tag:blogger.com,1999:blog-45048408519191807542024-02-19T10:40:23.293+08:00Skewed OddsSecurity Analysis and InvestmentsMTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.comBlogger89125tag:blogger.com,1999:blog-4504840851919180754.post-5536586283612605792015-03-14T14:51:00.002+08:002015-03-14T14:56:16.527+08:001Q2015<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Arial, Helvetica, sans-serif;">Hi all, happy to say learning programming does have its benefits; managed to get Google spreadsheet to work now. Go ahead to view the current holdings; sorry to say Im boring...nothing much has changed with the holdings.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">1Q2015 is littered with events. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The precipitous drop of oil price from $100+/bbl to currently $44/54 for WTI/Brent followed by re-surfacing of Greek and Spanish woes. Russian issues stemming from 2014 also looks to be a repeat of prior conflicts like the Chechnya wars, rather interesting to note the global political game that revolves the axis of powers and correlation with commodities, in particular energy.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">US dollar rose in strength whereas everywhere else ex US has been performing monetary easing, including Singapore.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">The Swiss Bank (SNB) also removed a currency cap of 1 Euro to 1.2 Francs that was there since 2011. The cap was to protect Swiss exporters in event of rise in Francs versus Euro (which did occur when people flock to Swiss banks as safe havens in times of crisis). However with a large ECB easing impending with all the old country issues resurfacing, the act of even more buying of the Euro and selling Francs to maintain the peg seems a little out of this world and made everyone in Switzerland alot poorer overnight. Interestingly people in Poland, Hungary and Greece have their home mortgages denominated in Swiss Francs, ouch! SNB has doubled their foreign reserves since the peg started in 2011, making it one of the top 5 largest holders of reserves globally. SND also lowered their interest rate to negative 0.75% levels, i.e. you have to pay interest to deposit in a Swiss bank to avoid a massive influx of foreign assets. Denmark's Krone was also mentioned as a "next target".</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Im a bit concerned where US equities and credit markets are heading. It was great a while ago when shale was booming and they turned in a massive trade surplus for a few years. Now that oil is at 40+, marginal cost producers will definitely be sidelined, especially the geared ones. Overall competitiveness of US will be impacted. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Amidst all the craziness, China is still hot on heels of corrupt officials. Gaming stocks were affected, especially those in Hong Kong. Some are looking a little interesting though. Kaisa, 1638 HK: a real estate company also saw a roller coaster ride as their Chairman suddenly left the post, firm went into technical default. Bonds went to 20s at one points and now back to 60s/70s. However a offshore debt swap (with less favorable terms) now pushes it lower. Its white knight Sunac China, another levered real estate company set a 31 July deadline to settle outstanding negotiations with noteholders. There were talks that Chairman Kwok's departure was related to fallen politburo honcho, Zhou Yong Kang. Several Kaisa projects in Shenzhen (largest exposure by land area) were frozen.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Will write more about some ideas Im working on once I have more time on hand. Again drop me a message if you want more discussion(s) on companies.</span></div>
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MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-4043989872259884322015-03-14T13:27:00.003+08:002015-03-14T13:27:37.280+08:002013 and 2014 performance.<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Arial, Helvetica, sans-serif;">Sorry for the delay. Some quick updates.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">Work has been crazy and haven't had much time to go through everything on my plate but am still talking and discussing about companies and all so feel free to drop me a note if you have any you wish to discuss about. </span><br />
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<b><span style="font-family: Arial, Helvetica, sans-serif;">2014</span></b><br />
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<tr style="height: 17px;"><td style="background-color: #dddddd; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">#</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">Name</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">Business</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">Listing</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">Ticker</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">+/- ex divs </span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">+/- with divs</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">1</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Roxy Pacific</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Real Estate / Hotel</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">E8Z</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-4.42%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">8.77%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">2</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">AEI Corp </span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Aluminium extrusions</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">A18</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-13.24%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-9.56%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">3</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">World Precsion</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Precision Machinery</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">B49</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-12.00%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-8.67%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">4</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Nanyang Hldgs</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Conglomerate</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">HKSE</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">212</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">42.86%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">45.51%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">5</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Haw Par Corp</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Conglomerate </span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">H02</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">5.16%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">7.62%</span></td></tr>
<tr style="height: 10px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">6</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Real Estate Co</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Real Estate</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">HKSE</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><br /></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">3.97%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">31.45%</span></td></tr>
<tr style="height: 10px;"><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td></tr>
<tr style="height: 17px;"><td style="color: red; font-weight: bold; padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom; white-space: nowrap;"></td><td style="color: red; direction: ltr; font-weight: bold; padding: 0px 3px; vertical-align: bottom; white-space: nowrap;"><span style="font-family: Arial, Helvetica, sans-serif;">Negative / Shorts</span></td><td style="color: red; padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="color: red; padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="color: red; padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">1</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Olam</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Agri - commodities</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">L28</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-37.37%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-37.37%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">2</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Dapai Intl</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Bag makers </span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">FP1</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">56.00%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">56.00%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">3</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Eratat lifestyle ltd</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Sports goods </span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX </span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">F08</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">54.55%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">54.55%</span></td></tr>
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<span style="font-family: Arial, Helvetica, sans-serif;">I exited World Precision in 2014 and added a real estate company in HK. Reason why I bought it was simple:</span><br />
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<li><span style="font-family: Arial, Helvetica, sans-serif;">Owner owns a significant majority and were aggressively buying back</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">They own a significant portion of land in Macau and stand to benefit from the linkage of HK/Macau/Zhuhai bridges and the lack of hotels around that area</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">The owners are astute real estate investors and operators and watches cost like a hawk</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">The only risks are owners do a "take-under" or severe contraction in real estate market of which the latter is already happening but the firm remains resilient.</span></li>
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<span style="font-family: Arial, Helvetica, sans-serif;">Olam is interesting. 2014 saw an acquisition from Singapore's sovereign wealth fund and hence the price increase. Im not vested in Olam since 2012 as its not cost efficient to maintain the short. Same goes for the other shorts, so the prices are for display. Eratat went bust despite having a huge cash hoard. See my previous posts <b><a href="http://skewed-odds.blogspot.sg/2011/04/koon-update-and-other-ramblings.html" target="_blank">here</a></b> and <b><a href="http://skewed-odds.blogspot.sg/2011_03_01_archive.html" target="_blank">here</a></b>.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">A quick post on 2013 results as I realized I have not posted it up.</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">2013 was interesting as I literally sat on things, there was no action on my part for 2013 at all.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">Gains were mainly for Nanyang (management did a partial tender, of which I did not tender since it would result in odd lots and these have a discount in the HK market) as well as Haw Par. Haw Par gains were oddly not in line with its portfolio companies, namely UOB, UIC and UOL. Also exited Koon in 2013.</span><br />
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<b><span style="font-family: Arial, Helvetica, sans-serif;">2013</span></b><br />
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<tr style="height: 17px;"><td style="background-color: #dddddd; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">#</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">Name</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">Business</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">Listing</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">Ticker</span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">+/- ex divs </span></td><td style="background-color: #dddddd; direction: ltr; font-weight: bold; padding: 0px 3px; text-align: center; vertical-align: middle;"><span style="font-family: Arial, Helvetica, sans-serif;">+/- with divs</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">1</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Roxy Pacific</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Real Estate / Hotel</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">E8Z</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">25.00%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">28.68%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">2</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">AEI Corp </span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Aluminium extrusions</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">A18</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">12.40%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">20.66%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">3</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Koon </span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Mix Engineering</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">5DL</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-28.57%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-26.19%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">4</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">World Precsion</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Precision Machinery</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">B49</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">-7.41%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">17.28%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">5</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Nanyang Hldgs</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Conglomerate</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">HKSE</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">212</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">42.42%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">44.85%</span></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">6</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Haw Par </span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Conglomerate </span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">H02</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">34.10%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">37.40%</span></td></tr>
<tr style="height: 10px;"><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td></tr>
<tr style="height: 17px;"><td style="color: red; font-weight: bold; padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom; white-space: nowrap;"></td><td style="color: red; direction: ltr; font-weight: bold; padding: 0px 3px; vertical-align: bottom; white-space: nowrap;"><span style="font-family: Arial, Helvetica, sans-serif;">Shorts</span></td><td style="color: red; padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="color: red; padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="color: red; padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td><td style="padding: 0px 3px 0px 3px; text-align: center; vertical-align: bottom;"></td></tr>
<tr style="height: 17px;"><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">1</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Olam</span></td><td style="direction: ltr; padding: 0px 3px; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">Agri - commodities</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">SGX</span></td><td style="direction: ltr; padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">L28</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">8.93%</span></td><td style="padding: 0px 3px; text-align: center; vertical-align: bottom;"><span style="font-family: Arial, Helvetica, sans-serif;">8.93%</span></td></tr>
</tbody></table>
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MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-19193595178647920222014-09-20T22:07:00.000+08:002014-09-21T11:11:41.036+08:003Q2014 - I start to see some steam!<div dir="ltr" style="text-align: left;" trbidi="on">
Apologies for the late update and for the fact that its getting less of the numbers and statistics and more of thoughts and dilemmas or confusion if you will. I appreciate more now, the importance of moving away from a more quantitative approach.<br />
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<b>Company updates: </b><br />
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Nanyang Holdings started a partial tender offer, started at HKD33/sh up to 8.2m shares (about a fifth of outstanding shares or 40% of free float which has seen share price reached about HKD39+ from the 20s+ when I first wrote about it. Nothing fantastic but still interesting. Price came down to about 35+ but doesnt affect me much. I wouldn't do that if I were the management.</div>
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I added a HK listed real estate/ investment holding co to the portfolio. Not cheap but I envision with the opening up of the country to surrounding countries and its massive property portfolio, not to mention a family that has a great track record, its likely some upward movement is overdue. Float is extremely thin, so I'm adding in nibbles from time to time. Not helping that it has since ran up too. I thought I was crazy to buy it at such high levels, but looking not too shabby now. Not that Im smart, Mr. Market has been very active.<br />
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SHC Capital (on sgx) is one counter I missed. I have been thumb sucking over the wide spreads and it cost me dearly. Zurich Re took it over at 70%+ premium. I'm no expert in the P&C and reinsurance field but this firm stood out like a nail. </div>
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Don't ask me about Alibaba, I have great respect for Jack Ma but that's about it (See <a href="http://vulcanpost.com/5407/billionaire-jack-ma-teaches-you-how-to-be-successful-in-life-and-business/" target="_blank">http://vulcanpost.com/5407/billionaire-jack-ma-teaches-you-how-to-be-successful-in-life-and-business/</a>). My views are limited on that. </div>
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<b>Other randoms..</b></div>
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I chatted over lunch with friends and spoke about humans, their confirmation bias and risk aversion characteristics. The industry, the world enjoys specializing and putting things in fixed buckets. It has far reaching problems and is closely related to how people interact socially and especially in their jobs. I do realize the opportunity in there and the problem is an incredible moat in itself if one could build something out of it.<br />
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For example, its always easier to sell a high dividend income yield fund than to say its going to be a opportunistic fund where I cannot guarantee no losses but its going to put money in whichever opportunity that makes the highest returns. People fear losses but more importantly, they dislike the fear of uncertainty and even if it means a false confidence of knowing something that may not be true or real. </div>
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A high dividend fund gives the idea of no or low losses with stable income but people dont realize, such a fund will suffer a worse impairment to capital in times of trouble. One would rather trust a specialist investment analyst with a focused 5 years experience in real estate than trust someone with broad experience in various fields and have tried starting an investment business. I have experienced this first hand, it is painful and illogical but I can see where people are coming from. I know a family employs a "consistent high income fund", essentially is a leveraged, income strategy that holds high yielding securities. My repeated concerns fell on deaf ears, since I don't have the experience or "track record". To be honest, I am fairly frustrated and at the same time empathetic. I see many very intelligent talents around getting severely penalized for being generalists and having broad interests.<br />
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Similarly, its the reason why there's credit ratings, its a form of a fixed buckets system. People are lazy to accept the fact that there's always the situation where its simply not well defined. Instead of a grid system where one just check the boxes or add scores from a pre-defined scoreboard for easy comparison sake. People are not willing to do the extra groundwork and admit outliers and anomalies. Adding to the complexity is the fact that it is always harder to go against the flow. How would one explain to his bosses that it does not fit in the grid system? What if the boss said it should go into a certain bucket, would one be able to challenge and make the boss look bad? If one runs a investment outfit, would one risk picking oddities and underperforming or to emulate an index and make small tweaks for a slight boost? Reason is that they rather ensure they have similar performance to the index with a smaller variance than to risk a year with mega losses. </div>
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The downside is unlimited in such a scenario while the upside is somewhat capped. Its times like this where people start to sweep small systemic problems aside where it snowballs to a massive problem. That's how the global financial crisis happened in the 2007/8s, apart from clear violation of the agency relationships and conflict of interests.<br />
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Risk aversion plays a crucial part in how people think. Its also the reason why most people don't start up companies. They appreciate the outsized rewards upon success but are more focused on the extremely low probability. (I mean having a family and a stable career and others etc. are extraneous factors that also affect how one thinks here) When you lose money, it hits you much more than when you make them. When you enjoy that stable income and/or lifestyle, you start to forget that you are also in a system and when there are more factors introduced in a system, changes come fast, and in violent magnitudes. It is more pertinent that one stays in a upwind position where learning and not pay is the key priority.<br />
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Its the way people think and many times, people step too deep to realize they are in a hole. I remember a close friend of mine who said, "How can equities ever be safe, fixed income is the way to go. With added leverage, its a sure bet. why would anyone consider equities?" Classic case study example.<br />
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Its probably a time to relook at how these will pan out in the next few months again.<br />
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<b>3 quotes </b><br />
<span style="background-color: white; font-family: inherit; font-size: 15px; line-height: 24.639999389648438px;">“Managing your career is like investing. The degree of difficulty does not count. So you can save yourself </span><span style="background-color: white; font-family: inherit; line-height: 24.639999389648438px;">money and pain by getting on the right train.”</span><br />
<span style="background-color: white; font-family: inherit; line-height: 24.639999389648438px;"><br /></span>
<span style="background-color: white; line-height: 24.639999389648438px;"><span style="font-family: inherit;">“Risk comes from not knowing what you are doing.”</span></span><br />
<span style="background-color: white; line-height: 24.639999389648438px;"><span style="font-family: inherit;"><br /></span></span></div>
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<span style="background-color: white; font-family: inherit; line-height: 24.639999389648438px;">“What we learn from history is that people don’t learn from history.”</span></div>
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MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com0tag:blogger.com,1999:blog-4504840851919180754.post-26016108172616159202014-06-22T13:01:00.001+08:002014-06-22T13:09:09.811+08:00June 2014 - Diving into technology<div dir="ltr" style="text-align: left;" trbidi="on">
Firstly, sorry for the bad English and aesthetically, non-pleasing post. Wrote this in a impromptu manner.<br />
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As many of you know, I'm working on a project that's tech oriented. Its partly because what I am trying to solve is a big problem I face everyday and partly because I felt theres no better time to solve this with the lever of technology and information and platform freedom. Its still ongoing and I am fumbling with the mountain of things to clear and sort and worrying about whether theres a true problem, whether the problem is a one single mega pain or a collection of big and mostly small pains which is harder to solve.<br />
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The key (which I learnt) was to spot problems that are too painful to be ignored, come up with a rough, simple product that solves most of it and continuously listen to user feedback and iterate if it fails. The belief that solving a very important problem and getting users crazy over your solution before thinking about revenue models is also something very new to me. There were also talks about growth hacking, making things go viral and then Whatsapp just disproved it with no PR, no marketing, by charging people and the user stats still hit through the roof, because of a great product that users loved. The interesting thing was things are viewed differently, very dynamic, very forward looking and a constant stage of experiments. Reminds me of the saying: "Focus on where the puck will go, rather than where it was". Its a very different world from where I came from which admittedly is very backward looking for most of the practitioners, and I can better appreciate how Buffett, Munger start to look at things. Steve Jobs also hinted that innnovation and creativity is all about doing what you love (ensures you go through lots of crap), connecting the dots between far flung concepts (aka latticework mental model as per Charlie Munger) and of course think big (not in the ambition sense but more like macro level) to mix and match stuff to see what works and not.<br />
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I actually picked up programming to understand how it all works and understand what and how engineers or programmers as some call, work on problems and I must say its all a very cool process. Ive also burnt many weekday nights and weekends learning it (still learning it), my last was trying to do "pushes" via a command prompt which is really a basic concept of making changes on your PC and pushing it to the cloud servers in layman terms. Its basic but I took forever to learn it, its a unique field and incredibly powerful. You realize that you can actually create things that makes makes a difference, makes life easier, basic ones like getting bus timings, movie schedules etc. and they have serious big scale applications. I mean I would still take a few weeks or months to build one but I have seen people doing it in a few days.<br />
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There is in fact a much deeper impact to me. Suddenly it becomes clearer what tech or some startup companies were doing. Why Facebook bought Whatsapp or Occulus, why Twitter could do a billion range IPO despite its financials (Not that I totally agree with the valuations) but you have a much panned out view of the landscape. Why is Swipe, VMware and Salesforce (I know there was a recent short call on it) so popular etc? Why is Tesla so different? Are they crazy to build a hyper loop or make humans do interstellar travel like weekend trips. We aren't really talking about singularity here but you can start to see how things and technology converge and why people start to move towards the cloud, towards privacy secured products and services like Snapchat and more importantly towards mobile etc. I recommend reading <b><a href="http://www.slideshare.net/kleinerperkins/internet-trends-2014-05-28-14-pdf">this slide </a></b>by Mary Meeker of KPCB.<br />
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More importantly, the actual process of trying to start up something is immensely gratifying, and I have not even came up with a product yet. The act of doing it, I have already learnt so much from it. Crafting experiments to test for product demand and relevance, understanding the difference between whats a want and a need, whether to listen to your customers or regard them as users who dont know what they want. Also understanding whats the industry landscape, categorizing product types and building features. I enjoy reading posts from a few people in the industry, from the big hitters like<b><a href="http://www.paulgraham.com/articles.html"> Paul Graham</a></b> to lesser known ones like <b><a href="http://www.defmacro.org/">Slava who runs RethinkDB</a></b>. For PG, I particularly like "Do things that dont scale", "Ambitious startup ideas", "How to get startup ideas", "Schlep Blindness" and "Startups in 13 Sentences".<br />
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The fact that startups are the mix of very intelligent people on the forefront of technology and the desire to break things make for some very interesting combination and results.<br />
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On the other hand, my portfolio has little changes except for a HK listed real estate company which I invested into. I went in at a high, there's some massive price movements even though volume and free float is very low. Value remains and likely a minimum 2 bagger. There seems little thats reasonably priced for me though at the moment. Fed's decision to cut back on bond buyback also had some real impact, rates are moving up fast and Chinese companies borrowing in 2014 is staggering. Its US$14 trillion, even more than US companies now. China corporates also will make up over half of total global corporate borrowing needs over 5 year period (i.e half of US$60 trillion up to 2018) <b><a href="http://www.reuters.com/article/2014/06/16/us-china-debt-idUSKBN0ER0YH20140616">Read here for more info.</a></b> A quarter to a third is financed by shadow banking. And no surprises for guessing its steel and real estate that dominates. And foreign reserves that China has is US$4 trillion. Uh oh...<br />
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Also favorite highlight, Bumi Resources tipping on the default edge, like again... <b><a href="http://www.bloomberg.com/news/2014-06-19/indonesia-leads-defaults-as-bakries-face-a-third-asean-credit.html">HERE</a>. </b><br />
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Again, appreciate any exchange if ideas and/or comments.<br />
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MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com0tag:blogger.com,1999:blog-4504840851919180754.post-78811898680904241222013-09-11T18:37:00.003+08:002013-09-11T18:37:23.688+08:003Q2013 Updates <div dir="ltr" style="text-align: left;" trbidi="on">
Sorry for the slow updates, been really caught up at work. I have not sold as much as I had suggested in my last May post due to onerous restrictions at work.<div>
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Just read a local business news publication and saw an article which got me a tad disappointed with the quality of reporting here. Nothing irks me more than generalization and mis-aggregation of information. It talks about China needing to improve quality of disclosures and regulations and goes on to suggest that Indofood taking over China Minzhong (CMZ) is a divine retribution to foreign speculators. In the reporter's exact words, "They should have been aware that Indofood taking up a majority stake would mean they have done their homework". </div>
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To explain shortly the story, basically Glaucus (Canadian based research firm) accused CMZ of fraudulent financial reporting with a report and a short position. Stock fell 48% to S$0.53/sh. Subsequently Indofood, a Singapore listed food products and palm oil company affiliated with Salim Group who already owns a 33.49% of CMZ, announced taking over CMZ at S$1.12/sh, valuing the firm at S$734m. </div>
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A public announcement to rationalise the offer and to correct the article was rather akward. <a href="http://infopub.sgx.com/FileOpen/Press_Release_Offer_Unconditional.ashx?App=Announcement&FileID=255109"><b>LINK</b></a> here and <a href="http://infopub.sgx.com/FileOpen/CMZ_Response_to_BTArticle_9Sep2013.ashx?App=Announcement&FileID=255592">LINK</a> here. My thoughts: </div>
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<ol style="text-align: left;">
<li>Does Indofood taking over CMZ mean they are necessarily right and Glaucus is wrong? </li>
<li>Does taking majority take (30+%) mean Indofood has absolutely done their work and are right?</li>
<ul>
<li><i>If you bought Zhengzhou Siwei Mechanical and Electrical Co like how Caterpillar Co done their work, congratulations, you have just managed to make -84% returns within a few months. Many other examples like China Agritech and China Biotics and the list goes on, and on and on. </i></li>
</ul>
<li>The acquisition rationale felt like the planning was messed up. </li>
<li>Ultimately shorting - you need 7 stars aligned. You cant brute it, need to pick the right fight.
</li>
<li>I wont comment on CMZ, but feel free to exchange views with me by dropping a note :) </li>
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I cant fathom how anyone can make such a statement. Fallacious much?</div>
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MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-45599238716101713052013-05-22T14:50:00.000+08:002013-05-22T15:18:23.768+08:00Sell in May and go away - 2013 version<div dir="ltr" style="text-align: left;" trbidi="on">
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Seems like a themed party that didnt work out.<br />
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The chase for yields continues as free money drops from the sky. Everyone is massively printing money which has literally thrown the global economy is disarray, losing its much needed equilibrium for an actual recovery to set in.<br />
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Post Fraser & Neave bidding war saga, it seems the play on inflation was right. It remains that globally, the scenario where an ever increasing pool of capital is chasing a limited set of assets and options.<br />
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Some continued signs of the staggering chase includes:<br />
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<ul style="text-align: left;">
<li>US$1.1B acquisition of "Tumblr", a microblogging and social network site which in the past 7 years has recognized close to or 0 revenues. (Nice!)</li>
<li>"Twitter" was last valued at US$1B, and investors were quoting on its fast growth in revenues, estimated to hit an "eye popping" US$1B. (What about earnings? to speak the least)</li>
<li>"Oxley Holdings", a Singapore based residential real estate development company setting up a S$300M MTN Programme and issuing S$150M 4 year unsecured at barely over 5.10% (Have fun reading their financials)</li>
<li>"Croesus Japan REIT IPO popped up 20% on IPO day, with yields of over 8%. (The BOJ Put at work! Mind you, the so called shopping malls are suburban "Wal-Mart" type of malls)</li>
<li>India Tata Communications/Steel/Auto each raised debt funding in Asian markets despite their financials. Subsequently they raised the money and Tata Steel wrote down assets by US$1.6B within a coincidentally close date after the fund raising. (Check the financials)</li>
<li>The US$23B "Heinz" acquisition carried a valuation tag of over 14x trailing EBITDA while peers are 10-11x. Note Buffett is this case is the financier, not the acquirer.</li>
<li>Claims of China's hyper-inflated trade surplus with on the ground testimonials! See the article courtesy of Bloomberg <b><a href="http://www.bloomberg.com/news/2013-05-20/china-trade-surplus-seen-by-bofa-at-one-tenth-official-figure.html">HERE</a> </b>(I wonder what goods people trade this days with that sort of quantum)</li>
<li>In the 2011-2012, we also saw US$1B acquisition of photo sharing site, "Instagram", game acquisitions such as the US$200M acquisition of "Draw Something", a mobile game application and Hewlett Packard (HP)'s US$11B acquisition of software provider, "Autonomy Inc".</li>
<li>Asian equities are also enjoying high valuations. Thailand, Philippines, Indonesia etc are having across the board price to book of 2.6-3x which may be anecdotal but sure is a record event.</li>
</ul>
<div>
<br />
It may be all happy and rosy with rising asset prices. However the world is usually force-neutral. When theres a cause, theres an effect. Costs are creeping up (technically not true, they are silently moving up aggressively) and it seems that costs are likely to rise exponentially more than sales can grow.<br />
<br />
This is far more true when Asia is known to not be a product/service leader and naturally with low levels of automation and/or innovative internal processes. Further, if one would assume a higher level of automation or better internal process, dont forget the capex to implement it, which is of course is much higher upfront now. The underlying value of an enterprise (of which price is partly based on), is the end result of these interactions. For sure, when you cannot successfully maintain a low cost level commensurate with a higher sales level to generate profits, a manager would cut the next most obvious and immediate cost, the raw materials or inputs. That translates to a lower commodity price level which we have witnessed and certain to persist.<br />
<br />
As I write this on a related note, I regretfully read that theres 3 new suicide cases at Foxconn plants in China.<br />
<br />
It is tough to fight the tide, and it sure looks like its getting stronger.<br />
Perhaps I should just get a drink and sit back for a while.</div>
</div>
MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com6tag:blogger.com,1999:blog-4504840851919180754.post-31757705239258143752013-03-10T13:06:00.000+08:002013-09-13T12:05:32.879+08:00Random Muses<div dir="ltr" style="text-align: left;" trbidi="on">
Have been rather busy at work. I have with me a couple of random writing. Will follow up with updates for 1Q 2013.<br />
<br />
I wrote sometime back on why I disagree on Gold being a good investment or so called inflation hedge. Had a lot (and I mean "A Lot!") of discussions or you may call it arguments on this topic and many have slammed me and said I will be the biggest fool in the market for not buying Gold. Reasons given ranged from solid inflation adjusted price appreciation, tight supply (cant be mined specifically on its own, its more of a by product) to it was the value anchor for currency during "Bretton Woods" time etc. To me, it is clear why Gold may not necessarily be a good investment. A overemphasis on inflation adjusted data may be misleading given the lack of understanding on data integrity going back to 1800s and blind faith on charts. Besides Indians who use it massively for their dowry, I cant really fathom what other uses there can be apart from being highly expensive catalysts or electrical conductors. With a limited demand, a tight supply doesnt stand strong as an argument. Last but not least, the value of a currency depends on various factors, including economic strength, investments, currency supply/ demand which are interrelated. However Gold is merely a hot potato which passes around, with each guessing the price of it based on what others guessed.<br />
<br />
Given the recent hammering on Gold (no Im tempted to pick up any), I found it rather funny as I read back the comments of one of the global investors whom investment letters I read regularly. Hes Howard Marks of Oaktree Capital, please dont mind me using your quote.<br />
<br />
<div style="text-align: left;">
<span style="background-color: white; font-size: 14px; line-height: 25.1875px;"><span style="font-family: Times, Times New Roman, serif;"><i>“There is nothing intelligent to be said about gold. Nobody can tell you the right price for an ounce of gold. People will tell you it should go up or go down. To make any intelligent statements about investments you have to know what the right price is. You can’t do that with an asset like gold, which doesn’t produce any cash flow. So you can buy it out of superstition or ignore it because you are an atheist but you cannot buy it with an analytical foundation.”</i></span></span></div>
<br />
<br />
Secondly, theres also the focus on equities this year to date which I have mentioned in a 2012 post. As mentioned, the larger money supply will continue to hit the markets and the end result will be across the board inflation, not only in the fish and apples we buy but also the stocks and company values. Those who claim stocks will crash might be a little early to be honest. I don't deny valuations are not getting cheap but it does not warrant a doomsday expectation, especially on the back of economic recovery (though it is not clear if its sustainable in the long run). With such rising levels, the likelihood of rates or in some countries implied rates will creep up. What this means is whatever loans you have that is floating rate will likely rise. From an investor's perspective, it means bonds with low yields will get steamrolled so beware of picking up 1) quality fixed income with low yields or 2) crappy fixed income with high yields that is effectively no yield coupled with a sub par principal at the end of maturity. If you bought a perpetual, well hope that the company is of quality name then.<br />
<br />
<br />
<u>Last but not least, if there's any reader/s out there who can help with the following, drop me a note. </u><br />
<br />
1) Capital seeders/ investors/ multi manager office for an investment partnership (ideally someone/team that supports fundamental investing across the capital structure on a global basis), and<br />
<br />
2) High net worth or institutional investors for 2 coal mezzanine deals in Asia Pacific, one of which is a listed company. The advisory team supporting it is trustworthy and audited results/ JORC reports are available on demand. </div>
MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com1tag:blogger.com,1999:blog-4504840851919180754.post-46303181858782591462013-01-08T16:10:00.000+08:002013-01-19T09:45:17.375+08:00Performance - Year End 2012 <div dir="ltr" style="text-align: left;" trbidi="on">
Dear all,<br />
<br />
2012 has been a pretty interesting year.<br />
Despite the inactivity here, the same cannot be said of the investments made. I will firstly highlight the long performance and will later touch on the short ones, which has been great but of lesser significance since I have been having a lot of issues with the cost and execution of the ideas. So it shall be more of an educational display.<br />
<br />
I'll do this manually as Google Spreadsheets is still pretty much a malfunctioning tool.<br />
<br />
<b><u>Long positions 2012</u></b><br />
<b>No. Name Returns ex dividends Dividends Returns with dividends/ Others</b><br />
<br />
<ol style="text-align: left;">
<li>Nanyang Holdings + 38.2% HK0.5/sh + 40.8% </li>
<li>Haw Par + 27.5% SG 0.2/sh + 31.3%</li>
<li>Roxy Pacific +113.3% SG 0.0067/sh +119.9% Bonus of 1 for 2</li>
<li>World Precision - 7.0% SG 0.027/sh - 0.7%</li>
<li>AEI + 10.0% SG 0.01/sh + 19.0%</li>
<li>Koon - 32.9% SG 0.01/sh - 29.5% Rights 3 for 5@$0.19/sh</li>
</ol>
<div>
<br /></div>
<div>
<b><u>Shorts 2012 </u></b></div>
<div>
<b>No. Name Returns ex dividends Dividends Returns with dividends/ Others</b>
</div>
<div>
<ol style="text-align: left;">
<li>Olam <b> </b>+ 32.7% SG 0.04/sh + 31.0% Rights+warrants+bonds</li>
<li>Cacola +14.3% - + 14.3%</li>
<li>Dapai +58.8% - + 58.8%</li>
</ol>
<div>
<br /></div>
</div>
<div>
As a brief overview, heres also the operational summary for the long positions. </div>
<div>
Nanyang has been benefiting from the recent revaluation of properties around. Similarly landlord prices around the Kowloon area have shot up in 2H 2012. Haw Par picked up gains in investment income and largely remains undervalued to investments and book. Roxy on the other hand remains astute, recently bought 3 plots of land near Mount Sophia (pretty central area) in Singapore and cost psf remains reasonable. People starting to see value in this name as its hotel performance has been superb. </div>
<div>
<br /></div>
<div>
I have been thinking of cutting World precision but decided to hold on as its dividends have been satisfactory and recent China PMI and industrial output levels have started to rebound. Company specific, it also benefits from the additional infrastructure spending that the Chinese government has announced. The firm has also stepped up promoting itself. My concern is the added leverage with less correlation to its order book growth. AEI is still a small position and they recently updated the recover-ability of their loans which remains a significant portion of total assets. Will review again to decide if its to be disposed. Koon on the other hand announced their foray into Malaysian property segment. Track record is unknown. Rights issue was done at a slight discount.</div>
<div>
<br /></div>
<div>
The current markets have rallied due to a variety of news, from no US fiscal cliff, China didnt crash and Spain/Italy managed to get back on track. Am looking cautiously at some new ideas and will update accordingly.</div>
</div>
MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com1tag:blogger.com,1999:blog-4504840851919180754.post-22567150009979501632012-12-02T13:26:00.001+08:002013-03-24T23:39:28.853+08:00Olam vs. Muddy Waters<div dir="ltr" style="text-align: left;" trbidi="on">
Thought I would use a quick look during the weekends to run through Muddy's 133 pager report on Olam and summarize it here. The post is merely a run through and does not imply the author is agreeing or attempting to distribute/disseminate the content of the Muddy Waters report.<br />
<b><br /></b>
<b>Points are</b><br />
<br />
<ol style="text-align: left;">
<li><b>Capex/acquisition heavy with poor assets </b></li>
<ul>
<li>Crown flour mill (0.9% thin margin, cash burn)</li>
</ul>
<li><b>Capex attribution </b></li>
<ul>
<li>S$571M less investments that were annnounced</li>
<li>S$996.2M of capex were not attributable over the last 4 years</li>
</ul>
<li><b>Accounting Issues</b></li>
<ul>
<li>62.5% of non cash gains from negative good will from revaluations (SK Foods, tt Timber)</li>
<li>Rest from biological gains (I.e you dont sell the trees but change your estimate of its values)</li>
<li>Non cash accounting gains account for 37.9% of PAT from 2010 to 2012</li>
</ul>
<li><b>Financials </b></li>
<ul>
<li>Sept 2012, S$3.75B of debt due in 12 months despite S$1.38B in cash</li>
<li>Firm consumed S$2.5B in operating cash flowfrom FY2009 to 1Q2013</li>
<li>Significant margin account restatements, one over S$1B in 2008 </li>
<li>Significant impact of derivatives revaluation on profits (sensitivity up from S$3.8M to S$12M from 2011 to 2012 despite fall in value of derivatives)</li>
<li>Undisclosed account changes (page 35-41 of Muddys report)</li>
<li>Low rate of project and investment returns</li>
<li>Nigeria export incentives and grant income flows to Olam but is not sustainable</li>
</ul>
<li><b>Solvency and liquidity </b></li>
<ul>
<li>Refinancing quantum of S$4.6B over next 4Qs</li>
<li>FY 2012 has only 3 weeks of operating cash, over S$600M of cash out of S$1.1B are from withdrawals of broker margins. S$445.7M cash are from overdrafts at over 20%</li>
<li>Recent quarters saw a withdrawal of cash from margin accounts and mentioned no need to maintain the account as they net off positions daily</li>
</ul>
<li><b>War of words </b></li>
<ul>
<li>Mentioned Olam was defensive, Olam advised Muddy to go long and work with firm. Muddy declined in a abrasive manner</li>
<li>Muddy offered to pay for a debt rating on Olam</li>
<li>Olam 45 page rebuttal<a href="http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_4156F6CA6E7319E948257AC4000B68A2/$file/OlamRespondstoMW-ReportFindings_28Nov2012.pdf?openelement"> <b>HERE</b></a></li>
</ul>
</ol>
<div>
<b>Some takeaways </b></div>
<div>
Most points were previously covered by others including CLSA previously and now further written in depth by Muddy which is well appreciated. </div>
</div>
MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com4tag:blogger.com,1999:blog-4504840851919180754.post-34197922312995914332012-11-20T16:24:00.002+08:002016-06-01T11:18:02.834+08:00Updates 4Q 2012<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
Sincere apologies that I have been largely away and unable to write more.<br />
<br />
2012 largely has been fairly interesting, apart from the usual problems "still" plaguing in Europe (Spain and Greece) again. It is also interesting to note several large Japanese corporates are suffering from the stronger Yen, weakening domestic corporates and of course holding of the relevant companies' stock (ex. Sharp, Panasonic) especially the financial institutions. Link of news from Bloomberg <b><a href="http://www.bloomberg.com/news/2012-11-14/japan-megabanks-6-7-billion-stock-losses-seen-spurring-selloff.html">HERE</a></b><br />
<br />
More importantly, I was glad to know someone has similar findings to what I wrote about OLAM previously <b><a href="http://skewed-odds.blogspot.sg/2011/02/olam-concerns-sgx.html">HERE</a>. </b>Stock has also fallen some 12 % in 2012 YTD alone.<br />
<br />
The single most interesting corporate action in Asia involving F&N also took a new twist with OUE coming into play with well known funds like Farallon coming into the bid which imho is playing a financing role. This highlights the scarcity of assets as well as the silent expansion of global capital largely resulting from quantitative easing which in turn results in the inflation of prices.<br />
<br />
Other updates as follows:<br />
<ol style="text-align: left;">
<li><b>Roxy Pacific </b></li>
<ul>
<li>recent dividend policy of paying out min 50% of net operating profit of the hotel business which translates to about $6 to 10m per annum. Link <b><a href="http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_2A337CDED604C96F48257AAA0039E8E8/$file/Roxy_Ann_Dividend_Policy_final.pdf?openelement">HERE</a></b></li>
<li>Mgmt also upped their capital in the hotel business </li>
<li>3Q revenue declined vs 2011 and is above 2009 levels, mainly due to 2011 benefiting from a large revaluation gain of $9.7m from Kovan Centre </li>
<li>Grand Mecure is now worth some $438 M</li>
<li>Cash of $240M, debt of $433M, NAV $230M (pre-adjusted). With the hotel its $612M</li>
<li>Property development has some $844M of sales to be recognised, with $112M recognised</li>
<li>Hotel occupancy came down from 94 to 92%, while Revpar is up about 6% to $200. Its the star performer for 9M2012 thus far</li>
<li>Good to note that since the last call, the firm is up some 79% from post split cost of $0.29 to $0.52 currently (i.e market value of $491M)</li>
</ul>
<li><b>Haw Par </b></li>
<ul>
<li>I still hold my ground that this is a rather solid firm which has been misunderstood to be a pharma/ leisure company but really in essence an investment holding co</li>
<li>Results are up significantly but do not take it to heart since 2011 9M results were marred by a exceptional loss of $13.4M</li>
<li>Firm has $2.3B in assets and only $0.1B in total liabilities. Out of $2.3B, $1.78B is in AFS financial assets (i.e stocks, bonds) and $0.14B in cash and liquid deposits.</li>
<li>Market values this firm as $1.4B currently</li>
<li>Lastly, it helps to note Mr. Wee (both Jr and Sr) are constantly buying back.</li>
</ul>
<li><b>World Precision </b></li>
<ul>
<li>Exposed to the slow down faced in China. However things are picking up from data signs of PMI and all. Will continue to update this shortly. </li>
</ul>
<li><b>Koon</b> </li>
<ul>
<li>Firm recently announced their plans to move into Malaysia property development supported by a rights issue. </li>
<li>That in my opinion is not their niche and Im still trying to get my hands around it. </li>
<li>The application date is 26 Nov 2012 so please take note.</li>
</ul>
<li><b>Nanyang Holdings </b></li>
<ul>
<li>No significant action on this front except that the recent HK government goals to revamp the industrial area in Kowloon which is helping to add value to many companies holding plots of land in that area, among which Nanyang is one of them. </li>
</ul>
</ol>
</div>
MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-15192299103892819892012-07-24T15:13:00.005+08:002012-10-15T23:08:47.916+08:00(APB) Asia Pacific Breweries / (F&N) Fraser & Neave<div dir="ltr" style="text-align: left;" trbidi="on">
<div>
<div style="text-align: justify;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">Currently theres a 2 way bidding war for APB as well as a related part-owner, F&N. Its interesting to think about how this will pan out eventually. Any expressions are solely my views and not to be an advice to buy or sell. </span></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<br />
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">A chart I have done up on the situation. </span></div>
</div>
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<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpzPEPDIdaP5YA4VTAs2qiKCwfON_Dr-fhQa4fLE1nj3cd8yDHmLnW1KkWxYEIudy2uJgKDufr_9JBAzbhxMyEYCtbJeEO4qyZaUDFChdWP4aLHOgY-um92Iwf0wih-Kq8BLo_tDWRIzgI/s1600/APB+chart.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: Arial, Helvetica, sans-serif;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhpzPEPDIdaP5YA4VTAs2qiKCwfON_Dr-fhQa4fLE1nj3cd8yDHmLnW1KkWxYEIudy2uJgKDufr_9JBAzbhxMyEYCtbJeEO4qyZaUDFChdWP4aLHOgY-um92Iwf0wih-Kq8BLo_tDWRIzgI/s1600/APB+chart.JPG" /></span></a></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div>
</div>
<div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div>
<div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Total APB shares: 258.213774m </span></div>
</div>
<div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Total F&N shares: <span style="background-color: white;">1,160.119932m</span></span></div>
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<br />
<div style="text-align: justify;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Kindest Place</span></b></div>
<div style="text-align: justify;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b>- </b>Private entity related to ThaiBev, owned by son in law of owner of ThaiBev.</span></div>
<div style="text-align: justify;">
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><b><br /></b></span></div>
</div>
</div>
<div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>ThaiBev / TCC (</b><b>Thailand's leading brewer and beverage company) </b></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">- Total of 7.128% (22% * 50%) + 8.6% = 15.728% of APB</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">- Holds US$108m of cash</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
</div>
<div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><b>Heineken (</b><b>Dutch beverage company)</b></span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">- 3rd largest globally after Anheuser-Busch InBev and Carlsberg/SABMiller</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">- JV with F&N to create APB (Tiger beer) 80 years ago</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">- Total of 32.4% (via JV) + 9.49% (direct) = 41.89% of APB </span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
</div>
<div>
<div style="text-align: justify;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">Kirin (Japanese beverage co)</span></b></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">- Bought 14.97% of F&N stake from Temasek for US$953M/ S$1.3B in 2010</span></div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">- Total of 10.024% (indirect) of APB</span><br />
<b><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></b>
<b><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></b>
<b><span style="font-family: Arial, Helvetica, sans-serif;">Event timeline:</span></b><br />
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">1) Kirin bought a passive stake in F&N from Temasek in mid 2010</span><br />
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">2) ThaiBev offers </span><u style="font-family: Arial, Helvetica, sans-serif;">S$2.78B/ US$2.2B</u><span style="font-family: Arial, Helvetica, sans-serif;"> for 22% of F&N (S$8.88 per share, 12% premium to S$7.96 per share) while TCC will fork up S$0.9202B for 8.6% of APB (S$45 per share, 18% premium to S$38.10 per share price on 19 Jul 2012). </span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">3) Both stakes are acquired from OCBC, Great Eastern and Lee Rubber Group financed with bridge loan from HSBC, SCB and SMBC. Total S$3.7B paid for 15.728% of APB</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">4) Heineken came in, unhappy with the current state of the JV (especially on Kirin buying F&N from Temasek) and is buying APB whole for S$50 per share (S$ 5 more than ThaiBev's bid). This works out to be </span><u style="font-family: Arial, Helvetica, sans-serif;">S$5.1B/US$ 4.1B</u><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"> for F&N's stake in APB and values </span><u style="font-family: Arial, Helvetica, sans-serif;">S$7.5B/ US$6B</u><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"> for the entire APB stake that Heineken does not already own</span><br />
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">5) <span style="line-height: 21px;">Citigroup and Credit Suisse are advising Heineken, while HSBC and Morgan Stanley advised ThaiBev. </span></span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">F&N hired Goldman Sachs </span><br />
<b><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></b>
<b><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></b>
<b><span style="font-family: Arial, Helvetica, sans-serif;">Why the acquisition?</span></b></div>
</div>
<div>
<div style="text-align: justify;">
<span style="font-family: Arial, Helvetica, sans-serif;">Tiger beer are widely distributed in various SEA markets ex. Vietnam, Cambodia, Thailand and others like <span style="background-color: white; color: #333333; line-height: 20px;">Mongolia, Papua New Guinea and the Solomon Islands</span><span style="background-color: white;">. After China, beer consumption is the highest in Vietnam, of 37 vs. 75 liters per capita in the UK. </span><span style="background-color: white; line-height: 21px;">APB is the market leader in Indonesia, Malaysia and Singapore.</span><span style="background-color: white; line-height: 21px;"> </span><span style="background-color: white; line-height: 21px;">Furthermore, alcohol licenses in Muslim countries are restricted and such networks are highly valued. </span>C.25% of 2011 global beer sales of US$618B came from Asia Pacific. </span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">From Heineken's 2011 annuals, </span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Vietnam was its 2nd-largest market in Asia. Asia beer volume growth was also favorable, evident from Heineken's 6.2% growth in 2011 vs. 0.2% in Western Europe. </span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Western Europe counts for 35% of Heineken's operating profit vs. 8% for AB InBev and 1% for SABMiller (quoted by Sanford Bernstein), and Asia under 7%. Heineken bought Mexico’s Femsa in 2010 for US$8B and has the smallest emerging market presence out of the top 3. ThaiBev on the other hand has a loss making beer division while its spirits business is thriving. </span><br />
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Kirin acquired Brazil’s Schincariol for US$2.57B in August 2011. It also paid US$386M for Australia's Little World Beverages in June 2012. </span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Kirin bought out the stake it did not already own in Australia’s Lion Nathan. in 2009 for US$2.5B, Australia’s then 2nd-biggest brewer by market share after Foster’s Group.</span></div>
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<b style="line-height: 21px;"><span style="font-family: Arial, Helvetica, sans-serif;">Valuations</span></b></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 21px;">ThaiBev might risk a credit downgrade as its net D/E will hit 3.5x upon acquisition while Heineken's will be 2.2x. </span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 21px;">APB LTM EBITDA is S$754M and the latest Heineken bid (@S$50 per share) values the firm at S$12.9B. APB PBT have grown 24% CAGR to S$613M in 2011. Margins expanded form 15 -22% in the decade. F&N itself derives 38% of its NPAT from the beer business with the rest in property and printing. </span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif;"><span style="line-height: 21px;">The average premium in 45 beer takeovers in the last 2 years is 25%. The median takeover multiple is 13x for 9 brewery takeovers (worth over US$1B) in the last 5 years. The deal is valued at 17x EBITDA, 21x to PBT and 28x to NPAT of S$ 456.8m (including non controlling interest). This hints at some pricey valuations. At this juncture, while Heineken's bid seems strategically reasonable, the same cannot be said if ThaiBev continues bidding. At FYE 2011, ThaiBev had BHT3.5B/ US$111.2M in cash, a fraction of Heineken's </span><span style="line-height: 21px; text-align: left;">€</span><span style="line-height: 21px;">827M/ US$1.03B.</span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: 24px;"><b>Value of the stakes (@S$50 per share)</b></span></div>
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<span style="background-color: white;"><span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Kirin's 10.024% stake (indirect) in APB is worth S$1.294B/ U$0.9988B, a gain of 4.8% with US$/S$ of 1.2956 (24 July 2012), excluding other portion of F&N not valued. If using F&N's market value alone, its stake is now worth S$1.396B or gain of 13%. </span></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white;"><span style="line-height: 21px;">ThaiBev's stake will be worth 8.6% (direct APB stake)*S$12.91B = S$1.11B + 22%*S$8.04* </span></span><span style="background-color: white;">1160.119932M = S$3.162B. </span><span style="background-color: white; line-height: 21px;">Compared with the cost they paid of S$3.7B, seems like the market has not caught up with the partial offer. </span></span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Heineken urgently want this taken over and it seems to be at almost any costs.</span></div>
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<b style="background-color: white; line-height: 21px;"><span style="font-family: Arial, Helvetica, sans-serif;">What could happen? (and the probability)</span></b></div>
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<li style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Heneiken successfully bids for APB - (high)</span></li>
<li style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">ThaiBev bids higher for APB - (low to mid) since they have poorer financials but seem needy of a profitable brand and network. </span></li>
<li style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">ThaiBev bids higher for F&N - (mid to high) expressed interest in real estate and F&B</span></li>
<li style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Kirin bids higher - (low to mid) low stake and needs additional 15% for a general offer</span></li>
<li style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Kirin with another party (likely ThaiBev) to block bids - (low to mid) as Kirin holds c.10% and ThaiBev holds c.15% of APB</span></li>
<li style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Third party comes in with the higher bid - remote given the high valuations </span></li>
<li style="text-align: justify;"><span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Deal falls through, no one buys anything - almost 0 probability </span></li>
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">1 and 3 is high likelihood. 5 is also possible but to justify blocking Heineken for the sake of ThaiBev seems far fetched and only logical if ThaiBev bids up. but that would mean an illogical purchase on ThaiBev's part in terms of valuations. On the other hand, Heineken with over 40% will serve as a more effective block against any tie ups. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">My guess is that its probably 1 only happening. Kirin might actually consider bidding (i.e 4 is likely as well). They have a EBIT cover of 6x and D/E of 1.34x vs. Heineken's 4x and 1.95x. Further, Kirin has also seen a decline in revenues in the past year with operating margins of over 6% while peers are 12-18%. It might make sense for them to gear up and secure Asia Pacific. In order of probabilities from highest to lowest, its 1, 3, 4 and 5. </span><span style="background-color: white; font-family: Arial, Helvetica, sans-serif;">F&N board has till 27 July to consider Heineken's proposal. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Cheers, </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">MT</span></div>
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<b><b><span style="font-family: Arial, Helvetica, sans-serif;">-2 August 2012 (Update)</span></b></b></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Coca Cola was quoted to explore bid for F&N beverage business, reportedly worth some S$3 bn.</span></div>
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<b><span style="font-family: Arial, Helvetica, sans-serif;">- 6 August 2012 (Update)</span></b></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">F&N board accepted Heineken's offer and pending to table the offer to the rest of the shareholders. Various sources suggest a possibility of Thaibev and Kirin to go against the offer. Given their initial interest to purchase F&N for the breweries + beverage business, the probability of rejecting Heineken's offer is high, contrary to what the price is showing now.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">APB went gradually from S$34.69 (16 Jul) to a high of S$52 (25 Jul). It has hovered around the S$50 price levels to currently S$48.85. F&N gapped up from S$6.82 (27 Jun) to S$8.40 (27 Jul). Currently it is at S$8.20. There is a small likelihood that recent F&N investors may face a loss in event the deal falls through. </span></div>
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<b><span style="font-family: Arial, Helvetica, sans-serif;">- 7 August 20212 (Update)</span></b></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">ThaiBev offers S$55 per share for APB shares held by F&N (7.3%). This is higher than Heineken's previous bid of S$50 per share. While Reuters quoted a ThaiBev spokesperson to not wish for Heineken to exit the JV, it seems like a plan to buttress their share purchase with backstop from Heineken. A point to note is that a good amount (c.30%) of APB's volumes are for Heineken and pulling out its license will result in a much weaker APB. Kirin was also quoted to mention they are more interested in F&N Berhad, the Malaysian entity to APB.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Vichate Tantiwanich from ThaiBev mentioned the firm is looking to increase stake in F&N as they currently do not have board seat and influence. Real estate seems to be a pull factor. Board control is necessary not only for a profitable business but also to have access to returns from trading the listed assets. Notably Heineken and Carlsberg offered 23x EBITDA in a 9.5B pound tskeover of Scottish & Newcastle in 2008. </span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 18px;">Current ownership tally. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; margin-left: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijqih4eATA-TJ-CYrfPHKChqTb_hexKkV4L2UiwQ1lTqElI7dpBFRRVvCQ95IDtkKHs03Rk6mFjIPkrsVVfdt5G5W40dfzmlJsZLDCC9qWYr7SSGys9GtfdwdGmTvGo2DAogQruJWVnZH6/s1600/Bids+(Aug+2012).JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="285" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEijqih4eATA-TJ-CYrfPHKChqTb_hexKkV4L2UiwQ1lTqElI7dpBFRRVvCQ95IDtkKHs03Rk6mFjIPkrsVVfdt5G5W40dfzmlJsZLDCC9qWYr7SSGys9GtfdwdGmTvGo2DAogQruJWVnZH6/s400/Bids+(Aug+2012).JPG" width="400" /></a></span></div>
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<b>-14 Aug 2012 (Update)</b></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">Thai Bev raised its F&N stake to 26.2%. Looks like the original idea was right. But it does seem they are overpaying greatly. F&N is likely to be trying to achieve control since entire buyout would force ThaiBev to overgear. Credit ratings will be down at least 2 notches.</span></div>
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<b><b><span style="font-family: Arial, Helvetica, sans-serif;">- 27 Aug 2012 (Update)</span></b></b><br />
<span style="font-family: Arial, Helvetica, sans-serif;">F&N approved Heineken's US$6.35B offer for shares held by F&N and APB's minority shareholders, F&N's board also agreed not to engage in talks or accept other offers for its interests in APB. Heineken also attached a S$55.9M break fee on its offer and set a 15 Dec deadline (120 days). Heineken announced an offer of S$53 per share (S$5.4b/S$4.3B) for APB and additional S$0.163 for non-APB assets held by APIPL. Includes public market purchases.</span></div>
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<span style="font-family: Arial, Helvetica, sans-serif;">F&N states that it will return S$4B (US$3.3B) to shareholders through capital reduction. F&N will cancel 1 share for every 3 shares held, with a cash distribution of S$8.50 for each share cancelled. The price is based on VWAP for shares from 16 to 24 Aug. This means for every 1000 shares (1 lot), one will receive S$2,805 in cash and 330 shares cancelled, and still own the same proportion of the company. As of 14 Aug, ThaiBev holds 26.4% of F&N and stand to receive cash distribution of S$1.056B. Kirin with 15% in F&N will get some S$600M. </span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; text-align: -webkit-auto;">F&N is down 3.7% from its 52-week high of S$8.59, reached in the days before Heineken raised its offer for APB to S$5.4B or S$53 per share last week. Heineken's direct and deemed interest in APB has gone up to 84.24%. This includes the 2.68% stake Heineken bought on Tuesday for S$367M or S$53 a share. Temasek Holdings was said to be among the sellers (1.4%) in a married deal on 21 Aug 2012 at S$53 per share of APB.</span></div>
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<span style="background-color: white; font-family: Arial, Helvetica, sans-serif; line-height: 21px;">Heineken said it would fund the deal with available cash of about €2B ($2.46B), its unused revolving credit facility of another €2B and a new bridge loan arranged by its financial advisers, Credit Suisse and Citi. </span></div>
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<b style="line-height: 21px;"><span style="font-family: Arial, Helvetica, sans-serif;">- 10 Sept 2012 (Update) </span></b></div>
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<span style="font-family: Arial, Helvetica, sans-serif;"><span style="background-color: white; line-height: 21px; text-align: left;">News state Thai Bev is seeking </span><span style="line-height: 21px;">S$9B ($7.3B) share backed loan for possible F&N takeover. ThaiBev has already bought 29% of F&N for S$3.6B, funded partly by a S$2.8B loan, but does not have a seat on the F&N board. If ThaiBev's holding hits 30%, it would be obliged to bid for all of F&N.</span></span><br />
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<span style="line-height: 21px;"><b>- 13 Sept 2012 (Update) </b></span></span><br />
<span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">ThaiBev and TCC collectively owns 30.36% and offers to buy out entire F&N at S$ 8.88 per share, a US$7.2B cash offer. The consortium are advised by Morgan Stanley, DBS and UOB, offer is 2 weeks before shareholder vote on Heineken's offer for APB. The group mentioned they will not incur additional debt for the purchase. </span></div>
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<b style="line-height: 21px; text-align: justify;">- 25 Sept 2012 (Update) </b></span><br />
<span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px; text-align: justify;">Heineken completed purchase of 8.6% stake held by Kindest Place. ThaiBev and TCC also mentioned agree to vote for sale of F&N's stake in APB to Heineken.</span><br />
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<span style="background-color: white; line-height: 21px; text-align: left;"><b>- 28 Sept 2012 (Update) </b></span></span><br />
<span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">F&N's capital reduction plans fell through with 54.3% voted for, well below the 75% needed due to the Thai consortium voting against it. The other 94% of the F&N holders voted for the capital reduction. APB's S$7.9B/ US$ 6.4B sale to Heineken was formalised. Kirin is also expected to sell its 15% stake in F&N to the ThaiBev/TCC consortium. </span><br />
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<b style="line-height: 21px; text-align: justify;">- 10 Oct 2012 (Update) </b></span><br />
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<span style="font-family: Arial, Helvetica, sans-serif; line-height: 21px;">F&N board stated ThaiBev's S$8.88 per share offer is not compelling but fair based on sum of parts valuation of S$8.3-11.22 per share. F&N directors intend not to tender unless acceptances reach 50% and offer becomes unconditional. ThaiBev and TCC collectively owns 33.5% of F&N. F&N on the other hand also rejected a US$1.14B offer for its hospitality business by Overseas Union Enterprise. ThaiBev closed up 5.1% and F&N up 0.6% to $8.93. The offer for F&N ends 29 Oct.</span></div>
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<span style="background-color: white; line-height: 21px; text-align: left;"><i>Sources: Wall Street Journal, Financial Times, Straits Times, Business Times and various public news sources. </i></span></span><br />
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MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-46233641947078217892012-05-13T23:09:00.002+08:002012-10-15T23:00:31.264+08:00Mid May Post<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Arial, Helvetica, sans-serif;">Recently managed to squeeze out time to resume on my reading/learning.</span><br />
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<b><span style="font-family: Arial, Helvetica, sans-serif;">Some notables: </span></b><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">"Opportunities don't come to people who don't take absolute risk, who don't put away two or three or four years of their life. They don't come to you with a wife and kids in the suburbs. You can't be successful unless you accumulate a little bit, and the only way to accumulate is to live on nothing."</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">- Richard John Siemens</span><br />
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<span style="font-family: Arial, Helvetica, sans-serif;">"Investing can be very lonely, especially if you are a contrarian. You have to have a point of view, to have a belief and see something that other people don't. A lot of times you see something that other people don't, there's nothing there and there are other times when there's something there and the question is whether is it worth to invest your time and money in it.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;">- Eddie Lampert (Richard Rainwater Legacy)</span><br />
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<b><span style="font-family: Arial, Helvetica, sans-serif;">My thoughts are:</span></b><br />
<span style="font-family: Arial, Helvetica, sans-serif;">So true yet so hard for people to accept logical approaches that goes against the grain of human psychology.</span><br />
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MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-8819577866267132012012-05-08T12:06:00.003+08:002012-05-09T12:23:03.755+08:001Q 2012<div dir="ltr" style="text-align: left;" trbidi="on">
Dear Readers,<br />
<div>
<br /></div>
<div>
Some long overdue updates on the portfolio. </div>
<div>
Due to the problem with Google spreadsheet, I had to remove the live portfolio from the blog so I guess I'll have to manually input the numbers and update the performance manually. </div>
<div>
<br /></div>
<div>
In the backdrop, 2012 is looking to be rather interesting, yet again due to the macro issues similar to August of 2011. Greece defaulted as declared by ISDA with the haircut on the sovereign debt (debt swap) and Spain/Italy is wobbling uncontrollably while elections woes brings everyone back to reality. ("Hey where are all the equity bulls now?" ..They come and go in increasingly rapid pace). </div>
<div>
<br /></div>
<div>
On the portfolio, some notable mentions are: </div>
<div>
<ol style="text-align: left;">
<li>Koon - Still remains undervalued while management has taken efforts to diversify. Also wrote down some amount on their Vietnam port project. </li>
<ul>
<li><span style="color: blue;">Announced dividends of S$ 0.05/sh ex 10 May 2012. </span></li>
</ul>
<li>Roxy Pacific - Recently rallied on announcement of 1 for 2 stock bonus. The institutional analysts who once have this firm a hold/sell are all starting to recommend a buy. Valuation of the hotel is up to over S$ 410m while carried at S$70+m on their books. Revenue declined on slower property development but a bulk of their developments are over 90% pre-sold with over S$ 700+m of sales yet to be recognised. Firm market value stands at over S$$400m.</li>
<ul>
<li><span style="color: blue;">Gave dividend of S$ 0.02/sh - April 2012.</span></li>
</ul>
<li>Nanyang Holdings - Still a good 40-50% discount to firm value. Firm now owns 4% of SCSB bank. Occupancy rate of commercial buildings previously 80+% are now all over 90% which was a pleasant surprise. HK government also released more announcements for plans to convert Kowloon into a residential work-play hub which is positive to the properties the firm owns there. There was also news that the founder unfortunately has also passed on.</li>
<ul>
<li>(Will update this position shortly)</li>
<li><span style="color: blue;">Announced dividends of HKD 0.50/sh - March 2012</span></li>
</ul>
<li>AEI - Pending updates from new plant in China for automobile parts engineering. Operationally still weak but inventory and receivable levels are satisfactory. Gross profit declined on higher COGS as expected due to the Japan earthquake/Tsunamis and Thailand floods (Supplies hard disk components). The firm also extended the M2B loan of USD 2.5mm for a security of over USD 21m consisting of properties in Cambodia and stock of listed firm on JSX but the convertible loan is carried at 0 value on their books.Current market cap of S$31m, net cash of c.S$23.7m with S$6.2m of potential loans receivable. Will keep a close tab to determine if there's any cash burn and if its ideal to increase the size of this currently small position.</li>
<ul>
<li><span style="color: blue;">Announced dividends S$0.01/sh ex 4 May 2012. </span></li>
</ul>
<li>World Precision - Recently increased marketing awareness and size/position of the company. 1Q Sales took a slight decline due to the tight operating environment in China with the slowdown in capital flows and decline in incentives for promoting infrastructure and automotive markets. Firm is one of the few rare China based firms to have a good operating track record and good cash dividends payout. Their recent article on "The Edge" magazine also reflect frustrations of the founder on their depressed valuations, suspect something may be in planning on the horizon for this company. Also notably, their balance sheet has deteriorated slightly, will keep a close tab on this firm. </li>
<ul>
<li><span style="color: blue;">Announced dividends of CNY 0.135/sh ex 9 May 2012. </span></li>
</ul>
<li>Haw Par - Went long at the high 5s due to the unrecognised see through earnings, solid operating businesses and grossly undervalued assets. (I understand the risk that many view this as a value trap). </li>
<ul>
<li><span style="color: blue;">Announced dividends of S$0.14/sh ex 22 May 2012</span></li>
</ul>
<li>Currently about over 40% invested and under 60% in cash at the moment. </li>
</ol>
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<br /></div>
<div>
I have listed dividends for ease of reading and cross reference. It does not imply my insistence on only stocks that give dividends in any way. Thats all for now, will post a follow up on the performance for 1Q 2012. </div>
<div>
<br /></div>
<div>
Cheers, </div>
<div>
MT</div>
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<br /></div>
</div>
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</div>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com1tag:blogger.com,1999:blog-4504840851919180754.post-91020474127129765992012-04-20T01:35:00.002+08:002012-10-15T23:14:38.211+08:00Expedia (NASDQ:EXPE)<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Arial, Helvetica, sans-serif;">These were my unpublished thoughts pre-spin off of Expedia during 4Q 2011. I chose not to participate due to the fact that both businesses were neither cheap nor are they fantastic, coupled with poor overall climate.</span><b></b><br />
<div style="text-align: left;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">Looking back with hindsight, at then level of <b>$25.02</b>, after the firm did a one-for-two reverse stock split, i.e </span><span style="font-family: Arial, Helvetica, sans-serif;">2 expedia pre-split to 1 trip advisors and 1 expedia post-split which is now at $35.95 and 31.53 respectively. </span><b style="font-family: Arial, Helvetica, sans-serif;">Returns will be 34.9%.</b><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<span style="font-family: Arial, Helvetica, sans-serif;">I was also contemplating a long Expedia and short Priceline but thankfully Priceline though pricey, has some strong reasons to defend its valuations a little (at that time). I would have been killed had I shorted Priceline. Why? Take a look here, courtesy of Google Finance. <a href="http://www.google.com/finance?q=priceline">http://www.google.com/finance?q=priceline</a></span><br />
<b><b><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></b></b>
<b><b><span style="font-family: Arial, Helvetica, sans-serif;">(All amount in US$)</span></b></b></div>
<div style="text-align: left;">
<b><span style="font-family: Arial, Helvetica, sans-serif;">1) Business</span></b></div>
<div style="text-align: left;">
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Spun off from Microsoft in a IPO in 1999</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Online travel agency co, stand alone or package, owns Hotel.com, Expedia.com, Seatguru and Hotwire.com</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Competing with Priceline (PCLN), Orbitz (OWW), Ctrip (CTRP), Travelocity, Yahoo travel, Bing travel and Kayak (search only). Notably Orbitz is most often quoted due to availability for price comparisons</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Spinning off worlds largest trip reviews site, Tripadvisors (TRIP) with flagship site and 18 others travel media/ad sites such as <span class="Apple-style-span" style="line-height: 20px;">AirfareWatchdog, CruiseCritic and FlipKey</span></span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Expedia purchased TRIP in 2004 for $237mm and has 2 classes of equities, A and B</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">TRIP has a booking fee estimator (simple no frills system) and combined information of itinery which is greatly appreciated. Furthermore, it also has a good stock of reviews (over 40 million entries) on various locations and hotels which no other competitor has yet and it helps to retain users</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Business model wise, PCLN operates on a auction model with fixed travel times so price discovery and money saving are key. EXPE is more of higher end, more flexibility type of travel booking. </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">PCLN also has no booking fee vs EXPE, however 2009 all dropped booking fees, typically $6.99 to 11.99 hidden in government taxes and fees. However some like OWW still charge for multi carrier itineries</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">EXPE also does not have cancel or change fees if performed 48 hours before</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Some may prefer to have no fuss and book a secured quality lodging over an uncertain PCLN even it means a premium or slight discount for EXPE especially for sales tickets</span></li>
</ul>
<span style="font-family: Arial, Helvetica, sans-serif;"><b>2) Business Segments </b></span><br /><ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Hotel bookings - Negotiate deals with hotels, sometimes even buying up inventory to resell at a mark up. So the firm earns a portion of total sum paid for the hotel rooms, not as booking fees</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Airline ticketing - Firm gets unpopular seats from airlines at a discount on these sites and the site can opt to sell at a mark up</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Tie ups with Daodao.com and Kunxun.cn in China and has yet to realize its full potential</span></li>
</ul>
<span style="font-family: Arial, Helvetica, sans-serif;"><b>3) Financials </b></span><ul>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">EXPE is at 274.06M sh * $ 25.02, approx $6.85B mkt cap and around 17x PE </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">TRIP's 35% of revenue and profit is from EXPE</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">2010 EXPE / TRIP </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Revenues $3.35 / 0.486B (or 14.5% of total), growth 13% / 38% </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Revenue TTM $2.80B / 0.401B, growth 9% / 34% </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">EBIT $ 0.83B / 0.26B (or 31% of total), growth / 33% </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Unique visitors / month - 73M / 40M</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Registered users - ? / 20M</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">EXPE has grown revenues at 13.24% and FCF by 20.9% p.a over last 5 years</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Estimated 10-15% annual growth for TRIP</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Bulk of EXPE revenue is hotels (60%), airline booking (12%) and cruise/car and destination (10%)</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">15% of bookings are for multi package bookings for same itinery</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Bulk of TRIP revenue is CPC (Cost per click abt 80%), rest CPM (display ads 15%) and others 5% </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Firm also estimates global online travel ad/media to be worth $750B </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">The firm generates an annual ave $500M fcf TTM, high $600/ low $400 @ crisis, mostly $500mm. </span><span style="font-family: Arial, Helvetica, sans-serif;">At current prices, EXPE is at 11x FCF</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">EXPE will lose hedge against ad costs from TRIP, rising ad/op costs also hurt 1Q 2011 bottomline </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">TRIP may introduce new businesses such as direct hotel bookings which is EXPE's main business and carries a higher margin than airplane tickets (CEO <span class="Apple-style-span" style="line-height: 19px;">Dara Khosrowshahi said spin off will not affect EXPE ability to compete against PCLN)</span></span></li>
</ul>
<ul>
<li><span class="Apple-style-span" style="font-family: Arial, Helvetica, sans-serif; line-height: 19px;">EXPE and OWW stopped posting American Airlines (AMR) flight details and impacted earnings. However to note, AMR contributes only 1% to sales and airline booking is only 12% of total revenue. The issue is that AMR tried to have more of the customized flight fees to itself without going through EXPE since it offered a combined hotel and airline package through other sites such as PCLN and </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Liberty Interactive owns 19.3% of EXPE and may have influence on the management decisions</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">New entrants like Gogobot offers a combined package deal with social media (Seeded by Schmidt of Google) </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Google's purchase of <span class="Apple-style-span" style="color: #222222; line-height: 22px;">travel data specialist ITA Software will affect the entire online travel space. it is also using search algorithms to favor Google places over other sites and it is noted for 2010, </span><span class="Apple-style-span" style="color: #222222; line-height: 22px;">upstream traffic directed to TripAdvisor from Google has declined while same period from Facebook was up 30%. </span></span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Then spin off will be by 3Q 2011</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">The most interesting thing is TRIP makes money regardless of which broker as long as theres ads and affiliate fees when bookings are made on the affiliate sites </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Tencent bought a 16% stake in Elong (EXPE's china arm) for $84.4M. Tencent is akin to the Google of China with their own facebook and messenger services and 674M active users. It is traded on Hong Kong as 0700 HK. EXPE added 8$ for $41.2M. Both deals done in 2011.</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Elong has a 9% market share versus Ctrip (Nasdaq) with 53.6% in 2010</span></li>
</ul>
<b><span style="font-family: Arial, Helvetica, sans-serif;">Comps</span></b><br /><ul>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">PCLN trades at 52x PE and gained 150% since 2009 (now trading at $26B mkt cap) while EXPE is below its 2009 price. </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Travelzoo inc (TZOO) also trades at 64x PE</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Orbitz (OWW) is significantly profitable, focuses more on airline segment</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Travelocity (Not listed)</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Kayak (Not listed) - search only and referral </span></li>
</ul>
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div style="text-align: left;">
<div>
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div>
</div>
<div style="text-align: left;">
<span style="font-family: Arial, Helvetica, sans-serif;">Sources : Wall Street Journal, Firm websites, various sources</span></div>
</div>
MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-88406530415211194192012-04-20T01:23:00.001+08:002012-10-15T23:15:06.679+08:00Recruit holdings (0550 HK)<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: left;">
<span style="font-family: Arial, Helvetica, sans-serif;">Similarly, I wrote this in <b>2011s</b> and was unable to take action due to the partly some convoluted paper process to apply from my country to this counter in Hong Kong and the various fees involved (broker quoted) . Will T reminded me that this would have done very very well.</span></div>
<div style="text-align: left;">
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></div>
<div style="text-align: left;">
<span style="font-family: Arial, Helvetica, sans-serif;">*** Please be reminded the numbers and situation to this firm have change and is outdated.</span></div>
<div style="text-align: left;">
<b><i><span style="font-family: Arial, Helvetica, sans-serif;"><br /></span></i></b></div>
<div style="text-align: left;">
<b><i><span style="font-family: Arial, Helvetica, sans-serif;">(All in HK $)</span></i></b></div>
<div style="text-align: left;">
<b><u><span style="font-family: Arial, Helvetica, sans-serif;">Businesses Background </span></u></b></div>
<div style="text-align: left;">
</div>
<ol>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">Printing services </span></b></li>
</ol>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Prints educational, lifestyle books for publishers and presses, 7th largest intl exporter to US</span></li>
</ul>
<ol>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">In-flight magazine advertising</span></b></li>
</ol>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Only HK listed firm working with 4 largest China airlines and one in Taiwan, leader in China</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Global in flight airline ads revenue worth US$1 billion in 2006, probably US$2 billion now assuming 15% growth per year. So with $616m or US$79 million revenue, its about 4% of global market share. A journal also mentioned Asia taking 30% market share, and China is probably internal flights + some externals, so I would think its around a fifth of Asia's total air traffic so that works out to be 6% of global market share. So 4-6% is feasible.</span></li>
</ul>
<ol>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">Recruitment magazine advertising</span></b></li>
</ol>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">2010 return to profitability - likely further shrinkage with shift to internet model</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Carve-out of printing business, Recruit will hold 57.98% post event (at least 50%) </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">25 Feb, PN15 submission approval granted and 18 Mar, PGL submitted listing applications</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">IPO and share placemen of PGL, after which spin off preferential PGL to shareholders </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;"><b>Parent price at</b></span></li>
<b><span style="font-family: Arial, Helvetica, sans-serif;"> $2.70, 311.71m shares = mkt cap $840m, <u>PE of 4.9x, PB of 1.7x</u></span></b></ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">In 2010, firm earned $169.5m/ $319.2m (net/ gross profit) over $1152.5m of revenue </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">In 2009, firm earned $92.8/ $208.1m (net / gross profit) over $698m of revenue </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">CAGR growth of over 27/ 24% for revenue / profit resp.</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">S/D costs went up $76 to $110m (44%) as the most significant impact to P&L</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Net cash is approx $100m, including financial derivatives and investments </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Trade receivables went from $224.2 to 340.3m while payables 138.8 to 128.7m (2009 to10)</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">SH equity stands at $495.5m, firm earned $77/ 50m of FCF</span></li>
</ul>
<ul>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">Segmental results (2009/2010)</span></b></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Advertising </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Revenue $243.7/ 616.6m, profit $47.5/ 122.3m </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Assets $171.1/ 218.65m, liabilities $69.8/ 65.93m, net $101.33/ 152.723m</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Printing </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Revenue $454.3/ 534.9 m, $66.7/ 74.0m profit </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Assets $411.54/ 483.67 m, $71.1/ 67.7 liabilities m, net $340.435/ 415.978 m</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">March 2009, spin off Cinderella Media <b>scrapped</b>. (I.e travel advertising too good to give up!)</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">The long range price is $2.20-28 so if carve-out fails, a likely immediate <b>loss of 18.5 - 21.4 % </b></span></li>
</ul>
<ul>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">4 hurdles to be cleared are, shareholders (check), both firm's board and listing approval</span></b></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">The advertising is asset light and more efficient in generating profits</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">RONA 2009/2010 is 46.8/ 80% for advertising versus printing of 19.5%/ 17.7%</span></li>
</ul>
<ul>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">Valuations</span></b></li>
</ul>
<ul>
<li><b><span class="Apple-style-span" style="border-collapse: collapse; font-family: Arial, Helvetica, sans-serif; font-weight: normal;">The closest competitors trade 7-9x PE but growth and ROE/ROA are not as good or even negative</span></b></li>
</ul>
<ul>
<li><b><span class="Apple-style-span" style="border-collapse: collapse; font-family: Arial, Helvetica, sans-serif; font-weight: normal;">A recent outdoor advertiser was listed on HKSE for 10x PE</span></b></li>
</ul>
<ol>
<li><u><b><span style="font-family: Arial, Helvetica, sans-serif;">Printing business (slowing growth, lower ROA)</span></b></u></li>
</ol>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Valued at lower of 5-6x PE or 1x PB</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">With normalized profits of $70mm and net assets of $415m, = value of $350-420mm</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Recruit once subscribed for 4.18% (407.273mm shares)of PGL at $0.30 through conversion of loan to equity</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">That values entire PGL at $2,923mm. Whilst this figure is off as it is a conversion instead of a cash payout, we believe management remains optimistic on the value of PGL</span></li>
</ul>
<ol>
<li><u><b><span style="font-family: Arial, Helvetica, sans-serif;">Advertising business (fast growth and grows 20-30% p.a, higher ROA)</span></b></u></li>
</ol>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">With a PE range of 10x</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Normalised profits of $100mm = value of $1,000mm</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">With fast growth, higher PE of 12-15x plausible but pegged it at the lower range</span></li>
</ul>
<ol>
<li><u><b><span style="font-family: Arial, Helvetica, sans-serif;">Combined entity </span></b></u></li>
</ol>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Total value $1350 - 1420mm </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">If purchased now, you will still get the printing business for free!</span></li>
</ul>
<ol>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">EXPECTATIONS</span></b></li>
</ol>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Expect the combined entity to trade at conservatively $1350 - 1420</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Possibly higher if the advertising business takes off</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Represents a conservatively possible<b> 60 - 69% return </b></span></li>
</ul>
<ul>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">The IPO and spin off is positive for the parent, Recruit as:</span></b></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Parents gets cash for the IPO listing, possibly for expansion of new businesses</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">The ads business is asset light and with little depreciation, the solid earnings will be visible</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Possible acquisition candidate due to strong balance sheet and phenomenal growth</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">A higher re-rating of the business is highly likely </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Fears of ending of airline ad contracts may be alleviated as logically, a 5+5 year extended contract duration is feasible (since they are the market leader) and hence a minimum of 10x PE is definitely reasonable. Every new contract hereon adds to the $100m profit</span></li>
</ul>
<ul>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">The IPO and spin off is positive for the subsidiary PGL as:</span></b></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">More understanding to the firm = more demand</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Shareholders get less of the free spin off = less pressure selling = more stable pricing</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Parent retains over 57% ownership, giving more upside potential for PGL</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">PGL executives incentives are more aligned to the performance of PGL</span></li>
</ul>
<ul>
<li><b><span style="font-family: Arial, Helvetica, sans-serif;">Other positives </span></b></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Insiders are taking part (Stock incentives and buybacks recently)</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">one of them an ex JCDecaux staff </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">In 2009, the printing business raised sales by 36% while overall export market dipped 10% with 20% excess production capacity </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Management foresaw publishers will reduce suppliers to maintain bargaining clout</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Competent management able to manage paper prices and fx exposures</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">One of the most solid balance sheet and profitable presses in the print industry </span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Institutions typically buy in post spin off due to risk mgmt and trouble of selling subsidiaries</span></li>
</ul>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Spin offs take on average 6-12mths to happen from announcement and 1 year to realize value in a study conducted by Penn State in 1990s</span></li>
</ul>
<span style="font-family: Arial, Helvetica, sans-serif;"><br /></span>
<div>
<ul>
<ul><ol></ol>
</ul>
</ul>
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span></div>
</div>
MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com1tag:blogger.com,1999:blog-4504840851919180754.post-38396493143094575512012-04-20T01:19:00.003+08:002012-10-15T23:16:03.192+08:00UE E&C<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="font-family: Arial, Helvetica, sans-serif;">Posted this to remind myself. <b>I wrote this in mid 2011</b> at compelling price levels but was not comfortable with the non-niche business segments and cyclical construction industry and hence did not take up a position in this. Seems like I was sorely wrong on this...</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
Took me a while to comb through new firms and old in Asia and after much consideration, I have decided to write on this interesting company.</span><br />
<b><span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></b><br />
<b><span style="font-family: Arial, Helvetica, sans-serif;">Background </span></b><br />
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">One of Singapore's established engineering and construction player with 30 years of operations.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Spun off from UE in 2010 at $0.48/sh, 70 mm shares offered on top of UE holding 200mm. With 60mm placement and 10mm via public.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Firm being related to UE is naturally related to the Straits Trading / OCBC empire (note common directors)</span></li>
<li><u><span style="font-family: Arial, Helvetica, sans-serif;">Business units (revenue %)</span></u></li>
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Construction - 85% Bulk of the business, fluctuating and thin 2-5% ebit margins</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Engineering (mech and electrical) - 8.2% Decent small business with 10-15% ebit margins </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Building materials & equipment - 6.8% Small but profitable with 20+% ebit margins</span></li>
</ul>
</ul>
<b><span style="font-family: Arial, Helvetica, sans-serif;">Investment Thesis</span></b><br />
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">BCA (Building Authority) expects S$22-28 bn of public constructions and 7-9b in 2010 for private sector.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Firm enjoys a position of being related to both public and private segments.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Simply a statistical play, Mr. market is paying me S$20mm to buy a firm for free. </span></li>
</ul>
<b><span style="font-family: Arial, Helvetica, sans-serif;">Financials</span></b><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span><br />
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Trading at S$ 0.37 per sh with 270 shares in total or approx S$100mm in mkt cap</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Despite being in the construction/ ppty field, it has mostly generated cash flows which is a big plus </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Firm had a bumper year in 2008 -09 due to ION Orchard, Marina Bay Sands and several other mega projects which is unlikely to happen in the near future. So earnings of S$40mm in 2009 will probably revert to 2007 levels or slightly over at around 7-10mm range.</span></li>
</ul>
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
<b>Risks </b></span><br />
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Slowdown in ppty sector (likely but not significant for 2011). 1H 2011 rev down 13+% and profit down 7+% </span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Negative margins for constructions and engineering, likely for construction (biggest revenue contributor).</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Firm suffering cash burn in future (historically leveraged to be involved in ppty devt and construction).</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Only 70mm out of 270mm shs are floated of which 60mm is in the hands of institutions, some of which if you check are known long term holders like 2G capital.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">Firm did mention no dividends promised in the prospectus and I believe may be valid since the entire sector is slowing and that firm has historically been in a negative working capital situation. May not be a bad thing since it may hint at stronger bargaining power to have faster current asset turnaround versus their liabilities.</span></li>
</ul>
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
<b>Expectations </b></span><br />
<ul>
<li><span style="font-family: Arial, Helvetica, sans-serif;">I would expect to pay above net cash and securities value of S$120mm. (Downside is capped)</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">On top of that, I will pay around 5x owners earnings on a worst basis, about S$4-9mm = S$20-45mm.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">So total value will be approx S$ 140 - 165mm or 40-65% upside from current levels.</span></li>
<li><span style="font-family: Arial, Helvetica, sans-serif;">However if you look at it, it is one of the dominant players in both construction and engineering with above average margins. If you pay 10x, that's equivalent to S$160 - 210mm or 60 -110% upside.</span></li>
</ul>
<div>
<span style="font-family: Arial, Helvetica, sans-serif;"><br />
</span></div>
<div>
<b><i><span style="font-family: Arial, Helvetica, sans-serif;">Disclosure: Author does not own a stake in the firm described above.</span></i></b></div>
</div>
MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com1tag:blogger.com,1999:blog-4504840851919180754.post-80876427755125700332012-04-20T01:15:00.001+08:002012-04-20T01:15:22.595+08:00China Yurun (1068 HK)<div dir="ltr" style="text-align: left;" trbidi="on">
<b><i>All figures in HKD</i></b><br />
China Yurun has been one of the market darlings for a while but a recent spade of negative developments have exposed the firm's vulnerability to market cycles. Further, there have also been observations that led me to think that this firm may not be what it seems.<br />
<br />
<b>Observations</b><br />
<br />
<ol>
<li>Their Hog farms do not have any livestocks at all (Bloomberg)</li>
<li>3 of 5 exec directors exercised and sold their options at $17-18 nish per share</li>
<ul>
<li>CEO and ED sold 2.45 and 2.5 mm shares post exercise during 24-26 August </li>
<li>While CEO still holds, his stake has been steadily declining while the ED holds zilch now</li>
</ul>
<li>Subsidies received from government to the tune of $0.7bn when profit/sales is $2.7bn/ $21.4bn</li>
<li>There has been heavy capex and firm continues to report low utilization (1H 2011 spent $1.6bn, which is substantially all of its profits in 1H 2011) and spent $3bn+ in 2010 when profits were $2.7bn. Net assets doubled from $8.4 to 14.4bn </li>
<li>China had a<b> total</b> 15.09mm hogs volume in 2010 while the<b> firm</b> had a slaughtering capacity of 35.6mm hogs? They preparing to take over the world?</li>
<li>Lease prepayments are a whopping $2.7bn while PPE stands at $9.7bn and total assets at $13.6bn. And the prepayments are so regularly paid ($0.6-0.8bn p.a) while not regularly disbursed/paid down and the sum accumulates. Adding prepayment for PPE, its a regular $0.9bn p.a outflow</li>
<li>Ownership certificates for $2.1bn worth of land is not obtained despite being paid for (suspected to be related to lease prepayments)</li>
<li>Company land pledged to support loans of the Chairman's personal property development venture</li>
<li>Negative goodwill recognized as income to the tune of $0.18bn and also occured for past years. This means the company has purchased consistently firms at a price below their recorded book values. The surplus is then accorded to Yurun as profits.</li>
<li>Further, companies bought were revalued at aggressive levels of 80-1000x earnings as hinted by <a href="http://seekingalpha.com/article/287921-cautious-on-yurun-expecting-shares-to-be-under-pressure-as-situation-unfolds?source=feed">"Long Term Value Researcher" in Seeking Alpha</a> </li>
<li>Despite sales growing from $13.8 to 21.4bn, trade receivables was stagnant at $0.58bn in 2010. Over receivables grew due to enlarged VAT tax recoverable and derivatives</li>
<li>The firm has $5.9bn in cash and $3.6bn in total loans</li>
<li>Contracted commitments were $1.6bn and authorised commitments not contracted were $1.2bn, totalling $2.8bn for 2010 versus $0.38bn in 2009</li>
<li>Placed 90mm shares ($23.88) in April 2010 and 47mm ($30.00) in November 2010 to end with total shares currently of 1810 mm</li>
</ol>
<div>
<b>The Defense of Yurun</b></div>
<div>
<ol>
<li>They are in slaughtering and processing, not in hog farming. Hog farming is the private business of Chairman. (Still does not explain the absence of live stocks)</li>
<li>Chairman and executive director Zhu Yi cai owns 25.94% or 470.7mm shares (15 July 2011)</li>
<li>Assuming price of carcass meat is US$1.50-2 per pound and market weight of a hog to be 250 pounds, thats US$375 -500 per hog. With 15mm total livestocks, that works to be US$ 5.6 - 7.5bn of value or RMB35 - 47 bn at USD RMB of 6.384. So that ties in with the 60% market share Yurun claims</li>
<li>KPMG are the auditors</li>
</ol>
</div>
</div>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-56849478737076926542012-02-06T00:45:00.000+08:002012-02-06T00:45:24.605+08:002012Hi to all,<br />
<br />
My apologies that I have not been updating this site recently. There have been some changes in my life and the current schedule has made writing more difficult. I dislike writing/posting analysis for the sake of doing it and will under no circumstance fall into that category.<br />
<br />
I will follow with some updates soon to come.<br />
<br />
Also just a quick update, the portfolio remains intact hence far and I will post up the updated 2012 portfolio on the spreadsheet.<br />
<br />
Thanks for the understanding.<br />
<br />
Regards.<br />
MTHMTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com3tag:blogger.com,1999:blog-4504840851919180754.post-85784483464776605402011-11-01T15:17:00.000+08:002011-11-01T15:17:09.938+08:003Q 2011 - Nanyang Holdings (0212 HK)<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">I wrote up a detailed report on the firm and it is listed on my good friends and fellow value investors' website at for which I am very thankful for. </span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">The report is listed at:</span><br />
<a href="https://www.gvinvesting.com/uploads/Nanyang_Holdings.pdf"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">https://www.gvinvesting.com/uploads/Nanyang_Holdings.pdf</span></a><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><b>A very big thank you to Will Thrower and Ryan Gill!</b></span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">They have been very supportive and truly global investors. Do visit their site for some good ideas as well. </span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Once you read the report, you will have a better idea of the kind of undervaluation I am talking about. </span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Note that there are many estimations of numbers and asset figures so hopefully my conservatism puts the valuation in range. </span><br />
<div><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span></div>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com6tag:blogger.com,1999:blog-4504840851919180754.post-7240404773896239982011-11-01T15:07:00.003+08:002011-11-10T09:19:43.636+08:003Q2011 Updates<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">This quarter was filled with much volatility</span><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">, I did not expect that the chart I did up on Euro/ Global indebtedness would come in so relevant, more so than the bottom up pickings which were absolutely boring this quarter with the exception of Koon which announced a 15% JV into real estate development, not surprising which I mentioned since they bought GPS Alliance, the real estate agency and advisory firm in 1H2011. </span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">NY Times had one good article talking about the Euro problem (with a far more impressive and interactive chart) than my boring table.<a href="http://www.facebook.com/l.php?u=http%3A%2F%2Fwww.nytimes.com%2Finteractive%2F2010%2F05%2F02%2Fweekinreview%2F02marsh.html&h=0AQG7cd_2AQFkYnA1w68qJT8wIHiQdxhbrGLbe86Ywu2bQg" rel="nofollow nofollow" style="background-color: white; color: #3b5998; cursor: pointer; line-height: 14px; text-align: left;" target="_blank">http://www.nytimes.com/interac<wbr></wbr><span class="word_break" style="display: inline-block;"></span>tive/2010/05/02/weekinreview/0<wbr></wbr><span class="word_break" style="display: inline-block;"></span>2marsh.html</a>. Well it appears by the reps of which countries are mentioned, Greece seems to be very crucial in the equation of solving the debt issues. However there's more than meets the eye. By absolute numbers, Spain and Italy send shivers down the spine, with related creditors such as Britain, Germany and France likely to be affected in a web of debt that makes Greece look really like David rather than the Goliath. </span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">I have also learnt many a thing during this quarter, one of which<b> "Your selling price is only as good as how much you bought it for"</b>. Undoubtedly, Nanyang Holdings is an extremely undervalued counter and I mean "very", I ought to have bought it lower especially when I expected the Euro debt issue to be replayed. </span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">World precision had some good support on price level with its steady growth. News of China slowing down the infrastructure spending and words of worker with wages on credit also toned down the enthusiasm for the company which announced significant investment in railway and automotive machine production which currently contributes over 50% of revenue in 2011. Utilization figures also suggest the economy has not yet slowed down significantly however we do expect the numbers to slow down sometime in the next few quarters. World precision is currently China's 3rd largest precision stamping tool manufacturer with 2.9% market share and needs to triple sales to top the charts which should not be too difficult given its technological tie ups with PAMA Group and Aida from Italy and Japan. Management owning over 77% of total shares and its record of stable dividends have also been comforting. Price wise, the last attempted takeover was at S$0.70-75 per share or S$ 395-423 million in total which is in my opinion a low target for the firm. Management has also stated that replacement cost for the plants alone stand at over RMB 1.5 billion or about S$ 300 million. Order book is at RMB 1.2 billion with LTM net margins at 15.3%, lowest 12% in 2010. Market values the firm now at over S$200 million.</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Lastly I have also exited a negligible position in Unidux with the takeover at S$ 0.143 per share for a good gain. Illiquidity of the counter did not allow for a good accumulation even though the case was clear.</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">I will also cover the shorts now to focus on the longs and their related experiments.</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
Feel free to email me any queries.</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com3tag:blogger.com,1999:blog-4504840851919180754.post-37533913456818089232011-10-06T11:02:00.002+08:002011-10-06T11:06:01.621+08:00Big Lots (BIG:NYSE)<span class="Apple-style-span" style="background-color: white; color: #333333; font-family: Verdana, 'Lucida Grande', sans-serif; font-size: 13px; line-height: 26px;"></span><br />
<div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><div><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">This is a write up I did a few weeks back and I think it is still very relevant. If you are interested to discuss more in detail, feel free to drop me a note to my email or to my blog inbox.</span></div><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">The firm was at market cap of $2.4 billion at around $32 per share. While I do not think it is likely to be a mega blockbuster within a short time frame, it does have the qualities and price levels that a private business owner will be interested in. A better valuation will be more ideal. </span></div><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">1) Company Background</span></span></strong></div><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Brief overview</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Big Lots (BIG) is a US’s largest closeout and overstock retailer (i.e buys surplus inventory, odd lots</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">The firm has 5 distribution centers, 1405 stores in 48 states, 41.925 million sf. (April 2011)</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Stores mainly in Texas, Florida, Ohio, Pennsylvania and California</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Distribution centers in Ohio, California, Alabama, Oklahoma, Pennsylvania total 9.5 million sf (All owned except 0.45 million sf leased in Ohio)</span></li>
</ul></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Operations</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Company basically contacts vendors who have surplus productions, shutting down operations or businesses and purchases goods in bulk at discounts and retails them at a slight markup</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Some merchandise not available through closeout and imported (20-30% of sales)</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Mainly in Seasonal and furniture and to lesser extent toys and home department</span></li>
</ul></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Segments</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Company products on retail to both individuals, families and wholesale to corporate </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">(% of sales 2010)</strong></span></span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Consumables (food, health and beauty, plastics, paper, chemical, and pet stuff)<span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"> </span></span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">- 29.3%</strong></span></span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Home (domestics, stationery, and home decorative) </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">– 15.8%</strong></span></span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Furniture (upholstery, mattresses, ready-to-assemble, and case goods) – 16.8%</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Hardlines (electronics, appliances, tools) </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">– 14.1%</strong></span></span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Seasonal (lawn and garden, Christmas, summer) </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">– 13%</strong></span></span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Others (toy, jewelry, infant accessories, and apparel) </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">– 11%</strong></span></span></li>
</ul></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Other corporate information</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Hit $50 in 1997, $30-40 range in 1999,2007,2008 and recent high >$40 in 2010 and 2011</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">At current price of $32.23 per share on 75.19 million shares gives a cap of $2.42 billion</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Owners are CEO Steven Fishman 1.3%, Wellington Co 7.1%, Sasco Capital 6.6%, Vanguard Group 6.1% and LSV Asset Mgmt at 5.2%. Directors and executives (21 pax) owns total 3.3%.</span></li>
</ul></li>
</ul><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">2) Investment Thesis</strong></span></span></div><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Business</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Resilient business – people like deals regardless of good or bad times</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">With bad economy and people less willing to spend, Big lots is clearly a beneficiary</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Such a boring business that no large bulge bank covers it</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Open to buy in excess of $3 billion for inventory liquidators – few can match that</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Firm has never had a negative year of same store sales</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><a href="http://www.biglots.com/corporate/investor-relations/comparable-store-sales" style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #3061d8; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: none; vertical-align: baseline;"></a><a href="http://www.biglots.com/corporate/investor-relations/comparable-store-sales" style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; color: #3061d8; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: none; outline-width: initial; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">http:/<wbr></wbr>/<wbr></wbr>www.biglots.com/<wbr></wbr>corporate/<wbr></wbr>investor-relations/<wbr></wbr>comparable-store-sales</a></span></li>
</ul></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Moat/Competition</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Largest in this field of closeout and overstock and no other close comparables</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Moat lies in the network of negotiation and distributions of products, clearly being large and having a strong<span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"> </span></span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">network is the key advantage which few can replicate</span></span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">No one is able to offer a lower price than Big Lots, not even the dollar stores or dollar tree stores</span></li>
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<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Operations, margins</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Thin margins as gross margins is around 40% and selling and administrative expense is about 31-32% with depreciation only at 1.5-2% range. Margins remains higher than peers</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Firm focus on cost led to decline of overall cost from 38.5% to 33.4% from 2005 to 2010</span></li>
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<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Management</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">2010, executives are awarded about 80% in non equity incentive compensation based on corporate performance benchmarks, total $22.8 million among 5 executives ofwhich average is 1/5 in options, 1/5 in non equity incentive, 1/3 in stock and rest in cash</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">8 directors compensation is around $1.5 million, about 50-50 in stock and cash</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">CEO Steven Fishman has experience in bankruptcies and turnarounds (Rhodes Inc 2004)</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Has a knack for deals as shown by intelligent acquisitions of competitors, recent by liquidators world based in Canada and sale of old toys department to Bain capital</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Open to sale of firm, recently rejected bids by 2 consortiums of ThomasH Lee+Advent , TPG+Bain advised by Goldman Sachs in 18 May. Analyst estimates bids at $3-3.5b while research houses value the firm at $4b. Management is also clear on the firm value. </span></li>
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<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;">Situational</span></span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Firm rejected PE buyers' bid and below estimates earnings resulting in sharp drop in stock price of 27+%</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Firm intends to expand beyond US evident from purchase of Canda’s Liquidation world</span></li>
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</ul><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-left: 1.25in; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span></div><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-left: 0.25in; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">3) </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Fin</span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">ancials (assumptions) - All figures in USD millions (unless otherwise stated)</span></span></strong></div><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-left: 0.25in; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><img alt="image" height="400" src="http://www.capitalistcollective.com/assets/mervynteo/img/PNL.JPG" style="border-color: initial; border-color: initial; border-color: initial; border-color: initial; border-style: initial; border-style: initial; border-style: initial; border-width: initial; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;" title="financials" width="320" /></strong></span></span></div><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Firm is net cash $178 million and employs 0 leverage</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Shareholder equity decline in due of the massive share buyback which resulted in approximately $1 billion in treasury stock versus $1.5 billion in retained earnings and $0.52 billion of paid in capital (shows the financial power of this firm)</span></li>
</ul></li>
</ul><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-left: 0.25in; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"> </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">4) </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Ris</span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">ks</span></span></strong></div><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">No dividends - but the firm has massive stock buyback programs, latest being $400 million worth</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Irregularity to consistency of range of products sold - led to recent gap of food products and same store sales</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Inaccurate expectation of demand may lead to poorer sales and inventory clearing or markdown</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Bigger, financially stronger retailers may enter their field - deep network expertise needed</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Energy prices affect transport from vendor to Big lot’s distribution center to Big lot shops</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Sourced 25% of goods overseas, notably 21% from China so theres fx risks - Yuan capped</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">All stores except 54 (Mainly in California) are leased - but distribution centre owned </span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">On average 250 leases will expire annually from 2011 to 2015.</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Slowdown in top line (although management has been able to squeeze higher profits) - attractive valuations</span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"> </span></span></span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Alignment of interest could be better since insiders only own 3.3% of total shares out</span></li>
</ul></li>
</ul><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-left: 0.75in; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span></div><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-left: 0.25in; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; text-decoration: underline; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">5) </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Expe</span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">ctations - figures in USD millions (unless otherwise stated)</span></span></strong></div><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-left: 0.25in; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><img alt="des" height="144" src="http://www.capitalistcollective.com/assets/mervynteo/img/Values.JPG" style="border-color: initial; border-color: initial; border-color: initial; border-color: initial; border-style: initial; border-style: initial; border-style: initial; border-width: initial; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;" title="valuations" width="400" /></strong></span></div><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><ul style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; list-style-image: initial; list-style-position: initial; list-style-type: disc; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 20px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"> <span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">KKR paid 11x EBITDA for Dollar Stores LBO back in 2007</span></span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Averaged firms trade at 10-11x EV / EBIT</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">If the discount rate is 10%, expected return is still positive at 3.9%</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">If the long term growth is 0% / -2%, returns are still 29.6% / 3.4%</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">A value o<b>f $3-3.6 billion is fair</b> but I opine that upside could be much larger</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Reason being theres a lot of room for improvement, PE firms interest, strong organic growth and financial strength</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Valuation accounts by using the perpetuity formula as mentioned in John Burr's "Theory of investment value"</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">If one uses a stepped FCF valuation, be it 5 or 3 years, the valuation will be higher</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Long term growth at 1% based on past growth and should not outgrow US economy growth</span></li>
<li style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-family: Times, 'Times New Roman', serif; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Discount rate is 30 year treasuries at 4.20%, bumped it to 7% for risk premium. Higher discount does not equate to negation of risks, it is purely a measurement tool </span></li>
</ul></li>
</ul><div style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-left: 0.75in; margin-top: 10px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><strong style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; font-weight: bold; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;"><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Sources: </span></strong><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Google, </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Wall street Journal, </span><span style="border-bottom-width: 0px; border-color: initial; border-left-width: 0px; border-right-width: 0px; border-style: initial; border-top-width: 0px; font-style: inherit; margin-bottom: 0px; margin-left: 0px; margin-right: 0px; margin-top: 0px; outline-color: initial; outline-style: initial; outline-width: 0px; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px; vertical-align: baseline;">Big Lots webpage, SEC filings and Annual reports</span></span></div>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-60098191119349960772011-09-30T16:54:00.001+08:002011-10-06T10:59:47.918+08:00Koon updates<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Hi all, recent market declines while painful, introduces some interesting opportunities and I will be working on them. So far the market has still been ignoring deep value and focusing more on sector rotations. Interesting to note that Koon while traded down in the past few sessions has the following new developments.</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<ol><li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Just got $53.73 mm in precast contracts, <b>total pre-cast book order of $103.4 mm</b></span></li>
<ul><li><i><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Growth of this segment is particularly fast given it was started only mid-late in 2010</span></i></li>
</ul><li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Recent $40.1 mm rehab project at Tampines Landfill site, <b>total construction book order of $128.3 mm</b></span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">67.8% stake in Tesla Holdings now has first power plant in West Australia up , 9.9 MW</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Still has the US 160mm Sao Bien Port project in Vietnam </span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Liquid assets and securities at $22 mm</span></li>
</ol><div><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">All these at a market cap of under $40 mm, unbelievable? I think so too. I couldnt help but bought some today. </span></div>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-61360688817485339282011-09-07T12:18:00.003+08:002011-09-07T12:25:59.664+08:00September 2011 Updates<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">There have been a flurry of global events and as mentioned, I have been heavily involved in other commitments which resulted in less active management of the holdings. But hey, most returns come from good analysis supported by solid facts and reasoning followed by much inactivity.</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Nevertheless, the large cash holding of over 50% and the resilience of the counters held the holdings overall to be down close to -5% while the overall STI YTD is at -12% and MSCI Asia Ex JP is at -13.5%. Also many of the counters in the holdings which declined substantially were fortunately not of a large position, for example AEI corp. The other positions as mentioned have declined but for no good reasons, they were neither fairly nor overvalued at the onset, nor were they large index constituents or firms with operational issues. Hence, I will continue to hold them as returns are not justified by year on year stock price movements but rather the value created on a sustained period of time. Now I truly understand what Buffett meant when he got irked by the annual rat race and comparison of relative performance in the 1960s when he contemplated winding down his partnership.</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">While the relative out-performance is numerically pleasing, the absolute return requirement was not met. The inability for me to execute the suggested shorts as well as other macro views especially for currencies restricted my actions as well as my performance since the Shorts did particularly well. However, I tried my best to achieve a similar outcome through many ways, one of which was to restrict my holdings to mainly SG while having no US counters, and minimal of HK and Malaysian Counters atm.</span><br />
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</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Feel free to send my any questions or queries and I will be happy to answer them.</span><br />
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<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Best</span>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com2tag:blogger.com,1999:blog-4504840851919180754.post-91426208093106671862011-08-18T17:01:00.005+08:002012-04-20T01:16:40.716+08:00Laxey Partners VS Wee Cho Yaw (UIS) - United international securities<div dir="ltr" style="text-align: left;" trbidi="on">
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><br />
</span><br />
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">If experience has it, perhaps more due diligence can be done before launching an activist approach, especially to an entity linked to one of the more well known businessman in the South East Asia.</span><br />
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<b><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Some points to note</span></b><br />
<ul>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Laxey only owns 10% vs Wee 49% (overwhelming difference)</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Laxey was also quoted as impudent."Asia does not work this way!" Look at how TCI fund performed when it tried to do something with J Power Corp.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Wee did something meaningful to grow UIS, why would people vote for you especially with that sort of attitude. If you cannot relate to other minority shareholders, half the battle is lost.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Stating that UIS as a closed end fund is trading below NAV is a weak motivation to change the board since most closed end funds trade below NAV, even one of the best in the world, Berkshire Hathaway does not always escape this fact with a good reason. NAV is often not a good representation of earning power and firm value. </span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Lastly, independence of the board is really a facade for Laxey to bring its own people up. How can the people be sure Laxey will not leave the shareholders high and dry?</span></li>
</ul>
<div>
<span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Good Luck to Laxey and Mr. Andrew Pegge, it is interesting and helpful to see minority interests are still much alive. If you are reading and wish to get in touch, feel free to drop me a note.</span></div>
</div>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com4tag:blogger.com,1999:blog-4504840851919180754.post-44974357201268511232011-08-06T12:56:00.003+08:002011-08-22T12:06:32.822+08:00August 2011<b><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Some important highlights </span></b><br />
<ul><li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">S&P downgraded US ratings from AAA to AA+ </span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">BOJ sold Yen to stabilize currency with losses on Thursday 4 Aug 2011 of approx US$ 50 billion</span></li>
</ul><div><b><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">What this means</span></b></div><div><ul><li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">While everyone is fleeing from equities, I cannot help but think that US is in fact much more important than I ever thought. With Debt to GDP of over 1x, it is around the same league as the many nations which have experience defaults in some ways or another but US had only a downgrade to AA+.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Everyone knew long ago that US rating was not AAA and this day will come eventually, however when the day comes, it seems alot of compromise was reached and much "face" given to US.</span></li>
<li><b><u><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><a href="http://www.guardian.co.uk/news/datablog/2010/apr/30/credit-ratings-country-fitch-moodys-standard">Click this link to understand the rating positions of the countries </a>- Guardian UK</span></u></b></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">While there is expectation of rising interest rates, there is nowhere else more liquid and more productive to be than in US debt. As such, we did see that US 10 year notes were in fact rising in price, hence a lowering yield.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">US is undoubtedly still highly competitive with advanced technology, a quarter of world's industrial production, so end of the world day scenario will <b>NOT</b> come.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">US and Japan has 40% of the world's largest companies with assets over US$ 40 trillion.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">US, Japan and Germany has over 50% of world's patents with US having 30%.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">There will definitely be an impact on the credit side, likely an across the board rise in required yields and probably lower volumes in higher yield issues as restrictions keep institutions from acquiring them.</span></li>
</ul><div><b><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Portfolio</span></b></div><div><ul><li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><u>Short side have performed well.</u> Whilst shorts are not my focus and expertise, this current year is filled with opportunities on this front and have done well beyond expectations. <b><a href="http://skewed-odds.blogspot.com/p/holdings.html">See Portfolio</a></b></span></li>
<ul><li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Decided to keep the shorts in Olam and Gallant </span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Reason being they are highly exposed to economic cycles</span></li>
</ul><li><u><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Long side while performance is not satisfactory, is still positive and undervalued.</span></u></li>
<ul><li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><b>Koon,</b> one of the larger positions sees a high price $0.30 never reached in almost a year. Came from positive news that firm bought into a real estate agency and expansion into advisory and valuation. Firm also secured S$30.9mm of projects (Seletar-marine bridge/TPE) to total of S$90.4mm excluding precast projects worth S$53.2mm. On both fronts, significant traction made and if firm maintains a minimum of 10% margin (was 17% in 2010), we will see at least S$9 to 11mm of profits for 2011 (was $12.7m in 2010). With cap at $43mm and net cash of S$19mm, one pays S$24mm for earnings of S$9-11mm, with a free option on a S$225mm Vietnam Port project (S$22.5mm worth of profits at 10% margins) and throw in the Australian power business for free which gives an additional S$1mm in profit est. annually. Sure that <b>some guy</b> warned me that income is not recurring and this looks bad. However at 2010 when I bought in, and at this rate, the company would had paid for itself with its earnings in the 2 years at 2x PE. Who cares whether it recurs or not at that level.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><b>Nanyang Holdings</b> remains deeply unappreciated and being more on commercial and individual focused, will have minimal impact from the corporate front in terms of the sovereign downgrades and economic situation in the west. Core properties in Kowloon also facing redevelopment due to lack of space in Central. Low costs mitigates risks of a downturn. </span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><b>Roxy 2H</b> came out well, lower sales but higher profits as expected, still undervalued versus other hotel cum development players out there. Hotel value <b>alone</b> is >= its market cap.</span></li>
<li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><b>World precision</b> had a new book order RMB 21.5mm, looks set to break 2H profit estimates. Price wise has also had strong support from good volumes.</span></li>
</ul><li><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;"><u>Many opportunities in the west</u>, however I will pick choices based on superior returns profile, preferably event driven and with a limited time period to limit possible losses from USD. I will be working hard to crunch the numbers over the weekend.</span></li>
</ul></div></div><div><ul></ul><div><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Thats it for now, Monday will be rough.</span></div></div><div><span class="Apple-style-span" style="font-family: Times, 'Times New Roman', serif;">Cheers!</span></div>MTH Investmentshttp://www.blogger.com/profile/00523146218701602591noreply@blogger.com1