First Tibetan Company Hong Kong IPO

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Tibet 5100 Water Resources Holdings(1115.HK) recently raised HK$1.38 billion ($177 million) from its initial public offering and will become the first Tibetan company to list in Hong Kong.

Tibet 5100 sells most of the water it produces to corporate clients like railway operators, airlines, banks and hotels as well as government organisations through long-term contracts. Its most important customer is China Railway Express, which is the procurement agency for the Ministry of Railways and accounted for close to 90% of its total sales volume in 2010.



However, it is also developing its retail distribution channels in China and its water is now available at supermarket chains such as Walmart, Carrefour, Metro and Auchan, and high-end hotels such as Shangri-la Hotels, and convenience store chains such as Lawson and Watsons.

According to Euromonitor, Tibet 5100 is the largest producer of premium bottled mineral water in China.

Tibet 5100 markets its water under the brand “5100 Tibet Glacier Spring Water”, emphasize that it comes from a glacial spring located 5,100 metres above sea level in the Nianqing Donggula Mountains in Tibet.

Source: Finance Asia

Tibet 5100 Water Resources Holdings(1115.HK) closed at 4.12 HK$ today and the company has a market cap of 10.58 billion.

Disclosure: No positions

 

The Top Companies in the U.S.Tire Market

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The graphic below shows the top companies in the U.S. tire market:

Click to enlarge

Source: Continental Sells to Tire Salesmen in the U.S., Bloomberg BusinessWeek

Goodyear, Michelin and Bridgestone sell about half of the replacement tires for U.S. passenger cars. Akron, Ohio-based The Goodyear Tire & Rubber Co (GT) is the largest U.S. manufacturer of tires and had sales of about $20.0 billion last year. Japan-based Bridgestone trades as an unsponsored ADR on the OTC market under the ticker BRDCY. The stock is up about 23% YTD.

Cie Generale Des Ets Michelin SCA (MGDDY) is a tire maker based in France. Michelin ADR is also up about 24% YTD. Germany-based Continental AG (CTTAY) is one of the largest tire makers in the world. Continental generates 13% of its revenue from the U.S.

Although much smaller than Goodyear, Cooper Tire & Rubber Company(CTB) had sales of $3.5 billion last year and has a higher profit margin. Since its humble beginnings in 1960, South Korea-based Kumho Tires has grown tremendously over the years to become the 9th largest tire manufacturer in the world. Hankook is also a South Korean firm and is the seventh largest tire manufacturer in the world.

Disclosure: No positions

Healthcare Expenditure as a Share of GDP Among OECD Countries 2009

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According to the OECD recently released its OECD Health Data 2011 report, healthcare spending continues to rise faster than economic growth in most OECD countries. Healthcare spending reached 9.5% of GDP on average in 2009, up from 8.8% in 2008.

As expected the U.S. continues to spend the most on healthcare. The following chart shows the wide margin between the U.S. and other developed countries:

Health expenditure per capita in US$ Purchasing Power Parity (PPPs) 2009, OECD countries

Source: OECD

Due to the lack of a decent national healthcare system for all citizens the U.S. is the only developed country where private health spending accounts is in addition to and higher than public spending as clearly shown in the chart above.

From the report:

In 2009, there were large variations in how much OECD countries spent on health and the health spending share of GDP. The United States continued to outspend all other OECD countries by a wide margin, with spending on health per capita of $7960. This was two-and-a-half times more than the OECD average of $3223.

As a share of GDP, the United States spent 17.4% on health in 2009, 5 percentage points more than in the next two countries, the Netherlands and France (which allocated 12.0% and 11.8% of their GDP on health). Norway and Switzerland were the next biggest spenders on health per capita, with spending of more than $5000 per capita in 2009.

Five European Bank Stocks To Buy Now

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Some investors are staying clear of European bank stocks as fresh fears of debt crisis haven re-surfaced especially with Greece in recent weeks. Greece will be bailed out for the second time and is on track to implement austerity measures that will fix some of the country’s awful fiscal woes.

In general, Greece has always been the poorest country in Western Europe plagued by corruption, tax evasion and other social ills usually seen in third-world countries. So in some sense the country should not have been invited to become part of the European Union(EU) in the first place. However after joining the EU, despite sucking billions in aid from the EU in the years since, the cradle of democracy continues to remain a problem child and gains the attention of the global media for all the wrong reasons. Rightly so, hard-working Germany and other nations are getting tired of coming to the rescue of the lazy and irresponsible Greece over and over.

It must noted that some European banks have high exposure to Greece. The fear of a Greek default and to some lesser extent fiscal issues in Portugal and Italy is keeping bank stocks depressed. However when looked from another perspective, some of these banks are cheap at current valuations and look attractive now. In my view, fears of debt crisis are way overblown and stronger banks are also badly hurt by the overall sentiment towards this sector. Investors with a long-term horizon of five years or more can consider adding some of the strong European banks.

Five European bank stocks that look attractive now are listed below with some reasons for investing in them:

1.Bank: Nordea Bank AB (NRBAY)
Current Dividend Yield: 3.84%
Country: Sweden
Investment Rationale: One of the largest banks in the Nordic region with a significant presence in the Baltic countries.Nordea’s Core Tier 1 Capital Ratio is high at 10.7%.The divided payout ratio is now higher than the pre-crisis level. The Swedish government plans to reduce its current ownership of around 13.4% from mid-August.

2.Bank: ING Groep NV (ING)
Current Dividend Yield: N/A
Country: The Netherlands
Investment Rationale: ING is one of the top European financials with a global footprint.Though the group has suspended dividends it is taking steps in the right direction for boosting its capital base and increase asset growth. For example, in June ING sold its popular ING Direct unit in the U.S. to the subprime lender Capital One(COF) for $9.0 billion.

3.Bank: Societe Generale (SCGLY)
Current Dividend Yield: 4.59%
Country: France
Investment Rationale:Societe Generale is one of the largest banking groups in France with operations in 85 countries. SocGen is slowly recovering after getting hit hard in the credit crisis and a huge fraud committed by a rogue trader. This year SocGen increased its dvidend payment significantly from 2010. The bank is well capitalized with a Tier 1 Ratio of 10.8% in the first quarter.

4.Bank: HSBC Holdings PLC (HBC)
Current Dividend Yield: 3.61%
Country: UK
Investment Rationale:Though based in UK, “The World’s Local Bank” has operations in 87 countries
serving some 95 million customers. HSBC has a strong presence especially in fast-growing Asia. In the U.S., HSBC took prudent measures and limited losses in its Household International subprime unit that it bought a few years ago. The bank has the highest market capitalization among the major British and top 20 European financials and stands to gain from growth in emerging markets.

5.Bank: Erste Group Bank AG (EBKDY)
Current Dividend Yield: 1.97%
Country: Austria
Investment Rationale: Erste bank has a strong presence in Central and Eastern Europe where the Czech economy is faring well and the Romanian economy has stabilized. Erste is looking for expansion in Poland which has become highly successful among the former Eastern bloc countries. Erste Bank has recovered well from the depth of the credit crisis since the government’s bailout did not dilute existing shareholders and came with extremely favorable conditions.

Note: Dividend yields noted are as of July 8, 2011

Disclosure: Long ING, EBKDY, SCGLY

U.S. Utility Stock Investors May Want to Switch to Foreign Utilities

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Investors looking for yields and stable growth have traditionally preferred utility stocks. The majority of the utilities in the U.S. are regulated and tend to have near monopoly in the operating areas offer stable growth. However in recent years U.S. utilities are facing many headwinds and their stocks have not performed as they have in the past.

From Fear and Loathing for Utilities by Liam Denning in The Wall Street Journal:

Widows and orphans have reason to be pessimistic. That, along with their love of big dividends and regulated cash flows, is why they traditionally value utility stocks. Utility-dividend yields historically have tended to move with Treasury yields. As the latter fall—usually when fear reigns—utility yields fall.


That has been the case since mid-April. Utility stocks have rallied strongly, sending their yields down, as the 10-year Treasury yield has dropped from about 3.6% to a recent low of less than 2.9%. It stands now at about 3.2%.

If the economic recovery falters in the second half of 2011, renewed demand for Treasurys could, in theory, boost utility stocks further. But don’t bank on it.

The sector’s current dividend yield of 4.2% is 1.05 percentage points higher than that offered by Treasurys, compared with a monthly average of 0.13% since 1970. Utility dividend yields have often been below Treasury yields. Indeed, across that entire period, there have been only three episodes where utility dividend yields stayed above Treasury yields for longer than 12 months. The current one, which began in mid-2007 and really took off after the financial crisis, is the longest since 1980.

The author further notes in the article that 42% of S&P 500 utilities missed their earnings estimates in the first quarter and earnings are expected to drop this year.

Compared to their U.S. peers, many foreign utilities offer better growth potential. This is true especially for large diversified utilities and those operating in emerging markets. As the demand for electricity continues to grow in emerging markets such as China, India, Brazil, etc. utilities are bound to experience higher growth. In addition, many foreign utilities offer higher dividend yields than U.S. utilities. Hence investors in U.S. utilities may want to consider switching to some of the foreign utilities at current levels. The potential for earning higher returns is higher with these utilities despite factors such as foreign tax withholdings on dividends, currency fluctuations, etc.

The following 10 foreign utilities have dividend yields of more than 4.2% paid by U.S. utilities:

1.Company:EON AG (EONGY)
Current Dividend Yield: 7.82%
Country:Germany

2.Company:Companhia Energetica De Minas Gerais Cemig (CIG)
Current Dividend Yield: 4.97%
Country: Brazil

3.Company:National Grid PLC (NGG)
Current Dividend Yield: 5.90%
Country: UK

4.Company:Veolia Environnement Ve SA (VE)
Current Dividend Yield: 6.48%
Country: France

5.Company:Huaneng Power International Inc (HNP)
Current Dividend Yield: 5.7%
Country: China

6.Company:Cpfl Energia SA (CPL)
Current Dividend Yield: 5.40%
Country: Brazil

7.Company:Enel SpA (ENLAY)
Current Dividend Yield: 6.31%
Country: Italy

8.Company:EDP Energias de Portugal SA (EDPFY)
Current Dividend Yield: 6.95%
Country: Portugal

9.Company:Gdf Suez SA (GDFZY)
Current Dividend Yield: 5.93%
Country: France

10.Company:Aes Tiete SA (AESAY)
Current Dividend Yield: 8.50%
Country: Brazil

Note: Dividend yields noted are of July 8, 2011

Disclosure: Long VE, EONGY