Capital Recycling

For a while, Aunty Scroogey has been pondering how to explain the concept of capital recycling in an interesting way so that readers will not fall asleep while reading the article. This week, something interesting happened in the corporate scene which got Aunty Scroogey really excited because this is the perfect case study to highlight the aforementioned concept.

Let me start by telling you a story. Once upon a time, in a land not so far away, there was an old man who bought a pharmaceutical company from 2 of his cousins. The old man worked hard at growing his business and when he died, handed it over to his son, who brought the company to even greater heights. This son, in his old age, in turn passed the business to his 2 sons, Mal and Shiv. The 2 brothers did very well in managing the business, and led the company to become the biggest pharma company in the country. A few months before the collapse of Lehman Brothers in 2008, the 2 brothers sold their 34.8% stake in the company to a Japanese pharma giant for circa US$2.4bn.

At this point in time, you might be thinking that this fairy tale is rather interesting and the brothers are ‘lucky’. Well, this is not a fairy tale; it is a real life story. The 2 brothers mentioned are Malvinder Mohan Singh and Shivinder Mohan Singh, who used to own and manage Ranbaxy Laboratories Ltd in India, before they sold it to Daiichi Sankyo around mid-2008. It wasn’t by a stroke of luck that they decide to sell the company – it was by vision (if you are interested in details, google to read more).

The 2 brothers got their stake in Ranbaxy largely by inheritance, and assuming that there is no debt repayment involved, you might be thinking that US$2.4bn is a neat sum for them to sit pretty for the rest of their lives.  But they didn’t stop there. Instead they recycled their capital into areas that they knew well. Through their other company Fortis Healthcare, Mal and Shiv went on to buy 10 hospitals from a competing hospital group (Wockhardt) in India, and in March 2010, bought a 23.9% stake in Singapore listed Parkway Holdings Ltd from private equity group TPG Capital.

Word has it that the other major shareholder of Parkway, Khazanah – Malaysia’s equivalent of Temasek Holdings – was comfortable working together with TPG but not Fortis (for details, please google to find out more), thereby leading it to make a public offer at S$3.78 a share to raise its stake to 51.5% in Parkway. This was met with Fortis’ counter offer of S$3.80 a share. Khazanah in turn made a subsequent offer of S$3.95 a share, thus putting the bidding war to an end when the Singh brothers decide to cash out at that price. So, in less than 6 months since they bought their stake, how much did Mal and Shiv profit? A cool S$116 million. If you’ve always wondered why the rich gets richer, this is one reason why. Aunty Scroogey has earlier written about it here.

Exercise 1: Take a minute to think about this – If you’ve just sold an asset, what would you have recycled your capital and profits into? Most people have no idea, because they do not take the effort to educate themselves financially. Worse still, would you have dump the whole sum of money into setting up a business you are new to (erm… miracles do happen sometimes, but most of the time, they don’t), or even use it to buy a non-productive item such as a car? And most importantly, don’t forget to apportion it in the Big Money way lest you lose track of the amount spent.

Exercise 2: Mal and Shiv use Singapore as a base for their companies to become a pan-Asian healthcare leader. Indeed, being in Singapore, we are well-positioned to take advantage of the Asian growth story in the years to come. How are you preparing yourself to be a part of, and to take advantage of this in the next 3, 5, 10 or even 30 years? Or are you another one of those folks who just sit and complain about how things have become more and more expensive?

Think about it. Yes, do your own thinking and researching. This column is not about giving you the fish, it is about teaching you how to fish.

Karaoke

The background is that A-gal bought a super karaoke set which was loaded with like a million Chinese oldies that none of us could sing. So being the savvy shopper she is, the old (but cool) sweatshop gang was invited to her house for a crooning session. So I made some Pico de Gallo and guacamole (if you haven’t tried it yet, the recipe is here. And believe me you’ll want to try it. Its liberating!), loaded a tonne of chips and sour cream in the trunk and off we went to A-gal’s.

Everyone was polite and dainty at first. And we stuffed our faces with chips and dips. Then we found out that the super karaoke set had a grading system.

That was when all hell broke loose. Especially when we found out (unfortunately) that the louder you are, the better your grades were.

So my pals went from singing..

To squeezing every ounce of breathe they had in their pathetically puny lungs.

It was loud. Really really loud.

A-gal’s domestic helper packed her bags and threatened to leave the house for good. A-gal’s dog dug a deep hole in the garden and flung himself inside. It was that scary.

But at least someone was happy with his performance.

Underbelly: Cute Pups Cruel Origins

Article courtesy of The Age (www.theage.com.au)

SAY hello – and goodbye – to Nobby, the beagle who has become the sad face and birth-battered body of the RSPCA’s new campaign against the factory-farming of puppies.

The RSPCA is using the image of Nobby – tagged with the bitter caption ‘Employee of the Month’ – on billboards and its website in its bid to close down intensive commercial production of puppies and to seek a ban on their sale from pet shops.

When this photograph was taken in 2004, Nobby was a breeding bitch on a puppy farm at Learmonth, near Ballarat, owned by Dr Ron Wells, the former Victorian MP and vet.

After raids and a campaign by anti-puppy factory activists, the business was closed in 2005 under a confidential agreement with Ballarat Council.

But Nobby was already dead.

Campaigner Debra Tranter, who took the photo during a raid on the property, said this week she remains haunted by the image. ”I was making plans to go back to rescue her when a staff member told me she had been put down.”

Ms Tranter said the beagle had spent her entire life in appalling conditions on the farm. Her mother was a breeding bitch and at birth Nobby was also selected for breeding. ”They used to choose some of the female puppies and put them aside to replace the older breeding females,” she said. ”As the older females were killed off, the younger puppies, at six or seven months of age, would replace them. Nobby was one of those.”

She said the dog’s swollen, sagging mammaries were evidence of her life as a production-line breeder.

”It’s through the constant, back-to-back breeding; their bodies just don’t have time to recover. After anything up to 10 litters in a short period of time it’s inevitable that happens.

”We’ve rescued dogs similar to Nobby, with their mammaries hanging on the ground, and the vets have had to remove entire flaps of skin and just sew it back together, almost like a tummy tuck, to stop that dragging in the dirt.”

Former staff have told the RSPCA that many of Nobby’s puppies, like others at the property, suffered from what they described as a bacterial ”flesh-eating disease”, believed to be streptococcus canis, or necrotising fasciitis, which causes large areas of skin and underlying fatty tissue die and peel away.

The puppies were either euthanased or lost limbs. At least one of them was secretly rescued by a staffer, though it lost half of a back leg. Called Trilogy, not only for it’s three legs but also because it was born on March 3, 2003, she is still alive and well.

Staff members said Nobby would grieve each time her puppies were removed: ”She was well known as the howler as every time her pups were taken from her, she would howl for days.

”A lot of the dogs do grieve every time they have a litter of puppies taken off them,” said Ms Tranter.

”The pups are not properly weaned; they’re taken straight off mum, put into the truck and driven to the pet shop. It’s this constant cycle of pregnancy or feeding puppies. There’s real psychological damage done to these dogs.”

RSPCA spokesman Tim Pilgrim said there could be no better image for the new campaign: “Nobby epitomises the hopelessness and deprivation associated with puppy factories.

”The image represents the continuous cycle of pregnancy into which so many of the animals in puppy factories are forced. The mothers have little rest or reprieve between litters and are used as breeding machines to churn out as many puppies as possible for sale in pet stores, online or in newspapers.”

Dr Wells did not return calls from The Sunday Age.

http://www.closepuppyfactories.org

Share Trading Account

Like we’ve said before, this column is written especially for people who are new to financial planning. And just like learning martial arts, we start from Ground Zero. On and off, Aunty Scroogey gets asked by friends and colleagues at the supermarket on procedure for opening a share trading account, so this is what we will go through today.

Mainly, the important thing is to decide on a brokerage firm. The 3 local banks each have their own brokerage arm, eg DBS Vickers http://www.dbsvonline.com/English/index.asp, UOB Kay Hian http://www.uobkayhian.com.sg/ and OCBC Securities http://www.iocbc.com/. If you maintain your operating bank account with any of these 3 banks, you might wish to consider using its brokerage arm. Apart from these, there are also other independent brokers such as Phillip Securities http://www.poems.com.sg/.

You will also need a Central Depository http://www.cdp.com.sg/main/index.shtml account (or CDP for short) for clearing your trades. When you are at the brokerage firm to open your account, your broker will open a CDP account for you at the same time, if you do not already have one. The brokerage firm will also allocate daily buying and selling limits based on your income level. For example, if your limit is $5,000, the total value (not the number of shares) of your purchase per day shall not exceed that amount.

One very important thing that you might wish to consider when opening your share trading account is to link the share account to your bank account so as to facilitate settlement via GIRO. After doing a trade of shares denominated in Singapore dollars, you need not follow up with payment manually if your account has been linked. Otherwise, you would need to make a point to remember to send in a cheque or do an internet banking/ATM transfer to pay for the shares you have purchased. Settlement period is typically 3 days. If the due date (T+3) falls on a Singapore holiday, settlement will be made on the following market day. If shares are not settled within the settlement period, they might be forced sold.

At time of opening your share trading account, you might also wish to consider applying for an online log-in. Brokerage charges for DIY online trading are usually lower than calling your broker on the phone to do a trade. For details of fees and charges, refer to websites of brokerage firms mentioned above. You should also go through a list of their FAQs to have a better idea of the share trading procedure.

By the time you walk out of the brokerage firm, you are almost done. Log-in and password will be mailed to you separately and your account will be ready in a few days’ time.
Opening a share trading account is the easy part. The difficult part is deciding on what shares to buy, when to buy and at what price. That is another topic for another day.

Live well,
Aunty Scroogey

Patchwork

Have you had an item which you kept since young, for it meant the world to you and cannot be replaced?

I do. It’s an old patchwork baby blanket that my great grandma made for me more than 30 years ago. Its disintegrated beyond shreds now, so much so I feel embarrassed to post a photo of it up. Even my mum, the master of all hoarders in the universe, wants to get rid of it.

Actually I might post a picture of it one day. When I master enough courage.

And then you’ll cringe. You’ll see. You just wait and see!!!

So what I am trying to say is, that rag of a patchwork blanket had inspired me for a long time to actually make one myself. I made an elementary level mini blankie for K-gal and beanie before, but it wasn’t that much of a real patchwork deal.

Therefore I decided to torture myself a little more and made this.





It took me more than 3 months to finish this as I am not familiar with sewing yet and made a few blunders along the way. But I have to say it’s worth it, and I’m happy with the results.

I shall make a faint attempt at showing you how it’s done, but I am still a novice myself so don’t shoot me!
First cut strips of your desired fabric and join them on the wrong side. Press the seams flat.

Cut squares out of the strips and join them on the wrong side, alternating the design and again, press the seams flat.

Cut strips of border fabric and frame the squares together by sewing around them on the wrong side. This is then what you’ll get.

Then just join them all together and add borders, batting and binding to complete. I forgot to take photos of the action but will share them for my next project. Stay tuned!

The Football “Psychic”

You know the whole world has gone bersek when they turn to an octopus as the football oracle.
Believe me I have nothing against octopus and I love all animals alike. Ok maybe a bit less love for rats but that’s another story.
And I am not saying the octopus prediction is bollocks or bogus, but I am against the notion of using any animals for fame, money or any other entertainment reasons. That is why I have always been strongly objective to the idea of animal shows, movies, rides or any mindless entertainment uses where they are made to work in captivity. It does not serve any purpose except the people who made monetary gains out of those acts.
Punters who worship Paul Oktopus and made money out of him, did you share your winnings or do you even care about him now that Germany is out? Will you still remember him and his greatness few months down the road? Yeah, I didn’t think so.
Of course this has not been a new practice. For centuries, men have been making use of animals for work, food and entertainment. Now that we have evolved and replaced animals with machines, turned to vegetarianism (for some) for food and the mass media for entertainment, maybe its time we rethink the need to make use of all our other mammal friends.

You know the whole world has gone bersek when they turn to an octopus as the football oracle.

Believe me I have nothing against octopus and I love all animals alike. Ok maybe a bit less love for rats but that’s another story.

And I am not saying the octopus prediction is bollocks or bogus, but I am against the notion of using any animals for fame, money or any other entertainment reasons. That is why I have always been strongly objective to the idea of animal shows, movies, rides or any mindless entertainment uses where they are made to work in captivity. It does not serve any purpose except the people who made monetary gains out of those acts.

Punters who worship Paul Oktopus and made money out of him, did you share your winnings or do you even care about him now that Germany is out? Will you still remember him and his greatness few months down the road? Yeah, I didn’t think so.

Of course this has not been a new practice. For centuries, men have been making use of animals for work, food and entertainment. Now that we have evolved and replaced animals with machines, turned to vegetarianism (for some of the greater ones amongst us) for food and the mass media for entertainment, maybe its time we rethink the need to make use of all our other mammal friends.

Baby and Lucas

are the 2 dogs I have. They get the same amount of love, attention and equal spanking opportunities when they don’t obey the house rules. D-man and myself love them to bits and would never trade them for anything. Nothing in this world can buy them!!!

Unless its 100 million US dollars.

In cold hard cash.

And provided we are granted visiting rights.

Then we might consider cloning them.

Anyways my point is, this 2 dogs of mine, are very different in every aspect. Baby is the big dog trapped in a short, small, stumpy body, whose sunkissed golden fur grows 2 cm everyday and flows like silk in the wind. Lucas is a chicken trapped in a hound’s white and black spotted body, with an otter’s tail attached.

Lucas sits by my bed and guards me while I am asleep..

Conscientious and careful of every movement and unfamiliar sounds…

He sits obediently for his food, his walk and waits for us to finish watchy telly before starting to peddle his toys to us.

Lucas can do tricks like left and right hand shakes, sit still, down, and jumps over high walls and hola hoops when asked.

While Baby has very different skill sets.

She lies on my bed all day….

And gets away with murder.

You see, life is always fair. :)