A war is brewing...(poll response needed)

One of the most exciting corporate battles is heating up in the history of Singapore. The crown jewel is obviously Asia Pacific Breweries. A listed company majority held by both Fraser and Neave ("FNN") and Heineken. Unfortunately, APB was also made famous by the fraud of one of its ex-employee, Chia Teck Leng.

It first got a bit complicated when Temasek sold its stake to Kirin from Japan. Kirin has been relatively quiet and in typical Japanese culture, non confrontational. While Heineken wasn't too happy, it was happy to let status quo reign.

The event that toppled this balance was when OCBC decided that it was time to "divest" it's non core stakes under the new CEO. Obviously for it to divest at a maximum price, it has to find a buyer that appreciates the value of both FNN and APB. Here comes Thai Beverage founder and owner of the Chang Beer. Now we have a spicy Thai flavor added to the brew! Thai Beverage bought FNN at $8.88 per share and a related party bought APB at $45 per share. Do note that Thai Beverage is paying a premium in terms of valuation vis-a-vis other listed peers including its own valuation.

Heineken then made an offer to FNN for its APB stake at $50 per share. The offer was supposed to expire last Friday but has since been extended for another week. I can imagine the FNN board must be very busy this period so that they can discharge their fiduciary duties in a proper manner.

Kirin bought its 15% stake in FNN at $6.50 per share. It will record a nice gain if based on the 22% stake of $8.88 paid by Thai Beverage. However, i don't think Kirin is after monetary gains. Thai Beverage continues to buy FNN from the open market and has now acquire 23.9% stake in the company based on the latest announcement to SGX. Kirin has yet to announce its intention. Kirin has hired Deutsche bank as its advisor has a few options. It can (1) Do nothing; (2) Make a general offer for FNN; (3) Sell its stake in FNN to interested parties.

What are the 3 possible outcomes for FNN.

FNN has engaged Goldman Sachs to advise them on the bid by Heineken. Based on the current projections, at $50 per share, it is valuing APB at 33x FY12PE. The offer is not an unfair one. FNN directors will be hard-pressed to explain to minority shareholders if they are going to reject the deal. Thus GS will also have to come up with a solid explanation as well as to why $50 is not an attractive proposition. After all, if FNN divest APB, it is like selling the goose that lays the golden egg and the attractiveness of FNN may decline. On the other hand, FNN and Heineken's relationship has been rocky in recent times and this may present the most face-saving way to part.

What do you think will likely happen in the next 5 days?

1. A new bidder appears

Either Kirin or Thai Beverage joins the fray and throw in a bid for APB at more than $50 per share. 

2. F&N accepts the $50 bid and put the transaction up for shareholder's approval.

If GS propose to sell APB and the board of FNN agrees to accept, then this transaction will be put up for shareholders' vote which will include Kirin and Thai Beverage combined stake of around 38.9%.

3. Reject the $50 bid on the basis the bid does not 'fully value' APB. 

Most likely FNN will use another valuation model, maybe DCF model, to justify why the bid is unattractive to FNN and request Heineken to either keep quiet or pay more for the stake.

I put up a few recent research reports for your reference to make a more informed poll. 

Nomura 25 Jul 12
DB 23 Jul 12
BNP 19 Jul 12

Please take a poll to indicate your views:

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Streamlining of Blogs

Dear readers, I am going to streamline my blogs so that it will be easier for everyone to follow. As such, with effect from today, the previous 2y capital fund will be redesignate as a Real Estate Fund where i will share my thoughts, views and experiences on real estate investments in Singapore.

Let me summarise the various blogs and its purposes:

Singapore IPOs blog - views on new listings in Singapore.

Starfish SRS Fund - views on long term investments to create a portfolio generating passive income for retirement.

Ninja Master Fund - views on the stock markets and on specific stocks and shares listed in Singapore and elsewhere. May also include views on forex, M&A and any other trivial matters. It's a catch all blog :-P

2Y Real Estate Fund - views on the real estate market market and how to generate passive income and pursue financial freedom from it. I will share some personal experiences here. :-)

SQ travelogue - snippets of the places which i have been

If any of the blogs interest you, please subscribe to the emails or feeds directly so that you are only informed of topics that interest you. Hope that by sharing my experiences, it will help both you and me in our pursuit of financial freedom.

Yours truly.

STI Update

The STI is pretty undecided as you can see by the long tail it formed today. I would have called this a potential shooting star in candlestick term if it had occurred at the top of the trend. The parabolic is still in the bearish mode and STI seemed to be waiting for something to happen?! Anyway, watch your stops while you trade. The market can get a little whippy from here, maybe affected by sentiments in the US reporting season although i have to admit that the undertone seemed to be firm.

I have decided to continue posting my views but probably not the trades as they are not timely and the timeframe is very different... and it may cause more harm than good and may act as an unnecessary inducement to trade even though i have a disclaimer on top.... but no worries, i will continue to share whenever the time permits. Happy trading.

Ninja Master Fund updates.

I closed off my short positions in Capitaland and Simsci this morning at a slight loss. The STI index seemed to be holding well and my July simsci contract is going to expire next Monday.

The market continue to hold well despite disappointing APPL results plus the fact that one of the most exciting corporate battle is going to happen to F&N and APB. We shall see the drama unfold in the coming weeks. Interesting to watch but not sure if the risk and reward of taking a position now is worth the effort. :)

Happy trading.

My thoughts on China Fishery Group

China Fishery Group has turned into a smelly salted fish. The chart broke the critical support level of 85 and is now at a new 52 week low. I hate making sweeping statements but once again, it has proven to me that we should be very very wary of Chinese companies. Just to name a few, China GaoXian, Sino Forest, China Hongxing, Hongwei Technologies are just one too many. Not to mention my previous article on China Taishan too (the share price is now 0.044 cents versus 0.10 when i last blog it)!  

Be careful of companies that have excellent 'financial results' but are always in need of cash for business expansion. They will forever be raising cash via placement issues or worse still, via high yield bonds and most importantly, they never pay dividends. 

Let me just share a few lessons which I have learnt the hard way in the past. If you can master the 3 things below, it will bode you well in your pursuit for financial freedom.

1.  Never trade on tips or insider news. 

2. Always know when and where to cut your losses (before you even enter a position).

3. Know yourself and do your homework.

 Blogging on the 3 lessons above will probably take me another few hours, unfortunately, i have many meetings tomorrow. Just spend some time to ponder on what i said and when i am free, i will elaborate on them in more details. 

Good night.

STI, CapMallAsia and Capitaland

Lets do a quick recap on my previous postings:

CapMallAsia hit my first target of 1.55 today. There is still some way for this correction to run and will probably head towards my second target.

STI - As mentioned in my update yesterday, i am bearish on the STI and has initiated a short position via July SIMSCI this morning. STI is probably heading towards 2950 followed by 2900.

Capitaland - Initiate a short position in Capitaland at 288. First target at 275 followed by 260. Cut loss just above recent high.  

Overall, i think the market sentiments is weak and many stocks look very weak to me. So do take precaution if you intend to take long positions.

STI update

My personal view on STI - Continue to tighten your stop  on STI as it looks weak and a short term correction is imminent in the coming days.