24 October 2007

Public Mutual join the China's "bubble party"

Finally, Public Mutual's "China Fund" was officially launched yesterday. Look at its advertisement: "Take advantage of China's growing economy" with new PB China Pacific Equity Fund.

Big China Fund

I don't know which unit trust company start this, recently we always heard about this kind of "Big China Fund" launching in our country. Maybe the funds performed very well due to the current China's maket condition, the unit trust companies manage to attract a huge number of customers/investors. If Public Mutual do nothing, it may loss its attractiveness to the customers, and may loss its market share to the competitive companies. So... though a huge bubble is forming in China's stock market... "under the pressure of public's demand", Public Mutual launched this China fund finally.

I have a friend who had recently become a Public Mutual's representative, he was trying his best to persuade his clients into buying this newly-launced fund. (does he get more commission from selling this fund than selling others? I don't know). If you ask his oppinion about the bubble forming in China's stock market, you'll probably hear this: "don't worry... the market is not likely to collapse before the Olympics". Maybe this is just a persuading tecnique taught by his manager/supervisor, but it seems that he himself believe in this, because he will tell you that he himself already invest in this fund too. And, you know, a lots of people believe in this phrase. (Please don't tell me the fund managers of Public Mutual also believe in this bull-shit thing.)

With its great brand-name and strong sales-agent network, I believe that the size of this PB China Equity Fund can easily grow to RM 1 Billion. The biggest unit trust company in our country now is grabbing millions of ringgit from the public, and send the moneys into the China's stock market. (According to the fund's rules, when the huge money reaches, the fund managers can't keep them as cash. They must invest a certain minimum portion of the money into China's stock market, no matter how bad is the outlook for the market.)

If we assume that the same things are happening in other countries, then there will be trillions of money keep flowing into the China's stock market.

This is what I imagine:

"demand from public"
unit trust companies lauch "China funds"
huge money reach fund-managers
they had to invest into China's market
China's market is boosted into record high
"China funds" shows great performance
more funds launched, more money had to be invested into China
China market go even higher
so, this can explain why the bubble of China's market can keep growing, and growing, and growing.... It's not impossible for the Shanghai's index to touch 10,000 point by next year. Under the aids of information technology in this globalisation era, one of the biggest bubble in the history is forming. It's already out of control.
(Believe it or not, no government can control the market, include the powerful communist government of China.)
Warren Buffett already sold most of his stake in PetroChina. I'll keep my self away from China's market. If anybody want to join this bublle party.... good luck, and take care.

23 October 2007

Rising latex price & the glove-manufacturers

In this post, we'll see how the rising latex price affect the profitability of the latex-glove companies. (Latex is the raw material for glove-manufacturing, accountable for about half of the operational costs)

Here's the historical price movement of bulk latex:

Latex Price Jan-00 till Sep-07
source: Malaysian Rubber Board, http://www2.lgm.gov.my/Mre/YearlyAvg.aspx
[updated 30-10-2008: pls click here for the updated-verion of the chart.]

From the chart, we can see the recent price of latex is about 150% higher than that in 2001 & 2002. This definitely will rise the operational cost of latex-glove companies. But will it have a significant impact on their profitability?

The following graph shows the EBITDA margins and PAT (profit after tax) margins for the three largest glove-companies in Malaysia:

Profit margin (graph)

While the latex price rise significantly from 2002 to 2006, the profit margin of these glove-manufacturers just show a small decline in the same period. This small decline in profit margins could be cause by other factors, e.g. rising financial cost for expansion of production lines.

So, I think we can say the rising price of latex has a minimal impact on the profitabilily of latex glove companies. They are always able to pass on the rising cost to their customers.

Again, I feel that Supermax is the best choice (for investment) among this 3 companies . From the charts, we can see that Supermax's EBITDA margin in 2006 is about 1% higher than that in 2002, while Topglove's EBITDA margin shows a decline of about 2%. This shows that Supermax's management is better in maintaining the company's profitability.

22 October 2007

On Time Performance of AirAsia & other airlines.

one reason I think AirAsia will continue to growth is its great on-time performance. An airlines that has a consistent punctuality will win the customers' respect and build up its name, thus gain a bigger market share in long run.

In this article, I just want to show: how good actually is the the on-time performance of AirAsia?

Here's the figures I get from AirAsia's website:
* a flight is considered on-time if it departs no later than 15 minutes from the schedule time.

AirAsia on-time performance 2007-09

From the chart, its two months (Aug & Sep) average performance is about 88%, Three months average (Jul~Sep) is about 85%.

We have to make a comparison to show how good is this figures. First, Lets compare the on-time performance of Jetstar Airways. (data from jetstar's website: http://www.jetstar.com/).

Jetstar on-time performance 2007-09

We can see that the on-time performance of AirAsia is as good as Jetstar's. And, Jetstar is the winner of the Best Low-cost Airlines (worldwide) in Skytrax's World Airline Awards 2007. I think this shows that AirAsia's performance is among the best in the world. (of cource, in this comparison, we assume that the figures announced on both airlines' website are true and reliable.)

Then, how about the comparisons with others airlines?

After some searching through the internets, I found that most Airlines do not publish their on-time performance on their web-site. However, we can get some statistics from http://www.flightstats.com/. Although the figures at this website only reflect the 20 most active routes for each airlines, it shouldn't be much different from the actual values.

Here's the figures I get from the website for some of the best airlines worldwide:
(statistic period: 15-Aug 2007 ~ 15-Oct 2007)

Low Cost Carriers:

Air Berlin

Jetblue Airways 76%
Jetstar Airways81%
Southwest Airlines83%
Tiger Airways 85%

Full Service Carriers:

Singapore Airlines

Thai Airways79%
Cathay Pacific Airways 75%
Qatar Airways73%
Qantas Airways73%
Malaysia Airlines76%

(It is quite a strange phenomenon that the LCCs perform better than those full service carrier. I guess maybe it's easier to be on-time for short-range flights. )

Unfortunately, the statistics about AirAsia at http://www.flightstats.com/ is incomplete, because it contains only figures for routes to Macau (which is about 65% on-time). This figures of single destination may be very different from the overall performance of AirAsia. For other routes which they don't have any data, they just quote 0% on-time-performance and 100% flight-cancellation. This does not reflect the real situation.

So, we can't double check the reliability of the on-time performance figures announced at AirAsia's website. However, according to my own experience (I've flown with AirAsia twice in September, and each flight I took depart on-time) and some of my friends' recently, I personally believe that error on the announced figures should be within 5%. So, lets assume that the real figure is 5% lower than the officially announced, the two-month-average performance of AirAsia (Aug & Sep-2007) still stand above80% (88% - 5% = 83%).

Conclusion: AirAsia on-time performance ranks among the best worldwide. Its performance is much better than those full service carrier like MAS, giving it an opportunity to grab a bigger market share in the future. I belive LCC model will continue to shake the aviation industry, and AirAsia will continue to grow and become the leading LCC in the reagion.

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