STILL NOT TOO LATE TO REGISTER !

Why is MAS still flying? Is it in NATIONAL INTEREST to keep bailing it out? - Koon Yew Yin

Why is MAS still flying? Is it in NATIONAL INTEREST to keep bailing it out? - Koon Yew Yin

MAS has just reported a loss of Rm 349 million in the 2nd quarter 2012 which is smaller than the loss of Rm 526 million in the same corresponding period last year. This is still twice as much as the first quarter loss of Rm 171 million. The total loss for the first half of 2012 is now Rm 520 million. The company has suffered losses in every quarter of the last 6 quarters.


As usual, there are the incorrigibly optimistic cheerleaders for the airline who are unable to see the writing on the wall. These ‘experts’ are still touting that the company is in recovery mode and will soon be returning to profitability.

The market however sees the prospects for the airline differently. During the past few days the airline share has been scrapping the one ringgit level. This is the lowest share price that the airline share has recorded during the past five years. Without the support of government-linked funds and left to market forces alone, it is possible that the share price of MAS will drop even more.

Many investors still holding on to the share must surely be hoping that MAS will not try to ‘break the record’ loss of Rm 1,262 million set in 2005 or that achieved in 2011 when the loss was Rm 2,521 million.

For non-investors, the recurring losses of MAS are a great mystery especially when they are compared with the performance of SIA. I972 Malaysia-Singapore Airlines (MSA) became MAS and SIA. In the last 10 years from 2002- 2011 SIA reported a total pre-tax profit of Singapore $13,992 million, averaging S$ 1.4 billion per year Should the government continue to bail out MAS?

The most recent losses bring the total losses of MAS to at least over $3 billion. In any normal business, any company incurring large and sustained losses would have closed down or gone into bankruptcy. This has not happened to MAS yet but I think the time is right – many observers will say, long overdue - for the government to withdraw the open cheque book extended to MAS.

When planning the future of MAS, it is important that the government avoids not only the past mistakes but also takes a rational approach based on economic fundamentals. One line of simplistic thinking is that there is a bright and profitable future for MAS since the number of air travellers continues to increase by about 5-7 percent per year.

But if you look at the history of airline industry profitability, this is not the case for airlines worldwide. The fact is the airline industry requires huge capital and produces poor returns on capital employed. Hence, year after year, many airlines produce poor profit margins or outright losses.

Why you might ask is it that an industry with year-on-year rises in sales cannot generate good returns to shareholders?

It all comes down to the economic structure of the industry. One of the forces that limit profitability is the intensity of the rivalry between the leading airlines. There is over-supply leading to pressure on prices. This is exacerbated by a high degree of freedom for new competitors to enter the industries.

If, say, an airline route between two destinations is found to be reasonably profitable it is not long before new entrants move in or current airlines simply move their planes to this profitable route.

It is truly an industry governed by the principle of “survival of the fittest”.

The ego and elections factor

It would seem that every developing nation wanting to show off to the world its progress MUST have its own airline, regardless of the impact on an industry already grossly over-supplied, and regardless of whether they have the ability to manage efficiently. So there is a regular stream of announcements of new airline ventures.

Now that Malaysia has also done it and failed dismally, the next logical question to ask is why doesn’t the Malaysian government allow MAS to fold up or go under?

There are two main reasons: Firstly, the perennial optimism of managers and shareholders. “Just one more chunk of money will see us break through into profitability as we rout the opposition!” seems to be the credo of these parties based on their self and not national interest.

Secondly, there is government interference. This factor however is less found now as many governments have learnt not to come to the rescue of their airlines.

Malaysia has not learnt these lessons – initially for reasons of national pride tied to the ego of leaders but now increasingly apparently to save jobs and to prevent the retrenched employees from voting for the opposition. This may make sense politically but it is poor economics.

Let MAS fly or crash without further interference or delay is the only way forward in the national interest.

SELAMAT HARI RAYA AIDILFITRI

nexttrade

another good one with fundamental and technical analysis

http://nexttrade.blogspot.com/

Alex Lu I am a remisier in the Malaysian stock exchange, currently attached with Kenanga Investment Bank Bhd. I have started this blog to record my observations of the Malaysian stock market as well as other investment markets. My email is alexlu_kl@yahoo.com.

KC LAU

A GOOD SITE TO SHARE   http://kclau.com/  

the author of TOP MONEY TIPS FOR MALAYSIANS

3 Secrets Of Successful Companies

3 Secrets Of Successful Companies

Some companies are just better than others. It could be name recognition, innovation, market share or any number of other attributes that makes a good company stand out from the herd. The important thing for an investor is being able to spot the eventual winners before they become household names.
In this article we'll take a look at three key attributes that make a company successful. Learn to spot them early, and you could find ride the coattails to success too.

Three Secrets of Success

So, what is it about one company that makes it a good company, and does that description equate to a good stock to invest in? The answer depends on whether you ask an accountant, an economist, a marketer or a human resources expert, but by pulling all of those disciplines together, you generally can define a good company by these three characteristics:

1.Competitive advantage


2.Above-average management


3.Market leadership


Competitive Advantage


Michael Porter pioneered the concept of competitive advantage and broke it down into two forms: differentiation advantage and cost advantage. Differentiation advantage is when a company provides a superior service or product for the same price charged by the market. Cost advantage is when a company provides the same service or product as the market, but at a lower price. Porter collectively refers to these as "positional advantages" because they define the firm's position as having the leading service or product in its specific industry. He also states that these advantages cannot be sustained for any length of time because the promise of economic rents invites competition.

•Barriers to entry

Good companies can also maintain their high status if there are significantly high barriers to entry into their fields. This can include large fixed costs, such as those associated with heavy manufacturing, or long-term research and development costs, like those found in the pharmaceutical or computer software development industries. All of these entry costs can deter competition from entering the market, thus helping the company sustain its leading status. (To learn more about these barriers, check out Economic Moats Keep Competitors At Bay.)
•Name Recognition


We tend to take the value of name recognition for granted when looking at a company's status. Brand names like Kleenex and Coke have become synonymous with their products. The problem with name recognition is placing a value on that name, and there is no easy way to do that. A name only has qualitative value, but it can provide a long-term relationship between a company’s products or services and its customers. While it can be debated whether this trait alone makes a company good, when combined with the other characteristics it can be a powerful source of success.

•Price Leadership

There is nothing more powerful than providing comparable services or products to the market for a lower price. In any economic environment, boom or bust, there will always be a demand for low-priced services and products. Being able to come to the marketplace with consistently lower prices across the board can fill a niche in the market that can attract customers for a long period of time. The key in price leadership is being able to sustain that level and fend off others who try to compete in that space. (For greater detail, check out Competitive Advantage Counts.)

Above-Average Management

The quality of its management is a big factor in whether a company is successful, and an important attribute in any management team is a blend of experience. Experienced managers can not only lead a company through market cycles, but they can also provide mentorship for the next generation of managers.

Another telling attribute is when management tends to stay at a company for a long period of time. Talented managers can be swayed to move from company to company with handsome compensation packages, but tend to stay at companies where they like to work and they believe in their company's future successes. (Learn how to investigate the management behind the numbers in Evaluating A Company's Management and Is Your CEO Street Savvy?)
Market Leadership


One of the most important characteristics in becoming a good company is market leadership. Leadership can come in many forms, but the reputation that comes along with this tag is priceless. The label of "industry standard" is one that every company strives for. Examples include leading the market in quality, innovation, customer service or even warranties.
Market leadership is probably the hardest status to maintain. No competitor is content being No.2 in the industry. This is where barriers to entry come into play. If the company you are watching competes in an industry with high barriers to entry, it's much more likely that its market dominance can continue. Companies can also move toward market leadership by buying and merging with other successful companies to improve their market share, vertical and horizontal integration, and technological bases. (For more on this topic, read Which Is Better: Dominance Or Innovation?)

Conclusion


So what is it about one company that makes it a good company, and does that good rating equate to a good stock to invest in? If the company has a competitive advantage, above-average management and market leadership, you are looking at a potentially strong investment. While these traits alone don't necessarily tell the whole story, they are important factors in evaluating whether a company might be recognized by investors globally as a good investment.


http://www.investopedia.com/articles/stocks/08/secrets-success-company-stock.asp#axzz20N7iSj2K

The 5 Most Dangerous Places to Get Investing Advice

The 5 Most Dangerous Places to Get Investing Advice

By Hans Wagner
November 16, 2010 1

Where do you get your stock investing ideas? Inspiration can come from many places, and while some resources make a lot of sense, others are a sure path to financial ruin. Here is my list of the five most dangerous places to get your investing advice.

1) Internet Message Boards


If you're currently turning to an online message board for investing advice, stop right now. The people posting on these web forums are notorious for making over-the-top predictions with little, if any, rationale supporting their claims.

The majority of posts can be broken down into a few categories: baseless claims, bragging, spam, and name-calling.
But the biggest problem with online investing message boards is the rampant manipulation. Some users post comments to purposefully manipulate the trading activity in their favor. For many companies, especially those lightly traded, it might be possible for the right comments to move the stock price in one direction or the other.

There are even cases where executives of companies use the message boards to influence the price of a stock by making inappropriate comments. Papers filed by the FTC revealed that for several years Whole Foods Market (NASDAQ: WFMI) CEO John Mackey posted highly opinionated comments under the pseudonym "Rahodeb" on a Yahoo! Finance message board.

Investors who make buy and sell decisions based on the message boards are playing a dangerous game.

2) Penny Stock Spammers


Right up there with the internet message boards are those annoying emails claiming that some new discovery (still widely unknown to the media) is about to send this $1.00 stock soaring into the stratosphere, quickly making millionaires out of anyone who buys shares.

That'd be fine, except for there's never very much information to substantiate the claim. But these emails are still going around, so someone must be taking the bait.

3) Hot Stock Tips

These aren't quite as bad as the penny stock spam emails, but that's not really saying a lot. These messages, usually filled with exciting language and testimonials from other investors, claim to have some inside information that, once disclosed, will make the stock double in price. According to the "researchers," only a crazy person would turn down such a sure-fire offer.

But the reality is if they did have inside information then someone has broken the law by disclosing it. Yet just like the penny stock spam, these hot tips don't ever seem to stop finding their ways into people's inboxes and mailboxes. While hot stock tips might be interesting, do yourself a favor and carry out the necessary research before making a commitment.

4) The Inexperienced Advisor Making a Commission on Their Sales


Would you take the advice of someone who was just beginning to understand stocks and the stock market? Can a newly minted broker address all of your questions in a thorough and complete manner? I know each broker must start somewhere, just be careful of the newbie who is selling what the firm is pushing.

Any time you rely on a broker's advice (regardless of their experience), remember to ask yourself if their suggestions are really right for your portfolio. This is especially true if the broker receives a commission each time he or she makes a sale. In Little White Lies from Your Broker, Dave Sterman urges investors to be wary whenever a broker is pushing a stock. "...Sometimes, a firm decides that its traders hold too much of a certain stock. And guess who has been told to help get rid of those shares? The broker." [Even the most well-intentioned brokers don't always deliver the straight scoop. Read Little White Lies from Your Broker to find out if your broker is watching your back.]
If you want to use a broker or advisor, be sure their interests align with yours. Many quality advisors do a commendable job. Most of them structure their compensation around your success, whether it is a straight fee or based on performance.

5) Financial News Networks

Don't get me wrong, I like CNBC and Bloomberg. They provide a quality product that includes views from each side of an investing issue. Many of their guests are very successful investors who deserve attention.

The problem arises whenever they recommend a stock -- many investors enter orders immediately. In some cases, you can see the price jump up on the ticker at the bottom of the TV. With millions of viewers, any comment on a stock can move the market.
Just because a noted investment advisor thinks a particular company has potential to appreciate, does not mean it is right for you. The traders buying the stock do not understand the fundamentals nor do they have a good entry or exit strategy.
Jim Cramer's Mad Money show is a good example. Jim features several stocks during his show. In each case, he exhorts his listeners to do their homework and not to buy immediately. Yet you can see the price leap up as many followers try to get in on each stock he commends.

The Bottom Line

Consider where your investing advice comes from. Is it from a reliable source? One with a proven track record of accomplishment? Does it fit with your personal view of the market? If you can answer "yes" to each question, AND you've already done your own homework, pat yourself on the back -- you've managed to navigate through the muddy waters of dangerous investing advice.