Morning Bamboo Insight: 14 Sep 2014

Morning Bamboo Insight: 14 Sep 2014


  1. The corporate M&A genotype theory

  1. Scotland’s fateful choice; The case for union is overwhelming. The path of separation is a fool’s errand; How a Yes would make enemies and alienate peoples

  1. The world is saying No to Scottish separation; The Yes campaign has elected to play a cynical, bewildering and finite game of identity politics

  1. Banco Espírito Santo: Family fortunes; Bank chief Ricardo Espírito Santo Salgado faces allegations that his group engaged in a fraud

  1. How important is the financial sector to Scotland’s economy? Scotland has a long, rich history in the financial sector. Money manager Standard Life has had its headquarters in Scotland for 189 years

  1. How Aaron Klein and Riskalyze are Revolutionizing the Industry?

  1. Corruption Fighter Gooch Tackles Abusive Shell Companies

Asia Pacific

  1. (Japan) – Banking group wants access to NPA’s yakuza database

  1. (Korea/China) – Backed by LVMH, Psy producer charts course into China fashion, music

  1. (China) – As China Opens Stock Market to Foreign Investors, Bargains Await Risk Takers; Amid Dismal Performance, Country Is Granting Foreigners Direct Access to Mainland Stocks

  1. (Asia) – Asia Less Vulnerable to Taper Tantrum, But Risks Remain

  1. (Japan) – Japan is creating jobs but workers do not prosper; Casualisation of the workforce is stifling the reflationary experiment

  1. (China/Japan) – China could be the next Japan: Merrill Lynch analysts

  1. (HK/China) – SFC leads class action against ex-CITIC bosses

  1. (China) – ‘Energy Delta’ becomes victim of China’s coal price slump

  1. (China) – Will herd investors sabotage Hong Kong-Shanghai Stock Connect?

  1. (China) – High-speed rail boom in China spawns network of ghost towns

  1. (China) – China’s shift to high-end electronics takes time: HSBC


  1. Highest-paid female executive seeks immortality-digitally

  1. Steve Jobs’ office is exactly as he left it

  1. Dr M: I failed to change lazy Malays

  1. As music sales fall, sax player Kenny G turns to stockpicking

  1. In a Study, Text Messages Add Up to a Balance Sheet of Everyday Morality; A study looking at daily attitudes provided a rough idea of just what constitutes the moral content of a random day

  1. Reading ‘Harry Potter’ Makes You A Better Person, Research Shows

  1. Scientists unlock secrets of coffee DNA; Research may help produce higher-yielding disease-resistant crops

  1. Angst, acne and capitalism at commerce summer camps for teens; Joline Godfrey is the founder of Camp Start-up, which charges up to £2,500 for a 10-day residential course

  1. Intro to computer science is now the most popular course at Harvard


  1. Apple working on products no one has guessed at, says Tim Cook; Apple chief Tim Cook talks about new products, Apple TV and the legacy of Steve Jobs in US interview

  1. With a new version out and millions hooked, WordPress creator Matt Mullenweg’s unconventional model can make or break the web.

  1. (China/Tech) – For U.S. tech firms, China entices in spite of tight state control

  1. (Japan/Tech) – Convenience, points fuel spread of e-money in Japan

  1. EBay CFO: Making Acquisition Sprees Work

  1. (Tech) – For UPS, E-Commerce Brings Big Business and Big Problems; Delivery company is squeezed by free shipping, fierce competition and the power of

  1. (Tech/Japan) – Sony Edges Toward Apple-Like Ecosystem

  1. Peter Thiel Reveals The Worst Investment Decision He’s Ever Made

  1. (Tech) – Robot capable of handling unfamiliar objects unveiled

  1. (China/Tech) – Alibaba defends payments unit split-off; Investors voice concern about corporate governance

  1. (Korea/Tech) – A time for nimbleness: Alarm bells are ringing in Korea’s IT industry – an ominous reminder of Japan’s fate

  1. Smartphone wars get really brutal: Samsung is squeezed by Lenovo below and Apple in the top tier


  1. Green Monsters: The Electric Bike Wars, Who Will be the Tesla of Motorcycles? Harley-Davidson, Energica, Zero and other electric-motorcycle manufacturers are battling to become the king of these green machines.

  1. Britain’s big supermarkets rewrite their grocery lists; Food price war forces UK retailers to reconsider their offerings

  1. How the fast-fashion supply chain became drug cartels’ favorite place to launder cash

  1. (China/Consumer) – Accenture: Mid, low-income consumer market worth US$4tn in China?


  1. (India/Healthcare) – 5 Things to know about India’s Healthcare System

Vijay Ramnath Jayaraman

Investing Process

  1. Investing Process – Carson Block’s Value Investing Congress Presentation: Short


  1. (Australia/Commodities) – Asian Iron-Ore Investments in Australia Fail to Pay Off

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The Cost Accounting Whale Curve to Understand Accounting Fraud in Asia


“Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”

BAMBOO LETTER UPDATE | September 8, 2014
Bamboo Innovator Insight (Issue 49)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
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The Cost Accounting Whale Curve to Understand Accounting Fraud in Asia


“It struck me as a business I didn’t know anything about initially. You know, you’re talking about petroleum additives… Are there competitive moats, is there ease of entry, all that sort of thing. I did not have any understanding of that at all initially. And I talked to Charlie a few days later…and Charlie says, ‘I don’t understand it either.’ I decided there’s probably a good size moat on this. They’ve got lots and lots of patents, but more than thatthey have a connection with customers… Lubrizol is exactly the sort of company with which we love to partner—the global leader in several market applications run by a talented CEO, James Hambrick.”

- Warren Buffett on Lubrizol, the $9.7 billion oil additives, lubricants and specialty chemicals company that Berkshire Hathaway bought into in March 2011


“It’s hard to imagine that three years after the fall of Sino-Forest, a fraud twice its size could navigate through a sea of regulators, investment bankers, and auditors to list on a global stock exchange.”

- Anonymous Analytics on Tianhe Chemicals, the “Lubrizol of China” in their 67-page report


Information may be used to inform or deceive. Accounting is at the heart of the information system in economies and companies, providing information to lubricate the market and internal working parts of an organization, thus contributing to their smooth functioning.


When accounting frauds and financial failures pop up as what appear to be rather sudden surprise while the most recent financial statements indicate a sound condition, accounting loses their legitimacy and effectiveness. Where were the accountants and auditors?


We were left asking this question last week when HK-listed Tianhe Chemicals (1619 HK, MV $7.6bn) was suspended on Tuesday after Anonymous Analytics (AA) issued a report detailing how the chemicals company, who raised $650 million in its June IPO deal brought to the market by sponsors Morgan Stanley, Bank of America Merrill Lynch and UBS, massively inflate its revenue and profits and “is one of the largest stock market frauds ever conceived.”


The role of two independent experts have come into the spotlight: the auditor verifying the accounting numbers, and the market research firm Frost & Sullivan producing industry and market share data which was heavily relied upon by analysts and investors. Tianhe is audited by Hong Kong’s Deloitte. According to data compiled by ChinaRAI in May 2013, Deloitte has more “occurrences” of fraud and other accounting issues in China than the other Big 4 firms combined (table above). AA said that original filings made by Tianhe’s main Chinese operating subsidiaries to the SAIC (State Administration for Industry and Commerce) showed revenue and profit that were 85 to nearly 100% less than what the company declared in its filings to investors in its HK IPO.


In another alleged accounting fraud, Emerson Analytics detailed how the sausage-casing maker Shenguan (829 HK, MV $1.1bn) inflated revenue (selling price to its largest customer was over 40% higher than what it charged others on average in the same standardized product) and concealed high cost of raw materials (cattle skin). Ernst & Young’s audit coverage excluded the BVI and PRC subsidiaries were audited by local firm Shenzhen Pengcheng, which had its securities business permit revoked by the CSRC in May 2013 for its failure to perform due diligence in the IPO of Yunnan Green-Land Biological Technology (002200 CH).


Tianhe claims to be a top five player in the world in terms of lubricant additive sales, behind Lubrizol of the US, the number-one manufacturer, and also number two behind DuPont of the US in speciality fluorochemicals (SFC).Tianhe’s lubricant additive make up 40% of sales with margins at 27% while its SFC clocks in a breath-taking 85% margin. Tianhe, with a market value of $7.6bn, is relatively large as compared to Buffett’s Lubrizol at $9.7bn. So what is the difference in the business model between Lubrizol and Tianhe?


Both Buffett and Munger initially did not understand about the competitive dynamics of this seemingly-commoditized business and wonder whether it has an economic moat and pricing power. After all, around two-thirds of Lubrizol’s sales come from oil lubricants and additives, which are oil-based and the company must purchase some heavy hydrocarbons such as crude to make them. That means that Lubrizol is exposed to fluctuations in the volatile oil market. When the price of base oil is high and keeps rising, a key question is whether Lubrizol can effectively passed that higher price on to consumers in a cost-plus pricing model based on volume.


Buffett gave us the all-important clue to assessing the moat of true compounders and Bamboo Innovators such as Lubrizol or Huchems Fine Chemical (069260 KS, MV $943m), Korea’s sole supplier of polyurethane (PU) intermediate materials: “They have a connection with customers”. A close customer relationship minimizes earnings volatility inherent in the petrochemical business.


Huchems Fine Chemical (069260 KS) Stock Price Performance, 2002-2014


For instance, one of the secrets for Huchems…


<Article snipped>


As the late management accounting pioneer Dr Charles Horngren puts it aptly, “You need to understand the business first, before you can understand the accounting of the business.”


An observation is that too often students today walk away from an accounting course in which they learned models, standards and techniques, were tested on computations, and now know a laundry list of standards, but have no clue about the accounting way of thinking and what accounting as a subject is all about.


Accounting is not just about reporting numbers but is also about structuring incentives, generating information that guides decisions, providing disciplinary feedback on decisions, and inspiring innovations. The accounting way of thinking gives us a language to analyze in a systematic manner and help us reach informed opinions. The accounting way of thinking requires logic and interpretation, an ability to grasp problems and offer solutions, and an ability to ponder deeper questions and offer tentative answers in an ongoing conversation and learning by inquiry.


When accounting frauds occur, accounting loses their legitimacy and effectiveness: Where were the accountants and auditors? As accounting educators, we cannot seek to answer this unless we have managed to think deeper about these two important questions:


  • Are students excited when they sit in an accounting class?
  • Are business and investment professionals excited when they read about the latest analysis of accounting ideas and concepts?


It would not be very often that we encounter someone who says, “Oh, how exciting, it really impacted my life and the way I think about the world.” We need to teach and research accounting as an intellectually exciting and world-illuminating discipline. Accounting doyen Ray Ball had bemoaned: “The absence of a solidly grounded worldview – a deep understanding of the function of financial reporting in the economy – is a major threat to accounting.”


Some of the most exciting developments for the next generation lie at the periphery of accounting even though information is often said to lie at the heart of accounting. We need to find ways to make investors feel the importance of bias in accounting and financial information through the interdisciplinary lenses: the ways that conflicts of interest affect the financial reporting process, the institutional mechanisms that limit or exacerbate this behavior, the power held by the preparers and reporters of information in the context of the countries and companies that do not permit a transparent flow of information. This is particularly true in Asia which is not a monolithic homogenous bloc and can be a heterogeneous mess for users of accounting information without a resilient mental model.


By expanding the accounting way of thinking to the cost accounting of whale curve to understand more about customer profitability and the business model in serving customers, value investors can better understand tunneling and expropriation acts by companies via related party transactions to generate artificial sales.


Warm regards,


Managing Editor

The Moat Report Asia



To read the exclusive article in full to find out more about the story of Korea’s bamboo innovator Huchems and the cost accounting whale curve to understand accounting fraud in Asia, please visit:


  • The Cost Accounting Whale Curve to Understand Accounting Fraud in Asia, Sep 8, 2014 (Moat Report Asia, BeyondProxy)


The Moat Report Asia

“In business, I look for economic castles protected by unbreachable ‘moats’.”

- Warren Buffett


The Moat Report Asia is a research service focused exclusively on competitively advantaged, attractively priced public companies in Asia. Together with our European partners BeyondProxy and The Manual of Ideas, the idea-oriented acclaimed monthly research publication for institutional and private investors, we scour Asia to produce The Moat Report Asia, a monthly in-depth presentation report highlighting an undervalued wide-moat business in Asia with an innovative and resilient business model to compound value in uncertain times. Our Members from North America, the Nordic, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.


Learn more about membership benefits here:


  • Individual subscription at $1,994 per year:


Our latest monthly issue for the month of August investigates an Asian-listed company who’s the leading ecommerce group in its home country with the complete platform coverage in the Amazon-type of B2C ecommerce of selling directly to end consumers (Sales/Net Profit: 90%/78%), Rakuten-type of B2B2C platform (Sales/Net Profit: 4%/12%) to support the online SME merchants who in turn sell to the end consumers, and the eBay-type of C2C auction site (Sales/Net Profit: 2%/21%) where individuals buy and sell to one another. This “Amazon-Alibaba” is highly profitable with recurring free cashflow (FCF yield 4.6-5% compounding at 25% in the next 3-5 years) bypioneering the world’s-first 24-hour delivery promise and guarantee when world-class logistics experts said it cannot be done. In emerging markets and Asia where logistics costs is 15-20% of GDP, most ecommerce companies fail to scale up due to lack of fulfillment capabilities and inventory risk became the killing blow as they pursue growth without the intangible know-how. The company designs and builds its own warehouses to provide fast and efficient delivery with 99.68% on-time rate and also complete backend services to suppliers, widening the gap between itself and peers. With its superior infrastructure, the company is able to provide consumers a one-stop shopping experience with all goods purchased from different vendors packaged into a single box and delivered to the client’s door. The company has consignment agreements with suppliers which allow it to have control over inventory management but carry no liability of inventory on its balance sheet, in other words, there is minimal inventory riskfor the company to scale up sustainably and without the usual accounting risks that plagued the ecommerce companies.


With (1) a superior ROE of 23.6% due to its wide-moat business model in 24-hour delivery system, (2) negative cash conversion cycle (-29 days) in its unique warehouse system with minimal inventory risk, (3) a sustained 25-30% recurring earnings and cashflow growth per annum in the next 5 years, especially a long run-way in disrupting traditional retailers, and (4) potential exponential growth in its option value in the third-party electronic payment business, the company can scale up multiple times. Short-term downside risk is protected by its healthy$128m net-cash balance sheet (15% of MV) and proven management execution in prudent capex expansion to support sustainable quality earnings growth. Its terminal value and long-term downside risk will be protected by giants Alibaba, Rakuten, eBay, Amazon who wish to swallow it up to possess its valuable trust and brand equity support it enjoys and its wide-moat business model in 24-hour delivery system. The company is one of the few Asian ecommerce companies with good governance and low accounting risks with its net-value revenue recognition method and it deserves a valuation premium. Upcoming deregulation in third-party electronic payment with the passing of the law in Sep 2014 will result in various government restrictions to be removed, paving the way for the company to introduce stored-value payments, O2O payment, P2P payment (money transfer without transactions), multiple currencies’ payments, big data analysis, payment services for customers outside the group to boost transaction volume and scale up its existing proprietary PayPal/AliPay businessLed by the inspiring and highly-determined founder and Chairman who established and listed the company in 1998 and 2003 respectively, the company has overcome the multiple obstacles to ecommerce transactions in its home market. The founder described the obstacles to ecommerce transactions as ‘friction’, and that he “resolve to take on the Life’s Task to reduce this ‘friction’”.


Our past monthly issues examine:


  • An Asian-listed company who’s the global #1 and #2 maker of two types of patient monitoring devices for both clinical- and home-use. Founded in 1981 and listed in 2001, the company’s reliable manufacturing technology platform for over 30 years has enabled it to build a global durable franchise in the niche patient monitoring device market that has stable resilient growth and yet is experiencing potential disruptions led by its new innovation. A secret to its success is its in-house capabilities to combine Swiss design, high-precision electronics and sensors components with clinical healthcare to produce world-class products with cost competitiveness. The firm has competitive technology and patents especially its core competence of having an algorithm to allow fast reading/filtering of signals and outputting the accurate results in a short period of time. Thecompany has the potential to consolidate the market further. The company is also a sticky ODM partner to reputable companies including Wal-Mart, Costco, CVS and it has a diversified customer base with none of the customers accounting for more than 10% of its sales. The company demonstrated that it has bargaining power over its powerful customers with the ability to build its own brand since 1998 (62% of overall sales). 91% of its sales are to developed markets in US and Europe. The company is trading at EV/EBIT 9.7x and EV/EBITDA 8.8x and has an attractive dividend yield at 5.6% and a strong balance sheet with net cash as percentage of market value and book equity at 23% and 47% respectively. The firm has also undertaken the unusual capital management program to reduce 10% of its shares outstanding in Sep 2012 to boost capital efficiency by utilizing the comfortable net cash position. The proactive shareholder-friendly stance backed by its strong net cash position should limit any downside in share price. The company’s terminal value and downside risk will be protected by giants such as J&J, Bayer, Abbott etc who wish to swallow it up to possess its valuable manufacturing technology platform and worldwide patents in algorithm-technology. The company’s worldwide patents in algorithm-technology has been commercialized into an innovative product series that is at the heart of its total solution service business model. This valuable intangible asset is not factored into long-term valuation.The innovative product with the algorithm measurement technology are not merely additional features; it “forces” the clinical community to adopt them as the standard, which in turn helps drive home-use penetration as patients seek a consistent and integrated healthcare experience. It transforms the product into a unique strategy that incorporates software development to create value-added services for health monitoring and collaborating with hospitals and governments on tele-healthcare projects. As a result of its wide-moat, the company has a far superior ROE at 20.9% that is nearly double that of its key giant conglomerate rival. When we compare EV/EBIT relative to ROE and ROA, the company is cheaper by as much as 120-150% when compared to its key giant conglomerate rival. The stock price of the company is down nearly 20% from its recent high in end March 2014 on profit-taking by short-term investors. Share price is back to May 2013 level, representing an attractive opportunity to take position in this long-term durable franchise. The stable long-term shareholdings and patient capital by the founder and the management team who together own around 48% of the equity has enabled the firm to adopt a very long-term approach to building its business and cultivating new growth areas. While he may sometimes be slightly over-optimistic and thinking too far ahead with his long-term opinions, this  idealistic engineer-visionary-philosopher has done a fantastic job in continuously defying the odds of many skeptics by growing the company from a small startup into one of the world’s leading patient monitoring equipment company. He is the rare Asian entrepreneur who was persistent in building his own brand despite the threat of offending his ODM customers. He was also early in cultivating and coordinating a global network with high-tech component, R&D and manufacturing in his home country, manufacturing, assembly and packaging in Shenzhen, China and medical R&D and clinical testing center in Europe, including making the difficult decision to establish a direct marketing sales force in Europe and North America given the high cost. Unlike most Asian business owners whose interest and focus in the core business starts to wane due to complacency from growing personal wealth and the inability to scale the core business, the founder is genuinely passionate in the company’s ability to add value to the patients and society. The firm can effectively run without the founder with the long-term corporate culture and management system in place, yet he can inject great value as the steward in new innovations; we believe that this combination is rare for an Asian company and deserves a valuation premium.


  • The world’s #1 ODM (Original Design Manufacturer) and global #5 manufacturer of a consumer healthcare device product that is used frequently, even daily, thus providing the foundation for stable recurring cashflow. This company is also a hidden champion in a niche product segment (50-55% of group’s sales) that has become a high-growth fashion product currently accounting for less than 10% of the overall industry. The company is able to mass-manufacture this niche product, but not the giants, because of its unique process IP in flexible manufacturing system and know-how to handle large-scale complex orders. The manufacture of this product itself is difficult to replicate and requires FDA/CE licenses because of its medical device nature and the entry barrier is not capital but the know-how and R&D expertise. In particular, the manufacturing integrates different fields of science including polymer chemistry, physics, optics, engineering, materials control, process control, microbiology, and, injection molding. The firm has also developed a proprietary system of tracking the manufacturing process of different sets of product so that if a quality issue arose, when and where the problem set of products was being produced could be swiftly identified, thus diminishing the scale and cost of product recall. This system has helped the firm win the long-term trust of its ODM customers to place stable large orders. The Big Four giants do not have such a system and have to incur substantial losses from product recalls. The company also possess its own brand which has many loyal followers and support in its home market where it enjoys a 30% market share and contributes to 25% of group’s saleswhile sticky ODM customers account for 75% of group’s sales, mainly from the Japan market. As a result of its wide-moat advantages, the firm enjoys a consistently high ROE of 41%, double or triple that of the giants. From FY07 onwards, even during the depths of the Global Financial Crisis in 2007/09, the firm has not raised equity. Since listing in Mar 2004, the company has only done one rights issue in May 2005. Also, it is able to sustain a strong stable cash dividend payout (>70% with 3% yield) with its healthy net-cash balance sheet (net cash $30m; net cash-to-equity ratio 23%) and proven management execution in prudent capex expansion to support sustainable quality earnings growth. M&A deals in the healthcare and medical device sector has been growing due to their strong defensive nature and giants seeking growth to overcome their own patent cliff. The firm will always be an attractive takeover target by giants who wish to swallow it up to possess its valuable flexible manufacturing system and know-how to fill their own missing competency gap and hence will enjoy long-term downside protection in its terminal value. In the battle between “ODM vs Brand”, we find the story of the company to be quite similar to that of TSMC (2330 TT, MV $103bn), now the largest ODM foundry in the world. “Skate to where the puck is going to be, not where it has been,” as hockey legend Wayne Gretzky advised. In our view, the profit and valuation premium in the value chain will start to skate to the “Inno-facturers” who are the hidden ODM innovators (the brand behind brands) consolidating the industry, such as TSMC and this company. While its valuation is not cheap with EV/EBIT (FY13) at 20.6x, when we compare EV/EBIT relative to ROE, the company is relatively cheap, by as much as 130-220% when compared to giants and other comparables. When we compare EV/EBITDA relative to ROE, the valuation gap is 90-160%. This long-term valuation gap implies that the company, with its far superior and sustainable ROE, could potentially double to $2.4bn, as it continues to consolidate its niche product segment and enter into a new product cycle of an innovative product whose patents are expiring in 2014/15 (US/worldwide) to make ASP/margin improvements in sustaining quality profits and cashflow. Its share price has dropped 18% from its recent high and underperformed the index by 26% in the last six months. This will present a buying opportunity for long-term value investors who can penetrate beyond conventional valuation metrics because of a deep understanding of its business model and underlying source of its wide-moat advantages. In Asia, many firms break apart or become value traps due to shareholder conflict, envy and differences in opinion on the business direction of the company. The stable long-term corporate culture infused by the late founder, who established the company in 1986 with the current executive chairman and 2 other key shareholders, to combine the energy and ideas of everyone to work hard to keep the business running forever is underappreciated.


  • The Home Depot of Asiawhich has the largest market share in its home country and now seeks to expand regionally. It is one of the few home improvement retailers in the world which is able to achieve a structural negative cash conversion cycle (CCC) at -39 days for resilient, recurring and sustainable operating cashflow to enable the expansion of its store network while keeping a healthy balance sheet. It is hard to achieve negative cash conversion cycle (CCC) as a home retailer as compared to a supermarket retailer as the product nature is more durable. Even Home Depot, Lowe’s and Bed Bath & Beyond (BBBY) are not able to achieve a negative CCC. Led by the capable owner-operators since 1995, the company is a pioneer in proactively creating awareness and demand in the minds of consumers that upgrading your home can be fun and in incremental affordable steps. Its creative branding has resulted in the firm to become the “first on customers’ mind”, or what Charlie Munger elucidated as the “psychological wide-moat” advantage. 80% of sales are generated customers looking for home improvement and renovation ideas and solutions.  Growth is supported by the management’s proven ability to identify and cater to dynamic changes in customer preferences. The firm’s comprehensive pre and aftersales service creates brand loyalty and sustains long-term sales. The merchandizing management is tailored to the peculiarities of customer preferences in each area to drive same store sales growth with creative customization by store, location, season and events. Its key strategy to expand its profit margin is to increase its higher-margin house brands and product-mix management. Its EBITDA/sqm of $400/sqm was higher than Home Depot until Home Depot experienced a rebound last year to $500/sqm. The firm’s resilient sales are supported by its unrivalled network of diverse locations throughout the country. Its bold vision and successful “Blue Ocean” execution in the highly fragmented second-tier markets has created a powerful wide-moat advantage that will last for many years to come. In short, the management have proven their ability to execute in difficult market and industry conditions especially in the past 5 to 7 years during the 2007/09 global financial crisis with the firm emerging much stronger. The Illinois Institute of Technology engineering graduate and quiet billionaire owner behind the home retailer is one of the few Asian business tycoons who has the thirst to scale up the business in a sustainable way, as opposed to opportunistic ventures, having been largely influenced by his early years experience observing the success of American wide-moat firms. If we can adjust the EV/EBITDA valuation metric to reflect the CCC, the company’s EV/EBITDA of 18.5x will be lower at 10-11x, while Home Depot’s EV/EBITDA 11x will be higher at 13x. Noteworthy is that Home Depot has a negative free cashflow throughout FY1989-2001 (13 consecutive years!) and yet market cap has climbed from $1.5bn to $103bn. Home Depot compounded despite the ugly valuations during the capex ramp-up. This once again highlights that the power of wide-moat is often underappreciated, misunderstood and overlooked. When Home Depot generated $180m in operating cashflow in FY1992, quite similar to this Asian firm now, Home Depot is valued at $5bn (vs $3bn). Store network is expected to double in the next 4-5 years, representing a potential doubling in market value.


  • The Northeast Asian-listed companywho is the world’s largest maker of an essential component with applications in apparel, shoes, diapers, car seats etc. All top 20 global athletic shoe brands, including Nike, Adidas, Reebok, Sketchers, UnderArmor are customers and this Asian innovator with R&D capabilities has forged long-term “spec-in” partnerships with them. Its broad product offering is protected by over 110 patents. By locating its Pan-Asian production plant network in China, Taiwan, Vietnam and Indonesia close to its major clients, including sales/customer service centers and warehouses in US and Europe, the firm is better positioned to understand their requirements, deliver fast and meet their needs. While top 10 athletic shoe brands account 40% of its revenue, the firm has a diversified clientele base of over 10,000 customers, giving it resilience and growth with both the established and emerging brands as clients. The company is trading at PE14e 12x, EV/EBITDA 7.1x and EV/EBIT 10.6x with a dividend yield of 3.9%. Interestingly, its EBITDA margin is double that of Adidas and its 8.7% net margin is higher than Adidas’ 5.4%, though below Nike’s 9.8%. Given the tipping point of its Pan-Asian production network and contributions from its new products and as capex tapers off in the next few years, free cashflow could be around $50-60m and applying a P/FCF of 15x would yield a market value of $750-900m,, representing apotential upside of 100-150%. Thus, the firm offers a similar quality growth trajectory to Nike/Adidas with its unique knowledge-based business model and yet trades at a more attractive valuation and higher dividend yield as downside protection.


  • The Middleby of Asia commanding a dominant market share of over 80% in hypermarkets, 50% in chain outlets, 30% in 4- to 5-star hotels in China and an overall 30% in its home market. Yet, no single customer accounts for more than 5% of its revenue. Just to recall for value investors, NYSE-listed Middleby, with its sleepy and boring business, has compounded 100-fold from around $50m to $5.7bn since its tipping point in 1999. The founders of this Asian family business demonstrated clear dedication in building up the company with its wide-moat business model backed by a strong and unique distribution/marketing network in finding, winning and binding new customers to build massive brand equity and long-lasting relationships with clients over time. Their devotion to its core product for nearly 20 years results in maximum problem-solving skills, innovative strength and product leadership and hence, to ever greater customer benefit that will protect the company to consolidate the fragmented market and provide ample opportunities to continue its profitable growth. The company is currently trading at PE13e 15.8x and an undemanding EV/EBIT 10.1x and EV/EBITDA 9.5xand its growth potential based on its unique business model is not priced in. There is a structural re-rerating of niche business models with (1) diversified client base, (2) steady revenue streams, (3) lean capex requirements that creates ample free cashflow and defensive growth. Based on PE, P/CFO and EV/EBIT, the company is trading at a 40-50% discount to the foreign listed comparables despite more efficient use of assets in generating profits and cashflow. It has an attractive 7% earnings yield growing at 20% over the next 3-5 years and a 3.8% dividend yield that is supported by its strong cashflow generation ability, steady revenue stream and lean capex requirements to limit downside risks in valuation. Based on the growth plans to penetrate new product and customer segments; build its third plant in India in addition to the ones in its home market and in China; and potential bolt-on acquisition opportunities with its healthy balance sheet in net-cash position, it has the potential to double its operating cashflow in the next 3-5 years and market value could double, representing an upside potential of 100-140%.


The Moat Report Asia Members’ Forum has been getting penetrating quality dialogues from our subscribers.Questions range from:


  • The nuances of internal dealings in Asia, including the case discussion of the recent deal in which HK billionaire’s Lee Shau-kee Henderson Landacquiring Towngas or Hong Kong & China Gas (3 HK) from his family holdings, seemingly déjà vu from the early Oct 2007 transaction when the market peak.
  • The case of F&N Singaporespinning out its property unit FCL Trust and getting “free” special dividend-in-specie and the potential risk in asset swap restructuring to deleverage the hidden debt in the entire Group balance sheet.
  • The dilemma of whether to invest in a Southeast Asian-listed company and hidden champion with a domestic market share of 60% due to family squabbles and a legal suit over the company’s ownership.
  • Discussion of the wise and thoughtful 107-year-old Irving Kahn’s investment into a US-listed but Hong Kong-based electronics company with development property project in Shenzhen’s Qianhai zone and the possible corporate governance risks that could be underestimated or overlooked, as well as their history of listing some assets in HK in 2004.. This is also a case study of “buy one get one free” in John’s highly-acclaimed book The Manual of Ideasin which the “free” property is lumped together with the (eroding) core business to make the combined entity look cheap and undervalued. What are the potential areas that value investors need to watch out for when adapting the SOTP (sum-of-the-parts) valuation method in Asia?
  • And many more intriguing questions.


Do find out more in how you can benefit from authentic and candid on-the-ground insights that sell-side analysts and brokers, with their inherent conflict-of-interests, inevitable focus on conventional stock coverage and different clientele priorities, are unwilling or unable to share. Think of this as pressing the Bloomberg “Help Help” button to navigate the Asian capital jungle. Institutional subscribers also get access to the Bamboo Innovator Index of 200+ companies and Watchlist of 500+ companies in Asia and the Database has eliminated companies with a higher probability of accounting frauds and  misgovernance as well as the alluring value traps.


Professional Development Workshops for Executives and Lifelong Learners

Our 8th run of the series of workshop From the Fund Management Jungles: Value Investing Exposed and Explored – (Part 1) Moat Analysis, (Part 2) Tipping Point Analysis and (Part 3) Detecting Accounting Fraud – on 14 June 2014 has been well-received with serious value investors, professionals, and serious lifelong learners attending, with some who flew in from Jakarta and KL!..


Our 9th workshop will be on Detecting Accounting Fraud Ahead of the Curve sometime later in the year.


Thank you for your support all this while!



Thank you so much for reading as always.


Warm regards,

KB Kee

Managing Editor

The Moat Report Asia


Mobile: +65 9695 1860


A Service of BeyondProxy LLC

1608 S. Ashland Avenue #27878

Chicago, Illinois 60608-2013

Other offices: London, Singapore, Zurich



P.S.1 Here is a little more about my background:

KB Kee has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of theinvestment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company.


He holds a Masters in Finance and degrees in Accountancy and Business Management, summa cum laude, from Singapore Management University (SMU) and had also published articles on governance and investing in the media, as well as published an empirical research paper Why ‘Democracy’ and ‘Drifter’ Firms Can Have Abnormal Returns: The Joint Importance of Corporate Governance and Abnormal Accruals in Separating Winners from Losers in the Special Issue of Istanbul Stock Exchange 25th Year Anniversary Best Paper Competition, Boğaziçi JournalReview of Social, Economic and Administrative Studies, Vol. 25(1): 3-55. KB has also presented his thought leadership as a keynote speaker in global investing conferences. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic, industry trends, and detecting accounting frauds in Singapore, HK and China, and had taught accounting at the SMU where he is currently an adjunct lecturer.


P.S.2  Why do I care so much about doing The Moat Report Asia for you?

My personal motivation in embarking on this lifelong journey has been driven by disappointment from observing up close and personal the hard-earned assets of many investors, including friends and their families, burnt badly by the popular mantra: “Ride the Asian Growth Story!” I witnessed firsthand the emotional upheavals that they go through when they invest their hard-earned money – and their family’s – in these “Ride The Asian Growth Story” stocks either by themselves or through money managers, and these stocks turned out to be the subject of some exciting “theme” but which are inherently sick and prey to economic vicissitudes. They may seem to grow faster initially but the sustainable harvest of their returns is far too uncertain to be the focus of a wise program in investment. Worse still, the companies turned out to be involved in accounting frauds. Their financial numbers were “propped up” artificially to lure in funds from investors and the studiously-assessed asset value has already been “tunnelled out” or expropriated. And western-based fraud detection tools and techniques have not been adapted to the Asian context to avoid these traps.


After a decade-plus journey in the Asian capital jungles, it has been somewhat disheartening as I observe many fraud perpetrators go away scot-free and live a life of super luxury on minority investors’ hard-earned money. And these perpetrators make tempting offers to various parties in the financial community to go along with their schemes. When investors have knowledge in their hands, we have a choice to stay away from these people and away from temptations and do the things that we think are right. With knowledge, we have a choice to invest in the hardworking Asian entrepreneurs and capital allocators who are serious in building a wide-moat business.


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The Moat Report Asia
A Service of BeyondProxy LLC
1608 S. Ashland Avenue #27878
Chicago, Illinois 60608-2013

Other offices: London, Singapore, Zurich


Morning Bamboo Insight: 10 Sep 2014

Morning Bamboo Insight: 10 Sep 2014


  1. Wage stagnation: The big freeze; Throughout the rich world, wages are stuck

  1. Loss-making public companies by region in America, Europe and Japan

  1. The wonky, absurd scales of (insider dealing) justice; Mathew Martoma was sentenced to nine years in prison for insider trading. And yet CEOs strategically time news releases to coincide with months in which their equity vests

  1. Dreams on hold, Brazil’s ‘new middle class’ turns on Rousseff

Asia Pacific

  1. (Korea) – Why so many Koreans are called Kim

  1. (India) – India revamps intellectual property policy in face of western anger

  1. (China) – Better companies needed for China shares to shine; many listed Chinese companies continue to be the subject of allegations of wrongdoing, accounting fraud and corporate governance issues.

  1. (HK) – The Chan family controls Hang Lung, one of the biggest and oldest property developers in Hong Kong

  1. (HK) – Hong Kong must seize the first chance to elect its own leaders; Successive governments have been working towards universal suffrage, writes C Y Leung

  1. (Australia) – Australia: Culture clash; The government seems preoccupied with policies that critics say amount to an ideological war

  1. (Japan) – Nissan building know-how at ‘global mother plant’

  1. (HK/China) – A much-hyped idea to link bourses in HK and Shenzhen is not in the pipeline, China’s securities watchdog said, saying one of its current priorities is to hammer out taxation issues for the upcoming Shanghai-HK Stock Connect

  1. (Spore/HK) – Bad news in Hong Kong is good news for Singapore

  1. (China) – Spectre of Corruption Haunts Huawei; Efforts to curb bribery in product rebate system nets 100 employees as series of corruption scandals engulf telecoms equipment giant

  1. (Taiwan) – Perng Fai-nan, governor of Taiwan’s central bank, was named one of the world’s seven best central bankers in 2014 for 10th straight year

  1. (Taiwan) – Taiwan semiconductor firms may lose talent as China pays better


  1. Marcus Aurelius’ 10 Rules For Being An Exceptional Leader

  1. The Most Frustrating Email in the World: “Please call me.”; add some details to an email to make it slightly less baffling and anxiety provoking.

  1. Over the horizon: Three issues that should preoccupy managers in the next 50 years

  1. Pardon the disruption: When firms succumb to new forms of competition, inflexible organisation is usually to blame

  1. Keeping it in the family: Patriarchs are reluctant to cede control of the companies they built

  1. Steve Jobs Was Depressed The Day After Apple Released The iPad


  1. (China/Tech) – After the float: The Chinese e-commerce firm faces growing competition

  1. Digital news: Investors are taking an interest in journalism: now that is news

  1. The Aerospace Industry Is Betting Big On 3D Printing Technology

  1. Amazon Is Under Attack Like Never Before

  1. CHART OF THE DAY: Most People Want Smartwatches To Track Their Activities

  1. Graphene developers edge towards commercial breakthrough; Stronger than steel, tougher than diamond and yet lighter than paper, graphene has all the makings of a “miracle material”.

  1. Small step for Paypal, one giant leap for magic internet money

  1. (China/Tech) – Tech Firms See Opportunity in China Stocks Link

  1. (China/Tech) – Online writing now a millionare business in China; The play to online novel series Grave Robbers’ Chronicles pocketed 28 million yuan (US$4.55 million) in ticket sales for 45 performances in Shanghai this summer alone

  1. (China/Tech) – Mobile phone gaming bubble poses risks in China

  1. (China/Tech) – Will Education Firm New Oriental Learn or Lose? Managers and even a CEO have defected from China’s biggest education company, which finds itself at a crossroads


  1. How Victoria’s Secret Will Continue To Crush The Competition

  1. The enduring appeal of mechanical watches; Smartwatches have not stopped a trend from digital to clockwork

Investing Process

  1. Research – Strategic News Releases in Equity Vesting Months


  1. End-to-end game: Commodity-trading houses are growing-and running more risks


Morning Bamboo Insight: 8 Sep 2014

Morning Bamboo Insight: 8 Sep 2014


1. Political booms, financial crises: Why popular governments are not always a good sign

Asia Pacific

  1. (India) – Roll up for the one-man band: Narendra Modi is proving dynamic, but he cannot run India on his own

  1. (China) – China imposes ceiling on the wages of state-owned enterprise leaders

  1. (China) – Media, PR Executives ‘Arrested over IPO Blackmail Schemes'; Chief and deputy chief editors of 21st Century News Group’s website among the eight people detained, state media reports

  1. (China) – Debts pile up, weighing on Chinese steelmakers; China’s steel industry now has an excess capacity between 180 million tonnes and 240 million tonnes

  1. (India) – Why Modi Cares About India’s ‘Neo Middle Class'; Tax Breaks, Job Training Seek to Boost Some 380 Million ‘Aspirants’

  1. (India) – How Jignesh Shah lost the plot & his empire; FTIL exits MCX completely, Shah is free and has time to reflect on the path ahead; Jignesh Shah could well have been India’s most mercurial financial market entrepreneur

  1. (Isia) – Across Indonesia, Local Chiefs Slam Plan to Stop All Direct Polls; Democratic Setback: Under a bill set to be passed this week, the House wants local leaders chosen by regional legislative councils

  1. (Isia) – Megawati’s Hand Seen in Jokowi’s Advisory Team; ‘Puppet President’: Fears that Megawati is the real power behind the scenes are only growing more acute; Editorial: Jokowi Should Avoid Diluting His Cabinet

  1. (Asean) – After 47 Years, Keeping Asean Relevant and Staying Together

  1. (Australia) – Meet Australia’s coffee pod tycoons; They’re part of a global market worth $10 billion and they’re spending millions on manufacturing facilities.


  1. Why Walking Helps Us Think

  1. Guess What: You Don’t “Implement” Innovation. It’s Created Through Principles

  1. Seneca on Saving Time

  1. Maya Angelou on Haters, Life, Reading, and Love

  1. Thinking Straight in the Age of Information Overload

  1. Why Flunking Exams Is Actually a Good Thing; To learn how to study, start by bombing a pretest.

  1. Welcome to my genome: George Church is a genetics pioneer whose research spans treating diseases, altering bodies and a desire to breed woolly mammoths

  1. Crazy Is a Compliment: The Power of Zigging When Everyone Else Zags

  1. Books – Smartcuts: How Hackers, Innovators, and Icons Accelerate Success

  1. Books – Your Inner Will: Finding Personal Strength in Critical Times


  1. (Isia/Tech) – Online shopping in Indonesia flourishes despite scam concerns

  1. The future of cars: Wireless wheels; Connected cars will make driving safer, cleaner and more efficient. Their introduction should be speeded up

  1. The connected car: Smartphones on wheels; The way cars are made, bought and driven is changing with mobile communications. This paves the way to a driverless future

  1. Demolition technology: New ways are being found to demolish old buildings in crowded cities

  1. The language of the internet of things: More and more devices are becoming connected, but will they speak the same language?

  1. In the moment of the heat: One way to keep warm is to heat people rather than expending energy heating the buildings they are in

  1. How Big Companies and Their Tech Suppliers Are Changing Together; cloud and mobility are reshaping the workplace, as well as the tech companies themselves.

  1. (China/Tech) – The Jack Ma Way: Alibaba, started by Jack Ma in 1999, is about to sell shares in the United States that could value the company at about $160 billion.

  1. Three Marks Of Real Data Science

  1. (Tech) – Too soon for consumer 3D printing, says Gartner; Consumer 3D printing adoption will be outpaced by business and medical applications that have more compelling needs in the short term




  1. Biohackers of the world, unite: Following the example of maker communities worldwide, hobbyists keen on biology have started to get together

Investing Process

  1. How to Pick Stocks by Recognizing the Flaws in Investors’ Thinking; Joe Huber, Huber Capital’s boss, tries to avoid the big mistake that many investors make.

Medicines on Call in Asia


“Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”

BAMBOO LETTER UPDATE | September 1, 2014
Bamboo Innovator Insight (Issue 48)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
  • Get The Moat Report Asia- a monthly in-depth presentation report of around 30-40 pages covering the business model of the company, why it has a wide moat and why the moat may continue to widen, a special section on “Inside the Leader’s Mind” to understand their thinking process in building up the business, the context – why now (certain corporate or industry events or groundbreaking news), valuations (why it can compound 2-3x in the next 5 years), potential risks and how it is part of the systematic process in the Bamboo Innovator Index of 200+ companies out of 15,000+ in the Asia ex-Japan universe.
  • Our paid Members from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.

Can You Guess This Asian Wide-Moat Company? Medicines on Call in Asia


If you live in North America, there’s a one in two chances that the medicine that you use is distributed by hidden giants McKesson (MCK US, MV $44.4bn) and AmerisourceBergen (ABC US, MV $17.4bn).

This Asian wide-moat company is the McKesson of its home country as the #1 private pharmaceutical wholesaler. For the business model of a pharmaceutical wholesaler-distributor, working capital management is critical. In terms of inventory management efficiency, at the inventory turnover period of 42 days, the company is nearly twice as efficient as state-linked giants and is nearly on par with world leaders McKesson and AmerisourceBergen, an impressive feat given the logistics challenge in emerging markets. The company’s 9.6% ROA is nearly double that of state-linked leader.


In an economy where business fortunes are built from government concessions or licenses, the company has forged a different path by relying on its own capabilities to provide quality pharmaceutical products and healthcare largely in the private sector. Dr K, the chairman and CEO, and his management team have exercised prudence and discipline in executing their operations and capex plans with a strong balance sheet fortified by net cash that’s around 10.5% of market value while deepening their core competencies in warehousing, logistics, sales and marketing to connect to the fragmented market of over 4,000 clients.


Public healthcare services in Asia face the problem of social and financial sustainability. The cost of medicare is pushed higher and higher, driving more and more people who cannot afford such healthcare into crowded public hospitals. Doctors get paid so well in private healthcare that public hospitals cannot afford to attract and hire the best. There is growing demand for reasonably-priced quality private healthcare services, generic drugs and consumer healthcare products of which the company is a key provider and beneficiary.


#1 Private Pharma Wholesaler and Integrated Manufacturing-Wholesale-Distribution Platform with New Growth in Making Orthopedic Components


Our latest monthly issue for the month of September investigates an Asian-listed company who is the #1 private pharmaceutical wholesaler and also one of the largest private sector manufacturer of off-patent medicines in its domestic market. Its integrated business model from pharma manufacturing to wholesale, distribution and marketing has carved out top-selling own-branded products such as #1 in medicated powder, #1 cough mixture, #1 cough expectorant etc. With its network of warehouses strategically located throughout the country, the company is able to provide comprehensive coverage and rapid access to markets and customers, delivering the “Medicines on Call” value proposition to over 4,000 private-sector customers from private hospitals, pharmacies to supermarkets and also serves as the long-term channel partner to international brands such as GSK, J&J, 3M, Colgate Palmolive, Nestle for over 30 years etc.


From FY2014 onwards, the company has operationalized the business to contract manufacture orthopedic components for top MNCs with the full array of machining, casting, coating and forging capabilities. In an economy where fortunes are built from government concessions or licenses, the company has forged a different path by relying on its own capabilities to provide quality pharmaceutical products and healthcare services largely in the private sector.


In an economy where fortunes are built from government concessions or licenses, the company has forged a different path by relying on its own capabilities to provide quality pharmaceutical products and healthcare. Dr K, the chairman and CEO, and his management team have exercised prudence and discipline in executing their operations and capex plans with a strong balance sheet fortified by net cash that’s around 10.5% of market value while deepening their core competencies in warehousing, logistics, sales and marketing to connect to the fragmented market of over 4,000 clients.


For the business model of a pharmaceutical wholesaler-distributor, working capital management is critical. In terms of inventory management efficiency, at the inventory turnover period of 42 days, the company is nearly twice as efficient as state-linked giants and is nearly on par with world leaders McKesson and AmerisourceBergen, an impressive feat given the logistics challenge in emerging markets. The company’s9.6% ROA is nearly double that of state-linked leader.


At EV/EBIT 10.1x, EV/EBBITDA 8.4x, PE14e 10.2x and P/Book 1.9x, the company is reasonably decent in valuations for its resilient earnings and cashflow growth. Giant drug dealers McKesson (MCK US, MV $44.4bn) and AmerisourceBergen (ABC, MV $17.4bn) are also on the global hunt for acquisition targets; McKesson has bought Germany’s Celesio, one of Europe’s largest drug distributors, for $5.4bn in 4Q13, to link up the supply chains of Europe and US; ABC has acquired a 19.9% stake in Brazilian drug wholesaler Profarma in March 2014 for $100m. More consolidation in the sector globally is likely and could be the catalyst to drive up the valuation of quality emerging market companies in the sector. Long-term downside protection in terminal value is provided by MNCs who will be interested to acquire or partner with the company to possess its valuable wide-moat advantage in its network of warehouses and wholesale-distribution know-how to reach the fragmented customers.


The company has achieved an impressively consistent and improving performance in difficult times and is well-positioned in the local pharmaceutical industry which is among the few industries quite unaffected by economic cycles as the demand for drugs will continue even in difficult times. Public healthcare services in Asia face the problem of social and financial sustainability and the overcrowded public hospitals and clinics have sparked growing demand for reasonably-priced and quality private healthcare services, generic drugs and consumer healthcare products of which the company is a key provider and beneficiary.


Warm regards,


Managing Editor

The Moat Report Asia


Evening Bamboo Insight: 4 Sep 2014

Evening Bamboo Insight: 4 Sep 2014


  1. Why Bill Gates And Warren Buffett Are Railroad Rivals

  1. Watch out for companies splashing cash; They are underperformers, in company with cash hoarders

  1. With Wikistrat, crowdsourcing gets geopolitical; A consultancy is trying to out-forecast intelligence agencies

  1. Germany’s taxis should not triumph over Uber; The problem is not that cabs are endangered but overly protected

Asia Pacific

  1. (China) – Q. and A.: Ren Jianming on the Fight Against Corruption in China, and His Own Solution

  1. (Msia) – Najib: ‘Every citizen has a place under the Malaysian sun’

  1. (China) – China Auto Industry Revved Up over Reports Rules for Imports May Change

  1. (Korea) – Kumho brothers at each other again; Kumho Petrochem Chairman Park Chan-koo has asked local prosecutors to investigate his older brother and the chairman of Kumho Asiana Group, Park Sam-koo, for breach of trust.|home|newslist1

  1. (Australia) – It’s change or die for Australia Post

  1. (HK) – HK University’s Law Professor Benny Tai leads fight for Hong Kong democracy, vows to push ahead with a Gandhi-style civil disobedience campaign

  1. (China) – Wheels come off China’s bike-share schemes

  1. (China) – China fraud unit questions Morgan Stanley arm over ‘princeling’

  1. (China) – China fraud unit questions Morgan Stanley arm over ‘princeling’

  1. (India) – India CEOs Look For Ways To Get Manufacturing Back On Growth Track

  1. (Korea) – Helping a Korean Electronics Giant Stay Nimble; feature of Young Sohn, President and Chief Strategy officer for Samsung Electronics


  1. If This Company Succeeds, We Won’t Be Fighting About Reclining Airline Seats

  1. 7 Hard Truths About Life That People Don’t Like To Admit; The world is full of suffering.

  1. If You Can Solve This Math Problem, You’ll Get A $1 Million Prize, And Change Internet Security As We Know It

  1. History channel’s miniseries are finding a happy medium between actual history and mindless entertainment

  1. It’s draining men (and women): how staff loyalty took plumbing firm Cooke & Dowsett to nationwide success

  1. “If you can get good at destroying your own wrong ideas, that is a great gift.” – Charlie Munger

  1. Five Tips That Will Free You From Mediocrity

  1. Jeffrey Katzenberg: ‘Do good — just don’t do too good’


  1. (China/Tech) – WeChat and third-party Android app stores: How China’s mobile ecosystem is different from the West

  1. (China/Tech) – PPTV, a former industry leader, is slowly getting carved up among investors as it is forced to scrap some of its most promising new products.

  1. (China/Tech) – MIT professor looks into Baidu’s big data strategy

  1. (China/Tech) – Baidu is a fixture of online life in China, but it wants to become a global power. Can one of the world’s leading artificial intelligence researchers help it challenge Silicon Valley’s biggest companies?

  1. (Tech) – The Met Plans To Become The Most Digitally Influential Museum In The World

  1. Exec: ‘We’re Gonna Suck The Life Out Of’ Microsoft

  1. Google Glass supplier to develop new smart glasses with French firm

  1. (Korea/Tech) – Korean Gov’t reduces online verifications; Koreans, foreigners must only enter name and address to shop

  1. Why Apple’s mobile-payments system might actually work

  1. Arrowgrass Capital, the $5bn London hedge fund, is planning to develop an electronic invoicing service in the latest move into disruptive financial services businesses by alternative investors


  1. Luxottica’s board revamp exposes Renzi’s old concerns


  1. Letting Foreign Investors Open Wholly Owned Hospitals Hardly a Cure-All; The reform would not fix the big problems facing the health care industry and might not even appeal to the facilities’ backers

Investing Process

  1. Shenguan Holdings (0829), a mainland- based sausage-casing maker, has been accused by short-seller Emerson Analytics of exaggerating revenue and concealing high costs of raw materials

  1. Canada watchdog says Sino-Forest execs deceived investors


Morning Bamboo Insight: 3 Sep 2014

Morning Bamboo Insight: 3 Sep 2014


  1. Sino-Forest tribunal will put fraud allegations – and the OSC’s reputation – to the test

Asia Pacific

  1. (China) – World’s largest duty-free shop opens in China’s Sanya

  1. (Korea) – Samsung Group merges affiliates: Heavy industries arm absorbs engineering in latest restructuring

  1. (Australia) – Meet the new breed of Aussie manufacturers exporting to the world

  1. (Korea) – Korean conglomerates decrease the trend of merging together

  1. (Msia) – 1998’s tough moves by KL vindicated; Minister says they also enabled M’sia to go through 2007 crisis unscathed

  1. (Japan) – New GPIF investment manager drawn to cheap Japan mid-caps

  1. (Taiwan) – Taiwan’s first budget airline set for maiden flight

  1. (Myanmar) – Myanmar city U-turns amid outcry over secret $8 bln housing deal

  1. (Asean) – Banking on the AEC

  1. (Isia) – Indonesia plays winning hand with global miners: Russell

  1. (India/Japan) – Indian PM Modi’s Foolish Crush on All Things Japanese

  1. (India/Japan) – India, Japan Will Shape 21st Century: Modi


  1. To be more productive at work, put a plant on your desk; Plants in offices increase happiness and productivity; Study suggests that minimalist offices produce miserable employees because ‘sometimes less is just less’

  1. Yves Carcelle, the charismatic executive who transformed Louis Vuitton from a staid French maker of handbags and travel trunks into one of the world’s most recognizable luxury brands, died on Sunday in Paris. He was 66.

  1. The No. 1 Reason Leaders Fall Short: Ego

  1. Culture Of Courage: Creating A Culture That Breeds Bravery

  1. Boone Reborn: Rediscovering life at 85; At 85, T Boone Pickens has discovered a powerful source of energy: His own. He’s got a new love, a new natural gas empire and a continuing mission to change the world. All he needs now is time

  1. The Rise And Fall of Financial Technologies’ Jignesh Shah; The 47-year-old entrepreneur, who had taken on institutional forces such as the National Stock Exchange with his commodity exchanges, became a victim of his own break-neck ambition

  1. 9 Habits That Lead to Terrible Decisions

  1. Obama’s Cool Head in Crisis – Asset or Growing Liability?


  1. Brainy, Yes, but Far From Handy; Robots still lack a critical element that will keep them from eclipsing most human capabilities anytime soon: a well-developed sense of touch

  1. Synaptics Has the Right Touch; With technology for fingerprint identification and touchscreens, chip maker Synaptics is in the sweet spot for smartphones. The stock could leap by 35% or more.

  1. Share a taxi with a stranger? Idea is catching in big cities


  1. Move over Amazon, HMV is getting people back in stores; The music retailer is on course to overtake Amazon as the UK’s biggest music and DVD retailer, just 18-months since its collapse. What’s behind the comeback?


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