Chinese and Japanese buying overseas stuff at high valuation

Now comes exhibit B: Anbang Insurance Group. Founded 12 years ago as a provincial car and property underwriter, Anbang has recently barged into wealth management, selling precariously high-yielding life insurance contracts and more than doubling its assets in a little over a year.

Laden with its clients’ savings, it has embarked on a wild shopping spree, spending nearly $2bn on New York’s Waldorf Astoria, promising $6.5bn for hotels owned by private equity group Blackstone and offering $14bn in a high-profile contest to acquire Starwood Hotels & Resorts Worldwide, owner of the W, Westin and Sheraton brands.

Within a few years of the Rockefeller and Bel Air purchases, the Japanese acquirers offloaded them for less than 60 cents on the dollar. In all, Japan is thought to have lost $400bn on US property during this period. Perhaps, knowing this history, the Chinese will prove more prudent. Then again, perhaps not.

Anbang is only the most extreme example of a recent shift. This year Chinese companies have bid more than $100bn for foreign assets, a sum approaching the $106bn recorded in the whole of 2015.

March 23, 2016 9:19 am

Airlines complain to Brussels over parts and maintenance contracts

Peggy Hollinger, Industry Editor

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©Bloomberg

Airlines have lodged a formal complaint with European regulators over the $60bn market for spares and repairs on the world’s fleet of 24,000 aircraft, as EU investigators intensify their preliminary inquiry into whether carriers are being forced to accept anti-competitive maintenance contracts.

Iata, the airline industry lobby group, last week sent a letter to the European Commission listing grievances such as requirements by engine and component manufacturers to use only their spare parts for repairs.

The preliminary probe, first revealed by the Financial Times last year, is focused on maintenance support for the CFM56 turbine and Rolls-Royce’s Trent XWB engines, as well for components including auxiliary power systems made by Honeywell.Meanwhile, Brussels is demanding further information from aircraft suppliers in a sign that it is deepening its informal inquiry into the workings of the maintenance and repair market. No formal investigation has yet been launched.

Safran, the French engine maker, and CFM, its joint venture with General Electric of the US, are among those to have received a follow-up letter to the original questionnaire sent to dozens of suppliers last autumn. Rolls-Royce and Honeywell said they had not as yet received a second request for information.

The rising costs of aircraft maintenance have been roundly attacked by airline chiefs at British Airways, Air France, Ryanair and Lufthansa. Carriers complain that some original equipment suppliers are withholding repair information from qualified third-party maintenance shops, which they say limits competition and pushes up prices. They want the commission to set limits on what equipment suppliers can define as intellectual property, which would open up the maintenance market to a wider range of suppliers.

However, suppliers such as engine manufacturers rely on the lucrative aftersales service market for their profits. New engines are often sold at a loss, with the returns made on long-term service contracts. Attempts to disrupt this model could force airlines into bigger upfront expenditure, say industry experts. Components suppliers are also looking to tap into the higher margin aftersales service market to make up for demands from aircraft makers that they take on a greater share of the risk in new aircraft programmes.

The trend to limit the choice of engine and other components on new aircraft programmes has given added urgency to airlines’ complaints.

©Bloomberg

“When airlines are negotiating with suppliers they do not have the leverage they would have in a normal competitive situation,” said a person with knowledge of the situation. “Are manufacturers right to say that airlines have to buy spare parts from them in perpetuity?”

The commission refused to comment beyond confirming that it is “closely monitoring competitive conditions as regards maintenance of engines and components for large commercial aircraft”. Iata confirmed it had lodged a formal complaint.

The maintenance, repair and overhaul market is set for robust growth over the next decade thanks to the unprecedented number of new generation aircraft coming into service. Aerospace consultancies such as ICF International and Technavio estimate the market will grow from $60bn this year to more than $80bn by 2025.

Maintaining and repairing an aircraft accounts for roughly 10-13 per cent of an airline’s operating costs and the complex job of servicing the roughly 30,000 components on an aircraft is often outsourced to a third party.

cyberloafing

This is no small problem. Such “cyberloafing” costs U.S. business as much as $85 billion a year, according to a University of Nevada study. In addition to hurting productivity, it uses up bandwidth and can expose a company to computer viruses. People in a study by Kansas State University admitted to cyberloafing from 60% to 80% of their time online at work.

Trade Mar 16

Sold 7k Shenhua 12.98
loss -14078 sgd

Sold htl 8k at 0.745 loss 1680 sgd

look to sell (personal cdp)
dbxt 5k

Vista Verde Tranche 2

SCB Sing to SCB Vietnam

USD 17k
Only commission of USD 30

USD to VND
22250 vs 22295
20bps commission
VND 371,834,112

WSJ snippets

NZ GDP growth used to be 4%, dropped to 2% due to fall in dairy prices

ChinaChem borrowing more to fund M&A
Partners with Silk Road fund with 40bn firepower
ChinaChem is barely profitable but asked for 43bn of debt in 2015

Server market: 50bn dominated by HP, Dell and Lenovo.

Gold to silver ratio

http://goldprice.org/gold-silver-ratio.html

Gold to silver ratio
Average 60-70
Peak 80 (now) = silver is cheap
Peak of peak 100 in 1990

Valley about 40-50 = silver super ex

HAECO 2015 full year report

New Airport in Xiamen

The municipal government of Xiamen has announced that the proposed new airport at Xiang’an will commence operations in 2020. This is subject to the National Development and Reform Commission’s approval. Management maintains regular communications with the local authorities about the new airport and its opening, which will be material to the operations of the HAECO Group in Xiamen.

In November 2015, conditional agreements were entered into for the restructuring of shareholdings in HAESL and SAESL. As part of the restructuring (and subject to satisfaction of the conditions to which the agreements are subject), HAESL will sell its 20% shareholding in SAESL. This sale is expected to result in a gain to HAESL. The amount of the gain will depend on (inter alia) when the agreements are completed. For illustrative purposes only, if (which is not certain) the agreements are completed by the end of April 2016, the gain to HAESL is expected to be approximately US$229 million. 45% of the gain to HAESL (equivalent to approximately HK$804 million if the agreements are completed by the end of April 2016) is expected to be reported as a profit by HAECO. As part of the restructuring, HAECO agreed to increase its shareholding in HAESL from 45% to 50%. On completion of the restructuring, HAESL will be owned as to 50% by HAECO and 50% by Rolls-Royce, and HAESL will no longer be interested in SAESL.

SCB transactions

 USD 17k for SG to VN - Commissions ?

New yen collateral

14m
Stocks being pledged

Adidas
Pepsi - 90k

JCNC 4300
SIA Engineering - 150k

Int 1%

Sgdjpy 82.26

HAECO

Background

HAECO is an Asian aircraft maintenance, repair and overhaul (MRO) company. Via 17 operating subsidiaries and joint ventures it offers airframe and line maintenance, engine and landing gear overhauls, cabin reconfiguration, and so on. In 2013, it sold 6.24m airframe maintenance man hours, handled line maintenance services for an average of 415 flights per day and repaired and overhauled 252 engines.


Basics

Man hours and line services

10m man hours per year likely

TEXL getting more impt

Sales breakdown

HK and TEXL big, Xiamen not so good

Expenses: labour and material mainly

Strong player

Revenue trend and expenses again

Asset breakdown

OP breakdown

Trends

OP trend not too great
US still unprofitable

Thesis

Growth in air travel - requires more maintenance
Limited players in Asia
Restructuring in US and TEXL, more growth
10% FCF yield


Positives

Almost all is non guaranteed at this stage

Turnaround in US business
Growth in manhours to continue (vol expansion)
Cost control (labour) positive
Swire Group support
Debt restructuring - EV equity improvement angle
Margin and ROE improvement

Financials

Risks

Debt
Net debt of 4 billion HKD, 2 year duration 2.6%
Berg shows 3.5bn in operating leases on top of debt

Salaries
Allowance is 50% of total staff cost at 2.5bn vs 4.8bn HKD (Directors and Exec Officer costs 50m HKD)
Firm has a defined benefit retirement scheme worth HKD 2.6bn


Concentration
67% of sales and 48% of purchases attributed to the Group five largest customers and suppliers.
GE accounts for 27% of sales and 40% of purchases.

Old

Old news - Swire to buy out Hong Kong Aircraft Engineering Co.

Hong Kong Aircraft Engineering Co. fell the most in two months in Hong Kong trading after Swire Pacific Ltd. scrapped a bid to buy the airplane-maintenance provider.

Swire, the biggest shareholder in Cathay Pacific Airways Ltd., said yesterday it wouldn’t extend or revise its offer after failing to get enough support from Haeco shareholders to complete a buyout. Investors owning about 15 percent of Haeco accepted Swire’s HK$105 a share offer, according to a Hong Kong stock exchange statement. That raised Swire’s stake to 76 percent, short of the 90 percent that allows for the compulsory acquisition of outstanding shares.

Swire offered a total of HK$9.4 billion ($1.2 billion) to buy outstanding shares of Haeco in a bet that rebounding global economy will stoke demand for air travel and plane repairs. Affiliate Cathay Pacific sold its 15 percent stake in the maintenance company at the offer price to help raise funds for planes and a new air-cargo terminal in Hong Kong.

Haeco declined 1.9 percent, the most since May 25, to HK$103.00. Swire closed unchanged at HK$94.35.

Swire’s offer was 25 percent higher than Haeco’s closing price on June 4, the last day of trading before the bid was announced. Swire owned 46 percent of Haeco when it made the offer.

Haeco operates facilities in Hong Kong, China, Singapore and Bahrain and has ventures with companies including Boeing Co., Honeywell International Inc. and Goodrich Corp.

The maintenance company will seek a three-month waiver from a stock-exchange rule that forces listed companies to have at least 25 percent of their shares freely traded.