☕️ Khazanah Nasional's RM550 mil studio investment went on fire sale

1. MARKET SUMMARY 📈

The markets in the US were closed for Good Friday (Apr 7, 2023).

2. NUMBERS AT A GLANCE 🔢

More than 147,000 people (at the time of writing) have signed a petition to Yang di-Pertuan Agong to oppose former PM Najib Abdul Razak’s royal pardon. Over the weekend, reports arose that the UMNO supreme council wants to seek an audience with the Yang di-Pertuan Agong to present an application to consider a royal pardon for Najib Razak following the Federal Court’s decision to dismiss Najib’s bid for leave to review his conviction in the SRC International Sdn Bhd case. PM Anwar Ibrahim played it cool, stating there is no conflict of interest, although he will be involved in the pardon process.

3.05% — the dividend for the National Education Savings Scheme (SSPN) for 2022, as announced by the National Higher Education Fund Corporation (PTPTN). The dividend involved an allocation of RM266.17mil which would benefit around 5.73 million depositors. Higher Education Minister Mohamed Khaled Nordin said PTPTN had distributed RM1.33 bil worth of dividends since the introduction of the scheme back in 2004.

The long queues at Louis Vuitton boutiques have very likely contributed to Bernard Arnault’s rise to the top — the wealthiest man in the world, with an estimated networth of USD223.1 billion. Bernard Arnault, the CEO and co-founder of LVMH Moët Hennessy Louis Vuitton, is the third person to surpass the USD200 bil threshold — after Elon Musk and Jeff Bezos.

3. IN MALAYSIA 🇲🇾

State Elections Updates:

1. Pakatan Harapan and Barisan Nasional have agreed to allow parties which won their respective seats in GE14 to contest them again in the upcoming state elections. The states to face an election soon are Kedah, Penang, Selangor, Negeri Sembilan, Kelantan and Terengganu. The state election will likely be held in the final two weeks of June.

2. Perikatan Nasional chairman Muhyiddin Yassin confirmed that the coalition will use the PAS logo for its candidates in Kelantan and Terengganu for the upcoming state polls.

PM Anwar Ibrahim to Muhyiddin Yassin: “Come to Parliament more”Following Anwar Ibrahim’s trip to China, where the PM said Malaysia is open to negotiations if there are overlapping claims by China on areas explored by national oil giant Petronas, Muhyiddin Yassin jumped the gun by saying Anwar was careless on the remarks. Muhyiddin added that Malaysia must defend its sovereignty.

Anwar denied claims by the Opposition that the government had been negotiating with China over the ongoing issue involving Petronas’ exploration activities. Anwar chided Muhyiddin Yassin by saying he should attend Parliament more often to understand the government’s stance on the ongoing issue.

The price people pay when they can’t keep it in their pantsA 22-year-old man and a 17-year-old girl from Pasir Gudang, Johor, have been remanded by the police over a 23-second viral video that showed them allegedly having coitus in a car. They have been remanded under Section 377D of the Penal Code, which criminalises acts of “gross indecency” - with a penalty of up to two years imprisonment. The girl, who was wearing a Malaysian Red Crescent (MRC) shirt, is also being investigated by the Malaysian Red Crescent (MRC) Society.

The Women, Family and Community Development Ministry have criticised the handling of the girl, who is a minor, by the authorities as they failed to protect her rights as a minor. The teenager was arrested and allegedly “paraded” before the press. Child Act 2001 stressed that minors must not be handcuffed, must be separated from adults whilst being detained in the police station and their identity must be protected and not revealed.

Business talks

1. According to The Edge Markets, CIMB Group Holdings Bhd’s investment bank, CIMB Investment Bank Bhd, has acquired KAF Equities Sdn Bhd from KAF Investment Bank Bhd (KAF IB). The value of the deal is undisclosed — the last known valuation of KAF Equities was when it was privatised in 2016 at a price-to-book value of 1.38x or about RM324 mil. CIMB Group is said to be acquiring the stockbroking firm as its joint venture with China Galaxy Securities Co Ltd (CGS) will soon come to an end, with CGS likely to be taking complete control of CGS-CIMB Securities. The acquisition will ensure CIMB Group will continue to have a Malaysian stockbroking business once it exits the JV.

2. Is there no more value to be gained in KLSE-listed companies? Government-linked investment companies (GLICs), such as the Employees Provident Fund (EPF) and Malaysian Retirement Fund Incorporated (KWAP), have been ramping up their return on investment by investing in alternative assets (and also riskier) such as private equity (PE) and private investment markets. The catch when it comes to PE and private investment is liquidity. As long as the GLICs have the proper investment framework for their asset allocation, they should fare well.

3. Khazanah Nasional Bhd’s wholly-owned special purpose vehicle, Granatum Ventures Sdn Bhd, has divested its 100% stake in Iskandar Malaysia Studios Sdn Bhd (IMS) to Studio Management Services Sdn Bhd (SMS). SMS is a consortium led by IMS’ current Malaysian management team in partnership with Singapore’s GHY Culture & Media Holding Co Ltd and its subsidiary, GHY Culture & Media (Malaysia) Sdn Bhd. GHY revealed in its filing that IMS’ net asset value at the end of 2022 was RM32 mil. The RM550 million studio facility was built to position Johor as the regional hub for film and television production. Can someone please call the fire department because it’s a massive fire sale?

PSA — For those driving back to kampung during the coming Raya, Puspakom is offering free vehicle inspection to all drivers and private vehicle owners until April 20, 2023. The caveat is — only at selected branches. Get your car inspected for a safe drive during Aidilfitri. Visit their website to find out more.

4. AROUND THE WORLD 🌎

China’s 3-day practice of encircling TaiwanThe Chinese military has begun rehearsing the encirclement of Taiwan in a 3-day military drill and staged “simulated joint precision strikes on key targets in Taiwan”. The Taiwan Defence Ministry said Chinese military planes and ships crossed the Taiwan Strait median line - the unofficial dividing line between Chinese and Taiwanese territory. 

This exercise comes after Taiwanese President Tsai Ing-wen returned from a trip to the US, where she held a meeting with the US House of Representatives Speaker Kevin McCarthy, which the meeting China had warned against.

Touching on the US-China relationship, Apple Inc and Walt-Disney Co are among US businesses that will face the steepest challenges in a “selective decoupling” from China given their massive presence in China. In Apple’s recent quarter, Greater China which includes mainland China, Hong Kong and Taiwan, contributed USD23.9 bil in revenue in just one quarter - annualised it, Greater China is nearly a USD100 bil per annum market for Apple. 

Tesla: Ok to cut prices, not ok to snoop on customers Tesla continues to capture market share by cutting prices in its largest market, the US, for the fifth time since the start of the year. Price cuts go as high as US5,000 for the more expensive Model S and Model X. An earlier price cuts globally in January is showing some signs of success — Tesla achieved record deliveries in Q1 of 422,875 vehicles, up 4% from the previous quarter and a massive 36% year-on-year. 

How low and long can Tesla go with price cuts? Relatively to its peers, Tesla has a lot of breathing space to dump prices. An analysis by Reuters says Tesla is using profits as its weapon in the EV price war. Tesla is the most profitable on a gross profit basis among the automakers. It earned USD15,653 in gross profits per vehicle in Q3 2022 - >2x of Volkswagen, 4x of Toyota and >5x of Ford. Also, unlike its peers, Tesla doesn’t spend a cent on marketing and relies entirely on organic growth and Elon Musk’s social media presence, giving it even more margins for a prolonged price war. 

A special report from Reuters found that Tesla employees passed around private videos recorded by vehicle cameras installed on Tesla vehicles to enable self-driving features, which was reportedly shared via Tesla’s internal messaging systems. A former Tesla employee told Reuters that some of the videos might even be recorded when vehicles were turned off. Following this news, a California Tesla owner has filed a prospective class action lawsuit accusing Tesla of violating the privacy of customers. 

Hotel 101 - the Big Mac of hotelsOne of the Philippines’ youngest tycoons, Edgar “Injap” Sia, just in his early 40s, is seeking to raise USD125 mil to fund the global expansion of his hotel chain. Hotel 101 Global Pte Ltd runs a hotel in Manila and has 10 others in various stages of development in the Philippines. According to him, the selling point of his hotel chain is predictability introduced through standardisation, likening it to McDonald’s Big Mac — all rooms in the chain are 226 sq feet with a double bed, a single bed, a stove, a kitchen and a refrigerator and its rates typically 25% lower than competitors. 

His ambition is to turn Hotel 101 to be among the world’s 5 biggest hotel operators by 2040 with 500,000 rooms in 101 countries. Based on existing projects, he will have 7,331 rooms by 2025, making it the biggest Philippine operator. He’s taking on an interesting financing approach to fund his expansion — rooms will be sold to investors, priced at USD100k-250k a unit, depending on the country, who will get 30% of the hotel’s gross revenue in returns.

Injap shot to fame after selling his BBQ chicken chain (overtook McDonald’s by store count in 2010) to Jollibee Foods Corp — a short profile of Injap here.

Shorts: 

1. Iranian authorities are installing cameras in public places — not for security and safety purposes — but to identify and penalise women who are not wearing the hijab. Violators will receive “warning text messages as to the consequences,” according to the police in a statement. A growing number of Iranian women are defying the hijab law to protest against the death of a 22-year-old Kurdish woman who died in the custody of the “morality police” last September.  

2. Osaka University researchers have used AI to decode subjects’ brain activity by creating images of what they are seeing. The researchers, however, stressed that this finding does not represent mind-reading by AI - the AI can only produce images a person has viewed. Test subjects were shown up to 10,000 images whilst inside an MRI machine.

5. FOR YOUR EYES 📺

1. According to Puchong MP Yeo. Bee Yin, it costs as much as RM1.8-2.6 mil to build ONE classroom on average, nearly the same price as a luxury condo in the city. She questioned whether the same budget ineffectiveness persisted with the maintenance of schools and called upon the government to re-evaluate the selection process of contractors.

2. Influencer turned sambal entrepreneur Khairul Aming closed his two factories for a day to bring his workers out for Raya shopping and gave them a big fat Raya angpow (look how thick the angpow is in the video!). In 1.5 years since he launched Sambal Nyet, he has sold one mil bottles of sambal, generating revenue of RM14 mil.