launched by the government in March this year, will also house Alibaba Group’s e-commerce hub for Southeast Asia. Malaysia Airports Holdings Bhd and Alibaba’s logistics arm, Cainiao Network, will be jointly establishing the trans-shipment hub there.

Liow said 20 of the world’s top 25 freight forwarders will have operations in the Aeropolis.

“It is estimated that a 20% increase in ICT investment will result in around 1.4% GDP growth for Malaysia,” Liow added.

Fitch expects Malaysian banks to offer higher rates on longer-term FDs

The NSFR metric focuses on a 12-month timeframe and is likely to encourage banks to compete more aggressively for even longer-tenor deposits, and shift towards long-term wholesale debt funding.

The ratings agency noted that Bank Negara Malaysia (BNM) has said that more than three-quarters of Malaysian banks have an NSFR that meets the minimum requirement, which will be set at 100%.

The banking sector’s loan/deposit ratio of 89% and liquidity coverage ratio (LCR) of 133% at end-August 2017 indicate that the system’s aggregate funding and liquidity are reasonably healthy.


KWAP mulls investment in Alibaba Group

“We have an asset allocation and, at the moment, investment in the tech space is still well below the asset allocation limit. We are trying to limit it to no more than 1% of our asset allocation in the tech space. At the moment, it’s just US$70 million (RM296.1 million). Our fund size is over RM100 billion.”

“KWAP has only ventured into the tech space recently. Two years ago, we invested in Uber. We have another two more tech funds that we have invested in. This is part of our familiarisation with the industry. So far, to date, we have put in about US$70 million: US$30 million with Uber and another US$40 million with two tech funds … we can do a bit more and we would like to have more involvement in this space. We have learnt a lot along the way and, with that, I think we can step up and make more productive investments moving forward.”


Property lending rule from 1997 is still relevant

“IBs, in demanding for this guideline to be ‘scrapped’, are taking a short-term view and should consider the long-term systemic implications of an over-exposure to the property sector and not narrowly focus on their own commercial gains. We should not be oblivious to the many lessons learnt from the Asian and global financial crises,” Bank Negara said in the statement.

The guideline, introduced on April 1, 1997, is for all commercial, Islamic and investment banks. In short, it stipulates that a bank’s credit facilities — meaning all forms of lending, including the issue of guarantees, private debt securities and commercial papers — to the BPS should not exceed 20% of its total outstanding loan base. Compliance to this requirement is calculated on a quarterly basis.


World Bank warns M’sia of pockets of risks

The World Bank in its semi-annual review of the region’s developing economies pointed out that the ongoing adjustments to the rising costs of living amid continued fiscal consolidation and elevated household indebtedness could weigh on the strength of private consumption in Malaysia. These deficits are especially worrying in cases where public debt is also high or rising. It is a combination of the two that poses risks to fiscal sustainability as the combination narrows governments’ policy space for responding to shocks.


World Bank sees currency risk in Malaysia

Monetary authorities need to be prepared to tighten their policy stance if capital outflows prompt currency weakness. In the case of depreciation pressures in China, authorities should allow greater adjustment through relative prices and closely monitor financial sector vulnerabilities as monetary policy further tightens.

Curated Insights 2017.10.01

Alibaba takes control of delivery business at center of U.S. probe

China’s largest web marketplace agreed to increase its stake in Cainiao Smart Logistics Network Ltd. to 51 percent. Under the deal, Alibaba plans to consolidate Cainiao’s financials into its own books, eroding Alibaba’s bottom line, and will get an additional seat on Cainiao’s board, taking its representation to four out of seven seats.

It oversees a coterie of more than a dozen shipping partners, orchestrating deliveries carried out by about 2 million people across more than 600 cities. Cainiao’s operation had enabled Alibaba to maintain what it called an asset-light model that eschewed expensive warehouse construction.

“They’re realizing that it’s much more capital-intensive than they expected to build this out. Right now they are essentially obligating themselves to report profit and loss on the income statement every quarter, which they probably should have been doing.”


A small-screen iPod, an Internet Communicator and a Phone

This comparison is apt: the Watch is effectively stealing usage from the iPhone. At first it took alerts, timekeeping, and basic messaging away. Now it’s taking basic phone calls and music and maybe maps.

It’s fitting therefore to remember how the iPhone was launched; as a tentpole troika: A wide-screen iPod, an Internet Communicator and a Phone. Today the new Watch is a small-screen iPod, an Internet Communicator and a Phone.

So not only is the Series 3 Watch more powerful than the original iPhone but it is also poetically capable of the same tentpole jobs. But it’s not just a miniature iPhone. It has a new, completely orthogonal attack on non-consumption and market creation: fitness and health. This is a key point. The iPhone was born a phone but grew up to be something completely unprecedented, unforeseen by its creators and, frankly, undescribable in the language of 2007.


Forget the Swiss, it’s Fossil that Apple is threatening

In the watch world, the Fossil Group is a giant. It has 17 brands: six of its own (Fossil, Skagen, etc.) and 11 licensed brands (Michael Kors, Emporio Armani, Tory Burch, etc.) In 2014, it was on a roll, achieving a fifth consecutive year of record revenues, at $3.51 billion. Watches accounted for 78% of that.

Then along came Apple. Suddenly, Fossil was competing with a monster 67 times bigger than it was (measured by revenues). “Prior to that, we were clearly positioned as the competitively advantaged leader in a growing category,” Fossil CEO Kosta Kartsotis told financial analysts in February. “However, with the introduction of technology into wrist devices, traditional watches came under pressure and we were disadvantaged. We didn’t have the technology capabilities to compete with smartwatches, leading to a decline in our market.”

“I haven’t met with anybody [in Switzerland] yet who sees this [downturn] as anything other than a slump,” he told me in March. “They don’t see the threat from the smartwatch.” Apple will continue to perfect the smartwatch, he says. “By version 3 or 4, everyone will be thinking this is a good thing to have. Forty to 80 million people will want this.”


Siemens to merge rail operations with French rival Alstom

Siemens will transfer its business making train and transit cars and signaling equipment to Alstom in exchange for a 50 percent stake in the enlarged company.

The combination will give the German company control of an icon of French industry that developed the high-speed TGV trains that zip across the countryside at upwards of 300 kilometers an hour (186 miles per hour)…Capping years of speculation in the industry about the need for consolidation, the tie up could mirror the emergence of European planemaker Airbus in the 1970s that went on to become the biggest competitor to Boeing Co.

Now, the companies’ tie up comes after Chinese dominance of the train market has solidified. CRRC controls about half of the rail car and locomotive market, while Siemens and Bombardier each have about 12 percent and Alstom around 11 percent, according to Desjardins Capital Markets. The Chinese company was formed in 2015 in a merger of the country’s two main regional train manufacturers and it has won rail orders in U.S. cities such as Boston, Philadelphia and Los Angeles.

China gives automakers more time in world’s biggest EV plan

Under the so-called cap-and-trade policy, automakers must obtain a new-energy vehicle score — which is linked to the production of various types of zero- and low-emission vehicles — of at least 10 percent starting in 2019, rising to 12 percent in 2020, the Ministry of Industry and Information Technology said on its website. The rule applies to carmakers that manufacture or import more than 30,000 traditional vehicles annually, and those who fail to comply must buy credits or face fines.

The targets look achievable for the industry as a whole, McKerracher said. Considering the credit structure, 12 percent in 2020 would translate to about 4 percent to 5 percent of actual vehicle sales.


Why India will tell us when self-driving cars will hit the US

When will self-driving cars arrive? Depends on who you ask. The VCs believe what they’re told by their portfolio companies. Automakers will say anything to inflate their stock price relative to Tesla. Self-driving evangelists and “keynote speakers” on LinkedIn? Broken clocks not yet right even once. The media? There are still less than ten people writing intelligently on a market expected to hit $7 trillion.

Population density is so high that no current Automatic Emergency Braking system could possibly work in traffic, because no car equipped with it would ever move. What about Blind Spot Monitoring systems? They’d be lighting up and chiming so much, you’d have to disable them.

That Indian roads are more dangerous than America’s is obvious, and beside the point. No government ever eases traffic safety laws. Indian traffic fatalities in 2013 approached 240,000, in a country of 1.3 billion. That’s 16.6 deaths per 100,000 inhabitants per year. For those numbers to go down, people have to have choices that lead to them to safety. In a country where the majority have never owned a car, where two wheelers dominate and road conditions are terrible, getting people into any car will improve overall safety.


Learning effects, network effects, and runaway leaders

Learning effects have the potential to generate enormous economic value, as network effects do, if companies are able to close this loop and make it self-reinforcing: that is, if their products learn more because they have become more valuable.

In order for learning effects to produce runaway leaders, a company must secure a definitive advantage over its competitors in one of the component areas of learning effects – data, intelligence, product innovation or user/customer growth – and leverage this into advantages in the others, such that the company can acquire data, learn, innovate and grow not only more rapidly than its competitors do, but more rapidly than they can.

Certain products – particularly those built on highly dynamic datasets – may have perpetual learning curves such that in a rapidly changing world, they can always be meaningfully improved. It’s around these kinds of products that the most valuable runaway leaders will likely develop. Potential examples include search, semantic engines, adaptive autonomous systems and applications requiring a comprehensive real-time understanding of the world.

How Europe’s changes to copyright law will affect America

The goal of these copyright changes is to adopt new protections for publishers and artists. But if they are put in place, the burdens they would place on internet platforms would curtail the kind of quick uploading, sharing, commenting and responding that makes the Web so useful. Additionally, we have no reason to believe that these new plans would actually benefit the journalists and artists in whose name the measures are being proposed.

Yet a lot more is at stake than the fate of Google or Facebook. Those companies at least can afford the cost of complying with (or avoiding) Europe’s copyright proposals. Smaller businesses can’t. For example, medium-sized internet platforms pay between $10,000 and $25,000 a month in licensing fees for a common tool that conducts a copyright scan of uploaded audio files, an impost that could wipe out a new startup.


India: A $6T GDP By 2027?

The government and the Central Bank are on a mission to rapidly formalize and financialize the Indian economy. India has introduced a universal biometric identification system (Aadhaar), initiated measures to boost financial inclusion, moved to a new fully online value-added goods and services tax system and implemented real-time payment systems. Coupled with rising smartphone penetration, likely doubling from 300 million to nearly 700 million by 2020, these changes are driving India’s digitization. We expect a step change in India’s per capita income, banking system and stock market performance over the coming years. The channels of change include more financial penetration, greater tax compliance and increased credit to micro enterprises and consumers.

The result could be a multi-trillion dollar investment opportunity. Aside from the near-term teething issues involved in execution of such big changes and other cyclical problems faced by the economy, there is scope for visible shifts in economic activity starting in 2018.


We’re going to need more lithium

By 2030, Tianqi Lithium, SQM, Albemarle, and FMC, the companies that dominate the business, will have to supply enough lithium to feed the equivalent of 35 plants the size of the Tesla Gigafactory now being built in Nevada, according to BNEF. The total investment in new mines, including some for other elements used in lithium ion batteries, will likely range from $350 billion to $750 billion, according to analysts at researcher Sanford C. Bernstein & Co.


 

Our hankering for meat is a boon for global antibiotic producers

Food animals will consume 200,235 tons of antimicrobial medicines by 2030, 53 percent more than they were getting in 2013, according to a study published Thursday in the journal Science. China, already the world’s largest consumer of veterinary antimicrobials, is forecast to lead the charge, with a 59 percent jump.

Limiting daily meat intake worldwide to the equivalent of one standard fast-food burger per person could reduce global consumption of antimicrobials in food animals by 66 percent, the researchers said.

37 quotes from big corporate execs who laughed off disruption when it hit

“Amazon.com is a very interesting retail concept, but wait till you see what Wal-Mart is gearing up to do,” he said [IBM Chairman, Louis V. Gerstner Jr.]. Mr. Gerstner noted that last year IBM’s Internet sales were five times greater than Amazon’s. Mr. Gerstner boasted that IBM “is already generating more revenue, and certainly more profit, than all of the top Internet companies combined.”

The Apple watch is an interesting toy, but not a revolution,” said Swatch executive Nick Hayek Jr., speaking to a Swiss newspaper. “I personally don’t want my blood pressure and blood sugar values stored in the cloud, or on servers in Silicon Valley … I cannot accept the responsibility of whether my device warns a customer in time before a heart attack.”

“Apple is like a mutant virus, escaping from the traditional structure of the PC industry, but the industry will still eventually build up immunity, thus further blocking this trend, and we believe the size of the non-Apple camp will exceed Apple’s, because this is how the industry normally evolves.”

“Television won’t be able to hold onto any market it captures after the first six months. People will soon get tired of staring at a plywood box every night.”


So few market winners, so much dead weight

Only 4 percent of all publicly traded stocks account for all of the net wealth earned by investors in the stock market since 1926, he has found. A mere 30 stocks account for 30 percent of the net wealth generated by stocks in that long period, and 50 stocks account for 40 percent of the net wealth.

Once you actually find these rare companies, you have to hold on to them. This too is much more challenging than most realize. The stellar stocks tend to have regular, gut-wrenching price slumps; the big winners above have all suffered retreats of 50, 60 even 90 percent on the way to becoming the biggest winners. Most investors lack the fortitude and discipline to manage the pain of these severe price fluctuations.

Once you get through those two challenges, you have to decide when to jettison these winners since nothing continues forever. As Sommer points out, General Motors Co. was a star from 1926 on — that is, until it went bankrupt in June 2009 and basically wiped out equity investors. AT&T Inc., meanwhile, was broken into many smaller parts, some of which have done very well (Verizon Communications Inc.), while others not so much (Lucent).

As we have observed repeatedly, finding the very best companies to own is very difficult to do.


Some market myths hurt investors

Margin debt at all-time highs mean euphoria in the markets. Margin debt reflects the amount of borrowed money used to purchase securities in the markets. It sounds scary when people point to margin debt at an all-time high because that means investors are borrowing more money than ever to buy stocks. But this indicator doesn’t really tell us anything. As markets rise, margin debt will rise. As markets fall, margin debt will fall. All historical margin debt peaks tell you is that margin debt fell when stocks fell. The following chart is more useful, as it shows margin debt as a percentage of the overall market cap of the stock market. Margin debt is a backward-looking indicator that tells you nothing else beyond how the stock market has performed in the past.

Something’s gotta give between stocks and bonds. Investors often assume stocks or bonds are telling them something. So when both rise at the same time, the assumption is that either the equity or fixed-income market must be wrong. The problem with this line of thinking is that stocks and bonds both go up over time, and most of the time they go up at the same time.

Bonds always lose money when interest rates rise. Out of those 36 rising rate years, 27 had positive returns on five-year Treasuries. So three-quarters of the time when rates rose on a calendar-year basis, bonds still earned positive returns. Rising rates will lead to lower bond prices, but you have to think in terms of total returns to understand the relationship between bond performance and interest rates.

Curated Insights 2017.09.17

Apple’s real advantage is what’s inside the new iPhones and Watch

“If you look at the Android smartwatches that have cellular, they are literally twice the size.”

The iPhone 8 and X have the new A11 Bionic chip, which enables all sorts of clever image processing, augmented reality and artificial intelligence tasks. That gives Apple a big advantage in the AR market, which Morgan Stanley estimates could be worth $404 billion over the next three years.


Steve Jobs’ legacy & the iPhone X

The FaceID is a perfect illustration of Apple’s not so secret “secret sauce” — a perfect symbiosis of silicon, physical hardware, software, and designing for delight. Their abilities to turn complex technologies into a magical moment is predicated on this harmonious marriage of needs.

Controlling your own destiny is a smart business strategy and Apple isn’t the only one doing it. Today Google and Facebook are designing and producing their own highly optimized hardware for networking and data centers, mostly because the industry vendors like Cisco Systems made gear that had to fit the needs of many companies. Google is designing its own chips — especially to conduct resource hungry machine learning and artificial intelligence tasks.

It all starts with Silicon. Unlike software which can be written, discarded and rewritten at a rapid clip, the law of reality makes it hard for a chip to be designed, tried and manufactured at scale. So in a sense, Apple’s chip and hardware teams have to peer almost two-to-four years into the future, predict what could be possible, what they can make possible and then make it work.


Alibaba’s Jack Ma sets his sights on a new target

“Today if you look at the volume of the packages generated from our platform, it is about 55 million a day and we strongly believe that this can go grow to 1 billion, some years later. The size of the retail business in China is about 30 trillion yuan ($4.6 trillion). The question is, how do you redefine smarter package delivery? You don’t have to get the package and fly it from one warehouse to another city for a 200-kilometers delivery. You can deliver from the store nearby. It still creates a lot of new packages shipped, but very conveniently. So, today, all these logistics systems should be integrated into the commerce system.”


Meet the Earth’s largest money-market fund

Fueled by contributions from some 370 million account holders, the fund, known as Yu’e Bao—which means “leftover treasure”—has grown rapidly to manage $211 billion in assets. It is more than twice the size of the next largest money-market fund, a U.S. dollar liquidity fund managed by J.P. Morgan Asset Management, according to data from Morningstar Inc. Yu’e Bao’s assets doubled in the past year alone, and the fund now makes up a quarter of China’s money-market mutual fund industry.

Data reviewed by The Wall Street Journal indicates Tianhong boosted Yu’e Bao’s returns in recent years by increasing its allocation of funds to financial instruments with longer maturities. Such assets, however, tend to be less liquid than bank deposits and lower-yielding investments. About 40% of Yu’e Bao’s investments mature in under 60 days, versus over 60% four years ago, according to Tianhong’s reports.

Tianhong said it has various measures in place to prevent a liquidity crunch and believes the “probability of mass redemption is very low.” It said most of the fund’s customers have fairly small holdings of around $590 on average.


China fossil fuel deadline shifts focus to electric car race

The world’s second-biggest economy, which has vowed to cap its carbon emissions by 2030 and curb worsening air pollution, is the latest to join countries such as the U.K. and France seeking to phase out vehicles using gasoline and diesel. The looming ban on combustion-engine automobiles will goad both local and global automakers to focus on introducing more zero-emission electric cars to help clean up smog-choked major cities.


France drives EU tax blitz on revenues of US tech giants

Currently, US technology groups such as Apple and Facebook are taxed in Europe based on profits rather than total revenues. Many of these companies have angered European tax collectors and voters for years by using EU governments’ disparate tax codes to record profits in jurisdictions with the lowest effective rates, meaning that some companies have been able to pay little or no tax in countries where they have billions in sales.

We still don’t really know what CRISPR does to human embryos

Genome editing works by breaking DNA, and letting a cell’s natural repair mechanisms fix it. This is usually quite haphazard, and precise repairs were thought to be rare.


What machines can tell from your face

Although faces are peculiar to individuals, they are also public, so technology does not, at first sight, intrude on something that is private. And yet the ability to record, store and analyse images of faces cheaply, quickly and on a vast scale promises one day to bring about fundamental changes to notions of privacy, fairness and trust.

China’s government keeps a record of its citizens’ faces; photographs of half of America’s adult population are stored in databases that can be used by the FBI. Law-enforcement agencies now have a powerful weapon in their ability to track criminals, but at enormous potential cost to citizens’ privacy.


I’m not sold on self-driving cars

Even if self-driving cars do become ubiquitous, the benefits aren’t certain — as an overview from the Victoria Transport Policy Institute points out. Consider traffic. Freed from driving, people might demand more luxurious vehicles, in which they can work or even sleep. The added amenities will take up more space on the road, while the comfort will encourage people to take bigger trips and endure longer commutes. They might even prefer to move more slowly, to avoid unexpected accelerations that could wake them up or tip over a wine glass. Empty cars might circle endlessly to avoid parking charges. The potential result: more miles driven, more congestion and increased emissions.


Your next meal depends on 14 choke points in the world’s food supply transport chain

As the share of the world’s population with insufficient food supply has fallen from 52 per cent in 1965 to 3 per cent in 2005, most gains have come not through improved food production at home and self-sufficiency, but through increased trade; nearly 1 billion people worldwide now rely on international trade to meet their food needs.

While China is a key driver of increasing stress on the global food supply system, it is ironically not among the most vulnerable – not just because it has worked hard to diversify its food supply sources, but because it stands alone in investing serious money in improving the food supply chains on which it so heavily depends.

International commentators claiming that China’s US$20 billion investment this year in overseas ports is an expression of military muscle and expansionism miss the point. Investment in ports like Djibouti and Gwadar – along with the other 42 ports worldwide that Chinese companies have invested in – has much more to do with securing stable food and energy supplies than anything more sinister.

Earnings Call Digest 2017.08

Apple (Q3 2017 Results) – Earnings Call Transcript

Services revenue hit an all-time quarterly record of $7.3 billion representing 22% growth over last year. We continue to see great performance all around the world with double digit growth in each of our geographic segments. Over the last 12 months, our services business has become the size of a Fortune 100 company, a milestone we’ve reached even sooner than we had expected.

Sales of Apple Watch were up more than 50% in the June quarter and it’s the number one selling smartwatch in the world by a very wide margin.

We’re also seeing incredible enthusiasm for AirPods with 98% customer satisfaction based on Creative Strategy’s survey. We had increased production capacity for AirPods and are working very hard to get them to customers as quickly as we can, but we are still not able to meet the strong level of demand.

We are very focused on autonomous systems from a core technology point of view. We do have a large project going and are making a big investment in this. From our point of view, autonomy is the mother of all AI projects. And the autonomous systems can be used in a variety of ways and a vehicle is only one.

The App Store was a major driver of this performance. And according to App Annie’s latest report, it continues to be by a wide margin the preferred destination for customer purchases, generating nearly twice the revenue of Google Play. Revenue from our Apple Music streaming service and from iCloud storage also grew very strongly. And across all of our Services offerings, the number of paid subscriptions reached over 185 million, an increase of almost 20 million in the last 90 days alone.


Square (Q2 2017 Results) – Earnings Call Transcript

One of the drivers of our results is our work on automation, which I mentioned is an area of increased focus for us this year. Automation has always been a core differentiator for us. We’ve used machine learning and data science to manage risk since the beginning of Square. We’re constantly looking for ways to make our services more automated and more self-serve and machine learning is perfect for that.

First, automation allows us to give more people access to the financial system. More than 90% of sellers are automatically approved and self-onboard to process payments, and we’re able to onboard individuals to Square Cash with just a zip code and an e-mail address or phone number. We’ve extended this approach to risk management in Square Capital to provide financing to the underserved.

Second, automation helps us scale as we grow. For example, we currently automate risk assessment for more than 99.95% of transactions. We’re also able to make improvements to our manual handling; our fraud models have already allowed us to resolve 40% more cases every week, compared to beginning of the year.

And third, automation allows us to help our sellers grow. You can see this in our unique suite of CRM tools. We leverage our deep understanding of the customer to build marketing and loyalty programs that are easy to use, measurable and effective. Our loyalty programs are tracked and managed by Square point-of-sale and our technology automatically recommends programs optimized for the seller’s particular business.

Subscription and services-based revenue nearly doubled on a year-over-year basis as Instant Deposits, Caviar and Square Capital all benefited from stronger adoption, both within our installed-based and for bringing new customers to the Square ecosystem.


Tesla (Q2 2017 Results) – Earnings Call Transcript

What we have ahead of us, of course, is an incredibly difficult production ramp. Nonetheless, I think we’ve got a great team, and I’m very confident that we will be able to reach a production rate of 10,000 vehicles per week towards the end of next year. And we remain – we believe on track to achieve a 5,000 unit week by the end of this year.

So, if you can sort of see where we came from, the Roadster – we were making only 600 units a week where the non-powertrain portion of the car was made by Lotus. And we did the powertrain and final assembly of the car, and then we went from that to 20,000 units a year of the Model S, a far more complex car, where we did the whole thing. And then with Model 3, we are more vertically integrated. I think people should really not have any concerns that we will reach that outcome from a production rate.

…We’re also thinking hard about, where do we put Gigafactorys three, four, five and six? We expect to keep the majority of our production in the U.S., but it’s, obviously, going to make sense to establish a Gigafactory in China and Europe to serve the markets there, because it’s not to build cars in California and truck them halfway around the world, particularly when you’re trying to make things as affordable as possible – that really hurts. We really want to make our cars as affordable as possible. And so that does require some amount of local market production, particularly for the mass market vehicles in order to make it as accessible as possible.

Model Y, or our compact SUV – it’s called Model Y. It may or may not be – would be a totally new architecture. Upon the council of my executive team – thank you. Thanks, guys – who reeled me back from the cliffs of insanity – much appreciated – the Model Y will in fact be using a substantial carryover from Model 3 in order to bring its market faster. Yes. So that will really accelerate our ability to get to Model Y to market faster, because fundamentally people prefer a sedan, people prefer an SUV. And in fact, the SUV market is larger. It’s the biggest single product I believe in the world.


Tableau Software (Q2 2017 Results) – Earnings Call Transcript

With subscription, our customers get the full power and simplicity of Tableau but with lower risk and a lower initial investment. And the move to subscription also creates recurring revenue streams, generates more predictable results over the long-term and expands the overall market.

For example, this quarter TransUnion, a credit reporting and global risk information provider that serves over 45,000 companies and more than 500 million customers, standardized their analytics on Tableau across multiple areas from credit reporting to health care and auto lending, amongst many others. By signing a subscription agreement, TransUnion will be able to flexibly scale their deployment as they grow and build out their analytic solutions…We continue to believe that subscription is the right long-term decision for all of our stakeholders and will only help us to sharpen our commitment to our customers on a daily basis.

Our passionate customer base is not just a U.S. phenomenon; it’s global. And it’s been incredible to see our community thrive around the world, across various user groups, training groups and conferences. For example, in the UK, Jet2.com, a leading British leisure airline and package holiday specialist, recently chose Tableau to visualize complex data that was difficult to analyze and access within Excel. With Tableau, Jet2 is now able to better analyze a range of data to attain faster speed to insight.

And in APAC, Mercedes-Benz expanded their self-service analytics capabilities with Tableau in their China Financial Services Group. Now the company, including the most senior management has real-time visibility on the organization’s auto financing, leasing and insurance performance and now makes daily strategic business decisions from a single source of truth through Tableau.

Turning now to customer momentum in the cloud, we’re seeing strong demand from customers who want to be able to run their analytics in the cloud. And with Tableau, customers can deploy on their choice of cloud, whether it be AWS, Azure or Google or a fully managed SaaS solution via Tableau Online. That flexibility and choice has already attracted thousands of customers running on Tableau Online and thousands more running Tableau on the public cloud. In fact, over one-third of our Tableau server trials today are deployed in the public cloud.

Turning now to product, I want to focus on two important areas: giving our customers choice with how they connect to their data and enriching our smart analytics offering via machine learning recommendations. Tableau now has over 65 native data connectors from on-premises databases like Oracle and SAP, Hadoop systems like Cloudera and Hortonworks, and cloud databases like Amazon Redshift and Google BigQuery.


IAC/InterActiveCorp (Q2 2017 Results) – Earnings Call Transcript

…it is a very – the SVOD market is very crowded and cost were skyrocketing.

In terms of new M&A, the thing that worked well for us are this concept of product – the scale improved the product, not just the price. That is the way – the way we think about network businesses or marketplace businesses and that’s what we’re looking for.

…there is again a natural tailwind today are in terms of the online migration, in terms of video being more relevant in a lot more places than it used to be, to a lot of businesses than it used to be, to lot more individuals than it used to be.


Activision Blizzard (Q2 2017 Results) – Earnings Call Transcript

We invest in creative and commercial excellence in order to expand reach, deepen engagement and provide more opportunity for player investment which then allows for reinvestment in creative and commercial excellence and for the growth cycle to continue.

Let’s start with audience reach, which was 407 million monthly active users this quarter. Blizzard did not have any new full game releases this quarter, yet a strong stream of content updates across Blizzard franchises drove an all-time MAU record of 46 million, up 38% from last year and up 12% from the last quarter. Blizzard’s community has now more than doubled in MAUs since early 2015, underscoring the ability to grow audience reach across the portfolio of platforms, regions, genres and business models.

As illustrated by the frequency with which players reengage each month, it remains at an all-time high. To put this in perspective, the time spent per player per day inside King franchises is 35 minutes, higher than that of Instagram or Snapchat.


Workiva (Q2 2017 Results) – Earnings Call Transcript

A large regional bank is using Wdesk for its call reports which are quarterly filings required by the FDIC. A large sporting-goods company is now using Wdesk for corporate performance management. The company will use Wdesk to consolidate spreadsheets into a linked workbook, thereby reducing manual data entry. The treasury department of a private electrical products manufacturer is using Wdesk for debt compliance reporting.

We remain focused on our leadership in the SEC compliance market. We continue to add new customers at both large and small public companies, because we believe that Wdesk is widely regarded as the best practice for SEC reporting and XBRL. In the first quarter of 2017, Wdesk was used to file 53% of all XBRL facts with the SEC. So as you can see, we have room to grow in this market. Customer press releases this quarter reported that a multinational agri business is achieving an ROI of 266% and reaping more than $677,000 in total savings and benefits over 3 years by using Wdesk to streamline its management reporting.

We finished Q2 with 2908 customers, a net increase of 286 customers from Q2 2016 and a net increase of 83 customers from Q1 2017. Our subscription and support revenue retention rate, excluding add-ons, was 96.1% for the month of June 2017 compared with 95.1% in both March 2017 and June 2016. Customers being acquired or ceasing to file SEC reports accounted for a majority of revenue attrition, consistent with our experience to date. With add-ons, our subscription and support revenue retention rate was 106% for the month of June 2017 compared with 106.6% in March 2017 and 110.2% in June 2016. Increased subscription revenue on non-SEC use cases from existing customers continues to be the primary driver of our add-on revenue retention rate.


Etsy (Q2 2017 Results) – Earnings Call Transcript

There has been much speculation about the size of the market for handmade. But handmade is not a purchase occasion nor is it representative of all of our 45 million listings. Etsy is about so much more than handmade. Buyers come to us when they want something special. And being the destination for something special is powerful because special can’t be commoditized.

But how big is the market for special? We believe the market for special is huge. Etsy shines specifically in three types of purchase occasions. Celebrations, gifting and style. If you think about it, these types of occasions happen regularly throughout the year. These occasions drive purchases across six primary categories, clothing and accessories, home and living, jewelry, craft supplies, art and collectibles, and paper and party supplies. Not surprisingly, these are also Etsy’s top six categories based on GMS.

First, we are building trust and reliability throughout the buyer experience. Trust is essential for any marketplace but is even more so for one that’s both on original and unbranded goods. Our goal is to bolster trust not just in the item and the seller, but in the Etsy brand.


NVIDIA (Q2 2018 Results) – Earnings Call Transcript

Data center is a very large market, as you know, and the reason for that is because the vast majority of the world’s future computing will be largely done in data centers. And there’s a very well accepted notion now that GPU acceleration of servers delivers extraordinary value proposition. If you have a data-intensive application, and the vast majority of the future applications in data centers will be data intensive, a GPU could reduce the number of servers you require or increase the amount of throughput pretty substantially. Just adding one GPU to a server could reduce several hundred thousand dollars of reduction in number of servers. And so the value proposition and the cost savings of using GPUs is quite extraordinary.

Cryptocurrency and blockchain is here to stay. The market need for it is going to grow, and over time it will become quite large. It is very clear that new currencies will come to market, and it’s very clear that the GPU is just fantastic at cryptography. And as these new algorithms are being developed, the GPU is really quite ideal for it. And so this is a market that is not likely to go away anytime soon, and the only thing that we can probably expect is that there will be more currencies to come. It will come in a whole lot of different nations. It will emerge from time to time, and the GPU is really quite great for it.

Volta was a giant leap. It’s got 120 teraflops. Another way to think about that is eight of them in one node is essentially one petaflops, which puts it among the top 20 fastest supercomputers on the planet. And the entire world’s top 500 supercomputers are only 700 petaflops. And with eight Voltas in one box, we’re doing artificial intelligence that represents one of them. So Volta is just a gigantic leap for deep learning and it’s such a gigantic leap for processing that – and we announced it at GTC, if you recall, which is practically right at the beginning of the quarter.

A neural net in terms of complexity is approximately – not quite, but approximately doubling every year. And this is one of the exciting things about artificial intelligence. In no time in my history of looking at computers in the last 35 years have we ever seen a double exponential where the GPU computing model, our GPUs are essentially increasing in performance by approximately three times each year. In order to be 100 times in just four years, we have to increase overall system performance by a factor of three, by over a factor of three every year.

And yet on the other hand, on top of it, the neural network architecture and the algorithms that are being developed are improving in accuracy by about twice each year. And so object recognition accuracy is improving by twice each year, or the error rate is decreasing by half each year. And speech recognition is improving by a factor of two each year. And so you’ve got these two exponentials that are happening, and it’s pretty exciting. That’s one of the reasons why AI is moving so fast.

The second major component is our self-driving car platforms, and a lot of it still is infotainment systems. Our infotainment system is going to evolve into an AI cockpit product line. We initially started with autonomous driving. But you probably heard me say at GTC that our future infotainment systems will basically turn your cockpit or turn your car into an AI. So your whole car will become an AI. It will talk to you. It will know where you are. It knows who’s in the cabin. And if there are potential things to be concerned about around the car, it might even just tell you in natural language. And so the entire car will become an AI.

The next revolution of AI will be at the edge, and the most visible impactful evidence will be the autonomous vehicle. Our strategy is to build a ground-up deep learning platform for self-driving cars, and that has put us in pole position to lead the charge.


The Walt Disney (Q3 2017 Results) – Earnings Call Transcript

It’s been clear to us for a while with the future of this industry will be forged by direct relationships between content creators and consumers. Given our incomparable collection of strong brands that are recognized and respected the world over, no one is better positioned to lead the industry into this dynamic new era, and we’re accelerating our strategy to be at the forefront of this transformation.

With this strategic shift, we’ll end our distribution agreement with Netflix for subscription streaming of new releases beginning with the 2019 calendar-year theatrical slate. These announcements marked the beginning of what will be an entirely new growth strategy for the company, one that takes advantage of the opportunities the changing media and technology industries provide us to leverage the strength of our great brands.

But we’ve already begun the development process at the Disney Channel and at the Studio to create original TV series and original movies for this service. So if the Studio makes, let’s call it, roughly 10 films a year or distributes 10 films a year – that includes Marvel and Pixar and Star Wars and Disney-branded and Disney Animation. We’ve commissioned them to make, to produce more films with the incremental films being produced very, very specifically and very exclusively for this service. So this will represent a larger investment in Disney-branded intellectual property, both TV and movies.

I think there are forces, whether they’re technological in nature or sociological or economic in nature, out there that are changing the way media is consumed in general, and I don’t think this is either going to hasten them or exacerbate things in any way. What it does do, though, is a couple of things. First of all, it gives us the ability to leverage the strength of our brands, which a lot of our peers and competitors do not have. Secondly, it gives us what we’d call optionality. It’s a word I’ve not used very much in my life, but it gives us the flexibility, really, to move our product to the consumer in many new ways, ways that we’ve not been able to do before, because of just how strong this platform is that we bought control of.


TripAdvisor (Q2 2017 Results) – Earnings Call Transcript

We have large app penetration and a great ability to offer attractions to our users, so marketing efficiency, but then just operational efficiency as well. So initially, a lot of manpower going into both site development as well as supply expansion and we’re now reaping some of the leverage benefits from that going forward. So you are right, we are managing the business not for profitability. We’re managing it for growth. There’s just tremendous opportunity in terms of the TAM of this – particularly the attractions market space. We feel we have an early lead and we continue to invest aggressively to capitalize on that advantage. So, we’re not seeking margin expansion, and going forward, we will continue to emphasize revenue growth. But the way the business has evolved has allowed us to see some margin expansion this year.

In terms of the monetization, there’s likely to be always a delta between monetization on desktop and on the phone. It is just more plausible that you book a larger trip, a multi-day, multi-destination trip on your desktop in the comfort, obviously, on your big screen and more detailed photos and skew the more immediate purchases to the phone.

As we are working on our conversion improvements, they’re all aligned with matching our advertising campaign and matching our value proposition that delivering to travelers of helping them save money on this trip. We’re so well known for reviews, which is wonderful, incredible differentiator. It’s hard to imagine anyone could ever make a serious inroad to us in terms of being a competitor in that space. But as we move the product, the display, the visibility and the impression of TripAdvisor on the part of our travelers, to view us as that review site, that review site that actually saved me a ton of money because it offered me a great value hotel that I wouldn’t have otherwise find with a better price or it helped me find the best place to actually reserve a room at this hotel that I want to go at, and that’s kind of a new piece and so part of the site redesign was clarity. Part of the site redesign was easier shopping experience, but one of the things that we love the most from our testing that we’ve achieved in this redesign is that we are educating our users, our travelers that we’re helping to save them money, that we’re finding them great prices. And we see that come through in our surveys, we see that come through in those anecdotes in the stories, and that matches, of course, the big message in our brand campaigns.


MakeMyTrip (Q1 2018 Results) – Earnings Call Transcript

The latest estimates from IAMAI, the Internet and Mobile Association of India, indicates that India now has roughly 420 million mobile Internet users and this base is expected to keep growing rapidly.

Large opportunities for new user growth will likely come from the non-urban parts of the country where penetration levels are estimated at 16%. Affordable smartphones and data plans are easily available via the recent disruptive offers from the telecom players led by Reliance Jio.

Additionally, a significant government initiative which can facilitate online penetration is the unified payments interface app called BHIM, which creates a common nationwide payments platform for simple and quick transfer of money.

Indian carriers collectively have already placed more than 1,300 new orders, with 250 planes expected to be put into service over the next two to three years. Furthermore, demand for air travel is expected to increase with the launch of the government’s regional air connectivity program called Udan by operationalizing up to 100 regional airports out of a total 400 unserved or underserved domestic regional airports by fiscal year 2019.


DISH Network (Q2 2017 Results) – Earnings Call Transcript

I think each carriers offer a little bit different strategy today. I mean, obviously AT&T is getting more heavily into the content side of the business. Verizon’s got more of a small cell strategy and T-Mobile is just taking away a lot of the pain points that are out there. So each have strategies that those guys are a lot more knowledgeable about the wireless business than I am, so each of the – there’s no reason that each of those strategies can’t work.

So, all those things are going to happen. The only thing I know for sure is that if you’re born today in the United States, you’re probably not going to have one second of your life you’re not connected. And you’re going to use a lot of data during your lifetime. And there’s going to be – and that’s just people. And every microprocessor and every light and every other thing is going to have a sensor that’s going to be connected. And that’s just – it’s going to make us more productive. And it’s going to save companies money. And so there’s going to be very large companies coming out of the connectivity business on a big scale, and we hope to play a part in that.

You can’t have all the profits going to three or four companies and have the guys that are – the companies that are providing them the raw material to make that money, not get wake up one day and get a little smarter. That’d be my guess, but I don’t know if that’s going to happen. But at some point, all the money going one direction, a lot of people are enabling that. They’re going to wake up and say maybe they should get – I’ve been through this business long enough to know that the money ebbs and flows between distribution and content. It’s probably going to continue to do that today. And a lot of the content companies, probably the distribution guys, probably are going to be in position to get a more of it. Then it may go the other direction.

The average smartphone probably consumes, I don’t know, 5 gigs a month. Use cases that are being discussed around 5G that will start to materialize in the early 2020s, they’re going to dwarf that in terms of the amount of data consumed whether that be drone network or autonomous vehicles or healthcare or massive connectivity. So to look at the marketplace in terms of today’s four big competitors and the new entrants, I think you have to really think about how the market will get redefined in the next five years to seven years to ten years.


The Home Depot (Q2 2017 Results) – Earnings Call Transcript

We’ve had obviously a protracted recovery here, and it has been clearly driven from housing which has been a steady but slow recovery in the market. You know we continually look at months of supply, there is 4.3 months of supply in the market of housing availability against a historical norm of six, that clearly is helping to drive improvement in home value appreciation, but housing starts haven’t returned to their norm yet either. The only thing that’s kind of run on an historical averages is housing turnover. So, we see this housing favorability continuing as we look forward. And I think the watch out for us is, you wouldn’t want to see affordability become an issue, but that at this point doesn’t seem to be a concern for us at all.

Right. As we look at the affordability index, it stands at 153%, so long ways to go before that would be a watch out for us. And recovery is a difficult thing to put your arms around. But if you look at simply PFRI dollars they’ve only recovered 70% of the loss. The other thing that’s really interesting to us is the age of the housing stock. We’ve talked to you a lot about 66% of the housing stock being older than 30 years. Did you know that 51% of the house stock is older than 40 years and as houses age, well, they need more of repair.


TJX Companies (Q2 2018 Results) – Earnings Call Transcript

Our key pillars for growth remain driving comp sales and customer traffic and our global store expansion. Our consistently strong performance tells us that our strategies to drive customer traffic and comp sales are working. Further, we see enormous global store growth potential for TJX. We have plenty of white space or markets to fill in throughout our current countries. Long-term, we see the opportunity to open 5,600 stores with just our current banners and that’s about 1,700 more stores than we have today. We continue to see store openings as an attractive investment and a very good use of capital. We are convinced that these growth drivers will allow us to continue to capture additional market share both in the U.S. and internationally.

We see our treasure hunt shopping experience as an advantage. As today shopper spends more on personal experiences, particularly millennials they constructed dollars further in our stores in both our apparel and non-apparel categories. We are very pleased that across our major divisions we continue to capture a broad age demographic with new shoppers skewing towards younger customers. We see this as a great indicator for our future.

In closing I would like to emphasize that the key advantages that I have discussed today are all built on our 40 years plus of experience in building, developing and refining our off-price retail model. While we were trying to keep our business simple and focused, the ability to operate and highly integrate international – to operate a highly integrated international off-price retail business doesn’t happen overnight and we believe would be extremely difficult to replicate. We have decades of experience to build international teams and infrastructures that we see as key advantages. We believe our buying organization of more than 1,000 associates is best-in-class. We have great longevity among our buyers which we attribute to our very strong corporate culture. Our worldwide vendor universe also took us decades to build. We see ourselves as a global sourcing machine. Our processes, systems and logistics are all built to support our off-price opportunistic buying. Further, we have been operating internationally for well over two decades and are the only major international off-price apparel and home fashions retailer.


Tencent Holdings (Q2 2017 Results) – Earnings Call Transcript

We have been investing heavily in AI but relatively quietly, as we view AI as an essential capability that enhances user experience and empowers us to capture the new exciting opportunities to grow our businesses for the future. We’re confident that our existing strength in computing power, data, engineering, technologies as well as use cases coupled with our proactive build-up of AI content — talent will give us a favorable position in this strategic initiative. Especially a wide and diversified business scope creates a variety of use cases for AI research and application across a range of AI fundamental research areas, such as machine learning, computer vision, speech recognition and natural language processing. We will be persistent but patient with our AI investment, because we believe it is a long-term initiative, and we do not necessarily require a research to generate revenue directly in the short-term. On the other hand, AI will significantly benefit all of our existing products, services and businesses in many ways.

There is a lot of usage, more and more people are watching online video at longer and longer time, on a daily basis. But at the same time — and at the same time, advertising revenue has been increasing, and there is also an increasing willingness from consumers to pay. So, the subscription number as well as revenue has been increasing quite rapidly. On the other hand, the flip side of this is the cost of content has been increasing, even faster. So, what we see is that over time, we believe the content will continue to increase, but the rates would probably be lower. And the subscription, as we continue to increase, would deliver higher revenue per active user. So, we will get closer to a more equilibrium between cost and revenue at some point in time. But I think unfortunately at this point in time, the net loss of the business is still increasing.

It’s a little bit tough to make advertising revenue from that because we usually — these video are relatively short; and depending on how aggressive you are in terms of balancing user experience and monetization, I think if you really care about user experience and the trends of putting advertising on these short videos are more limited.

In terms of the advertising, I think most of the growth has actually been from the click-through rates as well as the improvement in targeting technology. As a result, the pricing achieved has been higher. There is some help from the other two factors, which is slight increase in terms of the inventory and an increase in terms of the general traffic. But, I think from the inventory angle, we have achieved a second ad for some cities, but within a 24-hour period, not everybody is seeing two ads. So, compared to our international peers, I think the amount of inventory is relatively small. And at the same time, the traffic increase has been most significant around Moments. Then, if you look at our performance ads, it’s across pretty large number of different properties. So, the traffic growth in the other areas might not be as great as the Moments traffic increase.

At this point, my guess is that the big advertisers have a certain budget for television and then for online video and then they have a separate budget for social and a separate budget for search and so forth. And then, the migration between those buckets happens relatively slowly, typically at the beginning of each year rather than happening on a month-by-month basis.

In terms of providing AI-as-a-service, I think this is definitely a one direction that we are going into in our cloud business already and we are seeing a lot of demand on that. And we have been able to sign up a lot of customers because of our ability to offer them AI capability. And that’s just the beginning. Over time, I think we will do much more on that.

In terms of games and targeting, if you look at games playing globally, particularly on the personal computer, it’s moved from being media driven to being increasingly community driven. 20 years ago, people discovered new games on the PC in the U.S. and Europe through computer magazines; now, they’re discovering them through reddit, through Twitch, through those kinds of more communal venues. And some of the same trends are underway in China. And what we’re trying to do is working with the game developers to make sure that we target their games to the users who are likely to be most receptive.


Alibaba Group (Q1 2018 Results) – Earnings Call Transcript

The macro way of looking at the landscape is e-commerce accounts for 15% of total retail in China. The retail segment in China is about $5 trillion economy in value. 15% of e-commerce still leads, 85% of retail that is offline.

In this new world of consumption expectations, the distinction between online and offline would disappear.

Mobile Taobao is the Chinese consumers’ leading destination for online shopping and the total MAU for mobile apps with access to our China retail marketplaces has grown to 529 million. No other commerce app in the world compares to mobile Taobao’s consumer engagement and user stickiness. Our user stickiness measured by the DAU divided by MAU ratio continues to remain above 40% due to our relentless focus on more content and community-driven engagement on the approximately, allowing consumers to enjoy the fun of discovery and exploration. We not only satisfy existing user needs but more importantly we’re able to stimulate new demand as user experiences have become more content-driven by community of consumption-related content generators, such as influencers and key opinion leaders have emerged alongside buyers and sellers in the ecosystem.

What unifies the businesses in the Alibaba economy is our mission, to make it easy to do business anywhere. We believe the path to value creation becomes extremely clear when we focus on a single mission. In the next 5, 10, 15 years, you will see an unfolding of how we execute the new retail strategy as it becomes an integral part of the Alibaba economy. Shareholder value will follow when we create value for our customers. So, understanding this is important to understanding a long view of Alibaba.

Our cloud computing business continues to enjoy high growth at scale with annualized revenue growth well exceeding $1 billion, while paying customers surpassed 1 million. An important milestone in a landscape where every industry is seeking to migrate to the cloud, we believe 1 million is merely a starting point.

Regarding 30-minute delivery, as an example of where new retail can be very disruptive to existing ecommerce. Consumer demand is generated from an in-store experience and then that consumer says, well, I am going to a movie, so I don’t want to a carry bag with me, so I am going to have it delivered to my home within a very short period of time. That’s where logistics — your traditional e-commerce logistics infrastructure can be disruptive because you’ll need to fulfill out of that retail location as opposed to out of a warehouse that is not even in the city center. So, the expectation becomes 30 minutes and not overnight or 24 hours. So, that’s going to be very, very disruptive to existing infrastructure and investments that have been made.

Curated Insights 2017.08.13

Misunderstanding Apple Services

Services revenue for the last four quarters reached $27.8B, figuratively placing Apple’s Services 98th on the Fortune 100 List. If Apple Services were a standalone company, its $27.8B in revenue would just squeak past Facebook’s $27.6B.

…It’s the consideration of Apple Services as a self-standing business. Remove “Apple” from “Apple Services”…would this stand-alone “Services” company enjoy the same success were it to service Android phones or Windows PCs?

With Services, Apple enjoys the benefits of a virtuous circle: Hardware sales create Services revenue opportunities; Services makes hardware more attractive and “stickier”. Like Apple Stores, Services are part of the ecosystem. Such is the satisfying simplicity and robustness of Apple’s business model.

Electric vehicle realities

Peer reviewed research suggests the cost of the battery pack is about 50% greater than the cost of the battery cells, however, we note the same article suggests that ratio will remain the same as battery prices drop. This is unlikely as there is no reason to believe the largely mechanical battery pack will decline proportionately any more than the cost of an engine or transmission will decline. Most likely, the battery pack assembly, excluding the cells, will decline only slightly.

For example, about 2 million new passenger cars are registered in France every year. If only half of those were EVs, subsidies would total $7.2B. Money for roads, infrastructure maintenance, policing, and so on have to come from somewhere, and if ICEV sales decline substantially, European governments’ huge gasoline tax revenues would also deteriorate; in such an environment, it is reasonable to assume that EV subsidies would eventually disappear and be replaced by taxes.


Why 5G will transform much more than telecommunications

The transition from 4G to 5G will allow wireless technology to surpass three technical thresholds: 1) wireless internet speeds will surpass cable broadband and potentially also fiber optic cable; 2) the “internet of things” will have mass industrial applications for the first time; and 3) communication lag will fall to one millisecond—faster than the speed at which humans perceive touch response as instantaneous—giving rise to new, “tactile internet” applications such as remote surgery.

As a result of these barriers being broken, the 5G transition will likely have a larger and broader economic impact than shifts between previous wireless generations.

The end of typing: The next billion mobile users will rely on video and voice

…many of America’s most popular apps aren’t in India’s top 100… Mr. Singh’s phone uses Google’s Android operating system, which nearly monopolizes India’s smartphone market… Apple Inc., in contrast, has a 3% smartphone market share in India, in part because its least expensive iPhone costs over $300; in India, more than 90% of smartphones cost less than that.

In the year through June, use of YouTube in India has more than doubled, while Gmail use fell 15%…Facebook says it has just over 200 million active users in India, the largest number outside the U.S…

UC Browser, from Alibaba Group Holding Ltd.’s UCWeb, is optimized to use less data for low-speed connections like those India’s poor use. UC Browser, with a less-than-1% market share in the U.S. and Europe, controls more than 40% of India’s mobile browser market…

Google has also benefited from the dominance of its Android operating system.

Paytm, the biggest mobile money app in India, now has more than 200 million users in India, vastly more the number of credit-card holders in India.

Some poor users say they are willing to pay for data even if it means forgoing consumption of things like cigarettes to afford prepaid cards. Sales of shampoo and some snacks foods have slipped for certain consumers as they put more rupees aside for their phones, say consumer-goods companies such as Nestlé SA.

The evolution of machine learning

Traditional machine learning models — not deep neural networks — are powering most AI applications. Engineers still use traditional software engineering tools for machine learning engineering, and they don’t work: The pipelines that take data to model to result end up built out of scattered, incompatible pieces.

Facebook’s FBLearner Flow and Uber’s Michelangelo are internal machine learning platforms that do just that. They allow engineers to construct training and validation data sets with an intuitive user interface, decreasing time spent on this stage from days to hours. Then, engineers can train models with (more or less) the click of a button. Finally, they can monitor and directly update production models with ease.

Services like Azure Machine Learning and Amazon Machine Learning are publicly available alternatives that provide similar end-to-end platform functionality but only integrate with other Amazon or Microsoft services for the data storage and deployment components of the pipeline.

The market really is different this time

Over the past month, small investors have pulled $17 billion out of U.S. stock mutual funds and exchange-traded funds and added $29 billion to bond funds. That’s the latest leg of a long-term trend: Since the internet-stock bubble burst in 2000, investors have withdrawn half a trillion dollars from U.S. stock mutual funds.

The math is simple: If you had a target of 50% in stocks and they go up 10%, you are suddenly off-target, with more than half your money there. Your financial adviser or target-date fund will automatically sell stock and buy bonds to get you back to 50%.

These automatic adjustments don’t mean stocks can’t crash or soar from here. But such sharp moves are at least somewhat less likely, and less likely to last, in a homeostatic market. So don’t believe anyone who tells you Dow 22000 is driven by euphoric “dumb money.” This is a market in which millions of small investors have been selling, not buying.


When (if ever) has it paid to wait for a stock market correction? Reviewing 115 years of US stock market history

From a given “expensive” starting point, there was a 56% probability that the market had a 10% correction within 3 years, waiting for which would result in about a 10% return benefit versus having invested right away.

In the 44% of cases where the correction doesn’t happen, there’s an average opportunity cost of about 30% – much higher than the average benefit.

Putting these together, the mean expected cost of waiting for a correction was about 8% versus investing right away.

Now shifting focus from the historical record to looking forward, it’s true that the lower one’s expectation of the stock market return, the lower the expected cost of waiting for a correction. If you believe the stock market has a negative expected return to a particular horizon, then waiting for a correction to invest makes sense. However, at least as far as the historical record for the US stock market goes, higher market valuations are consistent with lower prospective long-term returns, but not negative expected returns.

Americans are dying younger, saving corporations billions

In 2015, the American death rate—the age-adjusted share of Americans dying—rose slightly for the first time since 1999. And over the last two years, at least 12 large companies, from Verizon to General Motors, have said recent slips in mortality improvement have led them to reduce their estimates for how much they could owe retirees by upward of a combined $9.7 billion, according to a Bloomberg analysis of company filings. “Revised assumptions indicating a shortened longevity,” for instance, led Lockheed Martin to adjust its estimated retirement obligations downward by a total of about $1.6 billion for 2015 and 2016, it said in its most recent annual report.

The fact that people are dying slightly younger won’t cure corporate America’s pension woes—but the fact that companies are taking it into account shows just how serious the shift in America’s mortality trends is.

Changes to life expectancy in the U.K. could cut 310 billion pounds from British private-sector pension obligations, or 15 percent of the total liability, PwC estimated in May, although other actuaries have called that figure “relatively extreme.”

The question actuaries can’t yet answer is whether the slowdown is a short-term blip or a more permanent shift. If mortality improved by 1 percent a year for most of the past 70 years, might the U.S. revert to that soon? Or, Keener asks, “is this really a new reality that we’re living in?”


Baby boomers who refuse to sell are dominating the housing market

Like much of his generation, Yanoviak is desperate to get a piece of an increasingly scarce commodity: prime American real estate. Millennials are finding themselves out in the cold because building has slowed, and longer-living baby boomers are staying put, setting up a simmering conflict between the two biggest generations in U.S. history.

People 55 and older own 53 percent of U.S. owner-occupied houses, the biggest share since the government started collecting data in 1900, according to real estate website Trulia. That’s up from 43 percent a decade ago. Those ages 18 to 34 possess just 11 percent. When they were that age, baby boomers had homes at almost twice that level.

Curated Insights 2017.08.06

The data that transformed AI research—and possibly the world

Today, many consider ImageNet solved—the error rate is incredibly low at around 2%. But that’s for classification, or identifying which object is in an image. This doesn’t mean an algorithm knows the properties of that object, where it comes from, what it’s used for, who made it, or how it interacts with its surroundings. In short, it doesn’t actually understand what it’s seeing. This is mirrored in speech recognition, and even in much of natural language processing. While our AI today is fantastic at knowing what things are, understanding these objects in the context of the world is next. How AI researchers will get there is still unclear.

“One thing ImageNet changed in the field of AI is suddenly people realized the thankless work of making a dataset was at the core of AI research,” Li said. “People really recognize the importance the dataset is front and center in the research as much as algorithms.”

Apple Glasses are inevitable

There is room for Apple to create value by controlling both the hardware and software comprising AR glasses. The sum will be greater than its parts. Apple’s big bet on AR will represent the catalyst for turning glasses and sunglasses into something more. An engaged base of iOS developers experimenting with ARKit will give Apple Glasses a hospitable app environment.

Apple’s success with Apple Watch has done much to calm some of my fears and hesitation regarding face wearables. With 29 million Apple Watches sold to date, Apple has turned the dynamic of tech meeting fashion on its head. Apple has been able to get people to wear an item that was increasingly losing its place in a smartphone world.

The idea of a product having a “killer app” has been misconstrued over the years. The iPhone really doesn’t have a killer app. Instead, the device itself has turned into the killer app – the most valuable computer in our lives. In addition, the iPhone’s role in our lives has evolved over time – a true sign of value. Apple Glasses would provide an improved view of the world to its user. For some, this will come in the form of clearer vision plus additional context. Others will gain value just from receiving additional context.


The Priceline party, the world’s largest online-travel company

Over the past decade Priceline’s pre-tax earnings have grown at a compound annual rate of 42%, faster than Apple, Amazon, Netflix and Alphabet. It also boasts a 96% gross margin. Its share price has risen by more than 50% over the past 12 months, about four times faster than the broader stockmarket. On July 26th the firm’s market value rose above $100bn.

Priceline’s focus on accommodation helps explain why it is more profitable and more highly valued than Expedia, a rival online-travel company that operates sites such as Orbitz, Travelocity, Trivago and Hotels.com. Expedia does more business booking flights, but these are not as lucrative. Online-travel firms take a meaty commission of 15-18% of a hotel room’s price, compared with a slim 3-4% for airfares.

The most dangerous rival, however, may well come from somewhere else entirely. “We’re all waiting for the moment when a big Chinese company comes in and tries to take market share,” says Erik Blachford, a former boss of Expedia. Ctrip, a giant based in Shanghai and worth an estimated $30bn, is the obvious candidate. But if it indeed makes a move, Priceline will not necessarily suffer. Not only is its Chinese business growing nicely, but it has also invested nearly $2bn in Ctrip’s debt and equity. Small wonder that some analysts consider Priceline the best-run internet company after Amazon.


Why Alibaba could double in two years

China online advertising is $50 billion market, currently Alibaba has about 20% market share. Entire online advertising market will grow at 15% to 20% for next eight years, I expect Alibaba to take incremental share and possibly increase to 30%+ market share of online ads in five years.

AliCloud is No. 1 in China by a huge margin.

Alibaba has a ton of equity investments made over the years. Core holdings include a 33% stake in Ant Financial, 30% stake in Weibo, and 47% in logistics network operator Cainiao.


Amazon moves into self-distribution with Woody Allen’s ‘Wonder Wheel’

Amazon is moving into self-distributing its own movies, putting it on the path to becoming a full-fledged film studio.

With their deep pockets and big ambitions, Amazon and Netflix have upended the film distribution landscape, although they have taken different approaches. Netflix is solely focused on servicing its streaming service subscribers. Amazon believes in premiering movies in theaters before offering them on its Prime digital service. With the move into self-distribution, Amazon now offers all of the services that a traditional film studio boasts — from financing to production to rolling out a picture in cinemas.


Amazon’s ‘Beehive’, drone-carrying trains reinforce focus on logistics tech

CB Insights’ analysis shows that the retail giant has been focused on shortening the distance between warehouses and consumers for some time. They have considered various formats for expanded warehouse networks, including flying warehouses, mobile truck-based mini warehouses, underwater warehouses, local re-stocking stations for drones, and a multi-level drone-docking fulfillment center.


This Amazon threat just got even more real

Already, the price transparency that’s characteristic of Amazon’s consumer e-commerce platform has exposed major flaws in Grainger’s model, forcing the company to roll out price cuts that have squeezed its margins and darkened its EPS outlook. In the face of Amazon’s staggering customer growth, Grainger CEO DG Macpherson’s admission earlier this year that the company hasn’t been able to acquire a new customer under its namesake brand in years and has struggled to use digital marketing to draw business becomes even more worrisome.


Foursquare eyes Amazon Alexa partnership as its tech is quietly built into Snapchat and Apple Maps

In the past four years, the company has been shopping its technology around to other companies, a task that turned out to be surprisingly easy. In an interesting development, Foursquare has found that a lot of companies looking for data or location tech come to Foursquare before Facebook or Alphabet’s Google because those two giants are trying to kill those companies who need help. “We’re like the independent broker of this awesome technology and you’re not tying yourself to Google or Facebook, yet you get these great tools to build competitive products,” Crowley explained.

The partnerships take different formats, with Foursquare sharing its tech in exchange for exposure, revenue or partnership deals, he explained. Facebook and Google haven’t teamed up with Foursquare due to competing products and because the Silicon Valley players have built up their own ecosystems, he said. But that’s a rare exception. Snapchat, Twitter, Uber, and Pinterest are using a version of its geotagging tech. Samsung’s new Galaxy S8 phone, launched in April, has Foursquare baked in to tell users where their photo was taken and what it was taken of. Finally, Apple is using Foursquare in its Apple Maps product.


Redfin set out to disrupt real estate—it was harder than it looked

Zillow and Trulia make money by referring customers to independent real estate brokers. Redfin, in contrast, aimed to disrupt the real estate business by becoming a real estate brokerage itself.

In a traditional real estate transaction, the agent on each side of the deal gets a three percent commission. Redfin offered a do-it-yourself model where buyers would do more of the work themselves, lowering Redfin’s costs and allowing it to pay thousands of dollars in rebates.

This approach sounded great in theory, but there was a big problem: customers hated it. Buying or selling a home is a complex, stressful, and often once-in-a-lifetime transaction. People wanted a personal agent who had plenty of time to understand their situation, answer questions, and guide them through the steps of the home-buying process. Redfin’s early approach—with an ever-changing cast of agents showing homes and writing offers but not doing much else—left most customers unsatisfied.

…some of the biggest opportunities for innovation were on the seller’s side of the market, because sellers ultimately set the terms of real estate transactions. And because home sellers tend to be older and more risk-averse, it has taken longer for Redfin to build up a customer base on the seller’s side of the market.


A look back in IPO: Google, the profit machine

Sources are saying that Microsoft was previously courting Google, pursuing options ranging from a kind of merger to an outright takeover. It appears that their overtures failed to materialize any deal, so now the Redmond will have to wait; Google is headed in the IPO direction, and if there’s a merger to be had, it’s likely going to be with a post-IPO Google.

“It’s still expensive at these levels,” said Will Dunbar, managing director with Core Capital Partners, a venture capital firm with no stake in Google. “There will be substantial competition in the near future and that’s one of the things that gives me pause about the price.”

Janco’s Pyykkonen adds that he was hearing it was difficult for traders interested in short-selling Google to find shares to borrow from the banks and brokers involved in the auction.

And according to an informal poll on CNN/Money, 85 percent of more than 23,000 respondents said that they did not plan on buying shares of Google once it began trading.

Inside Jeffrey Katzenberg’s plan to revolutionize entertainment on mobile screens

Katzenberg’s plan involves nothing less than the creation of a whole new species of entertainment targeting 18- to 34-year-olds: short-form video series produced with budgets and production values you might expect from primetime TV, along with top-shelf creatives on both sides of the camera. For example, imagine a drama akin to “Empire” or “Scandal” but shrunk to 10-minute episodes made for mobile consumption. Or a five-minute talk show, or a two-minute newscast — all with high-profile talent attached.

Disney CEO Bob Iger, whose company is considering producing for what Katzenberg has tentatively dubbed New TV, sees the merits in the idea. “The explosion of short-form video is obvious to all of us, but a lot of what we’ve seen is the production of amateurs — user-generated content,” Iger says. “Taking a professional approach to this kind of content, we haven’t seen that yet in a concerted way, and I think that’s a smart thing to try.”


Alphabet wants to fix renewable energy’s storage problem — with salt

It can be located almost anywhere, has the potential to last longer than lithium-ion batteries and compete on price with new hydroelectric plants and other existing clean energy storage methods. “If the moonshot factory gives up on a big, important problem like climate change, then maybe it will never get solved,” said Obi Felten, a director at X. “If we do start solving it, there are trillions and trillions of dollars in market opportunity.”

X is stepping into a market that could see about $40 billion in investment by 2024, according Bloomberg New Energy Finance. Roughly 790 megawatts of energy will be stored this year and overall capacity is expected to hit 45 gigawatts in seven years, BNEF estimates. Existing electrical grids struggle with renewable energy, a vexing problem that’s driving demand for new storage methods. Solar panels and wind farms churn out energy around midday and at night when demand lulls. This forces utilities to discard it in favor of more predictable oil and coal plants and more controllable natural gas “peaker” plants.

A new book ranks the top 100 solutions to climate change. The results are surprising.

The number one solution, in terms of potential impact? A combination of educating girls and family planning, which together could reduce 120 gigatons of CO2-equivalent by 2050 — more than on- and offshore wind power combined (99 GT). Also sitting atop the list, with an impact that dwarfs any single energy source: refrigerant management. Both reduced food waste and plant-rich diets, on their own, beat solar farms and rooftop solar combined.

Our models include a lot of things that were excluded from other models. One is land use. It’s given passing reference, but hasn’t been given much credibility by the IPCC. They don’t include, for example, farmland restoration — over a billion hectares of abandoned land all over the world. We know how to regenerate that, using animals, using cover, using no-till. Is there a transition cost? Yeah. But it’s a big sink.

First of all, let’s be honest: The US has never led in this area. Ever. When they’ve tried on an executive level, they’ve never been supported by Congress. States have led, cities have led, but never the federal government. Now the federal government is what it is. When [Trump] was elected, I went over every one [of the Drawdown solutions]. I said, “What can the [US federal] government do?” And it really isn’t that much.


The world’s first floating wind farm could be a game changer for renewable power

The first floating wind turbine has been placed about 20 km (12 miles) off the coast of Peterhead in Scotland. Another four turbines will be added to the farm, which together will generate enough energy to power 20,000 households.

Floating wind turbines cannot currently compete with fixed turbines, which have seen their cost plummet by more than 30% since 2012. However, Statoil believes that as floating wind farms are built at scale, they will soon be able to compete with traditional offshore wind turbines without subsidies.


It goes completely against what most believe, but out of all major energy sources, nuclear is the safest

Based on historical and current figures of deaths related to energy production, nuclear appears to have caused by far the least harm of the current major energy sources. This empirical reality is largely at odds with public perceptions, where public support for nuclear energy is often low as a result of safety concerns.

Whilst the share of energy production from renewable technologies is slowly growing, 96 percent of global energy production is produced from fossil fuels, nuclear and traditional biomass sources. Our global transition to renewable energy systems will be a process which takes time—an extensive period during which we must make important choices on bridging sources of energy production.

 

In fund management, churn is not necessarily burn

What may be more surprising is that we found no evidence of any relationship across all other styles of US equity fund, even in small-caps where the costs of trading are noticeably higher. On average, high turnover US equity funds have been able to add at least enough value to offset the additional transaction costs they incur. The moral is that pursuing a reduction in transaction costs without considering the consequences is misguided. Consistency between investment process and turnover is more important than the level of turnover itself.


Cities’ success leaves them vulnerable in the next downturn

But the specialization of high-end jobs and wealth in cities could end up being their undoing. The city model of old was like a grocery store — a balanced mix of all types of different products, from milk and bread to a pharmacy to some splurge items like cupcakes and Champagne. In tough times, cupcake and Champagne sales might fall, but people are still going to buy their milk, bread and toiletries, keeping the store afloat.

Cities today increasingly resemble endless aisles of Champagne and cupcakes. If tough times strike again — perhaps in a tech downturn, or in a stock market crash — the pain will be concentrated here. And while the well-paying white-collar jobs migrating to cities now are coveted, there’s no guarantee the best jobs will always be urban. The next economic cycle may well bring a different pattern.


Many Indians don’t know the real architect behind the country’s economic reforms

On that monsoon day in Hyderabad in 2015, no one could recall that a long-time inhabitant of that city, Pamulaparthi Venkata Narasimha Rao, PV as he was always known to the Telugus, was, in fact, the author of the most radical shift in India’s economic policy since Jawaharlal Nehru’s famous Industrial Policy Resolution of 1956. Nehru’s resolution had declared that India would strive to establish a “socialistic pattern of society”. In 1991 PV moved away from that pattern to unleash private enterprise.

PV was India’s first “accidental” prime minister, and a path-breaking one. He took charge of the national government and restored political stability; assumed leadership of the Congress, proving that there was hope beyond the Nehru-Gandhi dynasty; pushed through significant economic reforms; and steered India through the uncharted waters of the post-Cold War world.


NASA has a way to cut your flight time in half

…NASA will begin taking bids for construction of a demo model of a plane able to reduce the sonic boom to something like the hum you’d hear inside a Mercedes-Benz on the interstate. The agency’s researchers say their design, a smaller-scale model of which was successfully tested in a wind tunnel at the end of June, should cut the six-hour flight time from New York to Los Angeles in half.

Over the next decade, growth in air transportation and distances flown “will drive the demand for broadly available faster air travel,” says Peter Coen, project manager for NASA’s commercial supersonic research team. “That’s going to make it possible for companies to offer competitive products in the future.” NASA plans to share the technology resulting from the tests with U.S. plane makers, meaning a head start for the likes of Lockheed Martin, General Dynamics, Boeing, and startups such as Boom Technology and billionaire Robert Bass’s Aerion.

Company Notes 2017.07.28

Public Bank in a filing with Bursa Malaysia (and press release)

“The focus on the financing for the purchase of residential properties, passenger vehicles and lending to small and medium enterprises, has remained a market niche for the Group as it has maintained a large market share in these lending segments despite the still challenging lending market.”

“The Group’s funding and liquidity position has remained healthy with its net loan-to-deposit ratio standing at 93.6% as at the end of June 2017.”

In addition, Vietnam will continue to be on the Public Bank Group’s overseas expansion plan. With the 100% foreign-owned bank license obtained in 2016, the Group has further expanded its business through the opening of 2 new branches in the first half of 2017. As at to date, it has 9 branches and is planning to open 4 more branches in the near term.”


Globetronics in a filing with Bursa Malaysia

…expects to see significant improvement in business and volume loadings from the mass production of new products from July 2017. The mass production of new products will enable the Group to register a strong recovery in its financial performance for the second half of the FY.

…will continue to focus on escalating up the value chain and riding on the R&D initiatives in new products design and development with our key customer. This initiative is expected to result in the manufacturing of additional new products in year 2017 and 2018.


Pensonic in a filing with Bursa Malaysia

On 28 November 2016, the Group successfully secured the distributorship for MYTV set-top-box (decoder) in anticipation of digitalisation of the Malaysian television broadcasting in 2018. By then, all households in Malaysia will require the decoders to receive television signals for continued access to Free-to-Air TV channels. This distributorship is anticipated to contribute to Group revenue in the shortto-medium term.


Sasbadi in a filing with Bursa Malaysia

…aims to accomplish what we have set out to achieve by continuing to, among others, (i) leverage on our wide distribution network to improve effectiveness of product sales; (ii) expand our product offerings by leveraging on the intellectual properties across all subsidiaries; (iii) develop and introduce new print and online/digital educational products and materials to the market; (iv) grow the STEM education related offerings via Sasbadi Learning Solutions Sdn Bhd and its subsidiaries; (v) grow the direct sales/multi-level network marketing sales via Mindtech Education; (vi) explore opportunities for tenders under the Ministry of Education Malaysia; and (vii) explore collaboration opportunities for projects that leverage on the competitive strengths.


Bursa Malaysia Bhd in a filing with Bursa Malaysia

…strong performance came on the back of increased trading activities across all segments. We are seeing renewed interest especially from foreign funds who, I am pleased to note, are continuing to return to Malaysia’s capital market since the start of the year.

…achieved many milestones in 1H2017. These include the revision to the Tick Rule on Regulated Short Selling and Securities Borrowing and Lending to create a more facilitative trading environment. The Exchange also launched the Mid and Small Cap Research Scheme (MidS) to elevate the profile of mid and small cap PLCs. The first half of the year also witnessed the signing of a Memorandum of Understanding between Bursa Malaysia and the Shanghai Stock Exchange. The agreement allows both exchanges to explore potential ways to improve visibility and accessibility to market participants in Malaysia and China, reaffirming Bursa Malaysia’s status as the gateway for investors in the region.


Heineken Malaysia in a filing with Bursa Malaysia

“Our focus on growing the cider category is showing encouraging results, delivering double-digit growth in the first half. We are also proud of our latest innovation, Guinness Bright, which strengthens our winning portfolio and makes it even more exciting.”

Contraband remains a key industry concern with the continued influx, notably an increase in Peninsular Malaysia, representing a significant revenue loss to both the industry and the Government. The growing demand for contraband is a result of the large price gap between duty-paid and contraband products due to Malaysia’s excise structure, which ranks second highest in the world behind Norway and alongside Singapore.


Chin Tek Plantations in a filing with Bursa Malaysia

Harvesting of newly mature fields in the oil palm plantation of the joint venture located in South Sumatera Province, Indonesia has been delayed due to unrest in the villages neighboring the estate. Commencement of harvesting is pending clearance by the relevant authorities. This has resulted in the joint venture suffering losses.


Tasek in a filing with Bursa Malaysia

…due to lower demand for cement in the domestic market and lower average net pricing for both cement and readymixed concrete.

The ready-mixed concrete pricing has been under pressure from the prolonged price competition in the cement market and the segment’s margin of contribution was further affected by higher cost of cartage from rising diesel cost…

…more challenging with the prolonged price competition for cement due to lower demand for cement and weak sentiment of the domestic property market. The demand for cement and ready-mixed concrete would largely be driven by demand from the infrastructure and large-scale property projects.


Pavilion REIT in a filing with Bursa Malaysia

Total property operating expenses was higher mainly due to higher maintenance cost incurred as well as higher provision for doubtful debts.

Manager’s management fee was slightly higher despite lower net property income due to the increased in total asset value. Borrowing cost was higher due to drawdown of additional borrowings for acquisition of investment properties and working capital purposes.


New Hoong Fatt in a filing with Bursa Malaysia

PBT was lower mainly due to higher manufacturing and raw material costs, higher operating expenses and unfavourable impact from foreign exchange rates.

Amid a challenging operating environment where profit margins are impacted by rising raw material costs, the Group will continue to focus on driving business growth through expanding its product range and market expansion as well as further strengthening its cost efficiency programs.


Tenaga Nasional in a filing with Bursa Malaysia

The increase in revenue was mainly attributed to the recoverability of the higher generation costs via the effective implementation of government approved Imbalance Cost Pass-Through (‘ICPT’) mechanism. The ICPT mechanism, a part of the wider regulatory reform called the Incentive Based Regulation (‘IBR’) allows for TNB to be financially neutral from any variations in generation costs and fuel prices.


Caring Pharmacy Group in a filing with Bursa Malaysia

The higher revenue was mainly contributed by the higher sales generated from existing outlets due to aggressive and extensive promotional campaign launched during FY2017.

During the quarter under review, we have established additional of 4 complex outlets, closed down 1 high street outlet and 1 specialty retail outlet. As of 31 May 2017, we have a total of 107 community pharmacies.


Kronologi Asia in a filing with Bursa Malaysia

Demand for data backup is being driven by the proliferation of data such as emails, staff and business records, legal documents and more. Compliance with tighter regulations and business continuity requirements have led to the need for companies to safeguard their data more than ever before. As recent events have demonstrated, a safeguard against ransomware is also critical for business continuity.

Beyond the continuous efforts to build on the EDM business to meet the above demands, the Group is preparing to roll out its Transnational (cross border) backup solutions targeted for Singapore, Malaysia and Hong Kong. As announced in June 2017, Kronologi has entered into a strategic collaboration with Singapore Technologies Electronics Limited (“ST Electronics”) to expand in Hong Kong. This will be the second physical point of presence after Singapore for Kronologi, which is catering to the growing demand in Asia for data storage and protection solutions.


SWS Capital in a filing with Bursa Malaysia

Shortage of workers had resulted extra cost to the Group especially in the leather upholstery sofa division which is labour intensive. The leather upholstery sofa division has been recording a declining trend in gross profit margin. The Board notes these economic challenges and does not anticipate the predicament of the shortage of labour to be resolved rapidly in the near future. With the completion of the disposal of SWSISB, this will soften the issue of shortage of workers facing by the Group.

The management is in the process to increase in productivity and investment in technology, thereby reducing reliance on labour-intensive manufacturing practices especially in wood based division.

With the acquisition of ELE, the Group has been diversified to plastic manufacturing industry with a better prospect.

Kossan targets 2020 to complete automation overhaul

“Automation is the first thing we must work on before we can talk about big data or artificial intelligence. It (automation) is a key thing. Hence, we are working on the automation of our new plant while the old lines will be revamped to improve efficiency … the building of the new plant is not only for expansion but also for transformation. New features such as automation and computerisation will be in place. Our internal target is to complete the automation of our plants by 2020.”

With the new technology, Kossan became the first Malaysian glove manufacturer in the world to be granted the “low dermatitis potential” claim in gloves by the US Food & Drug Administration. The “low derma” gloves already contribute to about 10% of the group’s earnings, said Lim, who expects the figure to jump to over 30% in two years as the patented-technology gloves have a wider area of application.


AirAsia to list Indonesian, Philippine units by 1Q18

“That’s very much in progress. Indonesia is probably ahead of Philippines but both are going to be listed. This gives us the currency to look at combining into one AirAsia, which is my ultimate dream. I’ve highlighted to the market that AirAsia is not a company that takes short-term decisions, while the market was telling us to close down the Indonesia and Philippines units. We’re a company that takes a long-term view and we invest for the long term. Not for short-term quarterly profits.”


Malaysia Airlines: ‘China contribution to hit 20% in three years’

“I have never seen a potential in my life like there is from China to Malaysia. The market from China to Malaysia … I think people just don’t grasp the size of the opportunity for tourism in this country. It could easily double within the next six to seven years. I expect the China market to move from 8% to 9% of our business currently to about 20% in the next two to three years.”


Contractor’s pull-out flags mounting cost pressures

“We (big construction companies) were looking at the prices these guys were bidding and we were scratching our heads. Some were bidding as much as 30% lower than us! If they think they can do it at those sort of prices, we are more than happy to let them do it. For us, we rather focus on projects that can make money.”

“Without naming names, there are some parties out there that are looking for financing help to do these highway projects. They simply do not have the capacity to do such large projects. There are these so-called agents running around approaching other contractors, looking for help.”

“When your margin is low, you will try to squeeze your suppliers. In the case of these elevated highways, they will try and get better prices from the precast [concrete] boys. But the precast boys have enough work to do, MRT (mass rapid transit) 2, LRT (light rail transit) 3 are keeping them busy. No need to take the risk and prop up these low-margin projects.”


Grab raises US$2.5b in latest fundraising

Grab said it has a market share of 95% in third-party taxi-hailing and 71% in private vehicle hailing in Southeast Asia, and that the company will continue to strengthen its already-leading market position and invest in its proprietary mobile payment solution — GrabPay.

“We are delighted to deepen our strategic partnership with Didi and SoftBank. We’re encouraged that these two visionary companies share our optimism for the future of Southeast Asia and its on-demand transportation and payments markets, and recognise that Grab is ideally positioned to capitalise on the massive market opportunities.”


Touch ’n Go in mobile wallet venture with Ant Financial

“The collaboration will introduce a world-class e-wallet for Malaysians, and we plan to bring differentiated products for local users.”

The JV seeks to leverage TnG’s existing market presence in Malaysia, with up to 17 million cards in circulation and six million average transactions per day across multiple services such as toll roads, vehicle parking, public transportations and retail outlets.

“As long as CIMB and TnG are concerned, this will primarily be a Malaysian business. We do not have any plans to do this in the region.”


Single authority for property market

“If you look at Bank Negara Malaysia’s (BNM) rate, the real affordable house, it has to be in the region of RM200,000 and below. That is the level where a first-time housebuyer will be able to get 90% or close to 100% financing, but the supply is not there. You talk to the private sector, their affordable house is RM500,000.”

“Today, you look at all the high-end properties in Kuala Lumpur at night, you can see only 10% of the total units have their lights on. I think this is an unproductive investment of our money in the economy.”

Curated Insights 2017.07.16

Tom Russo on shareholder value creation and global brands

Competition is both global and local. The fight is typically fair, but not always. In India, for instance, Nestlé suffered a below-the-belt punch with its famous Maggi instant soup business. It suffered a massive goodwill assault by local forces that alleged the product would kill young children because of ingredients that were toxic. There is absolutely no hard science to support the claim. Yet, it ran across all 250 newspapers in India, and Nestlé’s brand preference score for the Maggi product dropped from 98% to 8%.

The century of biology

When engineering, biology, and computer science come together it elevates bio to a “read/write” paradigm. That is, you don’t just read the code of biology but you can also write, or design, with it.

…when you looked at a cell type that was normal, and you looked at its related diseased counterpart, you could see changes in the differential set of genes that were being expressed in one cell type vs. another (the cell program). Sometimes there’s not a mutated gene that’s causing the disease — it’s not just a bug or “bad gene” in the code (genomics) — it’s the cell running the wrong program, which is where epigenomics comes in again. The gene doesn’t just turn on and off like a light switch to cause disease, it can be more like a dimmer, going higher or lower (too much or too little of a gene). What causes a healthy cell to shift in to a diseased state, whether it’s cells multiplying uncontrollably in cancer or dormant immune cells suddenly getting activated in autoimmune disease? The ability to understand how the genome is being deployed or regulated within a cell — is it the wrong dosage or level for a particular set of genes? — becomes a very interesting new avenue to help us get to the right drug, for the right patient, at the right dose, and at the right time.

This leads us to the second derivatives of read/write, which is to enable insight/design. We’re not just generating data on the read side, we’re also fundamentally understanding it deeply in ways that we couldn’t before, especially with multiple data streams and machine learning to help make sense of it all. And on the write side, we’re not just editing, we’re also designing with biology. In the future, biology can become its own creative medium of sorts.

…our ability to read/write biology will disrupt a wide range of industries. In addition to its obvious impact across health, we’re increasingly using biology for manufacturing. Eventually it’s going to impact areas people don’t typically think about as “biological” — like textiles, architecture, and many more areas — in ways we can’t even conceive of yet.


Scientists can use CRISPR to store images and movies in bacteria

CRISPR was invented billions of years ago, as a way for bacteria to defend themselves against viruses. The bacteria grab the DNA of invading viruses, incorporating it into their own genomes. That viral DNA always gets inserted in the same place, and new sequences get added after old ones, as if the bacteria were stacking books on a shelf. They use these archives to guide an enzyme called Cas9, which cuts and disables any viral DNA that matches the stored sequences.

So, first and foremost, CRISPR is a kind of genetic memory—a system for storing information. And that information doesn’t have to be the DNA of viruses. Scientists can now encode any digital file in the form of DNA, by converting the ones and zeroes of binary code into As, Cs, Gs, and Ts of the double helix.

Recording information in DNA isn’t new: That’s effectively what living things have been doing since the dawn of life itself. More recently, scientists have realized that DNA makes the perfect storage medium. It takes up so little space that you could fit all the world’s data in the back of a truck. It’s durable, provided it’s kept cold, dry, and dark. And it is immune to obsolescence: DVDs and Blu-Rays will eventually go the way of cassettes and laser discs, but humans will always have the desire and means to read DNA.​


In China, shoppers buy bad loans online with their groceries

For 4.15 million yuan ($610,000), customers on the site can bid for the debt of a steelmaker from Zhejiang. The company has failed to pay back a 9.95 million-yuan loan, including interest, so a distressed asset manager is auctioning it off to the highest online bidder.

“Financial technology and e-commerce in China has reached a high level of sophistication. Online platforms are leveling the playing field in the distressed debt market as it means everybody gets access to the same information.”

“Conducting NPL auctions online has increasingly become a trend. More investors are using Taobao as a platform because of the simplicity, transparency and confidentiality of the bidders’ identity.”

But bad-loan investing isn’t like trading equities or even ordinary debt, which raises questions over the opening up of the market to rank-and-file investors.

The most important moat

“A Bezos Moat is premised on the idea that the customer is willingly and is frequently entering into a commercial transaction with the company because the customer is deriving more value from the transaction than he or she is paying for.

“A Buffett Moat attempts to identify companies that will be the only one (or one of a few) available in a commercial landscape, so that the customer is, in effect, forced to transact with these companies (i.e. only bridge, only newspaper, only soft drink option).”

Company Notes 2017.06.30

On earnings calls

Magni-Tech Industries in a filing with Bursa Malaysia

The garment segment accounted for about 89.1% and 95.3% of the Group’s revenue and profit from operations respectively.

Garment revenue surged by 38.8% which was mainly due to higher sale orders received and to a moderate extent aided by favourable foreign exchange movements.

Packaging revenue increased by 1.7% mainly despite the cessation of SIPP’s business in Q4-FYR 2017.


LKL International in a filing with Bursa Malaysia

…the lower revenue generated from medical/healthcare beds segment due to economic slowdown generally. Local market continued to contribute a significant portion amounting to 67.03% of the total revenue.

The fully automated Computer Numeric Control (“CNC”) punching machine (TruPunch 2000) which was acquired and completely installed is now fully operational, whereas the CNC laser tube machine (TruLaser Tube 5000 Fiber) is expected to be operational in the Q2 FY2018. These machines will increase the operations efficiency and process accuracy with less wastage, as well as reduce the dependency on manual labour.

The joint venture with T.M.I Solutions (Pvt) Ltd to distribute selected Nihon Kohden products has commenced its business in Q1 FY2018.


Hai-O Enterprise in a filing with Bursa Malaysia

The successful strategy transformation which focused on smaller consumer products and targeted recruitment strategy have continued attract more young entrepreneurs to join in as distributors.

Despite higher sales generated from patented medicine, it was offset by the drop in sales of duty-free goods. The drop in duty-free products’ sales was mainly due to the imposition of more stringent rules by authority on duty-free trade in border town.

The success in re-branding of its key beverage product “Min kaffe” during the year had attracted many consumers and boost up the sales of this product. The intensive member retention program and member recruitment campaign carried out during the year had resulted monthly average new members increased by about 5,000.

The implementation of CRM system which provided E-commerce platform had helped to increase distributors’ productivity and efficiency.


Hiap Tech Venture in a filing with Bursa Malaysia

The outlook of the steel industry in Malaysia in 2017 remain positive if China remains committed and steadfast in cutting its steel output capacity and other proactive actions which will prevent the dumping of cheap steel exports to Malaysia.

The majority of steel products produced locally is destined for infrastructure and construction sector applications. Hence, the outlook for the steel industry in Malaysia very much depends on the growth and performance of this sector. The construction sector is expected to maintain its robust performance with a targeted double-digit growth of 10.3% through new construction works valued at RM138 billion in 2017.


KM Loong Resources in a filing with Bursa Malaysia

We foresee an increase in FFB production from young mature areas and strong FFB yield recovery in Keningau region in where about 50% of the Group’s planted mature area is located. We expect the FFB production to be potentially 20% higher comparing the quantity achieved in the FY2017.


NTPM in a filing with Bursa Malaysia

…we would have felt the full impact on the cost arising from the raise the minimum wage for employees in Peninsular Malaysia by RM100 to RM1,000 per month, and to RM920 from RM800 for employees in East Malaysia starting from 1 July 2016, the recent increased volatility in the foreign currency exchange rate, pose a challenge for the Group to contain and monitor its manufacturing cost.


Subur Tiasa in a filing with Bursa Malaysia

In view of prevailing tight supply of logs in the market as the result of the forest management and timber certification initiated by the authority, timber prices are expected to sustain. The higher tax premium on timber imposed by state authorities will impact the performance of timber division.


Cypark Resources in a filing with Bursa Malaysia

…the implementation of Net Energy Metering Programme by SEDA will provide us with new opportunity to expand our renewable energy project portfolio. Cypark currently has been given first right to undertake the turnkey EPCC, management & operation contract to develop 15MW (dc) solar plants by the winners of the first LSS tender.

Our Biogas to Energy project will start to contribute to our revenue once our Fully Anaerobic Bioreactor System (FABIOS) in Ladang Tanah Merah is commissioned in 2018. We also plan to expand our biogas activities to include Palm Oil Mill Effluent (POME).

…focus our research & development resources in developing business opportunities from energy storage, exportable Biomass Solid Fuels (BSF) and Energy Efficiency (EE) projects.

…confident to secure more government contracts for landfill closures and new sanitary landfill projects. We believe that we have strong competitive advantage based on our solid track records of successful completion of 18 landfill closure projects covering total area of about 600 acres nationwide and our success in constructing and operating 1000 tpd sanitary landfill in Negeri Sembilan which is one of the country’s largest and most modern facilities.

…our current successes have made Cypark as the preferred partner for many world renowned green technology providers such as Hitachi (Japan), TESCO (Japan) and Ciel Terre (France).

On logistic services

Tasco shareholders approve venture into cold chain business

“The expected RM110mil revenue contribution represents about 15%-20% of our overall top line based on our revenue last year. We consider this to be a conservative projection, as we did not include the value that could be generated via the synergy created between the new cold chain segment and our other existing business segments. We believe that the acquisitions that have been approved by our shareholders would position us as one of the best end-to-end logistics solutions providers.”


Tasco develops global distribution hub in DFTZ for Renesas

“Whatever [Renesas] produces is sent to our KLIA warehouse to be integrated. We have something like a factory where we do ‘pick and pack’, and from there we distribute [the products] globally.

“The warehouse is actually temperature-controlled. It is how we will expand our dry service menu into the cold service menu — not just for food and beverages or pharmaceuticals, but also for semiconductors.

“Malaysia still carries very good conditions to be a regional hub. [However,] we see operations getting more sophisticated and need many things to cope [with that].”

“Our focus for the Westport land is making it a regional hub. We would like to promote it to existing customers.”


On banking

Non-performing loans to rise — S&P

The household debt-to-GDP ratio was 88.4%, while corporate debt was about 110% of GDP in Malaysia.

“The rate hikes are expected to lead to a higher NPL ratio among local banks to between 1.8% and 2%, up from a near-historical low of 1.6%.”

“Malaysian banks in general [have focused on] protecting their bottom line, but we do have our doubts about how sustainable this approach can be in the future. The banks need to grow, and they have constant requirements to invest in compliance and technology.


Banking sector consolidation faces many stumbling blocks — S&P

“We have a saturated banking sector. There are a lot of cannibalisation and duplication in the sector as a whole. So, there is a clear need for consolidation, which has taken place at a very slow pace.”

The sector’s net interest margins have been trending downwards consistently for the last five or six years, adding that profitability has been declining.


On corporate development

U Mobile ends network sharing deal with Maxis

Maxis said the termination is a convenience option available to U Mobile under the NSA. The termination will take place in stages over a period of 18 months with completion on Dec 27, 2018. U Mobile is not obliged to compensate for terminating the NSA as the company has an option to review the NSA after five years from the agreement’s commencement date.

“For FY17, the impact is going to be minimal, but it can be material moving forward. Assuming the fee to be stagnant at FY16’s level, that would be almost RM1 billion from FY19 through FY21.”

U Mobile was seen as a winner in the Malaysian Communications and Multimedia Commission’s spectrum reallocation exercise last year, where it was allocated 2x5MHz of the 900MHz frequency and 2x15MHz of the 1,800MHz frequency for 15 years effective July 1 this year. The spectrum used to belong to Maxis and Celcom.


Bumi Armada climbs on Armada Kraken first oil

“Achieving first oil on the Armada Kraken FPSO is an important milestone, as we work to deliver oil to our clients, EnQuest plc and Cairn Energy plc, and work towards receiving the charter income for Bumi Armada.”

The Armada Kraken is the third of four FPO projects Bumi Armada is starting up this year. “She is our first ever heavy oil production facility and has the largest liquid handling capacity in our fleet (460,000 barrels of liquid per day) and she marks Bumi Armada’s entry into the North Sea as a production facilities owner, operator and duty holder.”


Gamuda stands to gain from booming construction sector

…to benefit from the booming construction sector in Malaysia, given its dominant roles in the MRT and other rail-based projects.

…to ride on the next infrastructure/property boom in Penang via its project delivery partner role in the Penang Transport Master Plan.

“…there would likely be a lag effect before more meaningful earnings contribution, as land acquisition and actual mobilisation of machinery could be slower than expected for a project like the ECRL.”

Gamuda’s order book is still 50% lower than management’s target of RM10bil per annum.


Alibaba ups its stake in Southeast Asia’s Lazada with $1 billion investment

“That [valuation] is quite a significant uptick and overall that reflects the great performance and traction that Lazada has seen. It also reflects that Alibaba continues to be extremely positive about this region, doubling down on Southeast Asia and seeing the potential.”

“The e-commerce markets in the region are still relatively untapped, and we see a very positive upward trajectory ahead of us. We will continue to put our resources to work in Southeast Asia through Lazada to capture these growth opportunities.”