Tuesday, 4 August 2020

Rolf’s Thoughts: Keppel (the son), Hoping for Temasek (the father) 's Partial Offer?

Keppel posted quarterly loss of a staggering SGD 697 million. This is mainly due to impairments of SGD 919 million from O&M segment.

Excluding impairments, the company still reported quarterly net profit of SGD 222 million, boosted by other segment of the business such as property, infrastructure and investments.

Last year Temasek proposed offer of SGD7.35 a share (including SGD0.15 dividend declared after the proposal date) of SGD4 billion to raise stake to 51 percent.

This partial offer has a condition called Material Adverse Change (MAC) clause, stating that Keppel profit after tax must not fall more than 20% or below SGD557 million over the combined of four quarters from 3Q2019.

Keppel current cumulative PAT until End Jun2020 is minus SGD165 million. This mean that to meet this condition, 3Q 2020 result must be at least SGD887 million. This is highly unlikely considering Keppel past years average quarterly profit hovered around SGD200 million.

This means that Keppel will not meet the MAC clause and Temasek can either:
·       cancel its offer?
·       waived off the clause?
·       Re-offer a lower price?
·       Or?

Questions?

Will Temasek offer of SGD7.35 a share goes on?

The decision will be made known by end of August?

Share price of Keppel is SGD5.18 (at time of writing) with a P/BV of 0.9. During early 2016 oil crisis, Keppel PB dropped to 0.82 or SGD4.88. Covid March low is SGD4.82.

ROLF’S THOUGHTS

In my opinion, Temasek will continue with the offer amid a lower price. I may be wrong! Just my feel.

Eventually, I feel that Temasek will want to repeat the proposal for Sembcorp to Keppel, i.e. to de-merge O&M businesses.

Question is when?

I always picture that Temasek is liken to be our “Father” and SG Government is like our “Grand Father”!

Anyway, Temasek will always have or want control over the main companies in Singapore which forms the pillars of the country’s business. For e.g. Temasek has major shares in Financial institution (DBS), Transport (Comfort Delgro, SBS, SIA, SATS), Tele-communication (Singtel, Starhub, M1), Media (SPH), Properties (Capitaland, Ascendas, Mapletree) Technology (ST), O&M, Infrastructure (Keppel and Sembcorp) etc.

And then in bad times, Temasek will always come to the rescue of his son, just like Singapore government coming to rescue of Singaporeans during the Covid crisis. Sounds good huh… Blessed huh…

Good? (or maybe Bad?)

There is always someone to depend on, be it Singaporeans depending on the country, or major important businesses in Singapore depending on Temasek. In the short term, it seems great to have someone always protecting you behind the scene.

In the long run, or perhaps one day, what if the Father or the Grandfather will not be around, or they themselves also become weak. Then how…?

Sometimes I felt that we Singaporeans are like under-aged kids that will never grow and never be independent. We are always under our Grandfather or Father’s safety shelter net. No matter how old the child is, he/she will always be under the father’s monitoring and supervision at all times.

The child will never be able to go on his/her own adventure to seek for what he/she really want. Creativity and independence and survivor of the fittest seems a distant reality. Comfort zone sets in. The child rarely dares to voice out his/her own opinion, since the father’s opinion always overwrites his/hers.

The child’s role is just to be obedient and please the father. Failure is deemed incompetent, while elsewhere, failure is the opportunity to learn and grow.

The Grandfather or father will be forever be controlled in the child’s financial well-being. The child will always depend on the father for direction, guidance and advices. He/she will always be deemed incapable of looking after himself/herself and always seem incompetent of making informed decisions for his/her own well-being.

When child gets into trouble, the father will always come to the rescue!

Within the country, the child will think highly about himself/herself. But in the real outside world, he/she will be lost in the jungle, if, without his/her “Grandfather” or “Father” ‘s safety shelter net.

Ok … maybe I am over-exaggerating…

Bad (but maybe Good?)

In the past, I use to be very upset about my family being so poor, seeing my friend having their own bed and their own room, while all of us sleep on the floor and we do not even have a proper table to do my homework. Luckily we always have good neighbours and relatives who will support us for our school textbooks and uniforms, and our Chinese New Year new clothes. 

We were without a HDB of own, as we stayed in no-living-room rental flat followed by one bedroom rental flat. My mum always have financial difficulties even to buy food from market as our household income is less than SGD800 even until late 1990s. Minus the gambling advance pay from boss, my Dad was only left with SGD500-600 a month. Yes, no CPF at all. 

I am always out in the streets and like to stay whole night up in a "mess-room" playing snooker and street fighters or sleep over at friend's house. 

Looking back now, it does seem to be a blessing in disguise. And that is really how I learn to be street smart. On the flip side, it can also mean ending up in jail, like many of childhood friends.

As a Father myself

I will never want my children to follow my childhood footsteps. At the same time, I will be careful not to let them be over-dependent on me. I wouldn't want to control their life forever. I will want them to be creative, be themselves and speak up for what they believe in. However, I will make sure that when they are young, they will be properly guided by the good fundamental principles of life. 

When you learn from mistakes and become stronger, it is great. But as children at younger age, there is also possibility that they are learning the wrong things and take the wrong path and never recover again!

I come out with the "Door Analogy". 

Sometimes your child will only see one door which is straight ahead and walk through it. They may fall right through into the shit hole! As parents, I will tell them to look broader and let them understand that there are actually two more doors beside the one they had seen. Which one to choose is up to them, but at least, we widen their perspective! If they still decide to take the shit hole door, then they must be responsible for their action.  

16 comments:

  1. When gahmen or temasek bail out the people or GLCs, remember that they are using taxpayer money & national reserves. Sometimes it is necessary for survival during very bad situation, and hopefully can survive and recover.

    But sometimes it is throwing good money after bad, especially if the company or industry has structural decline and becoming irrelevant or obsolescence. Maybe not today or next year, but 10-20 years later.

    So govt will need to think & analyse for how long any GLC can remain relevant and strategic for Singapore, and how much reserves or taxpayer money to use up.

    ReplyDelete
    Replies
    1. Hi, thanks for the wise comments. I agree that the govt will need to think & analyse for how long any GLC can remain relevant and strategic for Singapore, and how much reserves or taxpayer money to use up.

      Perhaps something to think about.

      Let’s say you are a father, one day your son meet with a crisis. Have you think about how you are going to help him?

      How about those sons whose father is incapable financially to help their kid?

      Delete
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      Delete
  2. so which is the prodigal son? Keppel or sembcorp?
    =)

    ReplyDelete
    Replies
    1. Hi FC, haha where’s the brolf?
      I dodge your question of Keppel and SCM.

      Instead, since I read the bible many times, and I will write a separate article about the prodigal son and it’s relevance in managing.

      The prodigal son acknowledges his mistakes and truly repent! He humbled himself after realizing his mistakes!

      Humility is the essence of repentance and improvement.

      Is this common in the higher ups of Sg? Most ceo of successful companies don’t over think highly about themselves.

      The let the clever people use their creativity and ability to work wonders for the company.

      Again, is this common in local scene? Or the hierarchy is such that the higher ups is always correct for most times?

      Delete
  3. Have you considered that if your kids do not step out of Singapore that they will forever be in the Father-Son dependency syndrome as you had described?

    Maybe the size of our country and our market deems necessary this dependency (for success or whatsoever).

    ReplyDelete
    Replies
    1. Hi, before I answer you, may I courteously ask you back a relevant question.

      If you are a parent now(or one day), and if you child is of mature age one day, do you want him / her to have exposure both inside and outside Sg or just within Sg?

      May you can find my answers in this question.

      Answering to your second comments? On what basis, do you think that the size of a country demands dependency? What references of countries comparison are you making? Or based on which historical data are you basing your comments?

      Are you exposed to other smaller countries in the world, where you can find data to compare?

      Personally I think at which stage of the country is at, demands dependency is more relevant.

      For eg when a child is still not in adulthood, this is the stage where he/she requires dependency and lots of guidance.

      But once the child has enter the stage of adulthood and matured, he/she needs to be responsible for his/her action, and can no longer behave like a baby or child who still need milk.

      So my question back to you : do you think Sg is at a stage where we still drink milk or adulthood?

      I am trying to be rude or arrogant. I am just trying to let us think more!

      Delete
    2. Sorry, above typo. i mean i am Not trying to be rude and appreciative of the comments

      Delete
  4. What if the Father has set up a large Private Trust providing lasting income for next few generations and more? Still no good?

    ReplyDelete
    Replies
    1. Of course Good lah.

      i just discovered Rolex the Billion Dollar company belongs to no one until today because the founder had no children, he put Rolex in to a permanent TRUST.

      Now who are all the beneficiaries?

      And without owners only trustees, how the then company booms and booms?

      Strange isn't it?

      Because with owners, Rolex may have gone bankrupt because of GREED.

      Delete
    2. What if the Father has set up a large Private Trust providing lasting income for next few generations and more? Still no good?

      Hi CW, the larger the Father’s Trust meaning the longer or more hardwork had put in prior to that. 前人种树后人乘凉!

      It reminds me of my ex boss (whom I love n respected v much n who is also the one who baptize me), who passed away early leaving behind hundreds of millions to his 3 kids.

      I catch up with the elder son regularly. He does not seems as happy as you will like to think he is to be, if you were him.

      He is in fact quite frustrated that he cannot carve out his own, or have the free-will to do the things he truly like when he was younger. He envy his friends who are regular graduate, finding a job, and talk about their career.

      He always wanted to be in financial services since young, but because of the Dad and his Dad’s business, he had to enter the university course his Dad wanted him to enter. After graduate, he has to manage his dad’s business which for many years, he seems ok, but I never able to see the true joy from his face.

      But when he talk about financial related staffs, he is so joyful.

      So to you, if you inherit your Father’s trust you will be very happy or feels good, but the reality is, we have not have that experience before.. prior to saying it is good.

      Joy, wisdom and knowledge is something you cannot buy just with money. Happiness which is short term and circumstantial dependence, you can buy with money.

      And stupidity and arrogant fool can erode the Father’s trust faster than you think. You may think it can last for many generations, but a fool can squander it in no time!

      Delete
  5. Better to teach people how to fish rather than give them the fish, even if it means letting them make some mistakes!

    ReplyDelete
  6. Hi Temperament,

    Thanks for the info about Rolex! It’s amazing right that a company without owners can boom and boom and continue its heritage and creativity and longetivity!

    ReplyDelete
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