Curated Insights 2018.05.13

Who’s winning the self-driving car race?

Only Waymo has tested Level 4 vehicles on passengers who aren’t its employees—and those people volunteered to be test subjects. No one has yet demonstrated at Level 5, where the car is so independent that there’s no steering wheel. The victors will also need to pioneer businesses around the technology. Delivery and taxi services capable of generating huge profits is the end game for all.

Goldman Sachs Group Inc. predicts that robo-taxis will help the ride-hailing and -sharing business grow from $5 billion in revenue today to $285 billion by 2030. There are grand hopes for this business. Without drivers, operating margins could be in the 20 percent range, more than twice what carmakers generate right now. If that kind of growth and profit come to pass—very big ifs—it would be almost three times what GM makes in a year. And that doesn’t begin to count the money to be made in delivery.

Waymo had three collisions over more than 350,000 miles, while GM had 22 over 132,000 miles.

After Waymo, a handful of major players have demonstrated similar driving capabilities. It’s hard to say anyone has an edge. One advantage for GM: There’s a factory north of Detroit that can crank out self-driving Bolts. That will help GM get manufacturing right and lower costs without relying on partners. Right now, an autonomous version of the car costs around $200,000 to build, compared to a sticker price of $35,000 for an electric Bolt for human drivers.

Musk wants to use cameras and develop image-recognition capabilities so cars can read signs and truly see the road ahead. He has said Tesla is taking the more difficult path, but if he can come up with a better system, he will have mastered true autonomy without the bulky and expensive hardware that sits on top of rival self-driving cars. “They’re going to have a whole bunch of expensive equipment, most of which makes the car expensive, ugly and unnecessary,” Musk told analysts in February. “And I think they will find themselves at a competitive disadvantage.”

China’s got Jack Ma’s finance giant in its crosshairs

The rules will force Ant and some of its peers that straddle at least two financial industries to obtain licenses from China’s central bank and meet minimum capital requirements for the first time, according to people familiar with the matter, who asked not to be identified discussing private information. The companies’ ownership structures and inter-group transactions will also be restricted, the people said, adding that the rules need approval from China’s State Council and are subject to change.


Starbucks: A big deal should mean a sharper focus

The deal appeared positive because it ”accelerates the reach of Starbucks’ channel development segment globally by providing Starbucks with a strong distribution partner; and enables Starbucks to step up shareholder returns.

CEO Kevin Johnson said as much on the conference call. “We’ve been very focused on streamlining the company in a way that allows us to put our focus and energy behind the highest priority value creation drivers for the company,” he said. “And certainly, our retail business in the U.S. and China are the two big growth engines.”


Tinder: ‘Innovation’ can help it fight off Facebook

“In digital, and especially on mobile, there is always one brand that defines each core use case,” Ross wrote. “In dating, it is Tinder, whose user base and subscription base continue to explode globally. We don’t see that changing, even with scaled competition from Facebook.”

Tinder’s brand, scale and “freemium” model—with free basic access and the opportunity to pay up—should continue to make it appealing to users (particularly younger ones) even as new competitors emerge, according to Ross. “There is no real reason for singles not to still use the platform,” he wrote.

“The hard paywall brands tend to be those that are for the more serious online dater,” Ross noted, including older users and those seeking comparatively long-term relationships. “This is not only where Facebook has said it will focus, but also where it can best leverage its data and recommendation capabilities.”


Why A.I. and cryptocurrency are making one type of computer chip scarce

Crypto miners bought three million G.P.U. boards — flat panels that can be added to personal and other computers — worth $776 million last year, said Jon Peddie, a researcher who has tracked sales of the chips for decades. That may not sound like a lot in an overall market worth more than $15 billion, but the combination of A.I. builders and crypto miners — not to mention gamers — has squeezed the G.P.U. supply. Things have gotten so tight that resellers for Nvidia, the Silicon Valley chip maker that produces 70 percent of the G.P.U. boards, often restrict how many a company can buy each day.


PayPal: How it can fight back against Amazon Pay

“Given its two-sided network of 218 million consumers in the PayPal digital wallet and 19 million merchants for whom PayPal provides online & mobile merchant acquiring services, plus Xoom and Braintree, PayPal benefits from one of the most extensive payments ecosystems globally. Within this ecosystem, PayPal offers the best mobile wallet with an 89% conversion ratio from shopping cart to payment, creating strong consumer and merchant lock-in.”

It has other ways to provide incentives. “PayPal enjoys strategic alliances with Visa, Mastercard, Google, Facebook, Apple, Alibaba, Baidu, and a number of financial institutions, including Bank of America and HSBC, allowing it access to a vast customer base and potential consumer incentive plans,” they wrote, noting an HSBC offer to pay customers $25 if they link their cards to PayPal.

Etsy CEO: ‘Signs of progress’ in boosting repeat business

Etsy isn’t trying to become a place people shop every day, but it does want people to shop there more often. (The company cites figures saying 60% of customers buy just once a year.) It said both new and repeat buyers were up 20% year-over-year in Q1, which Silverman called “early signs of progress.”

Management wants to increase the “lifetime value” of a shopper by creating a cycle in which the company pays an acceptable rate for a new user, converts them to a buyer and then a repeat buyer, and then translates the money that buyer provides into more efficient marketing that acquires more new customers.

As Warren Buffett’s empire expands, many jobs disappear

Despite Buffett’s folksy image, Berkshire has thrived for years by keeping things lean and buying companies that—in his own words—are run by “cost-conscious and efficient managers.” The result? Buffett hasn’t shut down many operations during his five decades atop the firm. But more than two dozen of his companies employ fewer people today than they used to.

Berkshire often doesn’t note in the data when one of its businesses buys another, which can make it seem like there’s hiring when the conglomerate is just absorbing people. The company also doesn’t always make clear when units are combined or spun out of others.

The formula behind San Francisco’s startup success

Losing money is not a bug. It’s a feature. Not making money can be the ultimate competitive advantage, if you can afford it, as it prevents others from entering the space or catching up as your startup gobbles up greater and greater market share. Then, when rivals are out of the picture, it’s possible to raise prices and start focusing on operating in the black.

You might wonder why it’s so much better to lose money provided by Sequoia Capital than, say, a lower-profile but still wealthy investor. We could speculate that the following factors are at play: a firm’s reputation for selecting winning startups, a willingness of later investors to follow these VCs at higher valuations and these firms’ skill in shepherding portfolio companies through rapid growth cycles to an eventual exit.

Cheap innovations are often better than magical ones

Much of what we call “artificial intelligence”, say the authors, is best understood as a dirt-cheap prediction. Sufficiently accurate predictions allow radically different business models.

If a supermarket becomes good enough at predicting what I want to buy — perhaps conspiring with my fridge — then it can start shipping things to me without my asking, taking the bet that I will be pleased to see most of them when they arrive.

Another example is the airport lounge, a place designed to help busy people deal with the fact that in an uncertain world it is sensible to set off early for the airport. Route-planners, flight-trackers and other cheap prediction algorithms may allow many more people to trim their margin for error, arriving at the last moment and skipping the lounge.

Then there is health insurance; if a computer becomes able to predict with high accuracy whether you will or will not get cancer, then it is not clear that there is enough uncertainty left to insure.


The future of digital payments? Computational contracts, says Wolfram

Wolfram anticipates at least three levels of computational contracts, from minor transactions (less than $50) to mid-level (thousands of dollars) and high-end (in the millions).

“The lowest level–typically involving small amounts of money–one will be happy to execute just using someone’s cloud infrastructure (compare Uber, AirBnB, etc.),” he writes in his blog post. “There’s then a level at which one wants some degree of distributed scrutiny, and one expects a certain amount of predictability and reliability. This is potentially where blockchain (either public or private) comes in.

“But at the highest level–say transactions involving millions of dollars–nobody is going to realistically want to completely trust them to an automated system (think: DAO, etc.). And instead one’s going to want the backing of insurance, the legal system, governments, etc.: in other words one’s going to want to anchor things not just in something like a blockchain, but in the ‘weightiest’ systems our current society has to offer.”

A hedge-fund fee plan that only charges for alpha

Consider a hypothetical traditional hedge firm that has $1 billion of assets under management and another that charges a fulcrum fee of 0.75 percent, plus a quarter of the profits. If the markets rise 10 percent and the fund outperforms by 200 basis points, or 2 percent, a traditional hedge fund would charge $20 million (2 percent of $1 billion), plus a performance fee of $24 million (20 percent of the $120 million in gains) for a total of $44 million. Our hypothetical fulcrum fund would charge $12.5 million — a management fee of $7.5 million (0.75 percent of $1 billion), and a performance fee of $5 million (25 percent of the 2 percent above-market gain). The breakdown of the $24 million performance fee portion of the traditional hedge fund works out to $20 million for plain old beta and $4 million for alpha. That total is five times more than what the fulcrum shop charges for investment gains.

Now imagine a scenario where the market is up by 10 percent and a fund is up only 8 percent, or has 2 percent underperformance. The traditional hedge fund would have charged $20 million (2 percent of the $1 billion in assets under management) plus a performance fee of $16 million (20 percent of the $80 million in gains) for a total of $36 million dollars. Meanwhile, the fulcrum fund would charge $7.5 million (the 0.75 percent management fee), but it also would give a refund of $5 million (25 percent of the 2 percent, or $20 million, in underperformance). The net charge to clients would be $2.5 million. This is a small fraction of the amount charged by a standard hedged fund.

Why winners keep winning

With that 20% initial advantage, the final market share increases significantly. What is even more amazing is that this advantage was only given in the first round and everything after that was left to chance. If we were to keep increasing the size of the starting advantage, the distribution of final market shares would continue to increase as well.

The purpose of this simulation is to demonstrate how important starting conditions are when determining long term outcomes. Instead of marbles though it could be wealth, or popularity, or book sales. And most of these outcomes are greatly influenced by chance events. We like to think in America that most things come down to hard work, but a few lucky (or unlucky) breaks early on can have lasting effects over decades. If we look at luck in this way, it can change the way you view your life…

I ask you this question because accepting luck as a primary determinant in your life is one of the most freeing ways to view the world. Why? Because when you realize the magnitude of happenstance and serendipity in your life, you can stop judging yourself on your outcomes and start focusing on your efforts. It’s the only thing you can control.

Curated Insights 2017.11.26

What Tesla’s big rig must do to seduce truckers

In North America alone, the largest heavy duty freight trucks—Class 8 semis—account for about $30 billion in sales each year, or more than 250,000 new trucks, according to industry data tracked by Bloomberg. Class 8 trucks, which have a loaded weight rating of at least 33,000 pounds, come in a variety of shapes and sizes, from trash trucks and cement mixers to city buses all the way up to tractor-trailers whose drivers spend days and nights living on the road. The most common day cab delivery trucks cost around $100,000, and big rigs with sleeper cabins are about $150,000.

Batteries are the single most expensive component of an electric truck, and the battery of a cross-country hauler could cost $100,000 even before they build the truck around it. But that upfront investment can be offset by cheaper operating costs. Running a truck on electricity saves tens of thousands in fuel costs as well as savings of roughly 7 cents a mile on lower maintenance costs. And if the autonomous driving system is good enough to run without a driver, it could also dramatically cut labor expenses, which add about 57 cents for every mile on the road.

Any range less than 400 miles is likely meant for local and regional deliveries, the sort of thing done by UPS and FedEx or the type of hub-and-spoke model used by giant retailers such as Wal-Mart Stores Inc. to move goods from distribution centers to stores or warehouses. If Tesla wants to go after the longest routes to replace what are known as “over-the-road” trucks, which feature sleeping cabins for multi-day driving stretches, the company will need a range of at least 500 miles—or else a way to charge an electric truck that’s faster than anything in use now. The battery needs for each of these categories would be different, and so would the costs.

Perhaps Tesla’s biggest advantage over other truck makers is that its semi will share some core parts with the Model 3. Musk disclosed during an earnings call in May that the semi uses “a bunch” of Model 3 motors, which sit in line with the truck’s axles. These relatively cheap electric motors will give the semis unparalleled electric torque for getting quickly up to speed with a heavy load.


This man is leading an AI revolution in Silicon Valley—and he’s just getting started

Booming demand for its products has supercharged growth at Nvidia. Over the past three full fiscal years, it has increased sales by an average of 19% and profits by an astonishing 56% annually. Nvidia meanwhile has so far managed to retain its roughly 70% market share in GPUs despite competition from formidable rivals—among them Intel and AMD—who want their share of the billions in chip sales to come from this new tech revolution. “IBM dominated in the 1950s with the mainframe computer, Digital Equipment Corp. in the mid-1960s with the transition to mini-computers, Microsoft and Intel as PCs ramped, and finally Apple and Google as cellphones became ubiquitous,” wrote Jefferies equity analyst Mark Lipacis in a July note to clients. “We believe the next tectonic shift is happening now and Nvidia stands to benefit.”

“We believed this model of computing could solve problems that general-purpose computing fundamentally couldn’t. We also observed that video games were simultaneously one of the most computationally challenging problems and would have incredibly high sales volume. Those two conditions don’t happen very often. Video games was our killer app—a flywheel to reach large markets funding huge R&D to solve massive computational problems.”

“In the future, companies will have an A.I. that is watching every single transaction—every business process—that is happening, all day long. Certain transactions or patterns that are being repeated. The process could be very complicated. It could go through sales to engineering, supply chain, logistics, business operations, finance, customer service. And it could be observed that this pattern is happening all the time. As a result of this observation, the artificial intelligence software writes an artificial intelligence software to automate that business process. Because we won’t be able to do it. It’s too complicated.”

“We’re seeing early indications of it now. Generative adversarial networks, or GAN. I think over the next several years we’re going to see a lot of neural networks that develop neural networks. For the next couple of decades, the greatest contribution of A.I. is writing software that humans simply can’t write. Solving the unsolvable problems.”

Google advances their future smart clothing vision with focus on delivering an ‘interactive garment’

Notably the user is able to trigger various different types of functionalities through interactions with the interactive garment, such as by touching or swiping the user’s shirt sleeve. In addition, by enabling the triggering of functionality through interactions with a wearable garment, instead of a device, the user does not need to fiddle around with the user interface of a smartwatch or smartphone in order trigger a functionality. In fact, the user may be able to provide the gesture to the interactive garment without even looking at the garment. In addition, a simple gesture to a garment is discreet and thus enables the user to trigger functionalities in a crowded setting without the need to take out their smartphone or other electronic device.


Apple’s ginormous share of industry profit expands, says Canaccord

Apple is capturing more and more, at 72% of total industry profits, up from 68% in the July quarter, while Samsung’s share dipped slightly to 24%. Looking ahead, Walkley thinks Apple’s share of all smartphone units shipped in 2018 will expand to 14.5% from an expected 13.3% this year, while Samsung’s share he thinks will dip to 19.1% from 20.2%. He expects Huawei and Xiaomi, two big privately held Chinese vendors, to both see share rise in 2018, at 11% and 6.4%, respectively. They won’t do as well, however, as Oppo and Vivo, two other Chinese competitors, who may capture 7.8% and 7.5% of the market next year, he opines.


Why Apple’s HomePod is three years behind Amazon’s Echo

The Echo is a truly standalone product at the center of an ecosystem. The cloud-based operating system has made it easy for developers to create thousands of skills or voice-activated apps. By contrast, the HomePod is essentially an extension of the iPhone, like an accessory. When someone asks the HomePod to open a third-party app, the request won’t go directly to the cloud, as with the Echo, but to an iPhone. As a result, developers can’t write apps for the HomePod. They must create tweaked versions of existing iPhone apps. What’s more, Apple has limited the kinds of apps to messaging, to-do lists and notes. If Alexa is the beating heart of the Echo, Siri is almost an afterthought.


Asia’s consumers snubbing global brands for these products

In Indonesia’s $1.3 billion instant-coffee market, the disparity is more pronounced. During that period, Javaprima gained about 12 percentage points for a 33 percent share, while Nestle lost 1.4 percentage points to 16 percent. Nestle declined to comment on the Indonesian market. Javaprima is capitalizing on local trends, such as demand by women and new coffee drinkers for a smooth and creamy brew, director Agus Susanto said.

Nestle’s revenue from Asia, Oceania and Africa fell 23 percent between 2012 and 2016 to 14.5 billion francs ($14.7 billion). To capture more Asian consumers, the company introduced ready-to-drink cold coffees in the region, opened branded cafes at Chinese universities and formulated a Cafe Viet lineup.

Pechoin, owned by closely held Shanghai Pehchaolin Daily Chemical Co., saw its market share jump fivefold between 2012 and 2016, according to Euromonitor. The parent company had revenue of about $1 billion in 2016. The newfound popularity came partly at the expense of the L’Oreal Paris label, which lost more than a fifth of its market share in the same period. Pechoin, founded in 1931, focuses on herbal products and claims to be one of China’s first cosmetics brands.

L’Oreal remains the No. 1 beauty group in China, and the nation’s increasing demand for luxury cosmetics bodes well for its premium positioning, the company said. Paris-based L’Oreal also has boosted efforts to tailor products for Asia. In 2014, it bought Magic, a Chinese brand known for skincare masks, a popular local beauty ritual. The company also introduced a liquid foundation that uses a cushion applicator popularized in South Korea, and it’s competing with Amorepacific Corp. for the Muslim cosmetics business in Southeast Asia.

A new kind of self-sustaining fishery could offset the worst impacts of animal farming

The Ocean Farm 1 – created by leading salmon farming company SalMar – is the first offshore fish farm capable of complete automation in feeding and monitoring fish. According to SalMar, the farm can mature up to 1.5M fish in just 14 months. If the experimental facility proves viable (and environmentally sound) it may compel more companies and governments to use offshore fish farms to help grow our global food supply.

But American seas are newly open for business: The National Oceanic and Atmospheric Administration announced a rule in 2016 that allows for large-scale fish farming in federally controlled waters three or more miles offshore. In Europe, the regulatory environment has been more friendly. The EU embraced policy changes recommending the shift of aquaculture offshore back in 2002; by 2008, offshore farms were operational in Norway, Ireland, Italy, Spain, and several other countries. Norway is arguably the aquaculture capital of the world: Fish farming helped Norway produce around 1.18M metric tons of salmon in 2016, and fish contribute $8B annually to Norway’s economy – accounting for about 8% of its exports.

Developing only 1% of Indonesia’s suitable ocean area could produce more than 24 million tonnes of fish per year or over 3.9 × 1011 individual 4 cm bivalves. If consumed entirely within Indonesia, this volume of additional fish production would increase seafood consumption per capita sixfold. In fact, there is already considerable activity working to expand Indonesian aquaculture.


Asia’s richest banker spots a once-in-a-lifetime opportunity

For India, it’s a $207 billion mess, a pile-up of bad loans years in the making that’s dragging on growth. For the nation’s wealthiest banker, it’s the kind of opportunity that very rarely presents itself. What has billionaire Uday Kotak salivating is the government’s attempt to finally draw a line under delinquent loans, with recent steps to overhaul India’s bankruptcy laws and recapitalize state-owned banks. The moves are intended to lift a burden from the country’s banks and encourage them to accelerate lending, supporting economic growth.

The sense among some Indian executives that they could walk away from their debts without facing consequences was a major factor limiting past efforts to bring delinquent loans in check. The government’s announcement last month that it will inject a record 2.1 trillion rupees into state-owned banks is another sea change, in that it should give the lenders sufficient capital to write off bad loans weighing down their balance sheets.


Billionaire Kotak says Indian banks need to cut costs: Q&A

Debt markets and other segments will put pressure on the bank loan markets because they are working at much narrower spreads between the investor and the issuer. This is going to be one of the biggest challenges at a time when non-bank sectors like mutual funds, insurance, debt capital market and so on are dis-intermediating on the one hand, and technology is commoditizing the lending business at the other.

First is the formalization of finance. For instance, you see a reduction in the cash economy as less money is going into land and real assets, especially in rural India. That money is going into the formal economy which is a mega change which we are seeing. The second trend which we are seeing is the broad-basing of financial services. As finance became broader, savers wanted to look at things in addition to or beyond bank deposits. So money is going into mutual funds, insurance and equities markets. The third is digital. It, combined with Aadhaar (India’s biometric identification program), is a very potent force. We are at about 1,360 branches now. In the past we would have thought we would need about 5,000 branches. But with the digital economy, Aadhaar and customer behavior changes, we believe we can do with less.


Traffic is piling up—and so are its costs

Last year, congestion cost each U.S. driver $1,400 on average, for a total of nearly $300 billion, according to Inrix’s latest annual scorecard. The cost reflects wasted fuel, decreased productivity and lost time, which might include longer delivery times or missed meetings. The biggest losers are the most congested cities.

“We find that 49% to 61% of ride-hailing trips would have not been made at all, or by walking, biking or transit,” the researchers reported.

First digital pill approved to worries about biomedical ‘big brother’

Experts estimate that so-called nonadherence or noncompliance to medication costs about $100 billion a year, much of it because patients get sicker and need additional treatment or hospitalization.

The technology could potentially be used to monitor whether post-surgical patients took too much opioid medication or clinical trial participants correctly took drugs being tested. Insurers might eventually give patients incentives to use them, like discounts on copayments, said Dr. Eric Topol, director of Scripps Translational Science Institute, adding that ethical issues could arise if the technology was “so much incentivized that it almost is like coercion.”

This ex-trucker has some questions about the Tesla Semi

This first version of the Semi will not replace the dozens of thousands of trucks on huge regional or coast-to-coast runs, clocking 2,000 to 5,000 miles per week.

I understand acceleration is a core Tesla brand value, but I’m far more interested in braking. An 80,000-pound tractor trailer needs about 550 feet to come to a complete stop from 55 miles per hour, and I spent a surprising portion of every driving shift trying not to obliterate car drivers who weren’t aware of that fact. Show me how much the Semi can lop off that braking distance.

Companies like Wal-Mart and JB Hunt that have placed orders for Tesla Semis have the routes, terminal control, and money for terminal infrastructure to make the most of the Semi, so we’ll see what the production unit looks like in 2019 (hopefully) and parse the feedback after 10,000 miles of road duty. Don’t be surprised to see more mirrors.


Can carbon-dioxide removal save the world?

Carbon-dioxide removal is, potentially, a trillion-dollar enterprise because it offers a way not just to slow the rise in CO2 but to reverse it. The process is sometimes referred to as “negative emissions”: instead of adding carbon to the air, it subtracts it. Carbon-removal plants could be built anywhere, or everywhere. Construct enough of them and, in theory at least, CO2 emissions could continue unabated and still we could avert calamity. Depending on how you look at things, the technology represents either the ultimate insurance policy or the ultimate moral hazard.

As a technology of last resort, carbon removal is, almost by its nature, paradoxical. It has become vital without necessarily being viable. It may be impossible to manage and it may also be impossible to manage without.

Building arks, rather than trying to predict The rain

“One thing I’ve come to as an investor, is recognizing that there are a lot of ways to make money in the market. There are a lot of investment approaches and philosophies that can do very well, but all of them test the investor in one way or another. Therefore, it’s important for you to figure out how to align your investment philosophy with your own personality – so that when the investment philosophy inevitably tests you, you’re the sort of person who will pass the particular types of tests required to successful manage your investment strategy.”


What is blockchain technology?

The blockchain is still in its nascent stages. However, blockchain technology promises to entirely reshape money, middlemen, and trust. Ultimately, blockchain is as much a political and economic hypothesis as a technological one. Blockchain technology provides a new way to think about how we agree on things. For the first time, multiple untrusted parties can create and agree on a single source of truth, without the use of a middleman. The technology’s implications for traditional middlemen and corporate players are therefore potentially enormous. As the landscape evolves, the future of blockchain will likely take on forms yet to be imagined.

It’s fructan, not gluten, that’s causing stomach problems, says new research

The scientists found that the participants only developed bloating symptoms after eating fructan-containing bars. Other bars, including those with gluten, did not cause the distress. This led the researchers to conclude that fructan, not gluten, may be behind the bowel problems. One big reason it’s important to figure this out – people who are on a gluten-free diet were found to have an increased risk of developing type 2 diabetes by other recent research.


To solve problems caused by sitting, learn to squat

In the past half century, epidemiologists have been forced to shift how they study movement patterns. In modern times, the sheer amount of sitting we do is a separate problem from the amount of exercise we get. Our failure to squat has biomechanical and physiological implications, but it also points to something bigger.

“Every joint in our body has synovial fluid in it. This is the oil in our body that provides nutrition to the cartilage,” Jam says. “Two things are required to produce that fluid: movement and compression. So if a joint doesn’t go through its full range—if the hips and knees never go past 90 degrees—the body says ‘I’m not being used’ and starts to degenerate and stops the production of synovial fluid.”

Company Notes 2017.08.25 (Part 1)

Malakoff Q2 FY2017 Results

The results for the financial year ending 31 December 2017 will be affected by the lower capacity payment in the new revised Segari Energy Ventures Sdn Bhd’s Power Purchase Agreement commencing 1 July 2017.


Fiamma Q3 FY2017 Results

The new integrated logistics warehouse has improved the operation and cost efficiency of the Group and will also be able to generate a recurring income stream for the Group from the provision of storage space and logistic services to third party customers.


TH Plantations Q2 FY2017 Results

“The recovery in production and replenished stock levels throughout the industry have inevitably cause some downward pressure in CPO and PK prices, and we have seen average prices normalising down from their recent highs. However, we remain optimistic that the prices will still remain supported by increased demand for palm oil products, particularly in view of higher soybean oil prices in the United States.”


APM Automotive Q2 FY2017 Results

… lower demand from OEMs. ..lower revenue and higher operating costs from the newly completed plants overseas.

…profitability will be pressured by higher operating costs from the new overseas operations such as Thailand and Indonesia. These operations will focus on driving sales with an internal emphasis on efficient resource management, cost containment and increased technical training of workers to improve production efficiency.

…level of investment will not be curbed in the face of declining profitability… continue to expand its product range and to diversify geographically its reliance on one market.


Nestle Malaysia Q2 FY2017 Results

Compared to the second quarter of last year, the prices of major raw materials such as milk powders, coffee beans, and palm oil had increased by some margin.

Examples for the successful product launches in H1 2017 are MAGGI Hot Mealz, MILO “KAW”, KIT KAT Mini and MAT KOOL Panda Ice Cream.


Rubberex Q2 FY2017 Results

the provision of unrealized foreign exchange losses on investments held in China and higher costs of production, especially latex and resin, key components of our manufactured products.

The first phase of our nitrile disposable gloves project is currently operating at 80% capacity and is expected to be fully utilized by the second half of the year.

The Group is now embarking on the second phase of expansion with the proposed installation of two production lines that would increase the current installed capacity by another 500 million pieces to 1.5 billion pieces annually, however, commercial production is only expected to commence by the second half of 2018.


Evergreen Fibreboard Q2 FY2017 Results

due to higher log and glue cost…Production volume was reduced as a result of shortage supply of rubber wood and scheduled plants shut down for maintenance during the Ramadan festive period.


Star Media Group Q2 FY2017

On 12 May 2017, the Company announced that Laviani Pte Ltd, a wholly-owned subsidiary company, entered into a conditional share purchase agreement with Lucrum 1 Investment for the proposed disposal of its entire equity interest in Cityneon for a disposal consideration of SGD115,612,731 (equivalent to RM360,179,902) to be satisfied entirely via cash.

With the sale of the two radio stations (Capital FM and Red FM) which were loss-making in the last financial year, Radio segment is expected to contribute positively to the Group.

The Group has recently embarked on its next digital transformation plan with the launch of dimsum.my, its very own video-on-demand service. It offers Asian content and much of it on an exclusive basis. Currently, we are also building its library content to secure a much higher subscribers base.

All TV broadcasting companies globally are facing headwinds and with digital disruption within the media industry, the Company does not expect a turnaround from Li TV. In view thereof, the Board has decided to cease the business operations of Li TV Group to mitigate further losses.


Hock Seng Lee Q2 FY2017 Results

With a record order book of RM3 billion in hand, the Group is now busy on work execution. Nevertheless, the Group will continue to bid for projects that are related to our core business in infrastructure works. Our procurement initiative shall be undertaken in line with our prudent project management strategies, taking due consideration of the capacity and capabilities of the Group. The Sarawak Corridor of Renewable Energy (SCORE) initiative, as well as the forces of industrialization and urbanization, provides further contract opportunities for HSL in the key SCORE growth node towns of Tanjung Manis, Mukah and Samalaju and the major cities of Sarawak. HSL foresees the property development segment, with a variety of products on offer, will make a greater impact on the business of HSL Group in 2017.

“While we are busy executing contracts across the state, we are also experiencing some pressure on margins as demand for materials, labour and sub-contractors has pushed up operating costs.”


Kerjaya Prospek Group Q2 FY2017 Results

The outstanding performance, especially in the construction segment, has mitigated the slowdown in the manufacturing segment which was due to completion of existing projects.

The Group’s outstanding order book stands at RM2.5 billion as at the current financial quarter. In addition, the construction division has secured about RM362 million worth of jobs as at the financial quarter.


Ta Ann Holdings Q2 FY2017 Results

The Group’s log harvesting policy is in compliance with our certification exercise. The reduction of log export quota from 30% to 20% effective 1 st July will channel more proportion of logs harvested to the mills for processing. We have strategically revised our plywood production to processing more products with higher plantation and certified woods components as we are stepping up harvesting of our plantation logs and utilization of imported PEFC certified eucalyptus veneer. To-date, plywood products prices have gone up by USD25/m3 and with higher demand, we anticipate the price uptrend to continue.


Boon Koon Group Q1 FY2018 Results

The prospect of rebuilt commercial vehicles business in Malaysia is expected to remain challenging for the year ahead, with continuing weak consumer sentiment and stringent hire purchase lending rule.

Instead of overdependence on its existing business, the Group via its subsidiary, BKG Development Sdn Bhd, a wholly-owned subsidiary of the Company has proposed to diversify into the property development segment with strong growth prospects with Platinum Eminent Sdn Bhd.


Salutica Q4 FY2017 Results

Bluetooth headsets contributed approximately 94.6% or RM48.9 million of total revenue for the current quarter. Non-Bluetooth products and in-house brand FOBO made up of the balance 5.4% of total revenue for the current quarter.

…due to the deferment of new product launch to the following quarter. This had affected the absorption efficiencies of fixed and variable overheads.

One of the models to be shipped to one of its major customers in the second half of CY2017 will be a new form factor of Bluetooth headsets.

The Group expects the sales of its in-house brand FOBO to grow by increasing the marketing and sales activities through expansion of sales distribution channels and promotional activities. Currently, the Group is marketing FOBO Tire, which is a tire pressure monitoring system for light vehicles, as an OEM after-market accessories to automotive brand owners. FOBO Ultra, which is for heavy vehicles continue to receive encouraging response from commercial vehicles and fleet companies. The Group expects to grow and expand in tandem with the market response.


Pecca Group Q4 FY2017 Results

Revenue from leather car seat covers contributed approximately 73.71% of total revenue followed by leather cut pieces supply which accounted for approximately 18.36% of total revenue during the quarter under review. OEM leather car seat remained the largest contributor segment accounted for approximately 39.94% of the total revenue for leather car seat covers whilst REM and PDI contributed approximately 21.99% and 11.78% respectively.


Classic Scenic Q2 FY2017 Results

…lower export sales revenue from wooden picture frame moulding as the market demand for the wooden picture frame in North America remained flat…The input cost of the Group’s major raw material and timber was fairly stable in the first six months ended 30 June 2017.


Techfast Holdings Q2 FY2017 Results

In order for TPSB to become a one stop center for the military and aerospace business, arrangements had also been made with the said customer as above mentioned to transfer their broaching machines from the USA to the company. As such, these machines will enable customers to source from TPSB as a one-stop center for finished products instead of semi-finished products currently, where further enhancement processes are required.

Cape has dominated the Malaysian market with more than 70% market share of products supplied to most of the semiconductor companies in the country. It has also captured over 40% of the market share in South East Asia. However, the biggest markets for Cape’s products are in China and Taiwan where the monthly market demand for rubber sheets in China and Taiwan is about 150 tons and 30 tons respectively, out of which Cape has about 6% market share.

Oriem, on the other hand, is working on some high end LED and epoxy projects with two reputable international original equipment manufacturers in Penang. Oriem is already an approved vendor which meets the standards and requirements of their supply chain. Our company’s new products are now in the final stages of evaluation by the OEM companies and we expect a business deal to be clinched soon.


Rhone Ma Holdings Q2 FY2017 Results

The Group’s future plans and strategies will focus on the expansion of our manufacturing activities by constructing and operating a new GMP-compliant plant in Nilai, which will increase our production capacity by approximately 4 times of the existing maximum production capacity.

We have commenced work on our new warehouse situated in Kampar on 21 July 2017. The new warehouse, which will be used as our main distribution center to cater to our increasing storage needs for both animal health products and food ingredients, estimated to be completed by 3Q 2018.


Focus Lumber Q2 FY2017 Results

The Group’s production unit cost had surged every month and decreased our profit margin as a result of poor production in the current quarter.

We expect the profit margin of our products to be impacted if the supply of logs issue persists. Currently, management is actively looking for alternative supply of logs, which includes purchasing veneer sheets from local timber companies.


Dagangan NeXchange Q2 FY2017 Results

The Group’s Information Technology business continues to firm up its e-services by broadening its product range in business-to-business segment to complement the Group’s position in delivering business-togovernment services.

The award to supply Portable Container Systems (“PCS”) for petroleum products by Petro Teguh (M) Sdn Bhd, is in line with our plan to pursue opportunistic contracting work in Oil & Gas downstream sector leveraging on OGPC’s expertise in delivering innovative engineered systems in short-cycle projects. This PCS project augurs well with our strategy to expand on the Group’s Energy division and further strengthen this business segment and provide growth moving forward.


E.A. Technique Q2 FY2017 Results

The higher cost of EPCIC was mainly due to additional request for work from the client, of which we will pursue for its recovery in future quarters. The increase in administrative expenses was due to discount on receivables and amortization of goodwill for the acquisition of Libra Perfex Precision Sdn Bhd.

The Group remains optimistic on its operating performance in view of the deployment of FSU Nautica Muar, the chemical tanker and oil tanker in Q3 2017. The overall performance of the Group will depend on the closing of the EPCIC project.


BP Plastics Q2 FY2017 Results

…higher resin costs which the Group was unable to completely pass through to its customers in order to maintain price competitiveness.


UMW Oil & Gas Q2 FY2017 Results

In the second quarter of 2017, five out of the Group’s seven jack-up rigs were income-generating with four of them contributed full-quarter revenue thereby achieving an overall asset utilisation rate of 68%. However, the positive effect from higher asset utilisation was offset by the lower time charter rates as well as zero contribution from Naga 1, a semi-submersible rig, which disposal was completed on 9th May 2017.

While asset utilisation is improving for the second half of 2017, the charter rates continue to remain soft, in line with prevailing market rates.


Ann Joo Resources Q2 FY2017

The Group’s earnings were affected by 1) lower sales tonnage on softer domestic demand which was affected by various factors affecting the construction industry; 2) higher finance cost due to recognition of RCPS unwinding of discount; and 3) recognition of LTIP – share based payments expenses of RM1.06 million.

Global steel supply is expected to be affected by: i. Potential output cuts by Chinese steel mills over winter; and ii. Potential production constraints faced by electric arc furnace operators globally given shortages in graphite electrodes worldwide. This expected demand-supply imbalance should enable the Group to be in an advantageous position as a hybrid Blast Furnace-Electric Arc Furnace (“BF-EAF”) operator with high degree of operational flexibility.


MWE Holdings Q1 FY2018 Results

The construction of both factories in Vietnam (Textile division) and Penang (Telecommunication division) has been completed. New production lines will be gradually increased in our Vietnam factory during this financial year. As for the Penang factory, the production is fully operated after the relocation from the previously rented factory. With the additional new facilities, the management expects the expansion and development of new products will further enhance the future earnings of both divisions.


Plenitude Q4 FY2017 Results

70% of Group’s revenue was from property development and 30% from hotel operations.


IHH Healthcare Q2 FY2017 Results

Parkway Pantai expects revenue to increase with aging demographics, more complex cases undertaken in its home markets and the ramp up of its new hospitals. As Parkway Pantai embarks on its next growth phase, it would focus on markets, such as China and India, where there is robust demand for quality healthcare services.

While the Group expects the pre-operating costs and start-up costs of new operations to partially erode its profitability during the initial stages, the Group seeks to mitigate the effects by ramping up on patient volumes in tandem with phasing in opening of wards at these new facilities in order to achieve optimal operating leverage. The Group expects higher costs of operations arising from wage inflation as a result of increased competition for trained healthcare personnel in its home markets.


Spritzer Q2 FY2017 Results

We will continue with our marketing and sales efforts so as to improve our sales of bottled water in Guangzhou, China and in Malaysia. We will also continue with our market development and brand awareness activities in China. We remain confident that the sales of our bottled water products will be sustainable in the domestic market. We are also taking firm steps to improve our business operations in China.

La Nina to hurt air-con sales this year — Daikin

As the blistering heat of El Nino gives way to increased rainfalls under its wet cousin La Nina across Southeast Asia this year, air conditioner (air con) sales are expected to cool.

“I don’t think we will see similar [sales] numbers this year, as the market is shrinking. In the last two years, Malaysia and a major part of Southeast Asia were experiencing very hot El Nino weather and [air con] brands actually could not meet demand and ran out of stock in the months of April to June.”


Malaysia is IKEA’s near RM1 billion Asean distribution and supply chain hub

IKEA will invest RM908 million for the new centre, which will adopt the structure and technology of IKEA’s biggest regional distribution centre in Germany. IKEA will manage an inventory of 9,500 stock keeping units worth RM6.6 billion annually.

“With the establishment of the regional distribution and supply chain centre, Malaysia will strengthen its role in supporting IKEA’s growth in the Asean region. The centre will serve 12 retail stores in Asean, which will increase to 20 stores by 2026.”

Urgent need to regulate healthcare fees

…the central bank will come out with a framework as soon as possible to reduce the medical insurance rate, which is projected to rise to 12.7% this year.

…rising medical insurance in Malaysia and other countries in the region is partly due to unregulated rules.

“While doctors’ fees are regulated, other components of private hospital charges are not. We need a framework on private hospital charges so that prices remain fair and appropriate. Consumers are advised to request for more detailed billing of charges, breakdown of cost of treatment and medicines provided to them.”

Other components of hospital charges not regulated include fees for hospital stay, laboratory investigations, nursing care, use of equipment and operation room and drugs.

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).”