Thursday, 28 July 2016

Swiber winds up and in liquidation - Who's next?

Big news in the Oil and Gas scene today. Once, the darling stock of Singapore Oil and Gas - Swiber Holdings Limited wind up and ended in provisional liquidation. 

It is definitely unfortunate but not unexpected news judging from the debt, the company gets herself into.

I still remember before it was listed in 2006 when I visited them, they were relatively unknown and a small outfit based in a small office in Chinatown area. The next moment it became public and stock price grew vertically.


Throughout the last ten years, the company grew so fast. From few vessels to more than 50 years and not forgetting the separate listed entities they used to own – Kruez Subsea which was sold to a Venture Capitalist and Vallianz Holdings which they still own a major stake in today. Staff strength climbed remarkably from tens or low hundred to thousands worldwide within ten years.

Why is all these possible?

The power of Debt! 

Over-leverage is a double edged sword. Good times, you thrive. Bad times, you dive!

The question now, “Who’s next?”

By the way, those who have been following my blog will know that I am very bearish ever since a year ago when things are still not yet as bad and when everyone was still turning the music partying.  
Apparently, I was even more bearish lately with all the "onion peeling" posts on the market lately too with my "Gold and Silver" series and the "Fallacy of How to be Rich..." series. 

Since January this year, I also warned that it is perhaps not the right time to buy into O&G and Bank stocks now unless you wanted to treat it for trading purposes! 


Did I get burn myself with Oil and Gas stocks? Of course I did, otherwise how will I learn so fast now. 

Related posts:

Crisis
Gold and Silver series

The Fallacy of How to be Rich... series



Refer to Asiaone news here and extracts below:

SINGAPORE - Singapore oil field services firm Swiber Holdings Ltd filed an application to wind up the company and said a Singapore court had appointed provisional liquidators, making it the biggest local name to fall victim to the slump in oil prices.

In a statement to the Singapore Exchange, Swiber said the hearing to wind-up the company has been set for August 19. Swiber, which operates a fleet of 51 vessels, did give any specific reason for the move but said it was facing letters of demand for US$25.9 million (S$34.9 million) and had warned earlier this month of delays in raising US$200 million in preference shares.

Local oilfield services companies have been burdened by weak oil prices, which have strained their liquidity, with charter rates tumbling and clients either delaying or cancelling projects. "If highly leveraged offshore and marine companies are unable to raise capital from equity markets, then they will be left with very little other options other than to file for liquidation or for judicial management," said Joel Ng, an analyst at KGI Fraser Securities.

Over the next year-and-a-half, bonds totalling nearly S$1.2 billion from energy and offshore marine issuers in Singapore will mature, with S$615 million due over the next five months, according to IFR, a Thomson Reuters publication.

Another firm, Technics Oil & Gas Ltd, and its unit were placed under judicial management this month.

Investors had turned more positive on Swiber after it redeemed two bonds in June and July totalling S$205 million.

Swiber said this month a preference share sale agreement for US$200 million had been delayed and that it was seeking legal advice. But a flood of letters of demand, including statutory demands, had flowed in since Monday, claiming a total US$25.9 million, as of July 26, adding more pressure on the company.
Swiber said some of its executive directors, including its chief financial officer, had resigned.

From just 10 vessels in 2006, Swiber has expanded to own and operate a fleet comprising 38 offshore vessels and 13 construction vessels. It has more than 2,700 employees across Southeast Asia and other countries, according to its website.
Swiber's longest dated bond due 2018 started falling sharply in mid-March. The provisional liquidators of the company, which has a market value of S$50 million, have asked for trading in Swiber's shares to be suspended.

The High Court of Singapore appointed KordaMentha Pte Ltd's Cameron Lindsay Duncan and Muk Siew Peng as the joint and several provisional liquidators of the company.



Sunday, 24 July 2016

Bali Trip 2016

It’s the time of the year where me and my wife need a break to forget the work, the stock market and even our children. Yes, it’s our yearly routine trip to Bali. This will only be our first deserved overseas tour in 2016. It was a relatively short trip - 4D3N. Our initial planning was 5D4N but we have to cut short the trip, in exchange for the good news that we were shortlisted as “parent volunteers” for my child’s potential primary school and have to attend a briefing on one of the days of our initial planned trip. 

Anyway, I always enjoyed Bali for the sun, sea, sand, nice restaurants, cafes, bars, culture, friendly people, reasonable pricing. We also have a regular honest and reasonably priced local guide for years who will always bring us to all the nice places and explain to us all the local culture. 

Over the years we already been to several different parts of Bali, and this time round, it is the usual Kuta area that we stayed in plus the North East tour and also to the Southern Nusa Dua. 

Refer to my last year Bali trip here

The flight


Pamper ourselves with business class travel! Oops... this is not frugality. 
But it may not be as expensive as you think, thanks to my Krisflyer points! 

The Hotel


Our resort@ Four Points by Sheraton – In the past, we always stayed in the main Sheraton Kuta for the location and nice breakfast, but this time we opted for the cheaper newly opened Four Points by Sheraton Hotel.
  


My wife use her special contact to get ourselves a much better room in Four Points but still almost halve the price compared to Sheraton.

The Weather


It’s a cloudy and rainy most of the times … but still a fabulous trip for us!



The Food 



Traditional Balinese food! Thanks to our local guide. 

The Fine Dining

Amazing romantic fine dining at Majoly restaurant. Another good recommendation from our guide. 


Time for my hobbies



Beautiful view, cooling weather and a cup of hot tea to accompany my writing!




One of my all time favourite gyms I ever patronised in all hotels I been to. 


Interesting displays



Money register! 

The scenery 


View of Mount Agung in the background, a stratovolcano that is on the highest point of the island


View from Pura Besakih - Public temple of the Balinese



The romantic view during our dinner!

The shops


Shopping in Kuta, Legian, Nusa Dua etc

The temples




Pura Besakih temple


Pura Goa Lawah - Bat Cave temple

The animals


Can't see well? These are giant spiders! 


Cocky rooster! 


Thousands of bats! 

The beach



Kuta beach at the very beginning. Quiet and clean!

The spa

Our favourite spa at Sheraton Kuta. Although we are not hotel guest there this year, and it is very pricey, we love the quality of massage. 
When it's time to pamper ourselves, the price tag is immaterial - my wife says this, not me...LOL! 


The coffee 



A good tour cannot go without good coffee. The illy espresso coffee in the hotel just taste so good! 

Related posts:
































Saturday, 23 July 2016

Rolf’s View of the World and Singapore’s Economy - The Artificial Harvest of the Past (Part 1)

This will be the first of a series of articles ahead where I will present my views of the world and Singapore’s economy.  

For readers who are more sensitive, maybe it can be potentially controversial. Why? Well, opinions or predictions can always be controversial especially when people start to get too excited and serious about it. I will appreciate if readers can treat these articles casually and maybe even with a tad of fun. Please do not be overly affected by it. The whole idea of my writing here is to provide a view so that we can think out of the box in an unconventional way.

My slight edge

Who am I to give my views of the world? I am not a great political leader. I am not legendary investor. I do not even have my own business! I am just an employee who scaled corporate ladder. Perhaps my slight edge is the experiences gathered from my traveling to a fair bit of places around the world. It's not plain tourism but the understanding of the countries' cultures via dealings with the locals. Places includes different parts of China, India, Europe, US, Brazil, Middle East, South East Asia (Malaysia, Indonesia, Thailand, Vietnam), Japan, Korea, Australia etc. The one continent I have not been to is Africa, although I do know a few South Africans. 

The world of uncertainties today  

Today, the world is in a pretty unusual situation with a wide range of uncertainties!  The recent Brexit came somewhat shocking to the world. Donald Trump as President of US today is no longer a myth compares to a year ago as he has officially accepted the Republican party presidential nomination.

In fact, since the start of millennium, we had undergone a series of major disastrous events globally. They are the Dot.com crash, 911 attacks, War in Afghanistan and Iraq, SARs epidemic, Global Financial Crisis, Arab Spring, European Debt Crisis, Oil Crisis and ISIS threat of today. 

To top it all, Venezuela is heading towards humanitarian crisis with food and medicinal supplies shortage while North Korea continues to showcase their nuclear tests putting the world into fear. 


Of all places in the world, Singapore is still considered a relative safe country. However lest we forget that being a small city that depends heavily of global trade, we will not be shielded if economic crisis befell on our major trading partners. And being close allies of the western world, we are definitely prone to terror attacks as well. 

The start of the 21st century

In order for us to see the future more clearly, we need to understand what exactly happened in the past. As Winston Churchill puts it “The farther back you can look, the farther forward you are likely to see.” So let us revisit what has happened going back into the past. 

Dot.com bubble
The initial fear just before the turn of the millennium was the Y2k problem also known as the Millennium bug potentially causing disarray in computer programs. Yet, in reality, the real problem was the euphoria of the Dot.com stock market, which led to the biggest ever tech stock boom and bust.  Nasdaq hit the climax of 5,132.52 on Mar 10, 2000. Just one year before, it was at 1,700-1,800 points and five years earlier it was approximately a fifth of its peak. Many companies were not even having any earnings and yet the market's PE ratio ridiculously topped 100. 

9/11 attacks & Wars in Afghanistan & Iraq
The tech bubble burst and many companies folded. This crash of the stock market was worsened by the Al-Qaeda 9/11 twin towers attacks of 2001. Nasdaq index plummeted to below 1,300 on Sep 2002. This will later led to the U.S. President George Bush declaring War in Afghanistan and in Mar 2003, US and her coalition army invaded Iraq on grounds that Saddam Hussein's Iraq had weapons of mass destruction. Saddam Hussein was captured and executed thereupon, but no signs of weapon of mass destruction. 

Easy Monetary Policies
The few years of economic distress at the start of the 21st century led to the then US Fed Chairman Alan Greenspan (in office from 1987-2006), to drastically reduced Fed Fund rates several times from a high of 6.5% in May 2000 to a low or 1.0% in Jun 2003.  


The easy Fed monetary policy provided enormous thrust to the US and the global economy, which inadvertently led to the biggest Real Estate Subprime bubbles that resulted in the 2008/09 Global Financial Crisis (GFC). 

Ostensibly, the problems already begun in 1971 when then U.S. President Nixon took the US dollars off the gold standard, leading to the fiat monetary system of today. 

Read my previous articles:

Singapore's economic fairy tale

Turning the attention to Singapore, the last ten years or so had been an economic fairy tale for Singapore. Don't believe? 

Stellar GDP Growth
You just have to look at our GDP figures as follows: 


Nominal GDP US$
Nominal GDP S$
2005
US$127b
S$212b
2010
US$236b
S$322b
2014
US$308b
S$390b


In US$ terms, our nominal GDP appreciate 85% from 2005 to 2010. The next 4-5 years seen another stellar 30% rise of GDP. In a ten year period, our nominal GDP expanded a remarkable 143%.  
Singapore's GDP per capita in 2014 is US$56.3k (S$71.3k) making us one of the richest country in the world. 

Easy monetary policy
Since the SARs crisis in 2003, Singapore's economy grew at an increasing rate. Being an open economy we were obvious beneficiaries of easy global monetary policies.  If you refer to the below chart, you can see the incredible rise of Money supply in Singapore over the last two to three decades. In the next chart, you can also see that average overnight interest rate had fallen to near zero after the financial crisis.




Source: tradingeconomics.com


Loose immigration policy
In the face of a booming economy and facing labour shortage, Singapore government loosened immigration policy. This led to an influx of supposedly cheaper foreign labour to supplement the shortfall. Below is a table extracted from singstat.gov.sg to show the key demographics of Singapore from year 1970 to 2015.


To further breakdown in the table below, you can see that the last 15 years growth of foreign labour from year 2000 to 2015 is actually higher than the 30 years period from 1970 to 2000.


Total Population Growth
Resident Population Growth
Foreign labour
2000-2015
(15 years)

1,507.1K
(5,535 – 4,027.9)
629.3K
(3,902.7 – 3,273.4)
877.8K
1970-2000 
 (30 years)
1,953.4K
(4,027.9 – 2,074.5)
1,259.8K
(3,273.4 – 2,013.6)
693.6K

From 2004 (after SARs crisis) to 2008, businesses prosper and rich becomes richer! Salaried middle class workers did well too in nominal terms. The lower class though, as it always is, lagged behind the leading pack and becomes worst off as the economy inflated in prices. 

Expectations of salary were barely in checked. Almost everyone think that they were underpaid due to the rising median income and of course, the rising cost of living too. Most wanted to assume managerial posts with higher than respectable salary. Yes, even those who had only freshly entered the workforce for a few years were having extremely high expectations. 

Did productivity really increase at a faster rate?
In reality, capabilities and work experiences lag behind salary increase. Yes, productivity increased but arguably in my opinion at a much slower rate compare to the eruptive growth of the economy caused by leverage of easy money and the influx of foreign labour. 

Economic progress seems all-important for the high-handed ruling party in their quest to become a world class country of economic success. The intangible social impact was neglected leading to PAP narrowest victory over the opposition since independence in the 2011 Singapore general election. 
The country was enjoying one of our best economic success leading up to the GFC.  

Worst crisis since WW2, but the party resumed shortly after 

A mere seven years ago in 2008/9, we had just encountered the worst financial crisis since WW2. Some compare the GFC with Great Depression in 1930s and the Japanese real estate bust in the 1990/91. The main difference comparing with the Japan crisis was that back then, the crisis was limited to a single country. In retrospect, the GFC is global in scale due to the interconnectivity of the world today, as well as qualitative more severe.  

In 1929, total debt in US was 160% of GDP increasing to 250% by 1932. In 2008, the US's total debt was an astounding 365% of GDP, in which this calculation excludes the pervasive use of derivatives absent in the 1930.  

Yet, barely a year after the collapse of Lehman's brothers, financial market stabilized, stock market rebounded and economy recovered. It's back to business as usual. 

While the historical Great Depression and Japan real estate and stock market busts lasted for decade long, the adverse impact of GFC was short lived, thanks to the artificial support that Central bankers introduced by dishing out a series of QE globally. 

Refer to the chart below which shows the massive monetary base growth after the GFC.


Hence, the six to seven years of post GFC period had been an astoundingly and unusually successful one. 

The China story

Thanks to the zero interest rate environment led by US Fed chairman Ben Bernanke (in office 2006-2014), the global economy recovered quickly. Real estates in China, London, Singapore and Australia etc all boomed. Stock markets globally rallied. 

In the main, it was China driving the world economy, constructing new apartments, roads, railways, irrigation, sewage systems, commercial centers etc largely driven by State-owned Enterprise (SOE). And this was of course fuelled by the cascade of debts pouring out from the central bank. In particular, the ballooning shadow banking which is the unregulated credit in nonbank entities within the country has been a specter!  

Today's stock market

Stock market today is still at relatively high levels. This is not just comparing to period of GFC but even when reference to pre-crisis peak. 

Dow is mid 18,000s today while in 2007 peak, it was only barely hitting 14,000 points. It is the same bull case for Nasdaq peaking at >5,000 points compared to the pre-crisis of 2,800 points. 

Markets in Asia and Australia were slightly more modestly priced today due to the worries of China engine running out of steam having more than significant impact to regions here. This is especially after Black Monday in August 2015 when China surprised the world with the devaluation of their yuan.  


2007 Pre-crisis Peak
GFC
Today
Today vs Pre-crisis peak
Dow Jones
>14,000
>6,600
>18,000
+28%
Singapore STI
>3,800
>1,500
>2,900
-23%
Shanghai composite
>5,900
>1,700
>3,000
-49%
Hong Kong Hang Seng
>30,000
>11,900
>21,600
-28%
Japan Nikkei
>18,200
>7,100
>16,400
-9.9%
Australia ASX200
>6,700
>3,100
>5,400
-19%


To be continued …