To revisit your life

再度重相逢 伍佰 (Wu Pai) – I name the title of the picture as – Revisit your life (再度重相逢), a song of Taiwanese popular singer, Wu Pai.  

But the picture looks a little bit disarrayed for the backdrop of forest. I think so, not paying too much attention to outline of clouds. Just lazy to fix it!

你說人生如夢 我說人生如秀

那有什麼不同 不都一樣朦朧

朦朧中有你 有你跟我就已經足夠

你就在我的世界 升起了彩虹

簡單愛你心所愛 世界也變得大了起來

所有花都為你開 所有景物也為了你安排

我們是如此的不同 肯定前世就已經深愛過

講好了這一輩子 再度重相逢

For lyrics of the song, I try to translate into English version as follows:

******
So you say life is akin to a dream, yet I put it as a show.

How could be those words deemed not the same? It's all-but illusive at most.

Your arrival is already shown in that illusion. Having you by my sides is satiable.

Thereafter you will release a rainbow floating in my life.

To love your beloved in an easy fashion will leave the whole world amazingly boundless.

All kinds of flowers will blossom for the sake of you, so will all the settings be arranged.

We are there desperately contrasting, a sure thing we must have devoted to each other in our previous lives, at which we agreed upon a reunification for this time around.

******

Like my translations? if yes, click 讚 (Yes) please !

To revisit your life - a great soft rock song making you relaxed by its steady, strong and spectacular drumbeat tempo !!!!

I terribly love the song but not the picture though which I paint it myself. The song can be marked as one of Taiwan's most-honored blue rock in the modern time. The singer, Wu Pai, deserves high respect as he is talent to compose his own songs, unlike other Taiwanese singers directly echoing the theme and rhythm of foreigner songs in order to make a quick success.

Good Sunday Morning !

Link to 再度重相逢 -
https://www.youtube.com/watch?v=jL18yGlbDGI
http://www.youtube.com/watch?v=QvurpxdduFQ&NR=1

Nobody's Fool

           You take your road, I'll take mine,   The paths have both been beat

           Searching for a change of pace.    Life needs to be sweetened

           I sang my heart out just to make a dime,  With that dime I bought you love

           But now I've changed my mind,  I'm not your fool.

           Nobody's fool, Nobody's fool

                                  
                         Quoted from song lyrics – Nobody's Fool

                         Songwriters: Keifer, Thomas Carl. Performed by Cinderella

Things will get messier before they can get better.

A jumbled week for government policy – Proposed pay hike for civil servants

A confluence of contradictory news has left the island unsure of its political and economic trajectories recently. At some points, the tie between the government and the private sector is bound to tangle in a big way, and now it has.

What will be the paramount mess is the proposed 3% wage hike of public functionaries who have been in a misery state since 1998 due to lack of government aid. They are expected to receive the increase planned to be effective July 01, this year, with the needed expense, estimated around NTD11 bn, set aside by additional budget, rather than offering of national bonds.

The government's merciful idea sounds rightfully steadfast, coming after statistics showing that its tax revenue in 1Q11 soared 4.9% YoY to NTD14.6 bn, a quarterly high in 11 years. The Premier will weigh feasibility over the proposal during a meeting with related official think thanks this week before reporting to President Ma Ying-jeou. The extraordinary budget will then be forwarded to the Legislative department for ratification, in a bid to favor some 800,000 public servants who, hopefully, will open wallets to spend. According to the well-designed scheme, the upward adjustment will inject 0.64 pct to the island’s 2011 economic growth.

What's more upbeat is a chain effect that will accordingly spread to local conglomerates, and small and medium-sized enterprises (SME), which have been largely vexed of late due to the government's outcry,  though which is not a mandatory plea. The private sector, said to be on steroids, had been claimed to rake in more than NTD1.5 trillion (USD51.55 bn) in dividends and earnings in 2010, helped by a cut in corporate income tax rate, slashed from 25% to current 17%, and ongoing effect from Economic Cooperation Framework Agreement (ECFA) between Taiwan and China.

ECFA: A main factor to buttress economy

Taiwan's GDP in 2010 charged at a double-digit pace to hit a 25-year high of 10.82%. It is taken for granted that they must dole out more money to cheer workers. Meanwhile, the island's economic dynamo will power ahead this year, rumbling comfortably to their advantages. While the massive Japanese earthquake will stunt the GDP growth by 0.11-0.2 pct to 4.72-4.81%, decreasing GDP outturn by NTD15-20 bn this year, the bounty derived from the ECFA will prop up Taiwan economy, coincidentally projected stable by 2 scholars from US in Taipei Friday who opined that the ECFA pact will contribute to Taiwan's GDP by 4.4% by 2020 under the normalized trade relations.

Mainly aimed for a tariffs reduction on goods traded on both sides, the ECFA will also help Taiwan strike more FTA with other trade partners, and bring more Chinese capital and tourists to Taiwan, boosting domestic demand. Chinese visitors to Taiwan grew 68% in 2010 and are expected to arrive more this year, an actually fruitful event to the island which is now chocked full of Chinese tourists. That is water under the bridge now since the government has decisively vowed to create a ticking time bomb in the job market. But it has the rebounding tax revenue and stellar number of Chinese tourists scrambling into island as cushions to withstand pent-up blast from those economically less fortunate people.

SME urged to follow suit to raise wage

Widely hoped to be stand-outs echoing government's angling for a full-scale pay hike on the island, Taiwan Semiconductor Manufacturing Co. (TSMC, 2330 TSE Code), global No.1 contract chipmaker, and Formosa Plastics Corp. (FPC, 1301), Taiwan's leading petrochemical goliath, have expressed their endorsement for the scheme to raise labor wage this year. Affected by their leads, other firms have been urged to go hand in hand with government.

According to an official survey during Jan. 10-21 among 6,000 businesses, 33% of SME considered a raise this year. 55% of big-name businesses with pay hike plans will ponder a hike within 3%, while another 37% would map out a 3 and 6% rise. Nevertheless, in response to the request for private sector modeling after government, the National Association of SME asked the government to jump out of pack first to set an example. According to the association, more than 50% of SME have in fact begun to raise their workers' salaries, ranging in most cases between 3% and 5% but going as high as 20%.

A further hike of minimum wage is necessary

Several legislators expressed their opposition to the government's plan to give an across the-board pay raise of 3% to its employees, arguing that this could enlarge the income gap. There's still an uneven disposition in the proposal which should at the same time make sure that it would bode well for those underprivileged people.

Granted that the pay hike will ultimately usher in a repercussion effect from public servants who may spend more, and local businesses will also jump on the bandwagon, Taiwan's income gap will keep widening in an already-formed, increasingly-palpable M-shape society. The annoying structure may sweep and deepen the island into a political and society anxiety. Suffice it to say that without a hike of minimum wage, there won't be any actual benefit toward the island.

Average monthly pay of Taiwan employees last year stood at NTD44,430 (USD1,433), up 5.34% YoY and growing to the highest territory in 16 years. Meanwhile, for the first time in 3 years, the government last Sept. reframed the minimum monthly pay to NTD17,880, up NTD600 or 3.47%, and the hourly pay to NTD98, up NTD3 or 3.15%. A survey also reflected that 55.64% of the firms contacted approve of a proposed rise in Taiwan's minimum monthly wage. A whiff of further upwardly revision is swirling in Jan. this year, but will be insufficient to those who live below the poverty line.

As reported in March, the number of households in Taiwan living below the line soared by 2,000 from a quarter earlier to 112,000 in 4Q10 and the number of persons in such households chalked up by 7,000 to 273,000, both the highest of their kinds ever recorded. Their plight is a stark decoupling from a sturdy economic revival In 2010. Taiwan adopts 3 criteria to rate a family living under poverty line: family income, assets and real property. And the criteria vary by area. A family in Taipei, for example, is viewed as living under the poverty line if average monthly household income is below NTD14,614 (USD471), average bank savings is less than NTD150,000 (USD4,839) per person, and market value of real estate owned is less than NTD5.5 mn (USD177,419). However, the gauges employed in other less-developed cities will be made with lower yardsticks.

Taiwan's fiscal health turns for the worse

There're plenty signs that the island's fiscal status will morph into a bad pattern, if the government sticks to its gun to amplify public servants welfare. During 1990 to 2008 when the island was governed by current opposition party, DPP, outstanding national debt totaled NTD3.6 trillion, up by NTD1.2 trillion in its 8-year stint at the nation's helms. But the figure rocketed by NTD1.3 trillion since the ruling KMT party took its offices within a mere 3 year span. To make matters worse would be the still-pending tug-of-war about an enforcement of 18% preferential interest rate of bank deposits for those retired civil servants. Should that put into practice, national coffers will seep further red ink.

Taiwan's aggregate tax revenue perched at a cozy level in 1Q11, a main draw cited by the government to put forward the pay hike step. However, the government will find it difficult to address the financial crunch in future. The driving force behind that momentum will be stalled as the Legislative department last week finalized the special tax against ritzy and luxury goods including real estate property, pricey furniture and jets, etc. It was seen that in 1Q11, tax revenue levied on incremental price of land hit NTD22.9 bn, constituting 7% of total tax revenue and marking a quarterly peak since 2006 amid a bustling property market.

Luxury tax revenue to cover additional budget

Emboldened by zooming land-related tax revenue, government is fairly convinced amid a belief that luxury tax will amp up its capability to realize revenue around NTD15.1 bn per year, including NTD12.9 bn from realty tax income. And that is hefty enough to offset expenditure arising from public servants pay ramped up by NTD11 bn. Meanwhile, all of listed firms this year will pay out dividend, up by 40% YoY, appropriated from last year results. The tax slapped on that dividend is regarded as part of streams to strengthen government revenue spigot.

A faltering property market narrows tax revenue

Notwithstanding official optimism, it would be a folly to take in those rosy conjectures as the sizzling transactions in property in 1Q11 can be deemed as last hurrah for property mongers to flee the market which is now turning bleak and surely will be mired in a bind. The profit generator engineered by luxury tax will likely shift into lower gears, in light of the fact that the tax, formulated to knock speculative wind out of property market, will become effective in June this year at the earliest.       

Taiwan doesn't go alone in rolling out the austerity measure to curb price rigging in property market. In synch with its regional countries, the new tax is quite hailed by those new home buyers who can in future gain easier access to tap the market with stronger bargains power. But a question remains as to whether the reversal of market is a start of downward spiral, or has been well factored into recent sluggishness. Anecdotal data suggest that a boom-and-bust will tend to proceed in a 10-year period in the market.

Construction sector, long viewed as a bellwether industry in local economy, had lost its luster for past few months. It would be relatively in an early stage to moot a buy, particularly because banking interest rates are on a potential uptrend to edge higher. A vault over 4% in lending rates will take a big bite out of profits of property bugs who in last 2 years were financially-solid profiteers, abhorred not only by President Ma but also by some scholars. They had applied an astonishing mortgage loan from banks which, truly to say, had no better channel for lending activities. But a weakening property market is on track to shrink government tax revenue.    

Intensified conflict caused by a dropping corporate income tax

Another complicated feud between government and local enterprise will be the apparently compulsory subject for the latter to replicate a pay maneuver by government. Much has been reported that SME and other heavyweight firms had capitalized on lowering corporate income tax which was shaved by 7%. Things are reasonable for government to have a lavished recommendation for them to follow suit. TSMC and FPC are joined at the hip to show their submissions, while SME is still rebuffing the demand.

TSMC, a big-cap heavily played by foreigners, is 6.38% held by government-linked fund; FPC, on the other hand, is a main beneficiary for Taiwan's tariffs reduction for importing naphtha which it reprocesses into ethylene. FPC even outpaces the state-run oil refiner, China Petrochemical Corp. in terms of profitability. As a result, the profitable twins only get one-way bet: following the lead of government. However, their outlooks might be clouded as the rising labor cost might erode their profit margins a bit, thereby unsettling foreign holders.

A bevy of uncertainty to disturb enterprises

It might make sense for SME and listed concerns to get closely attuned to the 2 big-caps footsteps, given the fact they rejoiced at thinner corporate tax by 7%. But the "bonanza" unfortunately will be erased by global inflation specter and firmer local currency, NTD, which appreciated nearly 7% from last year to current NTD29 against greenback. A buoyant NTD will add pressure to exporters as Taiwan is developing on an export-oriented track. Taiwan CPI in March was up 1.41% YoY, but down 0.87 MoM due to seasonal factor which Chinese lunar new year fell in Feb. to cause a spike in food and vegetable.

Local enterprises have been also irked recently by government's efforts to broaden its scope of tax revenue. The government is reckoning that tax under the bracket of companies' retained earnings should be pulled to 15% from 10%, in a belief that the move will encourage them to share more earnings with shareholders and raise salaries for employees. The SME seems to get good reason to blink at the pay hike request, when it is in face of an outlook flux.

Level playing field game in job market

A push to lift public servants pay has made a media frenzy over doubts about the ruling government's attempt behind the scene. It has been suspected that the ruling KMT party is trying to secure support of civil servants in the next legislative and presidential elections (March 2012) by raising their salaries in near future, while those employed, gainful enough, will not unleash any criticism. In reality, there should be a lassies faire fashion, or at least level playing field game in the job market to lend a hand to those financially-pinched people. A scenario of overall and fixed-rate wage hike in public sector seems outrageous and will serve as an inhibitor for economic momentum. The public sector, to some extent, needs to be slimmed down.  

The government must initiate a cogent case that we are in for a self-sustaining recovery, rather than simply relying on the ECFA. The pact has in effect solicited more Chinese tourists to beef up consumption sector locally, but not proved to lure capital eyeing investment chances in Taiwan. In first 2 months of 2011, Taiwan poured USD1.82 bn into China, up 33% YoY, while received a paltry inbound Chinese investment of USD690 mn, down 77% YoY. The striking gap should hint of a likely languish economic landscape on the island in future, due to an extended exodus of domestic capital.

Investors will be also perturbed by headlines pointing to various widely-split opinions. Those include environmental issues, which Mr. Ma believes should trump industry growth. A setup of new petrochemical plant in central Taiwan results into a struggling twist among pros and cons. Further, debate over disposals of nuke wastes and safety worry also roars resoundingly, in the wake of devastating Japan quake which puts Taiwan into a funk due to its possessions of 4 nuclear plants. Worry about the uncertainty can not be deemed as a fuss. It seems at present that the government has uncanny knack of resolving those tangled problems.     

Taiwan stock market – Listless trade ahead of earnings reports

Taiwan stock market encountered a bumpy road last week, sliding in a downward flag formation to end at 8,718, down 176 points WoW. Forecasts for NB outlook had generally turned murkier by foreign analysts' notes. Construction shares were stuck in a dilemma concerning the impact by luxury tax. Bargain hunters this time around might not be able to show a real knack for turning the overlooked constructions into the envy of other counters. Trading will likely remain lackluster, as risk-chasing mode has evaporated ahead of 2010 and 1Q11 earnings season reports due by Apr. A market's renewed interest to bounce over the 9.000 mark is deemed quite unlikely, amid a lack of wow factors in the short haul.

HTC, the market's highflier, last Friday manifested its muscle to scale a historical high of NTD1.255, a level that enabled it to record a market value over NTD1 trillion for the first time. But a market late tailspin sent it closing flat at NTD1,220, with its market share still lagging behind TSMC and Hon Hai (2317). Hon Hai in March turned in sizable sales of NTD214 bn, up 40% YoY and representing a revisiting over monthly sales of NTD200 bn that made in 4Q10. The sale figure won some grudging support for the mammoth EMS electronic which found a solid floor around NTD105. How much it spends for the relocation into inland China by its subsidiary, Foxconn, will call the tune for its future course.      

HTC in 1Q11 enjoyed sales of NTD104 bn, up a brilliant 174% YoY with net income reaching NTD14.83 bn, rising from NTD4.99 bn a year ago and translating into NTD18.36 per share. The quarterly EPS multiple more than doubled the NTD6.39 from a year ago. The cellular handset maker is set to ship out 11-12 mn units in 2Q11 inundated with orders of 12-13 mn units. As reported, a delayed rollout of iPhone 5 until Sept. will underpin its sales to jump 23% in 2Q11 to galvanize its bottom lines further. Its 4G Thunderbolt model, in a hookup with Verizon, has been well received in US. Though the stock is probably on the brink of topping out, partly justified by shortage of follow-through buying from foreigners in recent sessions, one foreign house raised HTC target price from NTD1,400 to NTD1,600.

There seems no messy wordings from a fool to evaluate HTC stock. Nobody is a fool when it comes to making decision about cross-Taiwan Straits investment, domestic political votes and protection of corporate profits.

Good Luck !

Link to Cinderella - Nobody's Fool

http://www.youtube.com/watch?v=yMEiMXa20Rc&feature=player_embedded

The final countdown

                  
                       We're heading for Venus and still we stand tall
                       'Cause maybe they've seen us and welcome us all
                       With so many light years to go and things to be found
                       I'm sure that we'll all miss her so
                       It's the final countdown, The final countdown.
                           
                               Quoted from song lyrics - The final countdown
                               Songwriters: Tempest, Joey;    Performed by Europe

Just occasionally, the market's creaky trading machines in tech counters can whir into rapid action.

Bears sidestep Acer pit

Pep talks from Acer's chairman and interim CEO, JT Want, delivered much-need optimism for the flagging Acer stock which defied gravity to edge up NTD1 to NTD58.1 WoW last week. Not only refuting speculation about a rerun of lowering estimate in 2Q11 for the 3rd time in a row, Wang also signaled favorable odds for the NB maker to revise upward expectations for the quarter.

At its Apr. 07 analysts meeting, Acer released a slackening growth tip for 1Q11 sales, down 3% QoQ to NTD145 bn, which will be held the same in 2Q11. By product lineup in 2011, sales of its NB stripes, including netbooks, will gain at a single-digit pace. Netbooks will be sold off at a flat clip of 30 mn units with emerging markets eyed as main channels. Acer disambiguated it that netbooks operation won't slip into a rear-view mirror, and even put in pretty picture for 2011 total sales expected to be capable of an upward revision, on assumptions of better-than-expected delivery of its first tablet soon to hit shelves globally.

Pre-orders for Iconia Tab A500, its first tablet and to be sold exclusively on Best Buy stores at USD449.99 kicked off Apr. 08, with Android-based device available April 24. The Iconia Tab A500 has 16 gigabytes of storage, and front and rear cameras. It features only Wifi wireless internet without connection via a phone operator. The tablet has a 10.1" screen similar in size to iPad2 and is USD50 cheaper than the similarly equipped device from Apple. Upbeat news indicates that the new gadget is well-received on the island, to be closely-watched as a barometer for Acer's future resilience.

Acer dismissed uncertainty about its profit margins. R&D expense to be accelerated this year will erode gross margin less than 0.2%-0.3%, a ratio far lower than sales growth. It ruled out a big impact from shortfall of key material supply caused by Japan quake, and will face threat no more than Apple. One niggling concern among foreign analysts, however, is that cost for contracting services for Acer NB had been assessed to be in for appreciations. There are grounds for them to state so, given a global inflationary specter, but a tight alliance for Acer with its Taiwanese ODM makers could serve as silver bullets in the face-off of global NB seats, despite cost hike strains will linger over 2-3 years.

Guidance for 3Q11 and the whole 2011 will be announced in late May following a finalization of its new CEO candidate this month. A reshuffling of leadership as previous CEO, Lanci, stepped down also posed anxiety about a ripple effect, connoting that Lanci will uproot a team of high-ranking workers in Acer global footholds. Such an unwarranted concern is grossly inadequate, as the NB icon can surely find one to fill the gap in light of the fact that a shake-up of management is a high-frequency occurrence in an always cut-throat IT market.

In essence, higher gears into the already-crowded tablet market is relatively too early to prove its ability revising 2Q11 bar upwardly, but will come into clearer visibility in 4Q11, a typically peak season boosted by back-to-school buying spree. Its efforts into mobile PC, in particular the tablet and netbooks applying window 8 OS and ARM processor, will become a trendy and valuable cure-all to its outlook, much as its operation in China market that is hoped to double sales this year.         

Selling pressure from foreign investors plunged Acer stock to a weekly low of NTD55.2 Wednesday, then giving way to renewed buying interest occurring on Friday session which they posted a net buy of 14.5 mn shares. The reversal of foreign pundits, though not building up faith strong enough to justify a mid-term firm ground over NTD55, has at least reflected an Acer's win in penalty kick against foreign players. Acer may be long in the tooth to play as a rising star, but isn't a clumsy laggard in global battlefield. What's more convincing is its sooner-than-expected stock buy-back policy, another ace in the hole to support its stock. Buying on dips for Acer is still deemed reasonable, albeit not necessarily pepping your portfolios immediately.

Market is abuzz with M&A - Polaris & Yageo to be taken over

April has marked would-be barn burners for M&A activists who unleashed their buyouts of 2 listed firms–Polaris Securities (2854) and Yageo (2327), both of which are going to be delisted in next 6-12 months.

With a total price tag of NTD48.87 bn for the merger with Polaris, Yuanta Financial Holding (2885) will launch right issue and place NTD28 bn in the pipelines to defray the takeover that is going to ramp up its paid-in capital to NTD91.7 bn from current NTD81 bn, with a diluted effect of 11.6X. Valuation for the deal was reportedly formulated appropriate to please shareholders in Polaris whose NAV per share stood at NTD13.25, translating into a PBR of 1.71X based on the acquisition price of NTD22.9. The huge settlement is far larger than any securities house merger before, and pricier as compared with previous record PBR of 1.5X. Yuanta, already spreading into banking sphere, is poised to further cement its leading stock brokerage market share which commands a 12% market turf. It will take a bite on life insurance area and bare claws for remaining securities houses in future, after its owners were acquitted of charges of alleged bribery to former President.

Yuanta has picked up kudos in securities houses M&A which it began as early as 1991 when Taiwan stock market was hit extremely by sharply-dwindling daily trading volume that once dived to a nadir less than NTD8 bn. At that point, its market share ranked at fifth or sixth slot. Yuanta's management style has been astute, efficient yet draconian. Employee of Polaris certainly can remain chirpy as a canary, applauding the punter's reliability to vouch a 3-year warranty ensuring their working rights, but a phenomenon will always tend to emerge, - layoff will ensue minus or plus 3 years, an event not so freaky in the industry.   

History again repeated itself as doubts about a jump-the-gun effect loomed against the blatant action. Polaris stock, before the merger news was publicized on Saturday night, raked in 2.75% gain to close at NTD20.6, outpacing other financials in a lackluster market proceeding on Friday which dipped 7 points to 8,894. Motivated by swirling rumors being as potential acquisition bait for Yuanta, Polaris stock has been a financial leader to revisit a recent top of NTD20.65 logged in late Jan. Insiders seldom went on trial for insider trading fraud in Taiwan stock market. For instance, Taiwan Int'l Securities (6012), set to fall into extinction in May by a grab from Capital Securities (6005), shot through the roof on a 22% steep updraft preceding news release.

Barbarians at the gate make their Midas touch on Yageo stock

US private equity fund Kohlberg Kravis Roberts & Co (KKR) and Yageo Corp founder Pierre Chen on Apr. 06 offered an all-cash buyout for Taiwan top-notch passive component maker, Yageo (2327), in a ticket valued at USD1.6 bn priced at NTD16.10 each. The buyout will be conducted via a joint venture between KKR and Chen called Orion Investment. In response to the news, Yageo stock jumped to NTD15.6, up by NTD1.5 WoW.

Orion is scheduled to nab a more than 50% stake in Yageo after completing the tender offer, bringing about a merger of Yageo and Orion, as planned by KKR and Chen. Yageo afterwards will be delisted, if everything goes well. Funds managed by KKR and Chen's family currently own a combined 34.3% of Yageo outstanding shares assuming a complete conversion of KKR positions of Yageo Euro convertible bonds and exercise of all employee stock options. After the decoupling from Taiwan market, Yageo will reportedly work to restructure itself, mulling over a possible relisting in about 3 years.

To be sure, Yageo has been adept at sizing up the economy and enlarging its operation scale. In 2005, it spent NTD18 bn to purchase Phillip ( Taiwan ), and a series of bangs in acquisitions or ownership increases in 3 listed firms that included MLCC field allowed it to act as a bellwether in Taiwan passive component industry. Its buy offer for Ta-I Technology (2478), a resistor maker, was however a flop in 2007. The unrepentant market raider this time around reloads its elephant gun with trigger fingers itchy to hunt after no one else but its own company. 

The scheduled doozie hug for Yageo stocks comes at a time when it is primed to stretch out blockbuster showings. Last year, its sales zoomed 42.8% YoY to NTD27.32 bn, from NTD19.13 bn a year ago. Net income grew more than five-fold to NTD4.15 bn, from NTD 673 mm in 2009. EPS topped a 10-year apex of NTD1.88, up from NTD 0.31 in 2009. Skepticism about its intention for a demise of Yageo listing has heightened, not in the least of which is how it rolled out the offering price at NTD16.1, a level widely-criticized as dirt-cheap and unacceptable.

Disputes over offering price level intensify

Yageo clarified the gauge on the grounds that the price was culled by a fully-diluted effect from its outstanding CB, which in turn translating into a PER of 11X. Besides pointing out the offering price verges at a premium of more than 14.2% vis-a-vis market price at disclosure date last Friday, Yageo emphasized that the price also surpasses its NAV per share of NTD14.7288 (as of 3Q10). Another factor taken into account is the price stands for a peak in a 7-year span. All the remarks, on whatever kind of algorithm, make little sense and possibly try to dupe its shareholders.

Questions have roared up against a 7-year interval reference used by Yageo as yardstick for the offering price, rather than a stretch over 10 or 20 years. Yageo stock hit an all-time high of NTD 152 in 1997, and never breached a ceiling of NTD16.5 seen in June 2007 since 2005, a year before which the stock charged to NTD 24 in Apr. The 7-year period was then "explicable", as the offering price is lower than that zenith of NTD16.5. In other words, for investors adopting a buy-and-hold mode for a stint over 8 years, the valuation will run against their hopes. Yet, will there be any compensation for the long-term stock owners, if the plan gets a go-ahead from the authorities?

Stalled growth becomes viable for failing Yageo  

What's even worse, the stock is said to too big to churn out rosy results pleasing investors, and Yageo is exhausted to engage in Q&A for performance, as cited by its chairman. A full transfer into common stocks by KKR's USD228 mn holdings of Yageo 7-year unsecured zero-coupon CB, debuted in June 2007, will help lift its paid-in capital near to NTD30 bn. In Chen's interpretation, that will stoke unease about a scenario of being "so big to fail", instead of "too big to fail".  

In terms of its history of capital structure, Yageo would definitely receive no confident vote from investors who got involved in its past right issues programs. As of Sept. 2010, rights issues, recaps from retained earnings and recaps from capital surplus respectively made up 21.58%, 44.24% and 34.18% of Yageo paid-in capital, with the right issues portion coming at a higher-end metric than other electronics. Acer turned in more comfortable figures by 4.01%, 28.81% and 67.18%.   

Partly spreading confusion will be the role of Orion Investment, the mechanism to scoop up Yageo outstanding shares registered by a hefty number of 128K public investors. Domiciled in the Dutch with capital only documented at NTD0.5 mn, the JV between KKR and Chen will start a blitz to snatch up shares with the deadline fixed at May 25, before which the JV will buy a minimum of 16.7% of Yageo floating stake. Combined with the current stash from KKR and Chen, the JV's holding will accordingly exceed over 50%, making it applicable for a public tender offer without shareholders approval.      

Offering price is close to Yageo CB convertible price

There are certainly various ways of slicing and dicing the valuation that paints a sobering picture. One comes from the convertible price of Yageo 7-year unsecured CB at NTD16.15, fractionally higher than its tender price of NTD16.1. To some, the Yageo case is nothing but a makeshift to meet cash-out call from KKR which has an average investment horizon of 5 years and more in its portfolios companies. After getting a board seat, it exits its investment through IPO, SPO, and sales to strategic buyers.

KKR, listed in NYSE in July 2010, glittered in its 1Q11 results with asset under its flag lifted 10% to USD61 bn. But it might stumble in Europe where it underwent a management makeover in Feb. this year, and KKR Europe II fund continued to underperform. In addition, on Mar. 07, 2011, it said it has received a request from US regulators for information in Jan, 2011 about the company's dealings with sovereign wealth funds. KKR is now cooperating with the agency's investigation   

For the reckless move by KKR and Chen, KKR seems to pick a good time to ask more of return, now that Taiwan market is in solid footings to sport further gains with investors' complacency appearing high, albeit a short-term downward correction is on the horizon. Whether the buyout will be finally nodded by regulators or not, Yageo stock might already hold up well above NTD16.1 or higher than that CB convertible price of NTD16.15. If so, that will give chances for KKR to raise money to buttress its balance sheet by liquidating position of Yageo CB.

Redeem CB in the form of stock buyback

To fully convert its CB holdings into stock is probably one feasible way for KKR to depart from Yageo, particularly given the fact that market liquidity for ECB has long been shallow. What's also downbeat is that the CB doesn't carry any interest coupon. Yageo in the past 7 years was likely not so willing to see a stock price over NTD16.15, a level that will generate arbitrage opportunity, - buy CB and short the stock over that price at cash market by traders in local securities houses' int'l departments. Yageo's begrudging attitude had torpedoed any attempt for its stock to stage a stellar uptrend in the past 7 years. Plus, the stock's daily trend has been characterized by high churning rate, not a goodie technical sign for stock prices at lows but helpful outcome for stock brokers.

Buying from foreigners on last 2 sessions last week abruptly ballooned by a total net buy of 105 mn shares. It looks like a warm-up phase for Yageo to absorb potential selling from KKR in future. This doesn't mean that one can go in front of it (i.e. short selling Yageo) at present. Their buying is supposed to be extended to prevent a fallback of Yageo stock, if Yageo determines to redeem KKR's CB holding by means of stock purchase via Orion at stock market. A sudden increase of Yageo's registered foreigners' holdings, not by market transactions, will be another valuable canary, chirping that KKR has fully converted its CB holding into common stocks in preparations of a farewell.

What will happen next is a likely step for Yageo to announce a stock buyback project. Yageo, somehow, seemingly lacks capital to redeem the load of USD228 mn CB held by KKR, especially because Yageo is well reputed as an art collector. The buyout news will serves as an upbeat catalyst for common folks to buy the ideas that the firm is on the positive bias for stock price at least for the moment. Nevertheless, a development for a listed firm that garners EPS at a 10-year pinnacle yet decides to forfeit its trading status, if put into action, sounds irrational, irresponsible and counterintuitive.

Ditch new Yageo stock on relisting

It will not go unnoticed, for sure, to regulators concerning the name of real foreign buyers, offering price and social justice to shareholders who may start to be alert about the final countdown for Yageo delisting. When the buyout hubbub is settled into dust and Yageo really finds a new strategic partner after fleeing the market, someone can then take few days off to date with Rosamund Kwang (關支林) in Paris or Venus. But there will be raised a question: will you scramble to pitch a buy order for new Yageo stock if it again goes listed on this island within 3 years, according to source by people familiar with the issue?   

Investing is a complex rocket science that requires professional help - at least that's what professionals usually say. But a winning case can be made for investors following a rule known as KISS, which stands for "Keep it simple, saver." Any listed firm should also follow that principle - all they need to do are earning money for public shareholders and keeping production lines humming. Investors' portfolios must be reallocated or reviewed at least once a month to ensure that there isn't any stock padding sales record, involving in accounting shenanigans or orchestrating a scheme to tamper with the company's listing lifetime. It is a boring but a bare-bones approach.

Good luck and good trading !
Link to The final countdown - http://www.youtube.com/watch?v=7_IKcMl_a9A