Saturday, January 21, 2023
1. There was a lot of discussion in social media over the inflation of circulation figures by SPH. Many people clamored for transparency. They accused SPH of dishonesty in inflating the figures and were indignant that this episode would damage the reputation and integrity of Singapore.
2. I did not join in the accusation. I usually do not give a negative opinion when the facts are not clear. I am also not enthusiastic about defending Singapore's reputation and integrity, as I have some doubts over this matter.
3. A recent news report provided the following information.
- There was an overstatement of 49,000 average daily copies of news titles that was recorded as circulation numbers but not distributed. Most were digital copies. It amounts to 5 per cent of total daily circulation.
- There was an inflation of 5,000 average daily copies recorded after contracts had lapsed
- There was a difference of 17,000 between the reported circulation and the actual usage recorded by SPH Media's system
- There is a possible discrepancy of 19,000, which included a barter arrangement with another publisher
4. This is my perspective of the above figures.
a) 49,000 (mostly digital copies) were not distributed. Is there a need to "distribute" a digital copy? Could the subscriber access it by login to the website?
b) 5,000 copies were counted after the contracts have lapsed. Maybe they were kept alive for a few days or weeks in case the subscriber acts to renew and pay for it?
c) It is not clear whether the discrepancy of 17,000 is included in the 19,000.
5. If I were to include all the above figures, the total discrepancy amounts to slightly less than 10 percent of the reported circulation (which I estimate to be 1 million). It appears to me that the figures are not grossly inflated.
6. Let me explain what I understand about "circulation" in this environment.
a) The circulation includes print and digital copies over several newspaper titles
b) The circulation may includes paid subscriptions and free subscriptions.
c) The circulation includes copies sent to new agents who sell them at the news stands. Some may be subject to returns.
d) The subscriptions may be activated and payment has not been received, or may have lapsed and are kept for some time pending action to renew them.
The counting of the "circulation" is a matter to be decided by management policy, following industry practice.
7. There was a suggestion that the advertisers might have been misled to pay a higher advertising fee based on the inflated circulation. I do not think that this is a concern as the discrepancy is less than 10% and would probably be accepted as "industry practice".
8. It is generally unwise for a new management to challenge the decisions taken by a previous management over matters that rely on management judgment.
Tan Kin Lian
Friday, January 20, 2023
Some people said that Hyflux collapsed due to bad decisions taken by its management from the following:
a) Losses on overseas projects
b) Tendering a low price for the supply of water under the Tuaspring plant.
From my research, these above factors contributed to only a smaller portion of the loss by Hyflux. The main loss was due to their generation of electricity when the electricity price collapsed due to oversupply.
Wisdom of the Crowd: 41% of the respondents voted for Apollo (by Baidu) to be the self driving platform that will be the champion. 33% voted for FSD (by Tesla) and 18% for Waymo (by Google).
1. Europe and America experienced high inflation during 2022. Inflation in China was comparatively low. The data from statistica.com showed the inflation rate to be 11.1% in EU27, 8.3% in USA and 2% in China.2. A large component of the inflation is caused by high energy prices. Why was China able to keep inflation low, when it had to import a large proportion of its energy needs? Europe had to import most of its energy, but had a high inflation rate. Even the US, which was a major producer of energy, had high inflation.
3. The reason for the difference is probably due to the working of the energy market.
4. China signed long term contracts with oil producers in the Middle East countries to supply oil and gas at fixed prices. These contracts provide price stability for the producers and for China. My guess is that these oil companies that buy the energy on these contracts are given long term contracts to produce energy to the energy market in China at fixed prices.
5. I read that the pricing mechanism in Europe is different. The electricity and gas prices are based on the current market prices for energy. When the oil and gas prices increased sharply, the electricity and gas prices charged to consumers and industry increased accordingly. As the oil companies probably had long term contracts for their purchases, they enjoyed bumper profits.
6. My guess is that the energy prices in America follow the same pattern as in Europe.
7. The approach adopted in China is better. It ensured that the electricity and gas prices are kept relatively stable, based on the long term contracts. The oil companies produce the energy and supply them to the energy market at the contracted prices. The energy is then distributed to the households and industries at a small markup on the wholesale prices.
8. The energy market in Singapore probably follow the practice in America and Europe. The price of electricity and gas is probably quite volatile in Singapore.
9. The above observation is based on my research, understanding and speculation of the workings of the energy market. I am not an energy expert and may have interpreted the research wrongly.
Tan Kin Lian
Thursday, January 19, 2023
Wednesday, January 18, 2023
1. I recently learned that election into the national parliament and local (i.e. canton and municipal) councils in Switzerland are based on proportional votes received by participating political bodies.
2. Each political party which receives votes above a threshold gets a number of seats based on the proportion of votes received by the party. The party decides on the candidates in the party that takes the seats.
3. This system has the following advantages:
a) The number of seats received by each political party is proportional to the votes that the party receives. This is different from the "first past the post" system adopted in US, UK, Singapore and many other countries that follow the US or UK systems. For example, if a party receives 30% of the popular votes, the party will get 30% of the seats under the Swiss system. The political party will get less than 30% of the seats under the "first past the post" system. In some cases, they may not win any seats at all.
b) The political party will distribute the seats to its "candidates", based on seniority and experience of these candidates. It is likely that the most capable candidates will be selected. It will reduce the risk that a capable leader may lose an election based on "first past the post" system.
c) The cost of the election campaign spent by the political parties is likely to be much lower under the Swiss system, compared to the system in US and UK. The political party can focus on its election manifesto, rather than on the personal qualities of the individual candidates (which usually lead to large sums being spent to smear the candidates of the other parties).
4. There are some disadvantages under the Swiss system:
a) A corrupt or incompetent candidate cannot be thrown out directly by the voters.
b) The voters cannot vote directly for outstanding leaders.
5. On balance, the advantages of the Swiss system outweighs the disadvantages.
Tan Kin Lian
Wisdom of the Crowd: 86% of respondents said that universal suffrage (one man one vote) does not produce good leaders as the system is hijacked by rich people who have the money to influence the election.https://tklcloud.com/Crowd2/chart3.aspx?id=2803
Warren Buffet recently said that banks are a good investment for 2023.
I made a study of the financials for global banks. My findings are:
a) The average PE ratio is 10.6 times and dividend yield is 3.6%.
b) Most US banks have a PE ratio of around 10.0 times. The Asia banks (HSBC, DBS, MUFG) have a higher PE ratio. ICBC (China) has a low PE ratio
The risk to global banks is the possible loss from the drop in the property markets. The banks lent a lot of money on mortgages. This could cut into their earnings.
The property markets in several countries are under stress. The mortgages are being squeezed by higher interest rates. The defaults are expected to rise.
I will avoid the banks, except for ICBC which has a very low PE ratio and a high dividend yield.
Note - This is a personal observation. It is not investment advice.
Tan Kin Lian
Tuesday, January 17, 2023
1. I have suggested that the China govt get their e-commerce websites in China (e.g. Alibaba) to quote their products and receive payment in RMB.
2. The buyer can use Wise platform to pay CNY to an AliPay account of the seller. See https://www.youtube.com/watch?v=Bvk4AwpiNw8
3. My DBS Bank allows me to send CNY from my bank account to an Alipay account also.
4. The seller can quote an AliPay account for the buyer to make payment.
5. I believe that the bank fee should be quite low, compared to payment by SWIFT.
6. Two years ago, I bought some product in Alibaba and had to pay by USD. I incurred a high bank charge, maybe US$20 for a small payment.
7. If all the sellers from China quote their prices in RMB, the buyers will have to pay by RMB instead of USD. This will encourage the buyers to keep their balance in RMB (either in CNY or CNH). The RMB can become an alternative reserve currency quite quickly.
8. The USD will lose a large volume of the international payments that they enjoy now.
Tan Kin Lian
I own 170,000 shares of China Petroleum (0386.HK) at an average cost of $3,90 HKD. The current price is $4.02 giving me a small gain.
The PE ratio is 6.28 and the dividend yield is 13.84%.
The forward PE ratio is 4.82. This suggest that the earnings will increase by 56% for the current financial year.
I have read several articles that suggest that oil companies in China will be making a large profit in 2022 as they were able to buy oil from Russia at discounted prices and sell them overseas at a large profit. This should be reflected in the earnings of the oil companies in China, which have a large stake owned by the state.
Considering the attractive financials, I bought another 70,000 shares at $4.02.
Note - This is a personal opinion. I am not giving investment advice.
Tan Kin Lian
Monday, January 16, 2023
Wisdom of the Crowd: 74% of respondents said that it is a bad policy to bring in workers from low cost countries as it depressed wages for local jobs and is bad for local workers.https://tklcloud.com/Crowd2/chart3.aspx?id=2801
Sunday, January 15, 2023
I suggest that the China authority ask the e-commerce platforms to quote their prices in CNH (the international RMB) and operate a payment platform to handle the payments.http://tklcloud.com/Feedback/feedback2.aspx?id=5609
01/15 - 01/22
- A new approach for SPH Media Trust
- Discrepancy in circulation figures of SPH
- Losses suffered by Hyflux
- WOTC - Self driving platforms
- Review of Baidu (9988.HK)
- Review of Top Glove (BVA.SI)
- Inflation and energy prices in 2022
- WOTC - Surveillance to combat terrorism
- Wisdom of the Crowd - New Issues
- Election system in Switzerland
- WOTC - Universal suffrage
- Review of global banks
- Payment in RMB to sellers in China
- Review of China Petroleum (0386.HK)
- Wisdom of the Crowd - New Issues
- WOTC - Capable and honest system
- WOTC - Workers from low cost countries
- Payment in CNH
- WOTC - Globalization
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