Airasia Acquiring Batavia Air

Airasia is acquiring 49% of Batavia Air while the remaining 51% is acquired by its Indonesian partner. I have mentioned that it is looking at Indonesia as the base for growth and in fact this deal is even better, accelerating further the growth of Airasia as a group.

If anyone is holding any airline stocks in the region be it SIA, MAS, Cathay Pacific, Qantas etc, do change your holding as this Malaysian company is moving mountains. The larger premium airlines should be very afraid as the future of airline business is in low costs not your premium business seats!

Do not even bother about looking at the acquisition price they are paying for, as there is no point comparing someone so flexible who can bend, squat, run, hide while the other national airlines can only sit and watch. There is no competition in the future when comes to a company which can do deals with anyone overseas. Against these players, Airasia is just competing on a different rule. The deal is just an example on how fast they can get things done. National airlines would have it much more difficult.

This is the real Airasia as it no longer is a Malaysian based airline.

See announcements below.
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AirAsia Accelerates Indonesian Expansion Plans

AirAsia and PT Fersindo Nusaperkasa acquire Batavia Air

Thursday, 26 July 2012 for immediate release

Jakarta, Indonesia: AirAsia Berhad (“AAB”) today announced that it has through its fully owned subsidiary AirAsia Investment Ltd entered into a Conditional Share Sale Agreement ("CSSA") together with its partner PT Fersindo Nusaperkasa (“Fersindo”) to acquire PT Metro Batavia (“Metro Batavia”), which operates the Indonesian airline, Batavia Air, and Aero Flyer Institute (“AFI”), an aviation training school (together “Metro Batavia Group”). The agreement was signed today between AAB, Fersindo and Metro Batavia at a signing ceremony in Jakarta.

In accordance with Indonesian civil aviation ownership regulations, AAB will hold a 49% stake in Metro Batavia Group with the 51% majority held by its Indonesian partner, Fersindo. Fersindo is also the 51% majority shareholder of PT Indonesia AirAsia (“IAA”). The total purchasing consideration for Metro Batavia Group is USD80 million (equivalent to approximately RM253 million) and will be settled in cash. The acquisition of 100% interest in Metro Batavia by AAB and Fersindo will be carried out in two stages, through acquisition of a majority 76.95% stake and subsequently followed by the remaining 23.05% held by its existing shareholders.

Correspondingly, the total purchasing consideration for 100% interest in AFI is USD1 million (approximately RM3.2 million). The acquisition is expected to complete by 2nd quarter 2013 and is subject to regulatory approvals in Indonesia.

This new acquisition will complement AirAsia’s existing Indonesian operations, IAA, which has successfully captured strong market share in Indonesia’s international airline traffic, with an extensive and well-established domestic route network throughout the Indonesian archipelago. The Batavia Air acquisition provides greater domestic connectivity and an extensive feeder network into IAA’s existing hubs in Jakarta, Bandung, Denpasar, Medan and Surabaya. Upon the successful acquisition, Batavia Air and IAA will fly more than 14 million customers serving 42 Indonesian and 12 international destinations. The addition of Batavia Air will provide AirAsia immediate access to an enlarged fleet of aircraft, experienced pilots and flight crew and increasingly competitive slots at major Indonesian airports at a time when Indonesia’s travel sector is experiencing double-digit growth on the back of rapidly growing consumer demand for air travel.

Following the acquisition the number of distribution channels in Indonesia will increase ten-fold to over 5000 authorised agents and more than 70 sales outlets. With this enlarged agency footprint AirAsia will be able to reach even more customers while complementing our internet based sales. “The Batavia Air acquisition is a fantastic opportunity for AirAsia to accelerate our growth plans in one of the most exciting aviation markets in Asia and further underlines our belief in the growth potential of Indonesia’s aviation sector,” said Tan Sri Dr Tony Fernandes, Group CEO and Director of AAB.

Founded in 2002, Batavia Air has earned its reputation as a leading domestic airline with a strong safety track record throughout its operating history. Operating a fleet of 33 aircraft, Batavia has consistently held significant domestic market share through serving 41 domestic routes and has recently expanded its route network to international destinations such as Singapore, Jeddah, Riyadh, Kuching, Dili and Guangzhou. A certified flight school, simulator training centre and aircraft maintenance facilities also support Batavia Air’s operations.

“I am proud to have built Batavia Air into a leading Indonesian airline from its humble beginnings. Recent developments in the airline industry have made me recognise that Batavia Air requires greater scale in order to compete and grow further, and I am so pleased that AirAsia will now take Batavia Air to even greater heights,” said Bapak Yudiawan Tansari, Batavia Air’s founder.

“We are impressed with Batavia Air’s achievements over the past 10 years and will continue to build on Bapak Yudiawan’s legacy. We are excited with the potential synergies this acquisition will bring to AirAsia Group and see this as a natural extension of the success we have achieved with IAA . Indonesian air travelers can all look forward to even more affordable fares soon,” remarked Tan’ Sri Dr Tony Fernandes.

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Do You Think Now is The Right Time to Buy Top Glove

It is no surprise that Top Glove has high ambitions as it has been proven in their past records. It is mentioned in the article by EdgeDaily that this largest glove manufacturer is planning to triple its production capacities over the next 15 years while planning to increase its global market share to 50%. Doable? A bit overoptimistic I would think but it is not an impossible task.

I have mentioned in the past that if we want to buy glove manufacturers, one may not need to look beyond Top Glove and Hartalega. My reasoning is simple. In a mature industry which has decent growth, look for company that has size, strong balance sheet, reach and ability to scale. Both Top Glove and Hartalega have that. I am not discounting other players like Supermax, Kossan, Latexx Partners etc. but chances are that the dominance would probably be by the 2 companies. Only thing is that we do not know latex gloves or nitrile gloves would be the preference. The way I look at it industry players themselves do not know as they are preparing production lines that are switchable.

Anyway, over the last 6 months, prices of latex has tapered down as it was over speculated few years ago. At one point of time the price was so high that costs of production for latex gloves was higher than nitrile gloves, an unprecedented event. We will not know the future of these raw material however, but I believe these players would be more ready in future in the event any of the raw material shot up in price again.

With the recent price of raw latex reducing to below RM7 per kg, I am just wondering whether it is time to buy Top Glove again. Prices of these raw material however should not be a consideration for any long term investors. The main concern is the strategy.

Over time, it may not be the prices of latex or petroleum that is to cause concerns to these players but what I am more concern of is whether there can be a glut in terms of supplies as well as the increasing labor costs. Hence, these players will have to convert their plant to embrace automation much more than before as Malaysia and Thailand are introducing minimum wages almost at the same time.

On the concern for glut in supplies of rubber gloves, I am just worried as every time I read about the industry news, these players are preparing themselves for massive expansion. Can the demand be taking so much?

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Optimize Your Trading for Better Profitability

What do you have on tap for this weekend?  Gonna hit the bars with some friends? Hang out at the beach?  Perhaps you and your significant other are going to go to Home Depot and maybe Bed, Bath, and Beyond as well (if you have the time).

Let me be so bold as to suggest that you set aside a few hours this weekend for a project that will improve your trading….and your profitability.

This project can be as complex and in-depth as you want, but it need not be.  As long as you have a basic understanding of a spreadsheet program like Excel, just follow the outline below and you will be fine.

The first step is to download your trade history from your broker into a spreadsheet.  How far back you want to go is up to you, but obviously the more data you are willing to look at the better your results will be.

The goal here is to match up your opening and closing transactions to determine profitability. The best way to do this if you are a day trader is to sort the spreadsheet by “date and time” and if you are a swing or position trader by “symbol.”

Once trades are matched you might find it helpful to categorize them as “winning,” “losing,” and “break even” trades. The “break even” category should also include trades which were small wins or losses.  Once you match them up I suggest you color code the categories, with green, yellow, and red being the most obvious choices.

Now you want to go through each category and do some analysis by looking at the following;

Asset Class – Are there certain asset classes that you do better with than others?  That you do worse with?  A trader friend of mine who used to trade numerous asset classes went through this process and found out that he did worse overall trading equities than trading forex.  He dropped stocks and began focusing exclusively on forex to the benefit of his account’s P&L.

Instruments –  Here you are looking at the instruments within asset classes you trade to see what patterns emerge.  Are you a consistent loser with ETF’s?  How about leveraged ETF’s?  Do you do better with small caps or large caps.  Do your option profits come from in the money or out of the money options?  What forex pairs do you shine at trading?

Sectors –  Maybe you will find that you do better trading consumer goods stocks than pharma stocks.  You might be the axe in the NASDAQ E-mini (tech) and the donkey when trading oil futures (energy).  If you are crushing it in the $AUD make sure you know you are trading a proxy for commodities.

Time of Day –  Most historical trade data will not only have the date but the actually time that you entered the trade listed.  See if there is a pattern that you can identify.  Often the opening and closing hours are the good for trading, while the middle of the day is not.  Are your losing trades clustered around less than optimal times of day?

Length of Trade –  This is a critical area because even with a swing or position trade that you break even on, you still have to factor in how long your funds are tied up in those trades with no return.  Many traders don’t consider themselves day traders, but will find that in the few day trades they do take, they have a better win ratio than their longer term trades.

Price –  Where is the sweet spot here?  Are you coining money it the $20-$60 range of stocks?  Are you weak in the under $10 stocks but a monster in the $AAPL and $GOOG’s of the market?

Liquidity –  You won’t get this data from your history download but it’s easy to pull up the average volume numbers on the stocks in each trade category to determine if there is a pattern related to less or more liquid issues.  You can take this one step further if you like and browse the intraday charts of these stocks in more depth.  Many stocks that have what is normally considered “decent” volume can still move in a choppy fashion with wide spreads on an intraday basis, and a 5-min charts will show you that.

These are just some suggested filters and you can use whichever ones you think are most relevant.

In the end what you are trying to accomplish is to throw out any preconceived notions you might have about your trading and let the facts speak for themselves.  If you are open to what they are saying you can then start to eliminate factors related to your losing trades and emphasize the factors associated with your winning trades.

We all know that our weekend time is very valuable and it may seem a little bit tedious at first when starting this project.  But once you get into the process I think you will quickly see the value of it, and besides, nobody says you can’t still drink while you do it.

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