Next week on 26th April, PUC will be holding its EGM to approve the acquisition of a 33% stake in Pictureworks, which comes with guaranteed profits for two years. PUC sprang a surprise just prior to the important EGM by disclosing the deal with 11th Street. In one fell swoop, we basically have the largest listed internet commerce entity in Malaysia. 

Can anybody say that internet commerce will not grow even more significantly in Malaysia over the next 2, 5, 10 years? Well, how can anyone “participate” in that growth in a listed vehicle? Now you have it.

Ask yourself, can you buy a stake in Lazada or Shopee or even Zalora??? Yes, maybe when they actually list. Plus when they do, you can be sure the valuations will be astronomical (in the billions of USD).

Lazada, is backed by Ant Financial and Alibaba. Enough said.

Shopee is backed by Garena Group. Garena is backed by Tencent.

Celcom Planet Sdn Bhd is a joint venture between ADS and SKP, which owns and operates an e-commerce platform known as 11Street Malaysia, and is one of the largest e-commerce companies established in Malaysia. 11Street Malaysia was originally a leading e-commerce company in South Korea, operating under the management of SK Planet Co., Ltd. which expanded its operations to Malaysia to grow and expand the e-commerce industry in the country. From 2015 to 2017, 11Street Malaysia reported an achievement of more than 300% growth in gross merchandising value (“GMV”), 160% growth to over 13 million product listings, and 200% increase to 40,000 sellers registered on its platform. As of 31 December 2017, 11Street Malaysia recorded a GMV of approximately RM427million for financial ended 31 December 2017, and total monthly unique visitors (“UV”) of 13.5million for the month of December 2017. 

The Investment Amount translates to an implied valuation of 100% equity interest in CPSB ranging from MYR333.33 million to MYR375.00 million (the “Implied Valuation”).

How expensive was the deal? If you were to take the historical Gross Merchandising Value of RM450m, it means PUC is coming in at a staggeringly cheap P/GMV of 0.6x. How cheap is that? Well, similar deals in the same tech sector have been in the 1.5-2.0x.

Why would Axiata/Celcom do such a deal? One, that the management of PUC has the ability and vision to take 11th Street to the next level. If you look at the new ownership structure, the original shareholders will still hold much hight stakes than PUC in 11th Street, so nobody’s cashing out.

I believe some of the RM90m will be used to pay down debt at 11th Street. The burn rate at 11th Street has passed the initial setup stage. They are recording good growth and good revenues, hence any synergies and cost savings will go swiftly to the bottom line. 

PUC shall be appointed as a preferred partner of 11Street Malaysia provided that it shall offer competitive terms to 11Street Malaysia for the following (“Synergistic Collaboration”):- a. 11Street Malaysia’s marketing needs, especially in digital marketing; b. 11Street Malaysia’s payment gateway requirements for all its eCommerce services with PUC’s flagship digital services platform (“Presto”) being nominated and implemented as the Company’s preferred payment platform on all of its eCommerce services; and c. 11Street Malaysia’s technology needs for its eCommerce infrastructure and platform.

This is key to the transaction, elevation of PUC as the management and preferred partner. Obvious immediate synergies in e-marketing and e-advertising, the usual rice bowls for PUC. The management of PUC will be directing and putting in place the future direction of 11th Street, which is critical in being part of a listed entity. 

CONCLUSION

a) Valuation wise – PUC looks particularly compelling – just taking into account the impending absorption of the proposed stake in Pictureworks, which is very undemanding. Added to the guaranteed profit for two years, Pictureworks has a very good chance to be listed in HKSE Gem, which will translate to a substantive “potential value unlocking” if/when Pictureworks lists. Just follow the steady roster of clientele of Pictureworks: Malaysia, HK, China, Singapore… but largely in China, which bodes well for a China/HK listing (comfort level based on source/location of revenues).

b) Valuation wise – As indicated above, the P/GMV for the 11th Street deal makes a lot of sense for PUC. Should they be able to bring up the revenues of 11th Street from 2017’s RM427m to a billion ringgit within 2-4 years, that would certainly make it highly attractive to list or be sold to even bigger whales at a valuation closer to 2.0x P/GMV. As always, 11th Street is a highly sought after asset platform, hence the permutations for a sale or joint venture or seperate listing are always on the table. Another potential kicker in PUC’s inherent value, which they bought at a very reasonable valuation.

c) A COUP – If you were to believe the media, JD.com and Alibaba were also trying hard to buy 11th Street. Of course both have bigger firepower and money, but then it would immediately lose its Malaysian roots. I think thats part of the broader strategy by Axiata/Celcom, to bring in a local champion and bring about much higher valuation, maybe a Malaysian “unicorn” in the making.
https://www.lowyat.net/2017/143327/report-alibaba-jd-com-competing-acquire-11street-malaysia/

d) Institutional Funds – Fund managers now can no longer ignore PUC. It is a “must have” being the biggest listed internet commerce entity. That should see an upsurge in institutional holders. 

e) Data Science & A.I. – The bigger picture going forward. I think PUC is one of the very very few tech based companies that understand the whole ecosystem of the new world and the new future. PUC Ventures would be the vehicle to jumpstart alliances and investments. Just gauging its corporate moves for the past years and a half would paint a company and leadership that understands the really “big picture”.

My view: I like it that China has retaliated tit for tat, because there is no way a trade war will be good for either country. The fact that China did that will actually hasten the “end” to the trade wars quickly. Trump will now have to sit down and negotiate a kinda truce. 

The emerging markets selldown has been way overdone, a kneejerk reaction which has lowered average PE valuations of emerging markets to a 2 year low. I agree with strategists who called this a great opportunity for “all-in” into emerging markets, buying on this dip.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Some of the talking heads on the same issue (as reported by Bloomberg):

• “The market reaction is confused, reflecting the fact that it has no historical narrative on which to fall back. Today’s Chinese actions were not surprising, but the market response shows how confidence has been diminishing”
• “You cannot separate tweets against tech firms from tariff actions against China. This is a material change relative to the first quarter, when the market was bulletproof to bad news”
• Frieda said most probable scenario is a negotiated settlement before the first round of tariffs kick in on both sides. Yet second-most probable is that round one happens with the goods that have now been put on the table
• China has a strong desire to deescalate the situation
• Argentina and Brazil could be “unintended beneficiaries” from soybean tariffs

• Increased tensions may actually benefit emerging-market assets as markets could dial down their optimistic view of global synchronized growth and ultimately global yields will come down. That would add to the return outlook for spread products such as EM, he said
• “Valuations have already adjusted sufficiently to compensate for the increased equity volatility and EM spreads are better value now”
• “As long as China’s retaliation to the U.S. provocation remains within reason, which is our base case, fixed income should benefit and the appeal of EM remains strong and it stands to benefit from investors returning to a 2017 frame of mind”
• Faergemann favors the Mexican and Colombian pesos in this scenario as markets seem to be overestimating political risk associated with their upcoming elections

Anastasia Levashova, a fund manager at Blackfriars Asset Management in London:

• A trade war will have a mixed impact on EM countries as China buying less soy, avocados and wine from the U.S. means they’ll buy more from developing nations. On the other hand, no one knows where it will escalate, she said.
• More important indicator of direct competition between the U.S. and China was the launch of renminbi crude oil futures, a clear trend of strengthening their own currency and trade balance

• “It looks like a mixed bag for EM. On the one hand, it could benefit agricultural producers like Brazil and Argentina, but I doubt that is enough to offset the concerns about slowing global growth and protectionism”

• “It fuels the risk of a trade war, but we are not there yet. China has intensified its rhetoric, but I think we are still in a hard negotiation”
• If risks continue to intensify, Asian currencies would probably be most affected as some countries would be hit given supply chains and considering economies are more open to trade than other developing regions

• Although trade war fears should be taken seriously, it isn’t a factor in his long-term outlook for emerging-market assets
• “We like buying here but are conscious that trade tweets may present some downside risk,” noting Trump’s tweets on Monday, where he “hated Nafta in the morning and wanted a deal by the afternoon”

• “I still believe this is a negotiating stance for the U.S. — somewhat justified, somewhat politically driven by the mid-term elections in November. The Chinese understand this”
• “Up to this point, Mexico was getting all the collateral damage given the negative NAFTA rhetoric. Now I’m not so sure. If this escalates into a full blown trade war then global growth will decrease with negative repercussions for oil and metals”
• Marginal producers for oil and metals, or competitive producers with high fiscal break-evens will be negatively impacted, he said. Frontier markets such as Ghana, Angola, Mozambique, Zambia and Ecuador, which rely on these commodities as a primary source of foreign-exchange generation, could be particularly hurt.

• Cuadrado says he doesn’t share investor fears yet and hasn’t altered his long-term outlook for emerging-market currencies.
• He favors the Colombian and Argentine pesos for their carry

What goes around
Must come home
The time is here for all to take charge
The legacy of the most corrupted is at the end
Destiny or Fate is here
We shall witness A NEW BEGINNING
NAJIB WILL BE ENDING HIS CAREER AS THE MOST HATED PRIME MINISTER OF MALAYSIA BY CALLING FOR GENERAL ELECTION 14 ON THE 4TH MAY 2018.
HIDUP MALAYSIA
HIDUP RAKYAT

I’d do the same thing if I was any of them, I would also speed up to list before “new rules” comes in on duopolies to prevent any kind of “collusion” (seeming or apparent) or to give rise to “the erosion of a competitive market” or actions “that are not in the interest of the consumer”. An immediate group which will not like the deal- the drivers.

Read more at https://www.thestar.com.my/business/business-news/2018/03/25/sources-grab-seals-deal-to-take-over-ubers-southeast-asian-operations/#t51Wg2XxfseS85Te.99

Wine bars are aplenty in KL. What makes a wine bar better than the rest? 


SUBSTANCE – Wine

If you want to speak of wine selection, thats a fair comment, but seriously, wine bars do not produce wine. Oh, you mean you have a skilled curator or sommelier … (the latter is almost unnecessary unless you are talking about a 5 star or Michelin starred restaurant with an enormous selection to start with). 

What I am saying, getting a good variety of wines is not difficult, just peruse a few wine review magazines religiously, and try to stock up on those rated 85-88 or higher, further filtered by their prices (as most of wines consumed in wine bars has to be priced between RM150-400) … just for show, include 10% of your selection of those between RM800-2,000… and you are on your way to becoming a more than decent wine bar. Another trick is to have very few of the first growth, aim for the second/third for value pricing.






























Recently, I was introduced to Wineknot @ Taman Desa. To me, it probably is one of the top 3 places for wine. Better than that, the accompanying food are either good or excellent.


SUBLIMINAL – Senses

I like a place that not only provides the structure for a wine bar, put some wine there and call it a wine bar. Walk inside and you are instantly attracted by the ambience – its not the over the top “speakeasy lush designs” but rather very warm tones accented by the liberal usage of wood and dark hues. A lot of thought obviously went into the lighting, which was inviting and soothing.

While on design, I must applaud the way they laid out the place, they created walls which basically makes for plenty of nooks and corners for added privacy and seclusion.



All of that make you wish to linger at the place longer, more comfortable to have lengthy conversations.








SUBLIME – The Food, Oh The Food

Actually this place need not even be a wine bar cause the food is usually excellent. The owner is the cook and she creates unbelievably yummy dishes. Iberico is a frequent item, as reflected in the full name of the place. I loved the fried meehoon, to me its a 1 Micheline star dish.

Crispy duck confit

Iberico aglio oilio

Mapo tofu pasta

Matsuzaka beef

Iberico ribs

Iberico rendang with petai





These are just a few of the many more tantalising dishes.

Wineknot Wine & Iberico Kitchen
Address: Danau Business Centre, 9-0-10, Jalan 3/109f, Taman Danau Desa, 58100 Kuala Lumpur, Federal Territory of Kuala Lumpur
Operating hours:  opens everyday, 3:30pm – 2am

With such promising career how not to tumble down like a rolling stone.

PEOPLE WHO BITCH ABOUT HAWKER FOOD PRICES 

(I meant “good hawker food”, if they were no good, you would walk away, no need to bitch):

so you are questioning how much margin he/she should make… on a bowl of labour/passion, that is your favourite… why we never question what the margin is for I Phone … or concert tickets… 

but we would question the humble hawker, the vegetable seller who brings his products from the farm… the langsat seller from the back of his truck… 

we happily pay 400% margin to big ticket items but will squeeze the 20-30% or even 50% down for genuine strivers

or is it that we think hawker food should be affordable …. says WHO?? … this is not socialism or communism ok… good hawker food are not essential items … think its too expensive, don’t buy… just like your I Phone … eat bread, or better still fucking cook it yourself

We seemed to think that we have a NEED to CAP their fucking salary… would you like me to cap your salary!!??.. 


Is it that we have a mindset that hawkers should never, ever, fucking earn RM10,000 or RM30,000 or RM50,000 a month??!! Check your prejudices.