Random thoughts: BBL, DTC, Howard Marks, Thai Poverty, Musings
BBL shareholders approve the acquisition of PT Bank Permata TBK
It’s going ahead – Shareholders have approved approved its plan to acquire all the shares in PT Bank Permata Tbk (BNLI). The deal is now expected to close in 2020 after BBL completes the transaction with Standard Chartered and PT Astra to acquire their combined 89.12% stake in Permata. BBL will then do a mandatory tender offer for the remaining 10.88% of the shares at the same purchase price. There has been a Reuters report that BBL is interested in acquiring other Indonesian banks according to the OJK, Indonesia’s financial services authority. But it doesn’t appear to the case, for now.
Link: https://www.set.or.th/dat/news/202003/20027699.pdf
Dusit Thani dumped their Philippines education business It was a source of pride for the company that they have an education business, curious to see how they are going to “restructure” this business segment. Always liked the upside potential in DTC but they appear to still be figuring out how to unlock it….
Link: https://www.set.or.th/dat/news/202003/20027491.pdf
Thailand’s poverty increases since 2015
Any surprise that this country has the largest wealth inequality in the world coupled with an increasing poverty rate? What does this say for consumption/npl figures/loan growth etc etc So CPALL, CPN, THBEV are going to be reliant on the government funding consumers to buy their products. The Thai government must be happy that COVID-19 is in the news as opposed to focusing on this…
The Thai poverty rate rose to 9.8% from 7.2% between 2015 and 2018, and the absolute number living in poverty advanced to more than 6.7 million from 4.85 million, the multilateral lender said in a statement.
Howard Marks – Nobody Knows II
As usual, a common sense piece from Howard Marks
“But no one can tell you this is the time to buy. Nobody knows”
Link: https://www.oaktreecapital.com/docs/default-source/memos/nobody-knows-ii.pdf
COVID-19 and markets – Musings/ramblings
Well markets are continuing to be volatile, interesting that the fixed-income in the US is effectively pricing in a recession with the 10 year yields below 1% (note Thailand’s 10 year is ~1.2%, as of 04/03/2020 when I started drafting this). Wouldn’t be surprised to see more weakness as commodities take a further hit. (although the Saudis and the Russians doing a good job with this at the moment)
But the human reaction is more interesting, basically the lack of trust amongst some people, and thereby the lack of confidence, racist/prejudice comments re-appear and a lack of social cohesion appears. Amusing side – best meme seen regarding this says “Before when I sneezed people said Bless you, now they say !@#$ off”
China has done the most amazing social experiment by locking down its population…can you imagine this occurring in the Western Countries? (Yes, Italy is doing it now) Perhaps in Japan/Korea to an extent given the culture, but for China to lock down its entire population, it’s just both impressive and scary.
The story appears to be that by the time the spring/summer comes around perhaps the virus will be gone. What if it returns again in the winter time? And Australia will be going into their winter season in a few months…
I’m not holding out for a cure/vaccine for this virus anytime soon, scientists seem to state that it takes 1-1.5 years.
Now here’s a difficult question…what would people sacrifice, an entire economy => everyone is impacted, or force everyone back to work and allow a %age to die?
Or one can take the positive viewpoint and say that likely the best people in the field/world are focused on preventing this from becoming the Spanish Flu and that at the end day humans persevere.
All Central banks are easing i.e. cutting rates massively => What’s the discount rate now?
Governments are announcing MASSIVE fiscal spending packages (with the exception of Thailand which is more and more obviously run by a bunch of incompetent inbred donkeys). Will the policy response be large enough? What will the impact be on commodities?
The main question is whether the economic impact from this flows into the credit system. If it does then we’re screwed, if it doesn’t then when we look back at this period in the markets it may be one of the best buying opportunities since the beginning of the previous decade.
SE Asia governments are arguably in the best shape to weather this given that their balance sheets are relatively cleaner/less leveraged compared to the North Asia, Europe, the US.
China, from a low base and in a gradual way, hit a bottom in mid-Feb and showing improving activity (Link: https://www.capitaleconomics.com/the-economic-effects-of-the-coronavirus/?utm_source=branding&utm_medium=email&utm_campaign=corona)
Will the recovery with China coming back online (which it is, but yes comparatively -50% to 12 months ago), is it a V? a U? or a W? i.e. the first restart faces a hiccup. Same question applies to the rest of the world.
A several weeks freeze of the largest growing economy in the world will have an impact without a doubt.
Thailand has cancelled Songkran festivals for the tourists throughout all the major provinces. But the locals are still going to have fun I’m sure.
How much of the stock move is a decline in profits and/or a risk premium?
There’s no point in looking at P/E during this period, the E for the 1H20 is going to be awful, just focus on P/BV and of course the business itself.
Peter Barlow
I have been out of the market for 2 months now, waiting to buy in but the same inbreeding as you see is keeping the cash in the bank. I hate doing this but even KGI tanked.
Pon
My viewpoint remains unchanged, good buying opp over the next 2-3 months. no idea when the bottom is, but opps exist today in several businesses that have great CF’s