Curated Insights 2019.12.27

How Gen X, millennials and Gen Z became the low-inflation generations

Overall, 6 in 10 working-age Americans haven’t even seen inflation above 4 percent. A quarter of them haven’t even seen a sustained stretch above 3 percent.

This is how much money Mariah Carey’s “All I Want For Christmas Is You” is raking in

This time of year, it’s hard to go a day without hearing Mariah Carey’s “All I Want For Christmas Is You,” whether it’s playing in a store, in an Uber or on your holiday playlist. … The singer has earned more than $60 million in royalties from the song.

Curated Insights 2019.04.19

Making uncommon knowledge common

Part of the reason was that companies benefited from this credibility through obscurity. Real estate brokers have access to significantly more data about the specific houses and the general market via a set of data sources called the MLS. Historically, only brokers had access to MLS data, which gave them leverage over their customers and entrenched their importance as market makers. Similarly, lack of visibility into companies allowed bad ones to put on a good face until prospective employees had already joined. And only large companies could pay for data from compensation research providers, giving them advantage over the potential hires they negotiated with. Many incumbents are able to intermediate their markets and unfairly gain an edge from people’s lack of knowledge. And it’s scary to be the first to buck this trend on your own.

Before Zillow and Glassdoor, if you wanted to look up information about a specific home or company, there wasn’t a webpage for it. Barton’s companies created the definitive page for each house and company. Using a combination of data from authoritative sources (like all the various MLS systems) and user-generated data, they created high quality content unique to each company or listing. Being among the first to do this let them do a huge SEO land grab, which has been hard to displace since.

Barton’s companies take industries that are low frequency and use their Data Content Loops and SEO to acquire users for free and engage them more frequently. While most companies in real estate have super high customer acquisition costs, Zillow is able to get potential sellers even before they are ready to sell, so Zillow is already there when the sellers are ready.

Owning demand ultimately becomes its own compounding loop since becoming a trusted brand builds its own network effects. Consistently building this reputation increases people’s trust in them and makes them a go to destination.

Nobody had yet indexed all the homes in the US and brought them online. While sites like Apartments.com had started to do so for rentals, it wasn’t until Zillow (and Trulia) that this was done for homes. There was fertile search real estate to grab and Zillow rushed out to claim it all using the Zestimate as its spearhead.


Zooplus vs Amazon in battle for the European pet supply market

Many e-commerce companies go through this cycle where their customer acquisition costs look fantastic because early adopters are cheaper to acquire, but then marketing expenses later go through the roof. Ironically, many direct-to-consumer companies in the US have started opening physical stores because that is cheaper marketing than online ads.

Zooplus discussed this on their Q3 2018 call. They said online ad pricing has increased because their competitors are shifting more ad budget to online. Facebook and Google ads are auctions, so more competition means more demand and thus higher prices. Today, 80% of Zooplus’s marketing spend is online ads and Google Shopping. That makes them very susceptible to competitor pressure.

My concern isn’t so much that Zooplus loses share to Amazon, but that Amazon has the scale to price pet food at a lower margin (or loss) if they want to. This could cap Zooplus’s ability to ever earn a profit. Amazon doesn’t need to overtake Zooplus in market share to negatively affect them because Amazon already has enough market share that lowering prices would harm Zooplus. In this scenario, it’s possible that Zooplus keeps their market share, continues to grow along with the online pet supply market, and still never reaches their profitability goal.

Why I don’t think Amazon needs more market share to harm Zooplus is because of the lack of switching costs in Zooplus’s business. Even though Zooplus has a 95% retention rate with its customers, if Amazon lowered their prices 10%, there’s not much that keeps most of Zooplus’s customers using their website. Zooplus seems well aware of this issue and it has tied their hands when it comes to price increases. On the Q2 2018 call, management said they “don’t want to be the first [pet retailer] sticking their head out passing on manufacturer prices increases.”


Amazon 2018 letter to shareholders

As a company grows, everything needs to scale, including the size of your failed experiments. If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle. Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures. Of course, we won’t undertake such experiments cavalierly. We will work hard to make them good bets, but not all good bets will ultimately pay out. This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society. The good news for shareowners is that a single big winning bet can more than cover the cost of many losers.

Uber Global Ridesharing Footprint
Percentages are based on our internal estimates of Gross Bookings and miles traveled using our currently available information.

Ensemble Capital: Landstar Systems update

The U.S. truck driver supply is structurally constrained. According to the Bureau of Labor Statistics, the average age of a U.S. truck driver is 55 years old. The core “trucking generation” aged 45 to 54 accounts for 29.3 percent of the labor force, while 25 to 34-year-olds are just 15.6 percent of truck drivers. We’ve seen trucking companies offering huge cash signing bonuses to licensed commercial drivers, without a noticeable jump in the driver pool. In short, there aren’t enough young drivers coming up to replace the older ones.

The average Landstar BCO driver earned a record $197,000 in gross revenue. Now, that’s before expenses like gas, maintenance, and tires, but still a great income. In fact, it was so good last year that some BCOs decided to take the last few weeks of December off – they’d already made more money than they needed for the year. The agent node of the Landstar network also had a record-setting 2018, with 608 agents generating more than $1 million of revenue – up from 542 in 2017.

Given this success, we think Landstar’s network is strengthening. It’s attracting more truckers and agents – indeed, Landstar recently said both the BCO and agent pipelines are full, despite a tight labor market. This creates a virtuous cycle. When Landstar adds truckers and agents, more shippers make Landstar their first and only call to move their freight. In turn, more shippers attract more truckers and agents to Landstar. And so on. An important point to make about Landstar is that it generates 70% incremental operating profit margins on net revenue and their market share is under 10%. We think they have plenty of room to drive profit growth in the decade to come.

As for recession risk, Landstar is a capital-light business with a mostly variable cost structure. Remember, BCO-derived gross margins remain steady throughout the cycle. Landstar’s gross margins fall in periods of strong demand, as lower-margin brokerage operations account for a greater percentage of revenue. Without the BCO structure, Landstar would be far more sensitive to the ebb and flow of the industrial economy. So, while far from recession proof, Landstar is recession resistant.

The second technological threat is autonomous-driving trucks. While the technology is perhaps already there, we think regulations will require a human driver or engineer to be in the truck cab for some time to come. Airplanes, trains, and other heavy transportation vehicles, for example, use various amounts of “autopilot” but still have captains, conductors, and engineers at the ready. As we’ve seen with autonomous driving automobiles, there’s massive headline risk for any accident related to driverless vehicles, even if, on the whole they are safer than human-driven vehicles. Also, we expect that any initial shipments by autonomous trucks will carry commodity, low-cost items like boxes of diapers and food. Landstar carries a lot of special loads like automotive, machinery, and hazmat, where we think human drivers will remain the standard due to the costly freight and related liabilities.

Disney already has a booming streaming service. It’s called Hotstar

Disney is taking on Netflix with a new streaming service in the United States. But there’s an even bigger and hotter market where it’s already winning by miles — India. Hotstar, which Disney bought from 21st Century Fox last year, already has nearly as many users as the entire US population. And it’s growing incredibly fast.

The Indian platform now has 300 million monthly active users, Disney (DIS) revealed during its investor day on Thursday. That means its user base has quadrupled in a little over a year — Hotstar had around 75 million monthly active users in India at the end of 2017. Disney is already way out in front thanks to Hotstar. At the end of 2017, the Indian platform dwarfed Amazon and Netflix, which had 11 million and 5 million Indian users respectively, according to Counterpoint Research.

A breast milk ingredient is the hot new health supplement for adults

Global chemical giants DowDuPont Inc. and BASF SE are investing millions to ramp up production of an indigestible sugar found naturally in breast milk. Infant formula makers like Nestle SA can’t get enough of the synthetic ingredient. Now the companies are eyeing a potentially bigger customer: adults. DuPont estimates the annual market could reach $1 billion.

Human milk oligosaccharide is the third most common solid in breast milk, after lactose and fat. HMO escapes digestion, allowing it to reach the colon where it feeds beneficial bacteria. HMOs may explain why breast-fed babies tend to fare better than formula-fed, said Rachael Buck, who leads HMO research at Similac formula-maker Abbott Laboratories.

DuPont plans to spend $40 million building out its HMO production capacity this year, its second biggest capital investment after expanding a factory that makes Tyvek. Meanwhile, it’s partnering with Lonza Group AG to make enough product to meet current demand. DuPont will become a stand-alone company when it splits from DowDuPont on June 1.

After two decades of research, Abbott was first to bring HMOs to the U.S. baby nutrition market in 2016. It’s now expanded to 15 countries. Nestle last year rolled out HMO formula in Gerber and other brands across 40 countries. HMOs nourish bacteria that “train’’ immune system cells, 80 percent of which reside in the gut, said Jose Saavedra, Nestle chief medical officer. The health claims propelled about $600 million in sales of HMO formula last year for each of Abbott and Nestle SA.

Danish biotechnology company Glycom S/A is targeting the adult digestive health market with HMO supplements it began selling in the U.S. and Europe late last year. The company touts its Holigos IBS product as managing symptoms of irritable bowel syndrome, including abdominal pain, constipation diarrhea and bloating. It sells 28 doses on Amazon.com for $50.

Recycling isn’t about the planet. It’s about profit.

Oil had reached a two-year high, and soda bottles are made of PET, which, like all plastics, is basically just processed oil. As the price of “raw” plastic increased, recycled plastic—a natural substitute for manufacturers—became more expensive too. What was good for cities’ recycling programs was bad for the companies that did business with them. The Coca-Cola Company’s Spartanburg, South Carolina, plant, which had opened in 2009 to recycle old soda bottles into new ones, idled as recycled PET plastic prices went through the roof.

Americans are still diligently filling our blue bags with everything we can, but there are fewer places for our dirty goods to go to find redemption. That’s in part thanks to China’s 2017 decision to shut the door on imports of recycled materials, ending a two-decade stretch during which the U.S. came to rely on the country to take and process about 70 percent of its used paper and 40 percent of its used plastic. In 2017, Republic Services, the second-largest waste collector in the U.S., was selling about 35 percent of its recyclables to China. By the end of 2018, China’s National Sword policy, which banned plastics outright and placed strict standards on paper imports, brought that number down to 1 percent.

After China stopped buying, a supply glut sent prices for recycled materials down, and fast. Recyclers found themselves dumping paper in landfills outside Seattle and incinerating plastic in the suburbs of Philadelphia. Glass recycling is local but expensive, and its reuse had often been subsidized by paper and plastic, so with paper and plastic prices in freefall, glass disposal became more of a burden too. In October, Northeastern recyclers were sending just 54 percent of the bottles they collected to processors for reuse. The rest were basically landfilled.

The hunger of Chinese manufacturers for wood pulp, plastic, and aluminum can’t be met by Chinese suppliers or even big commodity exporters like Brazil and Indonesia. Chinese importers solved this problem by buying enormous amounts of recyclables to substitute for raw materials. China went from bringing in 7 million tons of recycled material between 1994 and 1998 to 104 million tons between 2009 and 2013—a 15-fold increase.

Did capitalism kill inflation?

In other words, the capitalists killed inflation. In the decades after World War II, Polish economist Michal Kalecki depicted inflation as a product of the struggle between business and labor. If workers manage to extract big wage increases, their employers recoup the costs by putting through price increases, forcing workers to seek even more, and so on in a wage-price spiral. In contrast, if workers have little or no leverage, as is now the case in many industries, the wage-price spiral never gets started.

The importance of working with “A” players

I observed something fairly early on at Apple, which I didn’t know how to explain then, but I’ve thought a lot about it since. Most things in life have a dynamic range in which [the ratio of] “average” to “best” is at most 2:1. For example, if you go to New York City and get an average taxi cab driver, versus the best taxi cab driver, you’ll probably get to your destination with the best taxi driver 30% faster. And an automobile; what’s the difference between the average car and the best? Maybe 20%? The best CD player versus the average CD player? Maybe 20%? So 2:1 is a big dynamic range for most things in life. Now, in software, and it used to be the case in hardware, the difference between the average software developer and the best is 50:1; maybe even 100:1. Very few things in life are like this, but what I was lucky enough to spend my life doing, which is software, is like this. So I’ve built a lot of my success on finding these truly gifted people, and not settling for “B” and “C” players, but really going for the “A” players. And I found something… I found that when you get enough “A” players together, when you go through the incredible work to find these “A” players, they really like working with each other. Because most have never had the chance to do that before. And they don’t work with “B” and “C” players, so it’s self-policing. They only want to hire “A” players. So you build these pockets of “A” players and it just propagates.

In my experience solving difficult problems, the best talent available rarely led to the best solutions. You needed the best team. And the best team meant you had to exercise judgment and think about the problem. While there was often one individual with the idea that ultimately solved the problem, it wouldn’t have happened without the team. The ideas others spark in us are more than we can spark in ourselves.

Curated Insights 2017.11.12

(Guardian: Apple secretly moved parts of empire to Jersey after row over tax affairs)
(BBC: Paradise Papers: Apple’s secret tax bolthole revealed)
(Apple: The facts about Apple’s tax payments)

“US multinational firms are the global grandmasters of tax avoidance schemes that deplete not just US tax collection, but the tax collection of almost every large economy in the world.”

“Apple claims to be the largest US corporate taxpayer, but by sheer size and scale it is also among America’s largest tax avoiders … [It] should not be shifting its profits overseas to avoid the payment of US tax, purposefully depriving the American people of revenue.”

One theory is that AOE “bought” the rights owned by ASI taking advantage of an incentive called capital allowance. This means that if a multinational buys its own intellectual property through an Irish subsidiary, the cost of that purchase will generate many years of tax write-offs in Ireland.


This is how Amazon could invade the pharmacy business

Drug delivery would also add to the value of Amazon Prime membership. Customers who pay the $99-per-year price for Prime membership are its most loyal customers, and Amazon is constantly looking for ways to increase the value of membership to keep shoppers from using competitors.

In generics especially, there are numerous markups along the way that Amazon could eliminate or pare back to capture market share.

Amazon already owns wholesale distribution licenses in at least 13 states and could build its own pharmacy business from scratch, restructuring the drug supply chain in the process. For now, these wholesale licenses may be part of Amazon’s business-to-business sales effort, which would focus on hospitals, doctors’ offices and dentists. In the longer term, however, the drug-distribution licenses could be the first step in building a hub-and-spoke model for drugs that could eventually serve consumers.

There are thousands of different drugs and dosages with prices that vary widely among drugstores and insurance plans. This makes it hard for patients to know when they are getting the best deal.


Tesla hits bumps in pursuit of mass market

Potential problems uncovered include workers in its Fremont plant manually operating robots that should be automated, several cost overruns and delays from suppliers because of late changes to design specifications, and difficulties sequencing parts once they arrive at the plant leading to a large number of unfinished vehicles coming off the line.

 

In multiple instances, the company shipped cars from the factory that lacked key parts such as computer modules, digital displays, or even seats. These parts were flown to Tesla-owned dealers, who then assembled them into the vehicle before completing the shipments to customers, according to several people familiar with the practice.


 

Apple acquired InVisage with well over 100 patents on quantum dot technology for advanced cameras and beyond

Apple’s acquisition of InVisage is very exciting as iPhone cameras are becoming a key feature to keep their smartphones ahead of the pack. Advancing video will be very exciting to see come to the iPhone and beyond. Between the advances in Quantum Dot technology and depth cameras, they have expertise in many markets that Apple could tap into over time.

Why AI is the ‘new electricity’

The U.S. and China lead the world in investments in AI, according to James Manyika, chairman and director of the McKinsey Global Institute. Last year, AI investment in North America ranged from $15 billion to $23 billion, Asia (mainly China) was $8 billion to $12 billion, and Europe lagged at $3 billion to $4 billion. Tech giants are the primary investors in AI, pouring in between $20 billion and $30 billion, with another $6 billion to $9 billion from others, such as venture capitalists and private equity firms.

Where did they put their money? Machine learning took 56% of the investments with computer vision second at 28%. Natural language garnered 7%, autonomous vehicles was at 6% and virtual assistants made up the rest. But despite the level of investment, actual business adoption of AI remains limited, even among firms that know its capabilities, Manyika said. Around 40% of firms are thinking about it, 40% experiment with it and only 20% actually adopt AI in a few areas.

The reason for such reticence is that 41% of companies surveyed are not convinced they can see a return on their investment, 30% said the business case isn’t quite there and the rest said they don’t have the skills to handle AI. However, McKinsey believes that AI can more than double the impact of other analytics and has the potential to materially raise corporate performance.


Why multi-cloud is the next big thing in technology

Why has cloud become so indispensable to so many companies? Because pretty much every company has become a software company, and they all need to deliver their software faster and to more people than ever before.

Avoiding lock-in and saving cost; Differentiation; responding to cloud vendor pressure; resiliency, redundancy, performance and data sovereignty; M&A and consolidation; access to resources.

A recent survey by RightScale found that 85% of enterprises now have a multi-cloud strategy, up from 82% in 2016. This creates immense opportunities for startups that can help companies work seamlessly across various different cloud providers. Startups that promise cloud neutrality – not being locked into one particular vendor – will have significant advantage in this new battlefield.


A decade after DARPA: Our view on the state of the art in self-driving cars

Developing a system that can be manufactured and deployed at scale with cost-effective, maintainable hardware is even more challenging. We are innovating across the sensing hardware and software stack to lower costs, reduce sensor count, and improve range and resolution. There remains significant work to be done to accomplish these conflicting objectives and get the technology to reliably scale.

Testing stochastic systems requires a significant number of repetitions generated by real-world data for it to be representative. That means we must gather millions of miles of road experience to teach the software to drive with confidence. (Imagine needing to drive millions of miles to get your driver’s license!) But not all miles are created equal, so “accumulated miles” is not an expressive enough metric to track progress. Think of it this way: The skills you acquired learning to drive in a quiet Midwestern town will not translate should you find yourself driving in the heart of Manhattan.

We’re still very much in the early days of making self-driving cars a reality. Those who think fully self-driving vehicles will be ubiquitous on city streets months from now or even in a few years are not well connected to the state of the art or committed to the safe deployment of the technology. For those of us who have been working on the technology for a long time, we’re going to tell you the issue is still really hard, as the systems are as complex as ever.


How many robots does it take to fill a grocery order?

The U.K.’s biggest online grocer hit a milestone this year: Ocado Group Plc put together an order of 50 items, including produce, meat and dairy, in five minutes. Fulfilling a similar order at one of the company’s older facilities takes an average of about two hours. The secret: a fleet of 1,000 robots that scurry about a warehouse snatching up products and delivering them to human packers.


Thanks to Wall St., there may be too many restaurants

There are now more than 620,000 eating and drinking places in the United States, according to the Bureau of Labor Statistics, and the number of restaurants is growing at about twice the rate of the population.

“Everybody thinks their brand has what it takes to succeed in the marketplace. You look at a location that looks good, but everybody is looking at the same place and they all come in, and the result is you get oversaturation.”

Sales at individual chain restaurants, compared with a year earlier, began dropping in early 2016, analysts reported. A majority of restaurants reported sales growth in just four of the last 22 monthly surveys from the National Restaurant Association. Before that, most restaurants had reported growth for 20 consecutive months, from March 2014 through October 2015, the survey found. As Americans work longer hours and confront an ever-growing array of food options, they are spending a growing share of their food budget — about 44 cents per dollar — on restaurants.

The shuttering of restaurants could have a major impact on the labor market. Since 2010, restaurants have accounted for one out of every seven new jobs, and many restaurateurs complain that it has become increasingly difficult to hire and retain workers.


Menu prices will tell the future of inflation

Take a company like the Cheesecake Factory. In its third-quarter earnings report back in 2013, when the labor market was looser, labor costs represented 32.1 percent of revenue. Operating margins were 8.2 percent. Fast forward to the third-quarter earnings report this year. Labor costs had risen to 34.9 percent of revenue, and operating margins had shrunk to 6.2 percent. In its conference call, the company guided wage growth in 2018 to 5 percent, in line with many of its peers. As labor pressures have eaten into margins and profits, perhaps not surprisingly, the company’s stock is flat over the past four years.

Lucky for the restaurant industry, even while labor costs have been rising, food costs have been falling. Cheesecake Factory’s cost of sales as a percentage of revenue has fallen to 22.9 percent, from 24.0 percent in the third quarter of 2013. Without this, margins would be even lower.

The cost of eating out has been going up at a rate of only 2.4 percent per year, less than wage growth in the industry.

Jeff Bezos’s guide to life

On raising kids: Jeff and his wife let their kids use sharp knives since they were four and soon had them wielding power tools, because if they hurt themselves, they’d learn. Jeff says his wife’s perspective is “I’d much rather have a kid with nine fingers than a resourceless kid.”

…decided “the best way to think about it was to project my life forward to age 80” and make the decision that “minimized my regrets. You don’t want to be cataloguing your regrets.” And while you might feel remorse for things you did wrong, he said more often regrets stem from the “path not taken” like loving someone but never telling them. “Then it was immediately obvious” that he should leave to start Amazon. “If it failed, I would be very proud when I was 80 that I tried.”

On space entrepreneurship: The key to opening the opportunities of space is reducing the price of getting objects out of Earth’s gravity. “We have to lower the cost of admission so thousands of entrepreneurs can have startups in space, like we saw with the Internet”, noting how web companies exploded in popularity as infrastructure costs came down.


Peak farmland, peak timber, peak car travel, peak child

About 1970 a great reversal began in America’s use of resources. Contrary to the expectations of many professors and preachers, America began to spare more resources for the rest of nature, first in relative and more recently in absolute amounts. A series of decouplings is occurring, so that our economy no longer advances in tandem with exploitation of land, forests, water, and minerals. American use of almost everything except information seems to be peaking, not because the resources are exhausted, but because consumers changed consumption and producers changed production. Changes in behavior and technology liberate the environment. – Nature Rebounds, Jesse Ausubel

Company Notes 2017.10.20

Digi.com Q3 FY2017 Results

Digi continued to register notable milestones, with our 4G Plus network being one of the fastest growing networks in Malaysia, capable of delivering consistent LTE speed around 10Mbps 80% of the time. Meanwhile, rapid LTE 2600Mhz and LTE 900Mhz deployments expanded Digi’s LTE-A coverage to 49% of the population, making us the frontrunner for widest LTE-A network coverage nationwide.

Postpaid ARPU levelled to RM77 on the back of a larger postpaid subscriber base supported by sturdy demand for our new postpaid plans. Prepaid ARPU steadied at RM32, with higher contribution from prepaid internet revenue.


Palette Multimedia Q1 FY2018 Results

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

The Company has effectively combined the latest innovative technologies: medtech, AI and Big Data in imedic. The power to be unleashed from these 3 technologies could be enormous. In additional to its early adoption by hospitals and doctors in the China market and other Asian countries, the Company has made successful penetration into the Russia market. The Company has recorded profit last quarter and Q1 FY2018. The Board of Directors is in the opinion that the Company will be profitable for the current FY.

Scientex expects growth from major investments

“For the manufacturing side, for the last three to four years, we have invested probably almost RM1 billion to expand the capacity to [produce] 350,000 tonnes [of stretch films per year].”

He said the group’s new stretch film facility in Arizona in the US is on track to commence its operations early next year. The two lines at the US facility, he said, will take about two years to be fully utilised. At full utilisation, the plant will be able to produce up to 30,000 tonnes of stretch film per annum. With this new plant, Lim said the group expects its sales in the US market to increase further.

Scientex now has a total land bank with a gross development value (GDV) of RM11 billion, which includes completed projects with a RM3.2 billion GDV and ongoing projects worth RM1.5 billion. The remaining RM6.3 billion worth of land will be used for future projects which can last the group for up to 10 years, said Lim.


Oriental Food seeks growth via biscuit venture

“We originally planned to launch our biscuit products this month, but we wanted to make a bigger impact by launching the entire series on the market. We still have another few products to finalise and we will be launching them next month.”

“We can easily add machines to our existing four production lines for our potato products. Adding one [machine] could boost our revenue probably another 5% to 10%. But in order to have more growth, we have to venture into another [new] segment.”

“For this financial year (FY18), it is very difficult for us to estimate our bottom line due to the rising cost of raw materials and labour. This year, we see a rise in sugar prices, as well as packaging cost due to higher paper prices. And the price of paper is expected to rise by another 8% in the near future as some China paper mills had stopped production on environmental grounds, resulting in supply shortage.”

“Although we absorb some margin loss, all of us are still making money,” he said, adding that raw materials account for 60% of the group’s production cost.


YSP Southeast Asia’s Vietnam ops to break even

“Our bottom line was previously very much affected by unrealised foreign exchange losses due to the volatility of the Vietnamese dong and the US dollar.” YSPSAH purchases a good 60% of its raw materials in US dollars. Lee said its exports, which are also denominated in US dollars, helped mitigate the situation.

“Our animal use drugs segment faces strong headwinds”, he said, since this segment, which caters to livestock and aquatic creatures, took a hit after the Chinese embargo on Vietnamese swine took place. Vietnam is one of the biggest pork producers in Asia, and the largest within the Asean region. The biggest buyer of Vietnamese pork used to be China, up until political tensions between both countries led to an import ban in November last year. “We have been trying to reduce our reliance on the domestic market there, and instead to focus on exporting products from there.”

The Vietnamese plant is running at a rather low utilisation rate of 40%, where it manufactures over 50 registered products that are distributed to more than 1,200 clients through 35 YSPSAH sales representatives to date. Lee said this is not its full range of products just yet. By year end, YSPSAH aims to have a total of 60 products registered and launched in Vietnam.


Affin to focus more on retail banking

The group now wants to shift its focus to retail banking, which had already contributed close to 50% to overall revenue this year.

“In this five-year programme from 2016 to 2020, we have allocated about RM300 million to spend not only on IT (information technology) but also with a view to improving the performance and delivery of our retail banking operation. So it’s actually quite a substantial improvement. I think we are well within our target to meet the 40% goal for Islamic banking by 2020 [set] in the Malaysian financial sector blueprint.”

“The positioning of the bank will be enhanced because the bank is at the apex [of the corporate structure], and hence [it holds] all the assets of the entities underneath it so the size will be enhanced as well. The bank will also have a direct access to the capital and equity market which, again, profiles the company as a much stronger entity.”


MPay gets MCMC licence to roll out mobile services

“With the ASP licence obtained from MCMC, MPay Mobile has become the latest mobile virtual network operator (MVNO) in Malaysia supporting a wide spectrum of services to the public nationwide, including the latest high-speed broadband 4G network.”

“Enabling Asia is a mobile virtual network aggregator, who has a wholesale MVNO agreement with one of four network operators in Malaysia, offering a complete network product and services to MVNOs.”

“The aim is to bring more convenience and accessibility for customers who are located at remote areas with difficulty to access to bank branches, or who intended to move away from traditional banking at branches towards online and mobile banking.”


Bellew explains why he is leaving Malaysia Airlines to return to Ryanair

On Malaysia Airlines, Bellew pointed out that success is just within its grasp. Just another 4%-5% in revenue monthly and it should move to profits, he added.

“It is Ireland’s greatest company. They need my help and there is a big challenge. It is a form of national service,” he said in a personal statement why he was rejoining the Irish low-cost carrier.

ASEAN Open Skies implementation remains slow — IDEAS

“Freedom of travel in air is characterised by nine different levels of freedom. Asean has implemented perfectly the first four levels of freedom, [while] the fifth freedom is in progress. The ninth level of permission, which is the final spectrum of freedom of air, essentially gives an airline the freedom to travel in the domestic destination of a foreign country, not just the capital city itself. We are halfway to full freedom of flight in the air. There is an understanding among the Asean countries that this can be done by the year of 2020, but as a think tank, we observe that the progress has been slow, and a lot of obstacles at regulatory and policy levels still exist.”

Ali noted that there are no national supportive policies in certain large countries in the region, which allows a foreign carrier to freely navigate across the country. “And then there are of course government-owned airlines operating in different countries, which also impose restrictions on private airlines originating from the same region to fly without permission,” he said. Therefore, Ali opined that Asean governments should stay away from aviation businesses over time.


Unshackle the EPF or face the consequences

The provident fund, which endears itself to many above 55, warned that it may not be able to keep up with the current rate of dividends if there are continued restrictions on its efforts to invest outside Malaysia.

The returns from its investments overseas outweigh the proportion of money allocated. For instance, as at June 30 this year, the returns from overseas investments accounted for 32.5% of the EPF’s total investment income. This is despite overseas investments making up only 29% of the total investment assets of the fund.


Economists warn of inflation if minimum wage hiked

“If there is a minimum wage increase next year, it would likely result in a cost-push inflation as businesses are likely to pass on the rising costs to consumers. It would also contribute to demand-pull inflation at the back of income growth. The increase in minimum wage will cascade up to other income groups and higher wage across the economy.”

“We will see another round of inflationary pressure [if minimum wage is raised], but it’s crucial to move Malaysia out of the low-wage industries. We need to move to higher value products and services. The increase in minimum wage will force manufacturers to seek out for higher value-added jobs and activities rather than the low value-added [jobs], high volume output.”

Noting that the minimum wage-earning workers in Malaysia are largely made up of foreigners, she said an increase in the wage rate could spur Malaysians to take on more of these jobs, and thereby help reduce unemployment in the country.

“A hike will add to the costs of doing business, which may mean more people in the lowest strata losing their jobs,” Wan Saiful said, adding that an increase in wages should come only after there is an increase in the productivity level.