Okay this one will just be a simple post about a conversion I had with few friends of mine about some hypothetical series of events where they maybe better or worse for the investors.
As I have written in my last post, Khazanah has initiated a proposal of buying out the remaining 30% of MAS stock to make the revamping process easier. So they offered 27ct for every single unit of MAS share currently being publicly traded. Now the share price hovers around 25.5ct to 26ct, where some people are still buying at 26ct, making a very slight margin of 1ct(3.8% not too bad actually) once Khazanah bought over the share.
But that's the thing. The thing have not been finalised yet. A a matter of fact,no official letter or anything has been sent out to the shareholders. So, until an offer letter has been sent out, there are still possibilities that this could go bad or go for the better. Bear in mind that this process may take months.
How it may go bad? Obviously, govt make a revision of the offer price, Citizens not happy with govt keep bailing MA out to help certain individuals, Tun Mahathir keeps bashing the current govt for bailing out MAS and many other reasons. All these could result into reduced offer priced or the bail out not to happen at all. In the case offer price being revised to less than 27ct, the guys that bought at 26ct are pretty much screwed, and if there is no bail out, all of the shareholders are screwed. However the likelihood for this to happen is very low since Khazanah(govt) did announce their decision and that would be a very blatant way of manipulating your people. They always screw their people from every angle they could, but this would be too subtle.
How it may go better? most of the shareholders, or there are a few big-time investors in that 30% rejected Khazanah's 27ct proposal. In this case Khazanah would have to revise and increase their offer.The likelyhood of this to happen is pretty darn low too because you know why right? MAS is pretty deep in the shit and 27ct is already a pretty good deal for most investors.
Even though it is almost sure that Khazanah would proceed with the 27ct buy out, anything may happen and may screw it all up.Also, since the takeover process gonna take months with no estimated date at this moment, would you rather wait or sell them at slightly lower price (25.5-26ct) and vet the money to something else,with chances to get more return within the same period. The answer would depend your personality and what kind of investor you are
Thursday 21 August 2014
Saturday 9 August 2014
The Malaysia Airlines Saga : In the midst of chaos, there is also opportunity - Sun Tzu
I think every single one of us is already very familiar with the problems faced by this company. The company has been in the red for so many years, and recently hit by 2 high profile aircraft disasters which will most definitely get Malaysia name into a few National Geographic episodes or series. Additionally for Malaysians we already know how terrible the state of this company with every single politician seems to have a piece of their pie in the company and has been sucking Khazanah fund since forever. So this company is definitely what should be classified as very high risk.
6months ago, MAS stocks was traded at 315ct and MH370 dissappearance really hit the market hard where the stock went to its all-time low to 155ct. I don't know why I didn't buy it at that time, but probably because it was too shitty, and with all the news and all I just got distracted. It was only when it reach 20ct I realised that "This is pretty damn low for a national carrier isn't it??" So I went in when it was 20ct.
Few reasons why I decided to go into MAS and why I think it has a potential to give big return:
1. All my other portfolios are what I consider medium risk. I wanted to diversify where I want a small portion of my portfolio vested in a "chance to strike gold" kind of stuff.
2. This company has history being saved by the govt, not once but twice. No reason why there can't be the third time.
3. People will argue bailing out MAS for the third time will be too much. But let's look back at why the first and second govt bail-out happened? As I mentioned above, so many politicians have their personal interest in churning fund out of this company. They will want that to continue
4. I was expecting 3 scenarios that will be in my favor. First is that Khazanah will inject extra fund, the second is like what is happening where Khazanah buy out the remaining 30% of the publicly traded share and make it 100% khazanah, privatizing it (It is actually nationalised since Khazanah is govt owned firm). The third scenario will be a third party investor came in and became a major shareholder. The third one is highly unlikely because MAS is a national flag carrier, so the govt wouldn't want a third party investor as the major shareholder. Likewise, a third party investor does not wanna be a major shareholder for a national carrier because they will be tied with a lot of political and nationalism bullshit. That is not good for business.
So I bought some at 20ct, and the price went up and down a few time, just like a normal stock. I was just waiting for "good news" from the govt to come in and saves the day. Although they were few bad days where the performance was too bad that I had to tell myself to stop looking to my Bloomberg apps price update every couple minutes. Freaking technology that gives you price update every second. Then MH17 happened.....
It was not an easy experience holding the stock when such crisis happened. The night when MH17 news came out all over my FB wall, while other people were saddened, worried and sad about the victims, I was up all night running analysis and thinking about what may happen with MAS stocks and its future post MH17 crisis, and decided to keep holding them. Like I wrote above, even though I went in with the mentality to write-off the money, embracing the fact that I could never get my money back, money is still money and nobody likes losing money. The only time you are at peace with writing off money is when you make a donation. Even then, you would still expect some reward in the afterlife. Some friends know that I bought MAS share, and they texted me and told me to drop and let go while I can, simply short of telling me that I am an idiot to keep holding it. That surely didn't help.
But I kept holding my share for a few reasons ;
1. MH17 was different from MH370. It wasn't a disappearance but the plane was shot down. You may argue as want but the bottomline is that in that case, MAS was a victim and Malaysians moved from anger to sympathy towards MAS. This would make it easier for the govt to justify bailing MAS out.
2. MAS is a national carrier, to a certain extend carry national pride. No Prime Minister want to leave MAS gone bankrupt when one of its carrier got shot down unjustly. Leaving it bankrupt would also mean that Malaysians are accepting the fact that MAS is incompetent and deserved to be left unsaved. I wouldn't say it was the right way to use people's money but politically the right thing to do.
3. But most of all even most Malaysians don't want the airlines to go down where a rebel group(or Ukrainian whatever) was the one to put the last nail to the coffin. It is just not right.
4. I went in buying a high-risk investment, this is the exact thing that I should expect. I have to stick to my gameplan. If I got spooked with such news, I am being emotional and pretty much beat the purpose of the whole thing.
So I held my share and I gotta say I am lucky that things worked out perfectly as I wanted it to be. A reminder to myself and my friends that it could have easily gone the other way around. This was basically my first high risk investment, I have learned a lot from it and in many way marks a big milestones in my investing journey.
Few advises for myself and friends for investing in high-risk stock;
1. Keep your emotion in check.
2. Stop looking at the price update every few seconds. The fluctuation may also goes proportionate to your blood pressure. Not good for your health. Doesn't help with my receding hairline problem either.
3. Only tell about your investment to a very close circle friends or friends that actually know and analyze the market properly. I am not saying you shouldn't listen to other people's opinion. I do have few friends who actually analyze data and information differently from I do. They could easily reasoned out how everything I mentioned above could go the way around, basically telling you the negative implications of the events. You NEED to listen to those people to keep your check and balance. What you don't want is a cocky guy telling how idiot you are by presenting a fact word by word from whatever he reads in the internet or hears from his cousins. Those people will just disrupt your emotions. Not good.
4. As a Malaysian, take advantage of the fact that you know the political background, and how it will affect the market. Many of my foreigner friends think it is a bad idea to invest in MAS because they were only looking at the cashflow, business performance and company's fundamental. They don't know and can't possibly understand the political connection and the history between MAS, the govt and the people. Capitalize that.
Well I guess that was all I got to write. Though I do feel that I have some more to say, but the idea just doesn't come up when I am writing them down. It's always easier to speak them up rather than writing them down. Probably it is tied to my mediocre writing skill. But I guess if you want more details about it you gotta buy me a coffee or lunch so that we can have a longer conversation about it. I always find it easier to discuss about stuff when I am full, and with a nice cigar in my hand. Cheers.
6months ago, MAS stocks was traded at 315ct and MH370 dissappearance really hit the market hard where the stock went to its all-time low to 155ct. I don't know why I didn't buy it at that time, but probably because it was too shitty, and with all the news and all I just got distracted. It was only when it reach 20ct I realised that "This is pretty damn low for a national carrier isn't it??" So I went in when it was 20ct.
Few reasons why I decided to go into MAS and why I think it has a potential to give big return:
1. All my other portfolios are what I consider medium risk. I wanted to diversify where I want a small portion of my portfolio vested in a "chance to strike gold" kind of stuff.
2. This company has history being saved by the govt, not once but twice. No reason why there can't be the third time.
3. People will argue bailing out MAS for the third time will be too much. But let's look back at why the first and second govt bail-out happened? As I mentioned above, so many politicians have their personal interest in churning fund out of this company. They will want that to continue
4. I was expecting 3 scenarios that will be in my favor. First is that Khazanah will inject extra fund, the second is like what is happening where Khazanah buy out the remaining 30% of the publicly traded share and make it 100% khazanah, privatizing it (It is actually nationalised since Khazanah is govt owned firm). The third scenario will be a third party investor came in and became a major shareholder. The third one is highly unlikely because MAS is a national flag carrier, so the govt wouldn't want a third party investor as the major shareholder. Likewise, a third party investor does not wanna be a major shareholder for a national carrier because they will be tied with a lot of political and nationalism bullshit. That is not good for business.
So I bought some at 20ct, and the price went up and down a few time, just like a normal stock. I was just waiting for "good news" from the govt to come in and saves the day. Although they were few bad days where the performance was too bad that I had to tell myself to stop looking to my Bloomberg apps price update every couple minutes. Freaking technology that gives you price update every second. Then MH17 happened.....
It was not an easy experience holding the stock when such crisis happened. The night when MH17 news came out all over my FB wall, while other people were saddened, worried and sad about the victims, I was up all night running analysis and thinking about what may happen with MAS stocks and its future post MH17 crisis, and decided to keep holding them. Like I wrote above, even though I went in with the mentality to write-off the money, embracing the fact that I could never get my money back, money is still money and nobody likes losing money. The only time you are at peace with writing off money is when you make a donation. Even then, you would still expect some reward in the afterlife. Some friends know that I bought MAS share, and they texted me and told me to drop and let go while I can, simply short of telling me that I am an idiot to keep holding it. That surely didn't help.
But I kept holding my share for a few reasons ;
1. MH17 was different from MH370. It wasn't a disappearance but the plane was shot down. You may argue as want but the bottomline is that in that case, MAS was a victim and Malaysians moved from anger to sympathy towards MAS. This would make it easier for the govt to justify bailing MAS out.
2. MAS is a national carrier, to a certain extend carry national pride. No Prime Minister want to leave MAS gone bankrupt when one of its carrier got shot down unjustly. Leaving it bankrupt would also mean that Malaysians are accepting the fact that MAS is incompetent and deserved to be left unsaved. I wouldn't say it was the right way to use people's money but politically the right thing to do.
3. But most of all even most Malaysians don't want the airlines to go down where a rebel group(or Ukrainian whatever) was the one to put the last nail to the coffin. It is just not right.
4. I went in buying a high-risk investment, this is the exact thing that I should expect. I have to stick to my gameplan. If I got spooked with such news, I am being emotional and pretty much beat the purpose of the whole thing.
So I held my share and I gotta say I am lucky that things worked out perfectly as I wanted it to be. A reminder to myself and my friends that it could have easily gone the other way around. This was basically my first high risk investment, I have learned a lot from it and in many way marks a big milestones in my investing journey.
Few advises for myself and friends for investing in high-risk stock;
1. Keep your emotion in check.
2. Stop looking at the price update every few seconds. The fluctuation may also goes proportionate to your blood pressure. Not good for your health. Doesn't help with my receding hairline problem either.
3. Only tell about your investment to a very close circle friends or friends that actually know and analyze the market properly. I am not saying you shouldn't listen to other people's opinion. I do have few friends who actually analyze data and information differently from I do. They could easily reasoned out how everything I mentioned above could go the way around, basically telling you the negative implications of the events. You NEED to listen to those people to keep your check and balance. What you don't want is a cocky guy telling how idiot you are by presenting a fact word by word from whatever he reads in the internet or hears from his cousins. Those people will just disrupt your emotions. Not good.
4. As a Malaysian, take advantage of the fact that you know the political background, and how it will affect the market. Many of my foreigner friends think it is a bad idea to invest in MAS because they were only looking at the cashflow, business performance and company's fundamental. They don't know and can't possibly understand the political connection and the history between MAS, the govt and the people. Capitalize that.
Well I guess that was all I got to write. Though I do feel that I have some more to say, but the idea just doesn't come up when I am writing them down. It's always easier to speak them up rather than writing them down. Probably it is tied to my mediocre writing skill. But I guess if you want more details about it you gotta buy me a coffee or lunch so that we can have a longer conversation about it. I always find it easier to discuss about stuff when I am full, and with a nice cigar in my hand. Cheers.
Subscribe to:
Posts (Atom)