Chinese Labour Strikes Put Singaporeans to Shame

The recent labour strikes in Honda factories by Chinese workers have been all over the global news. Chinese workers are demanding better work conditions and better wages, and they are willing to go on strike for their demands. The recent incidents have been reported by New York Times, Bloomberg Businessweek, Economist, AFP and many others. In one of the NYT article, was the following comments:

striking workers at another Honda plant less than 100 miles away in Zhongshan marched in the streets on Friday and made a new demand: the right to form an independent labor union.

“This is a remarkable development,” said Anita Chan, a labor expert at the University of Technology in Sydney. “Most strikes in China tend to be about not being paid or being mistreated. This was different. The workers were demanding very high salaries. And they want to elect union leaders democratically.”

In Singapore, workers have been intimidated and cowed into submission by the People's Action Party. They are told to be cheaper, better and faster. At the same time they have to accept competition from cheaper foreigners on their very own shores. And for the Singaporean men, they even have to sacrifice 2 years of their lives to protect the soil on which foreign labourers are working on. On top of that, Singaporean workers have to accept record housing prices, a congested transportation infrastructure, and even declining real wages.

They have to suck all of this in without a whimper or a sound. And they do.

Why?

Because they are pussies.

Singaporean workers would never dare to strike or speak out against the ministers. They would never dare stand up against an elite which pays itself millions of dollars in salaries while the aged uncles and aunties have to work in their 60s and 70s for subsistence pay.

Who says that democracy is not part of Asian values? Who says that strikes and democratically formed labour unions are not part of Chinese culture?

The Honda strikes in China have put an end to this utter nonsense.

Another NYT article reported:

Reports of the recent labor strikes have been unusually public here and have appeared largely uncensored in China’s state-run media.
Until now, the government has discouraged strikes and censored reports about labor unrest, apparently out of fear that the reports could fuel other strikes and lead to social unrest. But in the last few weeks, there have been reports — some in state newspapers — of several large strikes around the country.

This week, for instance, a local government-controlled union in the city of Shenyang has been negotiating with KFC, the fast-food giant, to secure a nearly 30 percent raise for workers.

Last Sunday, in another action, about 500 workers at Merry Electronics, a Taiwan-owned components maker, held a walkout that the company said was over a work dispute. Later that day, the company announced a 22 percent pay increase, though a spokesman said the raise was unrelated to the strike.

The PAP asks Singaporeans to be cheaper, better, faster. The PAP asks them to suck in the foreign cheap labour. Meanwhile,

The Chinese government has also encouraged local governments to raise minimum wage standards, and even called on companies to treat workers with more dignity. - NYT

Singaporeans vote in the PAP time and again with overwhelming majority - they keep in power the very hand that oppresses them. And they seem to love doing so.

The only possible reason is that this is because Singaporeans are cowards - sibei kia see!! Either that or they are bloody stupid to keep on believing Lee Kuan Yew's machinery which keeps them deceived with the propaganda straits times. Or they are masochists who love inflicting pain on themselves.

Which one is it???

Singaporean workers - time to wake up!!!!

K-Green Trust: Keppel Corp pulls a fast one past the Research Analysts

A couple of research analysts have released their research notes on keppel corp's K-Green Trust. Keppel recently released the listing documents for the KGT, which you can find here. It is interesting to note that both the research reports I have found so far are bullish on the KGT, and both suggest significant upside to the listing valuation.

My personal take on the KGT is that it is a structured finance vehicle (not unlike a CDO) meant to house junk project assets that Keppel does not want to have on its balance sheet. By hiving off the 3 project assets (Senoko & Tuas Waste-to-energy plants, Ulu Pandan NEWater plant) into a business trust, Keppel can obfuscate the substance of the assets and divest it to the fools in the market who haven't got a clue what they are buying into.

And, judging by the comments of the research analysts, it appears they have been comprehensively fooled. They have completely missed the substance of what is going on here and are acting as cheerleaders to what in my opinion is fundamental destruction of shareholder value by the Keppel Corp management.

I am very interested to see what more analysts think of the KGT and if any of them will actually call Keppel out on what is actually going on here. But judging by what happened with structured finance vehicles in the USA in the years past, I doubt any of the analysts have the brains to figure it out. And even if they do, none of them will have the guts to call Keppel out on its bullshit.

Update: I have elaborated significantly on my thoughts of the KGT here.

-----------------------------

Lim & Tan Securities

Based on projected distribution of 3.91 cents for 6 months and 2 days in 2010, and 7.82 cents for ye Dec ’11, the yield at $1.13 would be 6.82% (annualized) and 6.95% respectively. As a comparison, City Spring offers a trading yield of 7% at 60 cents (DPU of 4.2 cents). Note however two key differences between the two:

• KGT is Singapore-centric whereas 50% of City Spring is accounted for by Basslink in Australia;
• KGT is debt free vs City Spring’s high gearing, which has implications for KGT’s growth strategy going forward.

We believe KGT is attractive. KGT’s listing is expected at end June, and results from the distribution-in-specie by Keppel Corp on the basis of 1 KGT unit for every 5 Kep C shares, valued at 22.6 cents per Kep C share.

Kim Eng Securities

The listing price for Keppel Corp’s Keppel Green Trust (KGT) has been set at $1.13 per unit. Keppel projects a DPU of 3.91 cts for the remainder of FY10and 7.82 cts for FY11. This generates a yield of 6.82% in FY10 (annualised) and 6.95% in FY11. We see fair value of KGT at $1.53, with the implied yield of 5% derived from a highly stable cash flow.

Morning Bulletin 27 January 2010
Top Ideas

23-ct dividend in specie from KGT distribution
Shareholders will receive one K-Green Trust (KGT) unit for every 5 shares as a dividend in
specie. 50.5% of the trust will be distributed to shareholders. The effective value per unit is
therefore S$1.16. Financial details such as expected DPU, earnings and yield will be
forthcoming over the next few weeks, with a listing by 2Q10. We expect the terms to be
attractive, and to provide long-term, regular and predictable distributions to its unitholders. We
also estimate that KGT’s listing could see up to 40% upside from its base NTA valuation of
S$750m. 

Nestle & Neste Oil Supplier IOI Group Accused of "Intentional Fraud" and Illegal Deforestation

Following work done by Greenpeace to expose the illegal deforestation perpetrated by Indonesian palm oil giant Sinar Mas, Friends of the Earth has released a report on Malaysian palm oil giant IOI Group, accusing it of illegal deforestation and "intentional fraud." This report follows major press coverage of Nestle's decision to drop Sinar Mas from its supply chain because of mounting evidence that the latter is engaging in irresponsible destruction of high conservation value rainforest.

IOI is a major supplier of palm oil. Amongst its high profile clients are Nestle, the world's largest consumer foods group known for its global brands such as Kit Kat, and Neste Oil, a leading oil refining and marketing company which recently built a major biofuels refinery in Singapore.

IOI expanded its operations to Indonesia in 2007 in order to meet the increasing demand. The company bought over 150,000 hectares of new concessions on Borneo and it is on these concessions that IOI is accused of illegally clearing rainforest, peat land and habitat of the endangered orangutans. IOI is also a palm oil intermediary in the sourcing of palm oil from other producers to meet the demand of its customers.

As a palm oil plantation developer and producer, IOI is accused of

"No approved environmental impact assessments ... Fraudulent statements ... Unauthorised plantation development in forestland ... Encroachment in forested land ... Fires on IOI concessions in Ketapang ... Land conflicts in the making"

As a palm oil trader, IOI is part of the "chain of destruction" from environmentally destructive palm oil producers to food products retailers:

(click image for full size picture)

Indeed, the pressure is mounting on the palm oil industry to put a halt to its corporate social hypocrisy. Two of the largest palm oil producers have been "Caught Red Handed" and it is time for the destruction to stop.

OCBC Supports Environmental Destruction and Socially Irresponsible Business Actions

OCBC investment research's Carey Wong recently released a research note in response to the latest action by Nestle to terminate its direct palm oil purchases with Sinar Mas, which operates palm plantations through its Singapore listed subsidiary Golden Agri Resources. In her research note (signed off by head of research, Carmen Lee), Carey said:

Financial impact likely limited. While SMART did not reveal how much Nestle contributed to its sales, we understand that it is likely pretty insignificant at less than 0.5% of overall sales; this as the group sells most of its CPO to customers in China and India, where demand for CPO is expected to track the rapid urbanization in these countries. As such, the financial impact from the latest development, if any, will probably be very limited for GAR, although SMART may suffer some minor setback to its reputation. On that note, we believe that the adherence to guidelines laid out by RSPO (Roundtable for Sustainable Palm Oil) will become more important as the Nestle development suggests that businesses are paying more attention to “green practices”.

Maintain BUY with S$0.66 fair value. However, the push for full RSPO-certified CPO is still expected to be quite gradual; a Dow Jones report estimates that the total amount produced through sustainable methods is still quite small at 1.5m tons, as compared to the 45m tons of annual CPO output globally. As such, we continue to remain upbeat about GAR’s medium-term prospects and maintain our BUY rating and S$0.66 fair value.

Indeed, it is true that the direct contracts with Nestle constitute but a tiny fraction of Sinar Mas' overall sales and the immediate short-term financial impact is likely to be negligible.

(click image for full size picture)

However, Carey has conveniently ignored the high probability of other customers and intermediaries cutting Sinar Mas from their value chains. Cargill and IOI, both major intermediaries and purchasers of palm oil from Sinar Mas, are coming under pressure from environmental groups and customers for not terminating their purchases from now notorious illegal deforester Sinar Mas. Indeed, Nestle itself is putting pressure on Cargill to ensure that Sinar Mas is eliminated completely from its value chain. IOI has also recently come under fire for its environmentally destructive practices in the development of Indonesian Palm Oil plantations. The chance of further financial impact is not insignificant.

In any case, whether or not Sinar Mas eventually suffers financially from its fracas, I find it distasteful and socially irresponsible for OCBC to promote a business that wilfully and illegally destroys high conservation value rainforest while claiming that it is a responsible member of the "Roundtable of Sustainable Palm Oil." Through the promotion of Golden Agri stock, OCBC shows that it is willing to turn a blind eye to environmentally destructive practices and corporate social hypocrisy, in the pursuit of profits.

And just a point of note - in a detailed comparative profitability analysis of the 5 SGX listed palm oil stocks, Golden Agri has come in last, by a mile.

Hence, how on earth can any analyst with a conscience consider Golden Agri to be a buy?

First Resources - FY 2009 Detailed Fundamental Analysis

First Resources Limited is one of the leading oil palm plantation companies in Indonesia. It is an upstream operator with primary business activities in the cultivation and harvesting of oil palms, and the processing of fresh fruit bunches into crude palm oil for local and export sales. Established in 1992, FR is one of the fastest-growing plantation companies in the region. It manages more than 100,000 hectares of planted oil palm plantations and operate 8 palm oil mills in Indonesia. FR's plantations produced approximately 1.4 million tons of fresh fruits bunches and 323,000 tons of crude palm oil in 2008.

Following my profitability analysis and valuation analysis, FR has proven to be one of the interesting stocks amongst the 5 palm oil listed business in SGX. The following charts are a detailed fundamental analysis of First Resources from FY 2006 - FY 2009. (click charts for full sized image)

First Resources scored very well on the comparative profitability analysis, coming in first amongst its peers. It is interesting to note that this is despite the fact that its profitability numbers actually declined from FY2008 to FY2009. Across the board FR shows consistently high profitability. It consistently posts ROE above 20% and ROA above 15%. FR's high profitability is not a flash in the pan.

FR's profit margins are also consistent. Even with the big fluctuations in CPO prices up and down, gains in biological assets appear to be quite consistent over time. Gross and operating margins are also fairly consistent. Net profit margin has been rising since FY 2007, it is likely to revert to the mean.

FR's leverage has been consistently improving over time since IPO. If the company keeps this up, this is good for shareholders as it means that financial risk is lowered.

Asset utilisation is fairly consistent. Good upward trend in the receivables turnover.

Fairly consistent asset composition.

All in all, nothing very alarming, in fact good profitability numbers over time are a good sign for prospective investors in this stock.

Palm Oil Stocks Valuation Multiples - Wilmar, Golden Agri, Indo Agri, First Res, Kencana Agri

Based on the latest FY 2009 earnings and balance sheets statements, here are the relative valuation multiples for the 5 SGX listed palm oil stocks. The relative valuation is based on 2 key multiples: the price/earnings ratio and the price/book ratio

	Wilmar Int	Golden Agri	Indo Agri	First Res	Kencana Agri
Price per Share (SGD)	6.55	0.56	2.19	1.15	0.295
Price/Earnings Ratio	15.58	8.01	9.98	9.30	12.60
Price/Book Ratio	2.69	0.88	1.58	1.95	1.47

As can be seen, Wilmar has the highest P/E ratio. This is despite the fact that it is not the most profitable of all the companies. However, it is definitely the largest of all the companies. Its size and reputation definitely contributes to the fact that its P/E is the highest of all the 5 companies. In contrast, Golden Agri has the lowest valuation of all the 5 companies, and this is in line with its poor profitability.

Meanwhile, taking into consideration the profitability rankings, it seems that First Resources looks very reasonably valued on the basis of its P/E ratio, relative to its peers.



Based on the Price/Book ratio, Wilmar is again the most expensive. Golden Agri is the cheapest. However, this time First resources is not particularly cheap compared to the others. It has a high P/B, that partly reflects its high ROE.

Roundup: Based on all the profitability numbers and the valuation numbers, it seems that First Resources is the most reasonable buy amongst all the 5 SGX listed palm oil stocks, purely based on a financial analysis.

What is Cargill Waiting For? Cut Sinar Mas (Golden Agri Resources) Palm Oil Immediately!!

Unilever, Nestle, Kraft, Shell and Sainsbury have all cut notorious rainforest destroyer Sinar Mas from their list of palm oil suppliers. However, Cargill, the multinational commodities trading giant, is yet to follow the lead of its corporate peers in taking a firm stand on corporate social responsibility and environmental protection.

Despite clear evidence that Sinar Mas, the largest palm oil producer in Indonesia, is illegally logging and clearing high conservation value rainforest and peatlands, and in the process further threatening endagered species like the Orangutan, and contributing to greenhouse gas emissions, Cargill is still mucking around on the issue.

Cargill's role in the 'chain of destruction' is illustrated in the image below. The company is a middleman between the producers of the palm oil and the final users of the same.



The company has released a statement on the issue on its website, saying:

Cargill is keenly aware about the allegations made in December 2009 by Greenpeace about illegal forest clearance and the Indonesian palm oil company, Sinar Mas.

When we became aware of the Greenpeace report we contacted Sinar Mas’s senior management and we have communicated to them that we are looking to them to address the issues in the Greenpeace report. Additionally, we urged the RSPO board to review this issue. We are pleased the RSPO Board has instructed the RSPO Secretariat to get a response from Sinar Mas to the allegations in the Greenpeace report. We are continuing to follow this closely and hope to see a reply from Sinar Mas by the end of April 2010.

If the RSPO validates the allegations of improper land conversion or illegal planting in deep peat land as alleged in the Greenpeace report and Sinar Mas does not take corrective action, we will delist them.

The recent actions by Nestle and Unilever, however, demonstrate that Cargill's corporate peers have rejected the credibility of the RSPO. Indeed, the evidence of Sinar Mas' illegal and environmentally destructive activities comes in spite the fact that the company is supposedly 'certified' by the RSPO.



Forest4climate articulates the problem clearly:

So if within the palm oil industry there’s all this awareness of the potential damage they could cause to both people and the environment, why are we still finding evidence of wholesale forest destruction? Just a couple of weeks ago, we found bulldozers belonging to Sinar Mas clearing huge tracts near Jayapura in Papua, and yet Sinar Mas is an RSPO member. There’s obviously something wrong somewhere.

That something is the basic set-up of the RSPO itself. As it currently exists, its standards and principles are too vague and weak to really do any good and, as we’ve seen, some of its members are happily chewing their way through rainforests and carbon-rich peatlands. There’s no danger of actually being penalised in any way by the RSPO, even though they’re supposed to abide by the code of conduct which states “it is fundamental to the integrity, credibility and continued progress of the RSPO that every member supports, promotes and works towards the production, procurement and use of sustainable palm oil.” What kind of “integrity” or “credibility” does the RSPO have if it turns a blind eye when its members are clearing huge areas of forest or draining and burning peatlands?

Indeed, the whole point of the Greenpeace allegations is that RSPO is an organisation set up to give the palm oil producing industry merely the image of promoting corporate social responsibility, while at the same time engaging in corporate social hypocrisy. Going through the RSPO to hold Sinar Mas accountable completely misses the crux of the matter. It highly unlikely that the RSPO will ever "validate the allegations of improper land conversion or illegal planting in deep peat land"


Meanwhile, Sinar Mas continues to sidestep the issue and release more propaganda. There have been no statements coming directly from the company engaging directly the Greenpeace allegations. Instead, Bloomberg BusinessWeek reported:

PT Sinar Mas Agro Resources and Technology, Sinar Mas’s palm oil unit, is “committed in applying a responsible land clearing and the best practice of farming management in all of our plantations,” President Director Jo Daud Dharsono said by phone today. “We always maintain communication with Greenpeace and we will soon arrange a meeting and have a dialogue with them,” he said.. 

Sinar Mas is obviously denying the issue and trying to sidestep their way around it.


Cargill should stop depending on the RSPO to hold Sinar Mas accountable, and instead should conduct its own independent audit of Sinar Mas' environmental practices. It should demand a direct response from Sinar Mas to the allegations, rather than going through the dubious RSPO. Indeed, in the light of the undeniable evidence and the actions of Unilever, Nestle, and other food giants, Cargill should suspend all purchases of palm oil from Sinar Mas immediately until the latter is able to demonstrate that the allegations are false.

There is no excuse for Cargill to do otherwise. Cut Sinar Mas palm oil immediately!!!

Related: "Cargill's Legacy of Destruction"