MEGB update no. 2

Is MEGB marching into the light with its newly approved programmes?

(credit: Dreamstime)

Since my last post on MEGB more than a month back, a lot has happened.

A Concerned Investor sends in some queries to MEGB's Investor Relations (IR) Another concerned MEGB shareholder, Zuuk has been sharing some info with me via email and these were his concerns:

1) An updated list of the shareholders - this was updated on 9.03.2011 - which shows that Fidelity and Smallcap World Fund were still shareholders to a total of 8.5%. But of course, this was 3 weeks ago and the composition may have changed and we can only wait and find out whether they have further shed their ownership of Masterskill's shares.

2) Zuuk also had concerns as MEGB's bursa announcement that it had obtained approval from the Education Ministry to run its Kuching campus which conflicted with the Kenanga report on MEGB saying that the Diploma in Nursing for Kuching was facing some delay in obtaining approval. Management's reply to this was that the two things are not the same thing as the former as to do with the campus and the latter with the programme. Hence, they were not conflicting. Nevertheless, good on Zuuk for spotting these things and being an active investor and of course, sharing this info with us

Catalysts for Higher Prices? MEGB now has hit around the average price I bought it - RM1.9 and the fact it has been in the news may have something to do with it:

March 23 - Approval for its Cheras Campus to conduct BSC (hons) Nursing programme - This is obviously good news as well, if all goes well, a recognised certificate is almost as good as printing money.

March 29 - Masterskill then announced it was to collobarate with Kinta Medical Centre to set up a physiotherapy centre - This again is a plus as it states that KMC will bear the costs and share the profits with Masterskill and this may give Masterskill the 'unique selling point' it needs to get more students into Masterskill as the healthcare education industry gets more crowded with more players entering into this space.

What about Dividends? Share Buy Back? Of course the two pieces of news I cannot wait for is the share buyback and the payout of dividends.

And guess what - they recommend a dividends payout of 7.9 cents per share payable on 15 June so if my maths is right - a 4.1% return for the shares at the price of RM1.89 (closing price today). Read about it on the Edge.

Yet, when I think about it, can MEGB afford to also do a share buyback? Can they fund both while expanding aggresively as they are opening its new campuses or do they have to settle for one option? To me, I would prefer a dividends payout as I am holding long on to MEGB. Perhaps, it's time to write into their IR to find out...

Update 31/03 : OSK research maintains MEGB as a trading buy with unchanged fair value of RM 3.44 citing the current PER at 6.4 the cheapest in its covergae. Read it on the Edge.

Full disclosure: Yes, I do have shares in MEGB.

Bargain Hunting in Malaysia or Should I use Groupon-clone sites for my Business?

Love cutting coupons? There's a better way! Check out these websites... I've listed a few in my previous posts - Groupsmore, Milkadeal, Mydeal to name a few.

Rather than reinvent the wheel - There are actually nearly 40 over such sites listed here (check out the comments area too)- http://groupon2u.com/groupon-malaysia-navigation-list-all-groupon-clone-sites-in-malaysia

How do these works?

These sites offer discounts up to 90% for SPA treatements, mani/pedi, meals, food stuff, etc.. Some of them offer free credit for the first purchase and for referring friends so do take advantage of them.

You agree to a deal and once enough people sign up, you pay and you get a coupon to claim your discount. That's why it's called a groupon (group+coupon!)

What does this mean for the consumer?

Great news! You can go looking for the next bargain and stick with it if you really like the service/the product. Or you can always wait for the next bargain!

What does this mean for the business?

Not so great news. Such websites can be great publicity but they must be able to deal with extra demand for their services/goods and wow, they have do be really good to make sure that customers keep coming back for more even without those massive discounts. You see the business will have to pay the website a cut of the remaining % and offer the service/product at really low margins or even at a loss!

Example : My burger is RM10. I ask groupon clone site to offer 50% off. So I get RM 5 for every coupon sold. Maybe.. every RM 2 goes to the groupon clone site for offering it.

If you gain yourself a loyal customer, great! But the biggest danger is that this may spark a price war and the smaller business cannot afford to do so and will close shop eventually and also generally, may cause business to lower their prices and accordingly, their margins suffer.

So,if you're a business, think carefully!

In fact, you must do the math - http://boss.blogs.nytimes.com/2010/11/23/doing-the-math-on-a-groupon-deal/ -Ask youself - can my business afford this and also take in this huge sudden demand because of my promotion?

But hey, if you're a consumer, rock on and enjoy all the sweet deals and save some money!

Quick Post: Warren isn't perfect? Goldman Sachs

Morgan Housel of Motley Fool Questions Whether Warren Buffet's Investment into Goldman Sachs (GS) during the 2008 Credit Crunch was all that Profitable.. with the benefit of 20/20 vision of course...

20/20?

Warren's returns in his preferential stocks of GS wasn't all that great after all including the warrants he got for 'sacrificing' his professional image for an 'all-evil' investment bank if you compare it to market returns from 2008 to today.

Read on here: http://www.fool.com/investing/general/2011/03/21/how-goldman-treated-warren-buffett.aspx

Maybe the Sage of Omaha isn't that great after all or is it fair to look back with the benefit of hindsight? That said, he has been known to have a few mistakes/failures in the past. Netjets and General Re are to name a few.

One thing's for sure. If you're as successful as Buffet, you have a tough reputation to keep!

More on YTL's Tan Sri Francis Yeoh - YES broadband

A Follow-up on the post I had on Tan Sri Francis Yeoh's(TSFY) Interview I had Posted Earlier - Why Maxis, Digi, Celcom should sit up and listen.

YTL's latest Offering - YES BROADBAND

The podcast is available here to listen/download.


Other podcasts of BFM are here. There's some really good stuff to check it out.


First thing, is he used very 'hip' language - repeated the word 'awesome' and 'cool' quite a few times which leads me to think this was a trained interview and perhaps, he is trying to hard to appeal to the younger crowd? He did not answer directly to the Interviewer's questions but rather was marketing YES broadband. He was asked what were his internal targets for subscribers (currently 100k) but he didn't give a straight answer.


Then again, I do not know Tan Sri personally so maybe that is how he talks naturally...

Another thing to clarify is that 4G is not strictly 4G but more like.. 3.5G. From my understanding, 4G would use different technology rather than the current tech used by YTL. Read here WIMAX is not really 4G.



Ok, those out of the way... It was quite insightful to pick the brains of one of the most admirable captains of industry in Malaysia. In fact, family owned firms do better in the hard times - as reported in Newsweek.

YES BROADBAND

YTL's YES broadband is a very, very powerful idea and I am in fact sold on the idea. In fact, I have put money where my mouth in and I do have some YTL Power shares which own part of the YTL Communications that is running the show.

Why am I sold? Well, for my HTC wildfire on 18 month contract - I have to spend roughly RM 100 a month - RM50 for my calls and RM 50 for internet (500mb). Now, imagine if I could not have a phone and just use the internet for all my calls and messages. Impossible you say? No, but that's what I am ALREADY doing. I am saving soo much of my line costs but using Gmail, Gtalk, Whatsapp and if I had Skype, I don't have to use my line at all ! Imagine, how much I will save. If I was Maxis, Digi, Celcom, hey, I'll be shaking in my boots.

If YES can give me the speeds it promises, why do you have to make calls and text on a 'traditional' mobile phone line? There was one day where I asked my friend: If I have internet, why do I need my phone? For texts, I can message my friends with Whatsapp and Gchat. For phone calls, I can call using Skype!

I think alot of people don't get it about YES broadband. It's not for the high end users and I don't think it is fair to compare it to say TM's UniFy. Why the coverage along the NS highway and the ERL? Why the coverage in main areas in West Malaysia? It's supposed to work more like a phone line than strictly internet usage to surf, download and play.

MMS and SMS are so, like, yesterday!

Tan Sri was spot on when he mentioned the power of apps. For RM 30 a month, I can use 3.5 Gigg as opposed to the RM 50 of my RM 100 for my HTC for 500 mb only! (which mind you, is already the cheapest monthly payment with Maxis) With all that RM 30, I don't need a line. I can keep in touch with friend with Skype and Whatsapp... theorectically speaking of course.

The savings are huge - RM70 a month - RM 840 by year's end! Almost enough to pay for this budget smartphone of mine!

I think there can be revolution here if YTL plays their cards right. At the moment, I believe YES still has many nagging problems right from its launch (site crashed!) and it needs to increase its distribution reach by setting up more booths. IMHO, it lacks the presence and awareness of its plans and the power of the internet its offers.

There is alot more discussed by Tan Sri but I shall keep focused on my opinion of YES. I believe if it does well, it will prove a challenge to exisiting telco companies and even Astro. With the bandwith, they can transmit shows/films to your computer/home. As Tan Sri says, "You don't know it but we have built pipes to each one of us"(liberally paraphrasing)

It will take time but this is a very brave bold move in the right direction. YES may one day be the platform for YTL to provide services provided by Netflix in the West and I think the hybrid TV is a move in that direction.

Malaysia watch out, YES may help re-define the way Malaysia works, play and learn this decade!

Taking advantage of this crisis.

Remember BP + Transocean and the Gulf Oil Spill. Those stocks took a beating then but are up, beating market returns today. Does the same apply to the crisis in Japan? Does Crisis = Opportunity?

Read on:

Warren Buffet thinks so

Motley Fool has Three ways to Profit from the Japan crisis - Toyota, Uranium producers and Nuclear Energy Producers (good dividends)

YTL'S TAN SRI YEOH SPEAKS ON BFM

Reporting this on the go. BFM's morning grill had the man behind Ytl on air to interview. Some key take away points:

- He believes YES broadband will revolutionise mobile telephony. Why use texts and normal phone lines when you have 4G and can use multimedia apps like whatsapp, gmail,Skype. He sells his YES experience like using colour tv and not being able to go back to black n white.

- On kl property prices, he believes a high speed train linking S'pore n kl is what we need to raise our deflated kl prices n the gov seems to be assessing the situation.

There's a edited repeat later at 1230 n a podcast on BFM later. My take on some of the stuff he said later.

Disclosure: yes I own shares in ytlpower.

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5 articles you have to read

5 articles you have to read (Japan, black swans, no such thing as risk-free power, global recovery, 3 stocks that have hit 52 week lows - Dreamworks, Cisco and GM)

"There's a lot of information out there. Some of it is junk, some of it is frame-worthy. For every dozen foam-spewing-from-mouth rants out there, there's a well-thought-out, factual, logical piece of work that deserves your attention. Here are five you might enjoy:...."

Read on here : http://www.fool.com/investing/general/2011/03/17/5-articles-youve-got-to-read.aspx

Bank of America Report : Malaysian Stock Market no very popular among foreign investors?

One piece of News which Caught my Eye this Week

Full report here : http://www.themalaysianinsider.com/business/article/malaysia-near-bottom-in-banks-fund-manager-survey/

"Malaysia remains among the least popular markets for both global emerging market (GEM) and Asia-Pacific (AP) fund managers and suffered up to 43 per cent cuts in fund allocations, said a report by Bank of America Merrill Lynch (BoAML) released this week.

In its March report, Malaysia retained its February rating as second least popular market after Columbia among GEM fund managers and is now tied with India for least-favoured among AP fund managers, after coming ahead of the South Asian nation in the February survey."

Unfortunately, the Malaysian Market is not faring too well in the foreign investor arena. We are down there with India. The similarities are similar? Are not both our countries heavily dominated by government linked companies. This also goes to explain the recent sell off in foreign owned stocks which would include MEGB.

"Malaysia has traditionally been perceived by regional fund managers as a defensive and unexciting market, lacking in liquidity and dominated by government-linked institutional funds."

Perhaps, time to diversify outside or just a general fear over the impending government elections?

I personally think that the reason is the returns in other markets are better and will the foreign funds be back? Yes, the hot money may be back and it will take more than roadshows overseas but well, performing fundamentally strong companies with good, transparent corporate governance to get more long-term foreign investors in.

Will Malaysia take the tougher measures needed to make these changes? Hard la. Election year is coming so time for dress-shopping, not the hard but necessary measures needed. *sigh*

Full Disclosure: Yes, I have a position in MEGB.

Two other Malaysian Discount/E-voucher/gift Sites

Check out my previous post here on these websites offering deals in Malaysia. Usually great deals/vouchers on SPA/Food and other stuff...

Thanks to a poster on Lowyat.net, here are two more Malaysian sites to get great deals:

Joinme

Jackcow

Take advantage of these sites while you can. I somehow don't see these 5 of them lasting that long especially now that GROUPON (of US fame) has taken more groupsmore and maybe some of these sites were hoping they were the ones to be acquired by them!

Enjoy the great deals!

Stocks - Not just Capital Appreciation, it's the Dividends too lar, dummy!

Why you should invest in stocks that pay dividends?

This is why! (image credit: dreamstime)

Most property investors will tell you that buying a property is about two things - the rental and the capital appreciation. While you correct monthly rent, the property will hopefully (if it's a great location and demand is there), the property price will go up over the years beating inflation and making a good profit when you sell it. Ta-daa capital appreciation!

So what about stocks? Everyone seems looking for the next penny stock that rockets 100-200% but does anyone actually think about stocks paying dividends.

I think this may be a mistake and everyone's portfolio should have some dividend paying stocks.

Dividends are a way for the company to show of confidence saying : ' Hey, we are doing quite well and let's reward our faithful shareholders some money.'

On the flip side, it also can mean : ' We have money lying around but we do not know what to do with it or we don't have plans to expand so let's pay out dividends instead' - This seems to be very much the case for Malaysian Telcos such as Digi and Maxis where we have 110% mobile penetration in Malaysia (some people have 2 phones you see) and the mobile telephony infrastructure (in the profitable urban areas, at least) has already been set up. The higher growth areas would be Mobile Internet and that's where the capital appreciation for these stocks may (or may not) come in.

What to do with all that Extra Money

Coming back to the topic at hand - Basically, companies with huge cash reserves can do a few things:

1) Buyback shares

2) Acquire another company

3) Invest in capex to increase capacity

4) Pay out dividends to its Shareholders

5) Not do anything.. yet? (like in the case of Apple, Google, MFT)

So, if a company pays dividends steadily, more likely than not, it is a sign of the confidence that it is doing well and is willing to share the spoils with its shareholders.

The Numbers to Back Up

Consider this :

Take the S&P 500 and it's proven that dividend paying stocks outperform their non-paying cousins. Find the graph here from 1992 to 2004 in a study by Ned Davis Research.

Pay attention to the red lines where $100 grows to $2368 (10.1% per annum) versus non paying dividends stocks -$100 grows to just $395 (4.3% per annum). All this of course should be compared versus the market (blue graph) where $100 with the index ends up to $1475 (8.5 per annum)

Of course, there are a few key assumptions here : Reinvest the dividends made and also, do some research on whether the dividend payout is steady and has been increasing over the years.

In the Malaysian context, there seems to be little to no emphasis on such stocks and I am quite puzzled by this. Maybe, Malaysian investors are more impatient and would rather take more risky moves or generally, because most Malaysians are speculators ( I am guilty on this too!) rather than true investors buying a piece of business they really believe in and are willing to wait for their due returns. The fact that most investing houses make money from transaction costs and there are lots of people selling technical analysis tools to encourage trading maybe makes us more speculators than anything else!

Diversify

Personally, I hold some shares in YTLPower since 2H2010 which even with its YES! broadband venture - has been paying steady dividend of over 5% and been reinvesting those dividends. Holding steady dividend paying stock can help diversify your portfolio. It's not the best performing stock but even with the recent market hit - it hasn't traded below 2% of what I bought it at. The lesson try not to put all your eggs in one basket.

So, what are you waiting for? Consider having some steady performing dividend paying stocks in your portfolio today!

Further reading:

• The Extraordinary Power of Dividends - Morgan Hensel for the Motley Fool has a brilliant article on this -Read it here.
• 6 Myths on investing Dividends - Including one myth that stocks are only for older people who need income - I say its an integral addition to any portfolio! Read it here.
• Where Dividends Fit on the Financial Puzzle on FT (registration may be required)

Material Disclosure: Yes, I do earn stocks in YTL Power.

Scott Adam's on Investing on Stocks you Hate

Scott Adams of Dilbert fame take on the road to personal riches : Invest in Companies you hate the most! (ie: BP, Apple) (written 25 June 2010)

" When I heard that BP was destroying a big portion of Earth, with no serious discussion of cutting their dividend, I had two thoughts: 1) I hate them, and 2) This would be an excellent time to buy their stock. And so I did. Although I should have waited a week.

People ask me how it feels to take the side of moral bankruptcy. Answer: Pretty good! Thanks for asking. How's it feel to be a disgruntled victim?

I have a theory that you should invest in the companies that you hate the most. The usual reason for hating a company is that the company is so powerful it can make you balance your wallet on your nose while you beg for their product. Oil companies such as BP don't actually make you beg for oil, but I think we all realize that they could. It's implied in the price of gas."

Hilarious stuff! Why can't we have some fun while making some money? Then again, why listen to a Cartoonist for investment advice?

Read the full article here on WSJ:http://online.wsj.com/article/SB10001424052748704025304575285000265955016.html?mod=mktw

3 Great Websites which help you Save Money

*phew* It's been a long time since I have posted - The reason is partly because I have been really busy and also my laptop's fan got clogged up and had to get it repaired. Apologies, dear faithful (perhaps, near-non-existent) readers!

Wow, that's a cool magic trick! (image credit: Dreamstime)

Anyway, let me make it up to you by introducing to you not one... not two... but THREE sites that will help you save alot of money!

http://www.mydeal.com.my/

http://www.milkadeal.com/

http://www.groupsmore.com/

These 3 sites have been set up in Malaysia to try and capture the online voucher/coupon market made so famous by groupon.com. Google was rumoured to be interested in taking them over in the US!

Anyway, all you need to do, is give them an email and register and you will be sent emails on deals. If you're interested, you actually need to buy the coupon (pay online) and then you will be issued the coupon (provided the number of people who buy the coupon is met) and voila! Cheap (50% off or more!) manicure/brazilian waxing (ouch!)/food/spa treatment/shoes/subscription, etc...!

So, check these sites out!

My advice? The sites are competing each other and offering like free RM 2/RM 5 e-money to get you to sign up and try -so take advantage of it! For example, join milkadeal on FB and you get RM 5.

Any requirements for these sites? A credit card/paypal account oh, and facebook!

So what are you waiting for, sign up and wait & get the deal you want!