Immigration To Australia & Travel By Australians

The following article from Sydney Morning Herald revealed interesting trends on immigration to Australia, plus the robust Aussie economy has sharply boosted overseas travel by Australians as well:

China has become Australia's biggest source of migrants, for the first time eclipsing the traditional main points of origin, New Zealand and Britain.

The latest migration figures show a record 6350 settlers arrived from mainland China in the four months to October, more than the 5800 who arrived from Britain and the 4740 who came from New Zealand.

The new Chinese ascendancy owes more to a collapse in migration from the traditional sources than it does to the 15 per cent annual growth in migration from China. The number of migrants from Britain is down 28 per cent over the year and the number from New Zealand is down 47 per cent.

An Adelaide University demographer, Graeme Hugo, said the global financial crisis had hit migration from traditional sources in ways that hadn't much affected China.

In March the Government sliced 18,500 off the skilled migration program for 2009-10, disproportionately hitting Britain for which skilled migrants account for eight out of 10 flights booked. Chinese migration, dominated by family reunions, suffered less.

Professor Hugo said New Zealand migration collapsed as people decided to hang on to their jobs. ''Just as someone from Adelaide is likely to try to hang on to their job in the global financial crisis rather than move to Sydney or Melbourne to take their chance at a time of tightening employment, I think that would be the case in Auckland as well,'' he said.

''It's an immediate response. New Zealanders don't need to apply to immigrate. There's no pipeline - that's why the response is so big.''

Figures for short-term arrivals, also released yesterday, show a change in where visitors are choosing to stay. NSW, traditionally the most popular state, received 6 per cent fewer visitors over the past year. Victoria and Western Australia received 9 and 15 per cent more visitors respectively.

At the same time the high dollar and the continuing effect of bonus payments sent a record 570,200 Australians overseas on holiday in October, meaning that for at least some of the month one in every 40 Australians was out of the country.

Departures climbed 20 per cent in October, swamping a 7 per cent recovery in arrivals.

NZ remained the most popular destination with travel to Indonesia and the US up 51 and 47 per cent on the previous year. Travel to Malaysia jumped 50 per cent, travel to the Philippines 40 per cent, and travel to Fiji 24 per cent.

The executive director of the Tourism and Transport Forum, Brett Gale, said the boom came at a cost to the local tourist industry.

''Over the past year departures have outnumbered arrivals by almost 600,000,'' he said.

''On the one hand, it's hurting domestic tourism, but more optimistically, there's an opportunity because it has made so many new airline seats available to bring overseas visitors into Australia.''

p/s photos: Aum Patcharapa Chaichua

NSTP & Media Prima, Not That Fair To NSTP But What Can you Do

Business Times: Media group Media Prima Bhd (MPB) today made an offer to take over New Straits Times Press (M) Bhd (NSTP) through a 1:1 share swap to create largest integrated media group in the country. The share swap offer, at an issue price of RM2 each, also comes with one free MPB new warrant for every five NSTP offer shares accepted.

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Hmmm... think i should get a share of advisory fees ... http://malaysiafinance.blogspot.com/2009/10/unique-situation-of-nstp-media-prima.html

Comments in my 5th October posting:
Of course if Media Prima manages to get away with this, its share price will move a lot higher. Media Prima is not going offer cash and owing to its high debt levels... a share issuance is likely. A better proposal will be to issue some shares and new warrants to NSTP shareholders. The warrants would add as a kicker because if the offer was paltry, Media Prima shares will rise and in the end NSTP shareholders will still benefit. But that still should not be the correct way. I have heard that there might be a one for one share issue, considering Media Prima is some 20% below NSTP's share price, it does not look good. Two Media Prima shares for one NSTP would be considered as fair, even though that is still below NSTP's NAV, but is not likely to happen. I would then suggest to do a one for one share issuance/swap and also give NSTP shareholders a 3 for one free warrants (expiry in 5 years) in Media Prima, with the conversion price at RM1.50. That way, I think the corporate finance deadweight on Media Prima will be much less, and NSTP shareholders will get a very good kicker.

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Anyways, 2 free warrants for every 10 shares is good I guess. I think that Media Prima shares would rocket as this deal favours them no end. I think RM2.00 is no problem for Media Prima. The warrants if it has an exercise price of RM1.80 would trade around 40 sen at a minimum. Not much upside left for NSTP but tons of it for Media Prima.


p/s photos: Aum Patcharapa Chaichua

AirAsia, Well Managed But Just Not Time To Buy Yet

The move to raise funds by AirAsia was anticipated. Why am I not terribly excited with AirAsia for now? I have to say it is a highly attractive business model, and is establishing itself as the numero uno player in Asia-Pacific region for low cost carriers.

The success of Ryan Air and the likes have attracted a lot of European institutional investors being very keen on AirAsia. Following the placement, the foreign shareholding level is about toppish, where will the follow on buying come from?

Yes the move will reduce its net gearing from 3.5x to 2.5x but on the same note it is delaying delivery of 8 planes. The biggest nullifier for me is the volatile fuel prices - no one can feel thoroughly comfortable to invest in AirAsia not knowing how that will play out. Whether they hedge or don't hedge, its a big unknown every quarter.

While I can criticise that aspect, I don't really have an answer on how to better do things. The capex will still be heavy over the next 2 years and the major carriers are cutting at AirAsia's pricing game plan as well - so many uncertainties, not my cup of tea for now. But its a well managed company, just don't like some of the factors affecting the low cost carriers industry.

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FinanceAsia: Low-cost carrier AirAsia Berhad yesterday raised M$505 million ($144 million) through a fully marketed follow-on. The deal ended a little smaller than originally intended after it ran into restrictions regulating the foreign ownership of airlines. The base deal size was 400 million new ordinary shares, offered at a price between M$1.33 and M$1.40 apiece, which translates into a discount of 0.7% to 5.7% versus Monday's closing price of M$1.41. The deal priced at the bottom, M$1.33, giving the full 5.7% discount. There was also an upsize option which could have increased the deal size by 75 million shares. Fully exercised, the 475 million shares could have raised as much as $180 million, based on the bottom-end pricing. However, the final deal size consisted of just 380 million shares. The decline was a result of Malaysian regulations limiting the foreign ownership of local airlines. The deal size was therefore constrained by the strength of the domestic demand. So even though the overall demand was enough to cover the base deal, the low level of domestic demand meant that it was not possible to do so in a way that did not cross the foreign ownership threshold. As such, the order book tells two different stories. Domestic demand was centred around a few large orders, which is not surprising considering that Malaysia has a relatively small number of institutional investors. Demand from international investors, however, was much stronger, with UK investors in particular putting in some sizable orders. There was also interest from a big name out of the US alongside some Hong Kong investors. The 34 accounts that did participate were confident that Air Asia's share price has not already peaked, even though it is up nearly 60% so far this year. The follow-on did not come as a surprise; the company flagged a placement of up to 20% of its issued share capital in June and provided further details in early August. There was a marketing roadshow in the first week of September and shareholders approved the capital raising on September 10. The deal launched on Monday evening. The company intends to use the capital to pay off debt and for working capital requirements, according to a term sheet. A research report by RHB Research early last month estimated that the placement could reduce the company's net gearing to 2.54 times from 3.71 times. Correspondingly, net debt will fall to M$6.11 billion from M$6.71 billion. In mid-June, AirAsia announced strong results for the second quarter. Profit before tax of M$128 million was way above analyst estimates and a massive improvement on the M$1.5 billion loss in the same period of 2008. "AirAsia is one of the few airlines in the region to post profits in the second quarter without the aid of fuel hedging or currency gains," Merrill Lynch said a report. "Its efforts to build high-margin ancillary revenues are having a significant impact on the bottom line, as is the focusing of its growth on major markets, like Singapore and Hong Kong, against weakened competitors." In response to the strong second quarter results, Merrill put a "buy" rating on the stock, with a target price of between M$1.75 and M$1.95 a share. AirAsia is Southeast Asia's largest low-cost carrier. Its focus is on short-haul, point-to-point domestic and international routes. It has four operating centres in Malaysia, as well as a unit based in Thailand. As of the end of February, the company had a total of 74 aircraft - 58 Airbus 320 and 17 Boeing 737. The joint bookrunners on the AirAsia deal were CIMB and Credit Suisse.

p/s photos: Aum Patcharapa Chaichua

Updates On Private Equity Sector

The Private Equity (PE) industry experienced its worst year ever in 2008 with overall returns on investment down 27.6%. Although performance has picked up in H1 2009, the industry still faces a set of fundamental challenges ahead. There is recent evidence showing PE capital markets units sidestepping investment banks and providing bridge finance and underwriting services themselves.

According to FT, the private equity industry is sitting on over US$1 trillion in dry powder (i.e. committed but not yet collected equity capital by investors) but is facing a dearth of investment opportunities. Banks’ continued woes are the main reason the cash remains uninvested. Although many bank shares have seen their share prices rocketing over the past few months, the reality is quite different, especially when it comes to "risk management". Banks are unwilling to provide loan financing for leveraged buyouts (LBOs) they cannot securitize and sell on to hedge funds and other CLO investors.

Moreover, as long as banks are not willing to write down their distressed assets, PE funds cannot buy them up cheaply, especially as LBO sponsors prefer to loosen covenants in order to keep companies alive. Meanwhile, the FDICs new rules make investment in destressed banks too onerous. This leaves the secondary funds market where PE firms sell their stakes to each other as an exit strategy.

PE owned companies need to refinance or repay US$400 billion of leveraged loans within the next five years (BIS estimates US$500bn in 2008-2010). On the other hand, the maturity structure of high yield bonds starts to kick in in 2014 as many high yield bonds were refinanced at record low interest rates shortly before the crisis hit. It remains to be seen whether PE partners agree to deploy funds to rescue zombie companies or whether they rather redeem their stake, even at a loss.

PE's core competences include management restructuring and improvement of operative efficiency. These are in high demand during a recession. Investments in U.S. and UK account for about 50% in buyout value. China and India account for only 4% of buyout value and 8% of the number of buyouts. Although many funds want to invest in emerging markets to take advantage of impressive growth rates, corporate challenges in emerging markets differ from those in industrial countries. It will be necessary to develop tailor made management solutions.

Earlier research predicted that 20-40% of the largest 100 LBO firms will go out of business in this cycle. For the remaining firms, limited partners have committed more 'dry powder' than ever before but there is a risk that some limited partners will not be able or willing to make good on their earlier commitment in the aftermath of the crisis. The future PE contribution of financial institutions, of family offices and foundations, and of endowments in particular is likely to shrink whereas pension funds, insurers and sovereign wealth funds/government agencies will grow in significance as limited partners.


p/s photos: Aum Patacharapa Chaichua