Canada's Manulife Financial Expands Deeper into Asia via Cambodia. Poised to Have $4 Billion in Income by 2015.

Canada's Manulife Financial (TSE: MFC) spreads expands its Asian business and plans to reach $4 Billion in net income by 2015. This report, from Bloomberg, notes that Manulife will be opening an office Phnom Penh, Cambodia, its first in the Southeast Asian nation.

Manulife has recently been searching for broad expansion opportunities in Asia as the market is currently underserved by insurance corporations, unlike at home in North America, where the market is largely saturated. Currently, Manulife is the owner of Boston-based John Hancock Financial, as well as insurance businesses in Hong Kong, China, Malaysia, Vietnam, and Japan.

Regarding Cambodia, Manulife officials state:

“We see an emerging middle class here... These are people starting families with steady jobs, fairly good jobs, where the average age is 25.”

This is in stark contrast to the North American market where the rapidly aging population provides insurance companies with little room for base expansion. Also, in a wise move, the company has decided to begin by offering basic term-life insurance plans to Cambodian consumers, which should feed them a steady stream of premium income with less risk.

At present levels near the $10 range, Manulife yield almost 5% per annum, which for the Intelligent Investor is a good steady stream of dividend income.

Asian Governments See Canada's Natural Gas Resources as Very Cheap. Petronas to Pay 77% Premium for Progress.

Petronas Energy of Malaysia is going to pay a 77% premium, or $5.5 Billion for Canada's Progress Energy. Foreign companies like Petronas are racing to secure Canadian natural gas properties, and build a Liquefied Natural Gas facility on the country's west coast in British Columbia.

One the Progress' key owners is the Canada Pension Plan, and they have already signed-on to the deal, which indicates that most others will follow, and that it is doubtful that this deal will be held-up by the Federal Government.

Officials for Petronas state that:

"The proposed transaction will combine Petronas’ significant global expertise and leadership in developing LNG infrastructure with Progress' extensive experience in unconventional resource development to build a strong and growing world class energy business based in Canada."

Undoubtedly, the purchase is a boon for shareholders of Progress, and most of them will side with the deal and choose to tender their shares. 

What does this announcement mean for the Intelligent Investor? In the eyes of energy hungry Asian government's, Canada's natural gas supplies look abundant and severely undervalued at present levels. At about $20 per share, and with a fat dividend yield of almost 4% per annum, Canada's EnCana Corp. is also looking like a deep value play (TSE: ECA) (NYSE: ECA).

Questions or comments? Leave them below : ) 

What Country has the Highest Stock Market Returns Since 1900? Australia and Canada Near the top of the List. Here is a Way to Invest.

Banking giant Credit-Suisse highlights Australia as the stock market with the highest real return over the last 112 years. The country, blessed with vast amounts of natural resources and fantastic weather, boasts an average annual real rate of return of 7.2%. Over the same period, Canadian stocks have returned 5.7% per year, which is also above the world-wide average of global stocks. The global average return for stocks since 1900 has been 5.4% per year.

The Australian Stock Market, or ASX, is now the sixth largest equities market in the world, and the nation boasts one of the world's highest rates of "economic freedom," according to the Heritage Foundation. Currently, half of the Australian stock market is composed of banks and mining companies, which is very similar to the Canadian stock market, with the exception of our preponderance of oil and gas stocks. Big names include companies like BHP Billiton and the Commonwealth Bank of Australia.

With Australian Debt to GDP levels for 2012 at around 23%, the country is also in excellent financial shape. So what can the Intelligent Investor do with this information? Focus some of your international exposure on Australia. 10% of a portfolio could be invested in a basket of Australian stocks by buying a exchange traded fund (ETF). One such ETF trades under the ticker (EWA) on the NYSE. Over the last year the iShares MSCI Australia Index Fund has declined by about 13% and represents a good value at today's level.

Leave your comments or questions below and I will be sure to reply.

Search Wider to Profit from Natural Gas. Asian and North American Price Differentials Present an Interesting Opportunity.

Trying to profit in natural gas is difficult. The United States Department of Energy estimates that production of natural gas liquids hit a high in March and is now 50% above production levels in 2009. As a result, prices of some natural gas liquids have plummeted by 60%. Natural gas producers are becoming strapped for cash and there is now a lot of uncertainty about the viability of another of natural gas properties throughout North America. 


This is actually good news, however, for some chemical manufacturers that may need to use natural gas liquids, such as butane, in their processes. Examples of such companies include Dow Chemical (NYSE: DOW) and Dupont (NYSE (DD). 


The market for natural gas, however, is not the same throughout the world. While in North America supplies have spiked and prices have plummeted due to basic supply and demand dynamics, Asian prices have increased over 30% in the last year. Demand for Natural Gas Liquids in Japan, China, and India have all increased for 2011, meaning there is a huge spread between North American and Asian prices.

Essentially, if a North American producer can develop the terminals and infrastructure necessary to ship the natural gas liquids overseas, they will profit handsomely. Statoil (STO) out of Norway is a very interesting and reliable choice in this area. They currently have the only LNG production facility in Europe, and they have a terminal in Singapore, and soon Malaysia as well. This will bode every well for future cash flows.

Conclusion: For the Intelligent Investor, natural gas prices are making it very difficult for North American natural gas producers, but for those interested in profiting from the current low-price environment, try Statoil or other producers that have the capacity to profit from the differential between prices in Asia and Europe or North America.

If you’re considering buying a new home or refinancing/renewing your current mortgage, it would be a wise to carefully consider the following changes that will take effect on July 9th, 2012.

The Federal Government announced this morning four new clampdowns on insured mortgages that will quickly come into effect. The federal government's changes include:

1. Reducing the maximum amortization period to 25 years from 30 years.
2. Reducing the maximum amount of equity homeowners can take out of their homes when refinancing to 80% from the current 85%.
3. Limiting the availability of government-backed mortgages to homes with a purchase price of more than $1 million.
4. Fixing the maximum gross debt service ratio at 39% and the maximum total debt service ratio at 44%.

The first two changes will have the biggest impact on Canadian borrowers and real estate investors.

If you’d like to review your options or if you have any questions, please give me a call or send me an email, and I’ll be happy to discuss how these changes may affect your personal situation.

CIBC is estimating that the Canadian economy will barely keep its head above water over the course of the next year. The national economy is expected to grow at 2.1%, and along with a slowing global economy, this is expected to hold interest rates low for the foreseeable future.

Canadian consumers have exhausted much of their savings and their spending has almost reached its limit. Borrowing rates are high, which leaves Canadian consumers with little room to increase spending in case wages increase in the near-term, which is very unlikely.

Personal consumption, as the largest component of GDP or gross domestic product, plays the primary role in determining our nation's growth rate. Net exports (exports - imports), however, also play a major part, and with growth in the United States at a standstill, there is little room for expansion here in the near-term.

Harper's conservative government has been trying to diversify Canada's export market through trade negotiations with China and South-East Asia, but finalizing international trade agreements takes a lot of time, and may not even contribute to net exports over the long-term, especially if imports remain high.

So what does this mean for the Intelligent Investor? Mortgage rates and borrowing terms should remain favourable for the average Canadian household, and real estate prices, as a result, should still experience some near-term support.

As always, if you have any questions or comments, post them below!

RIM Turnaround Could Take Three to Five Years, Watsa Says - Bloomberg

RIM Turnaround Could Take Three to Five Years, Watsa Says - Bloomberg:

Below is an interesting excerpt from Bloomberg's article:

A turnaround at Research In Motion Ltd. (RIM) may take three to five years and the BlackBerry maker’s stock is undervalued, one of RIM’s biggest investors said today.

Prem Watsa joined RIM’s board in January and days later said his Fairfax Financial Holdings Ltd. (FFH) had doubled its holding, making it RIM’s third-largest investor, now with 5.1 percent. After Fairfax’s annual meeting today, he said he’s confident about RIM’s future.

“Is it going to turn around in three months, six months, nine months? No,” Watsa said. “But if you’re looking four, five years -- we make investments over four, five years. “Here’s a company with $2.1 billion of cash and no debt.”

Canadian Owner of Mac's to Conquer European Convenience Market with Norwegian Purchase.

Canadian convenience store operator Alimentation Couche-Tard Inc. is making a powerful foray into northern Europe and its first into overseas markets. Currently, the owner of Mac's convenience stores operates in Canada and the United States, and now it is expanding into Norway. 


The Canadian company is paying $2.8 billion for retail assets of Norwegian oil giant Statoil ASA. The plan is ambitious for the Canadian retailer and it represents a key and important peg in a new European growth strategy.


Couche-Tard shareholders were pleased and bidding on the shares shot up 15 percent on the news today. Some analysts are estimating that the deal could increase annual earnings by 20 percent. The deal will include 2,300 gas and retail stations in six Scandinavian and Baltic countries, including: Norway, Sweden, Denmark, Latvia, Estonia, and Poland. 


To ensure some continuity, the existing European management team will be left in place. To improve performance, they plan on streamlining operations and increasing profit margins with different mixes of new product and enhanced store designs.

Social Media Investment Bubble: Watch-Out! Advertising is Limited.

The Atlantic Wire recently published an article concerning the existence of a new bubble in the stock investment community. Facebook's recent purchase of Internet company Instagram for $1 Billion highlights The Atlantic's thesis, and I would have to second their opinion. Now, this is not to say that Facebook and other social networking corporations like LinkedIn cannot increase in valuation, but simply that sooner or later they have to come crashing down if they do not better learn how to profit from their users.

Instagram has no clear source of revenue, and at $1 Billion is valued far beyond its current earnings. As a business owner, one should expect a reasonable return over a reasonable period of time. Of course, proponents of many social media businesses would say that future earnings and future growth are coming, but investing based purely on expectations of future profitability with no clear path how to get there is a fools game and makes one inherently susceptible to market crashes irrecoverable losses.

Revenue comes from getting customers to buy something, or by selling advertising. Every social media company is largely claiming that their earnings will simply come from advertising, but it is not that simple. AOL, for instance, for years had an established network of users, but only recently by selling its patents to Microsoft, was it able to realize any significant value for shareholders. If all AOL had to do was simply rake in money from advertising, it would have made its investors a fortune by now. Remember GeoCities? Yahoo paid almost $3.6 Billion for GeoCities in 1999, and it is now defunct and shuttered. Why didn't Yahoo just utilize the magic of Internet advertising to make everyone rich? Because company's already have pre-existing advertising relationships that are often difficult to break. Ford, for example, cannot advertise via every medium, it has to select what it thinks will realize it the largest return. This often means it shells out lots of money to traditional outlets like CBS, but not necessarily to Instagram, which it might see as a flash in the pan.

Essentially, resources are limited and social media sites have to compete with other forms of media for advertising dollars. In tough economic times, this is not easy!

BlackBerry Maker RIM Rises About 7% in Trading as Bears Starting to Run for Cover.

News of the departure of CEO founder Mr. Jim Balsillie, and news that Research in Motion is seeking strategic alternatives sent shares in the BlackBerry maker sharply higher during Friday's trading session. Still over 70% down from its year ago price, the Canadian technology titan is giving shareholders a brief sigh of relief.

500,000 PlayBook tablets were shipped last quarter, well above the 150,000 shipped during the previous quarter. With the release of the 2.0 software upgrade, along with price reductions, demand is starting to pick-up.

Research in Motion ended the quarter with 77 million subscribers, which is an increase from the 75 million it had at the end of last quarter.

RIM's revenue for the quarter was $4.2 billion, which is at the higher end of analyst expectations.

BlackBerry 10 is still on track for release later this year, which will give a much needed boost to its revenues and subscriber base.

Lower-end BlackBerry 7 models are being developed for the many foreign markets to help stem erosion from new competition, such as many low-end Android models.

Desperately, however, the company still needs a more targeted and forceful marketing initiative. So many consumers are swayed by games and gimmicks on their devices, which has not been BlackBerry's hallmark. Going forward, the company needs to find a way to attract a more fickle audience... less concerned with quality and more concerned with fashion and fun.

Happy Investing and Happy Friday : )