Category Archives: Special Events

Commentary on special events in Thailand and the SET Index.


So our favourite funny man in the telecom industry has announced this morning that he wants to buy out all the shares in JAS at THB 7.25/share.

If you remember your corp fin 101, MBO’s are typically done for a strong cash generative business and with plenty of cash on the b/s. Now JAS doesn’t quite the criteria on these 2 points, their business is stagnant given they’ve sold off the CF’s to a fund already and they’ve gone on a sharebuyback spree in since the 4G debacle. So how does this make any sense?  We have our theories but writing them publicly would definitely be considered slander.. are the official announcements:

Source: SET website: Intention to make a TO; Additional Explanation

Raghuram Rajan: The independence of the central bank

I enjoyed reading this speech from the now former head of the RBI, it does give a quick insight into the thinkings of a central banker.

To bolster the value of the rupee, we had to give investors more certainty that future inflation would be low. After all, it was primarily India’s higher inflation with respect to the rest of the world that led to periodic abrupt falls in rupee value. Then Deputy Governor and now my successor, Dr. Urjit Patel, agreed to prepare a report on how we could move to a new inflation-focused monetary regime. That would help very much in the medium term, but in the short run we had to establish that we were not heading towards crisis. The easiest way to demonstrate that was to show we could raise plenty of foreign exchange.

This mission, however, exposes the central bank to criticism. If we try and bring down inflation, interest rates will remain higher than borrowers desire. If inflation comes down, the currency will depreciate less than some exporters desire. If we push the banks to clean up, banks may be less tolerant towards habitual non-payers. Whatever we do, someone will object. The RBI then becomes the favorite scapegoat for underperformance – if exports are not picking up, it is because interest rates are too high and because the exchange rate is too strong.

Source: BIS

B. Wein: Adjusting to Disruptive Change

Him, H. Marks and B. Gross are some of the few commentaries that I enjoy reading monthly/quarterly.  The key message this month is in the first paragraph which is below, enjoy!

The first was that the world was condemned to a prolonged period of slow growth unless vigorous fiscal spending took place in the major industrialized economies. Monetary policy had been helpful in the recovery after the 2008–2009 recession, but its effectiveness as an economic stimulus had diminished. The second was that considering the uncertainties caused by margin compression, limited revenue growth, the U.S. political outlook, terrorism, Brexit and other factors, the fact that the U.S. equity market is making an all-time high is remarkable.

Source: Blackstone

DSGT going private?

Rather surprised that no one has really picked up on this.

Two days ago DSGT announced to the market that it had received a voluntary tender offer from a PE Fund for the outstanding number of shares in the market at THB 5 / share

Here are some key points and a link to the announcement

The Offeror is an investment holding company and intends to hold not less than 295,613,636 shares or 23.46% of the total issued and paid-up shares of DSGT, representing 23.46% of DSGT’s total voting rights The Offeror intends to acquire shares of DSGT in a voluntary tender offer subject to the condition that the Offeror shall cancel the tender offer, if at the end of the Tender Offer period, shareholders of DSGT who accept the Tender Offer are less than 295,613,636 shares or 23.46% of the total issued and paidup shares of DSGT, representing 23.46% of DSGT’s total voting rights.  Pursuant to the Deed of Undertaking (“DOU”) entered into by the Offeror, Mr. Brandon Wang Shui Ling and DSG International Limited (“DSGIL”), a major shareholder of the Business on 2 September 2016, DSGIL and Mr. Brandon Wang Shui Ling have agreed to undertake to the Offeror that it will (i) not sell its shares in the VTO the Offeror’s Tender Offer and (ii) procure that two nominees of the Offeror are appointed to the board of DSGT.

The offer price for the ordinary shares is Baht 5.00 (Five Baht) per share (the “Offer Price”). The shareholders who accept the Tender Offer (each an “Offeree”), are subject to payment of a brokerage fee of 0.25% of the Offer Price plus value added tax (“VAT”) of 7% of the brokerage fee. Therefore, the net price to be received by the Offeree will be Baht 4.986625 (Four Point Nine Eight Six Six Two Five Baht) per share

Source: DSGT

Bill Gross still hates negative interest rates

There isn’t any new information in his latest monthly commentary as he continues on the negative aspects of zero interest rates and negative rates. But at least he doesn’t talk about sex anymore…

I and others however, have for several years now, suggested that the primary problem lies with zero/negative interest rates; that not only do they fail to provide an “easing cushion” should recession come knocking at the door, but they destroy capitalism’s business models — those dependent on a yield curve spread or an interest rate that permits a legitimate return on saving, as opposed to an incentive for spending. They also keep zombie corporations alive and inhibit Schumpeter’s “creative destruction” which many argue is the hallmark of capitalism. Capitalism, almost commonsensically, cannot function well at the zero bound or with a minus sign as a yield. $11 trillion of negative yielding bonds are not assets — they are liabilities. Factor that, Ms. Yellen into your asset price objective. You and your contemporaries have flipped $11 trillion from the left side to the right side of the global balance sheet.

Source: Janus

FTSE Index Changes

Several brokers sending this out this AM

FTSE Global Equity Index Series Asia Pacific ex Japan Regional Index and Japan Regional Index Semi-Annual Review.  
Constituent changes can  be accessed via the attachments below.  The changes will be effective after the close of business on Friday, 16 September 2016 (i.e. on Monday, 19 September 2016).

Large cap
Inclusion: SCC-R, KBANK-R
Exclusion: none

Mid cap
Inclusion: BEM

Exclusion: none

Small cap
Exclusion: BEM, THRE

FTSE All-World
Inclusion: SCC-R, KBANK-R
Exclusion: none

Exclusion: THRE

Emerging-Market Small Caps: A Distinct Growth Opportunity

This is a fact that several of us here know and love, Small/mid cap’s are, have always been, and will most likely continue to be under-researched, under-covered, it’s just the nature of the business. The clever folks over at Franklin Templeton have just put out a short research paper on it, here are some snippets and a link to the paper.

EM small caps are far from a niche investment, despite broad perceptions. The asset class represents more than 23,000 companies with an aggregate market capitalization of close to US$5 trillion1 and daily turnover of close to US$60 billion, constituting substantial proportions of overall emerging-market liquidity and market capitalization, as the chart below demonstrates. Accordingly, the sheer size of the EM small-cap investment universe provides abundant opportunities to uncover mispriced companies









Source: Franklin Templeton

Interview: Star Microelectronics Plc (STAR)

Diversification helps Stars to shine brighter

Stars Microelectronics (Thailand) Plc (SMT) has been listed on the Stock Exchange of Thailand since September 2009. Chief executive Peerapol Wilaiwongstien discusses the company’s strategy and outlook.


Stars is undergoing a transition. Could you walk us through this?

The company was founded in 1995 with an initial focus on integrated circuit (IC) packaging assembly, later expanding to additional products and printed circuit board assembly (PCBA). Our growth was interrupted as a result of the 2011 floods in Thailand, and with a loss of customers as well as a high reliance on one main customer, we decided there had to be a big change in the business.

Our vision for Stars is to become a global electronic manufacturing services (EMS) player, but in order to achieve this we have to set in place a strong foundation, which means a culture that takes into account all of the stakeholders in Stars. A strong foundation for us consisted of three factors: first, we had to become more cost-disciplined; second, we had to increase our focus on customers that were mature and provided reasonable profitability; and finally, we needed to have a diverse customer base across multiple industries.

What type of customers does Stars target?

We are more focused on advanced-technology products and are not specific to any particular industry. Currently we have five industries that we focus on: communication, medical devices, energy, the Internet of Things and infrastructure.

Within each of these industries we also want to have a diverse set of customers with their own business cycles — whether they are startups or mature businesses — because being diversified at both the industry and the customer level ensures that Stars can remain stable during periods of fluctuation within each industry. We are able to service these multiple industries because the fundamental process of electronics is similar across the board, with perhaps minor modifications to match the customers’ requirements.

Continue reading Interview: Star Microelectronics Plc (STAR)

Random Thoughts: Analysts being kicked out, Howard Marks Memo, Vietnam

Silly CFOs

If you wonder why you don’t read too many negative analyst reports in the market this is typically a reason why

Chris Lee can be seen standing over a seated Timothy Lam and ordering him to leave the conference room on Wednesday. Lam initiated coverage on PAX Global’s stock in April with an underweight rating, making him the only analyst out of 17 tracked by Bloomberg to have a bearish recommendation at the time.

Asell-side analyst’s relationship with the management is so important, they can receive further insight into the business, easily arrange meetings for their clients and some of the time you’ll even see those sell-side analysts join the firm’s that they wrote reports on. It’s not the individual’s fault its just the way the business is. I’ve heard from a friend that he also received negative treatment from the CFO of an airline company here for writing a negative report on them, you can probably guess which one that is….
Source: Bloomberg
Howard Marks: Political realities.
There’s a lot in Howard Marks latest memo and I can’t do it justice with a summary, so here’s his last paragraph and a link to the whole article

I wrote this memo to explain what happened in the UK this year and what I think is happening in the U.S.  I wanted to point out that politics rarely hews to economic reality; rather, it has a reality all its own.  

The recent trends in income, wealth, trade and employment are causing a lot of dissatisfaction in the U.S. and Europe, and I expect them to have a strong impact on politics for years to come.  Widespread economic dislocation can cause voters to choose the wrong leaders.   The U.S. is not exempt, and we must be highly vigilant in this regard. 
I’m off to Vietnam for the next few days so there won’t be any posts til Thursday