Hard Choices (not the book) – SMRT, Starhub, delistings and the SGX

Hard Choices : Challenging the Singaporean Consensus is the latest book hot off the press from our elite think tank incubators. This is not the be confused with Hillary Clinton’s memoir of the same title, released last week.

I have not read it but I suspect it is one of those US vs THEM books – US = those who have read the book and THEM = the majority who hasn’t. And since I cannot really place myself in the picture, I have resolved not to buy the book unless it is less than 15 bucks (for paperback) which is exactly the same reason I have not bought any of LKY’s books, particularly the last one, Hard Truths, as I feel it should errr, be free for all citizens (perhaps including PRs) although I am behind every single piece of his writings in spirit.

Good review of Hard Choices (Singapore Style) http://www.theonlinecitizen.com/2014/04/from-hard-truths-to-hard-choices/

Rumour mills are churning overtime on the potential privatisation/nationalisation of MRT and it’s up over 20% in 2 days with the volume to match stirring SGX’s queries. http://www.straitstimes.com/news/business/companies/story/singapores-smrt-shares-surge-sgx-queries-activity-20140424

Apparently a special dividend will be paid out to all shareholders , the majority being  Temasek (54.24%), Capital Group (1.72%), Norges Bank (0.50%) etc.

Other rumours include a proposal where the Government buys back the lease of the rails from MRT and takes care of future maintenance which is a nice Christmas present for April/May.

SMRT was listed on 26 July 2000 at $ 0.61.

Total dividends paid since listing $ 0.7148 excluding the upcoming dividend on 30 April 14 which is 0.005 cts.

As a shareholder, that is 117% returns over 14 years which is a rough 8.37% return per annum.

I daresay it would have been one of Temasek’s more successful investments and will boost their returns.

I have been quite fascinated by my Starhub discovery on Tuesday, finding out that their Price to Book ratio is 86 times. Starhub defendents have said that their book value is understated and such but how understated can it get ?

Starhub is 29 times leveraged ! which is a lot of debt for its equity which is just $ 271 mio vs market cap of $ 7.14 bio, as I mentioned in my post a couple of days ago. [Incidentally, I hope someone followed up on my lead on Asia Fashion, one of the net cash companies I picked, which has rallied 166% in the past 2 days !] https://tradehaven.net/market/singapore-stock-market-trivia/

They have been paying out more than the usual fair share of dividends and special cash dividends, to run on negative retained earnings.

Listed on 13 Oct 2004 at $ 0.95
Dividends paid since 2005 – $ 1.5905 *not taking into account the 2 stock splits which would roughly add about 20% to the number.
Return of capital since 2005 – $ 0.647

Another wonderful investment for their shareholders.

For about half the companies in the FSSTI are GLC’s, government linked – MRT excluded.

SGX is not doing too well except on their commodity front.

“Last year Singapore’s stock exchange was overtaken in terms of trading volume by its Thai counterpart, knocking Singapore into second place in Southeast Asia for the first time.
More recently, it was also overtaken by Japannext, a relatively small trading platform that competes with the Tokyo bourse. This makes SGX, the Singapore exchange, Asia’s 9th largest share market – a frustrating state of affairs for an exchange that prides itself on being “the Asian gateway” for investors in the region.”
http://www.ft.com/intl/cms/s/0/aa39866c-caa6-11e3-9c6a-00144feabdc0.html?siteedition=intl#axzz2zrIYJTaw

9th place is not fun for ranking hungry Singapore.

Losing MRT would be even less fun after all the delistings we are potentially seeing led by Capitamalls Asia, Olam and HPL. We have already lost Guthrie and WBL in the past half year and running dry on decent IPOs which does not give the average investor a great deal of options. http://business.asiaone.com/news/potential-delistings-cast-pall-investors-choice

This comes at a time when global M&A has topped US$ 1.2 trillion for the first time in history. http://www.reuters.com/article/2014/04/25/investment-banking-activity-survey-idUSL6N0NH3KN20140425

We are seeing massive inflation in equity prices and wealth created at an incredible pace.

At the same time, we are ignoring a very important fact. That only about half of companies are beating their sales expectations even if 78%, so far, have beat earnings expectations.

Temasek has done well in her investments in Starhub and MRT. They do not have SGX in their stable.

My warped and slightly demented head which entertained the idea a few weeks back that Temasek has timed the market top (https://tradehaven.net/market/sick-thoughts-temasek-times-the-market-top/), can only think that this must a very hard choice for the SGX and Singapore. That a consolidated stock market has much less to lose in a crash than a bloated one.

3 cheers for private-nationalisation !