Monday, August 5, 2013

Red Sena, a F&B SPAC? Are we really serious?

Malaysia suddenly has become a land of SPAC. Firstly, there were these petroleum SPAC, in the form of Hibiscus and Cliq. Well the success so far is in the share price hence capital appreciation than anything else. A few more are coming. The beauty is that of course none of them are making money right now, and again the beauty of the story is that we are supposed to wait. These are long term investments. If we are not careful, these investments are going to be long shot for success, rather than long term investment. And the beauty is that, people are willing to wait through the SPAC story but not any other stocks that are in the market already.

How is it going to be successful? A SPAC is a way to raise capital for a team of supposedly professionals in what they do and well professionals are supposedly to be paid well. Another way of calling it, they are going to be expensively paid people - I presumed so.

A consumer based company FMCG or something close to that is supposed to be a business that is built to last. It will take time to be built, a lot of execution, and perseverance. Through this method, a brand is built, using lots of manpower, time, money and maybe more importantly perseverance and luck. It is not supposed to be using a bunch of expensive people, to do the selling and then what? Maintain the team, use up people's funds and we are supposed to be trusting for it to hopefully do well in the long term future.

If the business is to be built this way, it is not through a SPAD but rather private equity or venture capitalists. Sometimes, a petroleum SPAC I can understand where they are investing into a "make or break" oilfield or technology or something like that. Engaging professionals would probably allow us to reduce that probability of failure.

But again in F&B? C'mon. What are they going to do? Buy some businesses? Things like buying businesses to compete against the likes of Coca-cola, Pepsi, DKSH, Harrisons and some private companies? If this is the case, my question is why not turn them into a closed-end fund? Just purely investments. Private Equity rings the bell?

If on the other hand, buying start-ups is the idea. That's even worse. How long the investor is going to wait, if return from investment is to be used as a benchmark rather than just capital appreciation.

I am just wondering, first the Second Board. When it was a ring for syndicates to play and many businesses failed, it was abolished. Then MESDAQ (which later renamed to ACE). We sort of failed although created few really good businesses. Then the Red Chips stocks. We are failing now, after again the experiment. Then the SPACs, 2 good stories so far, in terms of share price but nothing else. Do we want more with an absurb plan of an F&B team of superstars?

Is it a way of just creating stories after stories without much to show success of. Where has the traditional mindset of proving that you are successful then the reward goes rather than the preference for get rich quick scheme? I surely am not favoring the black cheque for SPACs...

9 comments:

K C said...

Hibiscus, cliq, sona, wonderful SPAC, all in the fantastic oil and gas industry, or are they? Now F&B SPAC? What about OMG SPAC?

These are all murder holes! SPAC is the short from of Selling Promises And Craziness. Best deal for investment bankers.

Think about it!
1) Would a promising company need to do deal or merge with SPAC, or rather it just go public through a IPO on its own merits?
2) SPAC no doubt has some seemingly successful business people behind them. Are you sure they too will succeed in this new ventures? Or they were successful because of luck or through other people? I tend to believe more of the later.
3)Those early birds whose cost is so much lower will unload in droves once listed, leaving those poor retail investors holding the hot potato.
4) Investment bankers will be laughing to the banks with your money. They pay themselves multiple times:
a) When they take it public
b) Consultant to the SPAC on retainer as a potential acquisition is sought.
c)When an acquisition is found
d) The one year process when SPAC is seeking shareholders and regulator approvals.

Fees, fees, fees, an ATM machine for the investment bankers. Guess whose money in the ATM machine?

hng said...

Household water bills 3.5% rise

The average household water and sewerage bill in England and Wales is set to rise by around 3.5 per cent over the next year, water regulator Ofwat has announced.

The hike, which will add around £13 to the average bill, will deliver customer benefits in the long term, the regulator insists.

Ofwat has today confirmed household water and sewerage bills will rise by around 3.5 per cent over the next year.

Bill changes for this year will come into effect on April 1, 2013, and will apply until March 31, 2014. The impact of the new charges will vary for individual household customers depending on the company which supplies them and whether or not they have a water meter.


Ofwat estimates the average household water and sewerage bill will rise by around £13. This takes into account a rate of inflation of three per cent, and will mean an average bill of £388 in 2013/14.

Customers in the South East face the biggest rise of £23 a year, while those serviced by Wessex Water will see a hike of £22.

But some will in fact pay less – South West Water customers will see their bills fall by £40. This is because household customers served by South West Water will benefit from a Government Contribution, which will reduce the bill for all households by £50 per year.

Without this reduction, which is being applied from April 2013, South West Water’s combined average bill would be increasing by two per cent, or around £10, to £549.

The bill changes for each provider are listed below:

Anglican Water: £12

Dwr Cymru Welsh Water: £7

Northumbrian Water (excluding Essex and Suffolk?): £8

Severn Trent Water: £7

South West Water: -£40

Southern Water: £23

Thames Water: £18

United Utilities: 13

Wessex Water: £22

Yorkshire Water: £12

hng said...

The major catalyst will be come from Wimax Yes + 1Bestarinet. The moment these division turnaround, all analyst will shout to upgrade YTLP to 'strong Buy'. In the meantime, YTLP will continue derive steady earning from

100% local IPP
(risk: more amortization as plant expire in 2015; fully provision will be made by end of the tenure. These power plant likely continue operation even without power agreement as Gov may continue buy power but at lower rate, profit margin will drop to single digit form current double digit)

20% PT Power Indonesian
(Recent Power traffic hike, no sure impact on power generator. However, earning is dominated in US dollar, stronger currency translate into higher earning in RM)

100% Power Seraya
(risk: increase power supply, increase competition, decrease profit margin, but stronger Sing dollar could mitigate earning erosion.

100% Wesses water
(water traffic hike, stronger pound vs. RM, positive impact on earning)

33.5% ElectraNet
(power transmission traffic hike, positive impact on earning)

Chin Ghee Tan said...

Hng, with water bill increase , how much will YTLP EPS increase next year? Any calculation?

hng said...

The water traffic increase by Wassess is about 5.6% will start contribute beginning from 1 April. The net impact will be reflected in coming Q4 result release by middle of these month.

Chin Ghee Tan said...

hng,

Thanks, let see this quarter result

leetawei said...

Ask around all the retail investor? I am not sure about institutional investor's motive. Most just want to make money. They don't care about other thing, less so long term investment.

Gark said...

Hng,

I am familiar with Indonesian power prices.

The total power price hike for 2013 is 15%. 7.5% hike is already effective April 2013, 7.5% more by 1st October 2013.

owen81 said...

Thanks for sharing,a good review about SPAC. Unfortunately, people buying SPAC are purely speculating so they don't actually care about the fundamental or future.

All these SPAC are money sucker,they require to throw a lot of money during their start up,extremely high capex and reinvestment,so we don't expect to see any dividend coming in in near future.

The company's future is solely dependent on the expert team behind,but what if these people leave? Very likely the business can just close shop, the risk is too just too high.