Three Steps to Protect Your Identity

The data breach at Target has been much in the news. It highlights the fact that once our personal data is collected we have limited control over who gets access. So as the saying goes, control what is in your power. Below are three steps you can take to protect your credit information. 1. Monitor and check all account statements at least once a month. By federal law you can not be held  liable for more than $50 in fraudulent credit card charges. Most creditors are likely to waive all charges, but you need to report the unauthorized charges. For debit cards, how much of the unauthorized charges you are liable for depends on how quickly you report the incident. Most banks will work with you.
2. Order your free credit reports annually from www.annualcreditreport.com . This is the only federally authorized site to get a free report.
3. Consider putting a security freeze on your credit  reports. The freeze stops access to your credit reports without your authorization. This stops a potential thief from opening new accounts in your name, but there are advantages & disadvantages. For more information about security freezes, visit our web site http://hillsborough.ifas.ufl.edu/tampa-bay-saves and click the hot topics link in the financial management section.

EPF Announced 6.35% Dividend for 2013

The Employees Provident Fund (EPF) announced dividend rate of 6.35 percent for the financial year ended 31st December 2013 after obtaining approval from Minister of Finance. It was the highest since year 2000 and 0.2% higher than 6.15 percent announced in 2012.
Kindly refer to “Historical Employees Provident Funds (EPF / KWSP) Dividend Rate” page for EPF dividend rate table & chart since 1952. You may want to compare it with by using EPF Dividend Calculator.
The total dividend payout stand at RM31.20 billion from RM35 billon investment income.  The remaining are used for investment expenses, operating expenditures, statutory charges and net impairment allowance on financial assets. The payout representing an increase of 12.81 per cent compared to RM27.45 billion recorded in 2012.

Equities emerged as the largest contributor to the EPF’s gross investment income in 2013, generating RM19.52 billion of income, a significant increase of 40.39 per cent compared with RM13.90 billion recorded in 2012.
EPF total investment assets as at 31 December 2012 stood at RM526.75 billion surpassing the half a trillion mark, up 12.31 per cent from RM469.04 billion recorded in the previous year. This increase was largely contributed by the positive net annual contributions from members and employers as well as consistent and encouraging investment performance across all asset classes.
For those who have EPF i-Akaun, you may see the dividend was already credited to your account. Alternatively, members could obtain their EPF account statement from the EPF kiosks or at any EPF branch starting from 17th February 2014.

The Market Missed This Or Under Appreciated The Multiplier Effects

When I did my weekly Murasaki Masterclasses, many were not able to pinpoint what I regarded was a most important development over the past week. Below was a decent blurb from Arab research:

The Star reported that SapuraKencana Petroleum, Hibiscus Petroleum, Sona Petroleum, CLIQ Energy and Coastal Energy are interested to bid for US-based Murphy Oil Corp’s proposed sale of a 30% stake in its Malaysian oil & gas assets, which could be worth US$2bil-US$3bil (RM6.6bil-RM9.9bil). The indicative market value translates to up to 3.3x the US$898mil (RM3bil) acquisition value of Newfield’s Malaysian assets by SapuraKencana, which was completed recently.

 

Murphy currently has majority interests in five separate production sharing contracts – Block K, Block H, Block SK309, Block SK311 and SK 314, as well as three gas holding agreements in Block PM311. In 2012. Murphy’s Malaysian assets generated revenue of US$2.4bil and operating profit of US$894mil. As at 31 Dec 2012, its assets were worth US$4.8bil, with oil reserves of 95.7mil barrels of oil and natural gas reserves of 357.6bil cubic feet.

 

Murphy holds an 80% stake in the Kikeh field, Block K offshore Sabah, which is Malaysia’s first deepwater production field, and is one of Murphy’s key assets. Other significant assets are the shallow oil fields in Block SK, Sarawak, and the yet-untapped Block H, where Petronas is planning to deploy its second floating liquefied natural gas vessel (FLNG) in the Rotan field by 2018. The engineering, procurement, construction, installation and commissioning job for the Rotan FLNG has been awarded to a consortium of JGC Corp and Samsung Heavy Industries Co Ltd.

 

One of the interested bidders are Houston-based Coastal Energy Co, a firm linked to Malaysian investor Taek Jho Low. Coastal Energy has interests in upstream blocks in Thailand and Malaysia, including a 70% stake in the Kapal, Banang and Meranti (KBM) cluster of marginal fields. Petra Energy Bhd owns the remaining 30% stake in the KBM field.

 

Amongst the Malaysian operators, only SapuraKencana appears to be sufficiently capitalised to take on Murphy’s assets. But this would not be an easy contest as we expect other international players such as Shell and Exxon Mobil to enter the fray.

 

My comments:

a) the size of the assets are significant, its almost as if another Petronas has decided to hive off marginal oil fields - its as significant

b) these are Murphy Oil's assets which may be deemed as "pre-qualified" thus elevating their attractiveness

c) I do not think Murphy is exiting but rather concentrating on "bigger things" with the big boys

d) I do not think the assets will end up with foreign parties as I see a deeper agenda

e) A new light has shone on SPACs looking for decent assets, no need to scrounge off Indonesian waters, to that end the fortunes for Sona, CLIQ and upcoming oil and gas SPACs have brightened

f) The last year and a half saw numerous listed counters benefiting from Petronas marginal oil fields strategy - this is as significant if not more so

g) However, I do not see these assets going to the same parties who have benefited last year, I think its a strategy from the top to farm out these assets to a more diversified base thus boosting the breadth and depth of the local oil and gas players

h) I don't think SapKen will get it as it does not make much sense, especially since they can already go regional and even global, its pretty obvious the strategy is to broaden the number of players

g) SONA, CLIQ and some of the upcoming players such as TH Heavy, Scomi group of companies, Yinson may a better chance

h) the "rush" for some of the local smaller oil and gas operators to go via RTO may be a strong indication of the need to tap capital markets to bid for such assets )e.g. Barakah and the recent on=off PDZ deal)

i) overall its a very significant multiplier effect on the overall markets, read it however you think I meant it be

How Much Life Insurance Do You Need?

Do you have enough life insurance to provide for your family if something happened to you? Protecting your family is important, but you also need to avoid spending extra money on insurance that is needed for other purposes. The key is to find the right balance. The amount needed depends on your situation and usually fluctuates throughout the life cycle. If you have dependent children, life insurance is most likely a necessity. If you are single with no dependents and have other assets to cover funeral expenses and outstanding liabilities you may need little or no coverage. Divorced couples may want to consider carrying a policy on the ex-spouse if he or she depends on that person for child support.
Consider the following questions when estimating your life insurance needs:

• How much will my family need to meet immediate needs such as funeral expenses and outstanding debts such as a mortgage?
• How much will my family need to sustain their standard of living?
• How much is needed for long-term expenses such as college for children?
• What financial resources such as investment assets, Social Security survivor benefits, and other life insurance policies would be available to meet these expenses?

For additional information read the publication “An Overview of Life Insurance” which discusses different types of life insurance http://edis.ifas.ufl.edu/fy1393

From Barbarians to Beggers at the Gate: Revisiting the Kodak Patent Sale Debacle

I have on various occasions discussed the saga of the Kodak patent portfolio and how a valuation of $4.5 billion for only part of the portfolio ended up in a sale and licensing of just above $500 million. Explanations have been sought to explain this colossal drop from the multibillion dollar estimate in late 2011 to a payout of only a fraction thereof within less than a year. An interesting attempt to provide answers has been offered by Mark Harris, a journalism fellow at MIT. Entitled “The Lowballing of Kodak’s Patent Portfolio”, here, and brought to my attention by the ever-helpful Patents Analytics group on LinkedIn, the piece is well worth a full read. Permit me to provide the highpoints of the article.

Even as Kodak sank deeper and deeper in its competition with Fuji and others, it continued to engage in innovation, spending nearly $500 million yearly. In so doing, it came up with inventions such as the megapixel camera. By 2012, Kodak had assembled a portfolio of 22,000 patents in 160 countries and earned more than $3 billion in licence fees between 2003 and 2011. As bankruptcy loomed, the company saw the sale of some of its patents as the way back to reinventing the company as a commercial packaging and printing enterprise.

The anticipation that its patent portfolio would fetch a reasonable sum seemed reasonable in light of the sale of the Nortel portfolio for $4.5 billion and Google’s expenditure of over $12 billion for acquisition of the Motorola Mobility business and patents. Consultants chimed in with estimates ranging from between $1.8 billion and $4.5 billion for the Kodak portfolio, against the backdrop of what should appear obvious—“patents are unique and idiosyncratic assets.” In particular, in July 2011 Kodak hired 284 Partners, here, who had been the consultants in the Nortel transaction, to advise Kodak. Focusing on 1,730 patents, the company employed a discounted cash-flow analysis, here, to estimate their value via licensing and litigation, if required. Based on this analysis, it came up with a cash flow of $3.07 billion from 2010 to 2020, with a net present value of between $2.2 billion to $2.6 billion.

Kodak relied on that estimate and proceeded to seek purchasers for the patents via an auction against the back drop of ongoing multiple litigation. Unfortunately, two weeks before the auction was set to commence, the US International Trade Commission ruled invalidated a key patent that led to a reduction in the estimated value of its portfolio to around $1.4 billion. This downward trajectory became much more pronounced when only two bids were made, the higher of which was only $250 million dollars. This amount was less than the company needed to secure loans that it had arranged for the company.

Harris goes on to explain thus:

"The potential bidders, it turned out, had organized into two camps. In one, Adobe, Apple, Facebook, and Microsoft formed a consortium led by Intellectual Ventures. In the other, RPX mustered Amazon, Google, HTC, Samsung, and the photo-printing website Shutterfly. Each participant in such a consortium gets to keep a share of the patents and a license for the rest. The cost to each is relatively low, and all gain the protective power of the entire portfolio".

At the point, as the court allowed the auction to continue, Intellectual Ventures, here, and RPX, here, perhaps the two most prominent patent aggregators (although each with a quite different business model), put together what Harris called “a superconsortium”. The two existing consortia merged and added three additional members-- Fujifilm, Huawei and RIM, with a combined market capitalization at the time of $1.5 billion (more or less the GDP of Australia). It was November 2012 and the parties reached their High Noon, here, moment. Kodak needed more money than what was being offered to secure financing of $793 million, namely such financing being contingent on Kodak raising at least $500 million from its patent portfolio. The result—the superconsortium offered $527 million in exchange for payment of $94 million for the patents under negotiation plus $433 million in licensing fees for tens of thousands of Kodak patents that had not previously been on the negotiating table (plus the mutual dropping of legal cases against each other). To put the $94 million amount in perspective: it was 4% of the initial valuation given by 284 Partners. As Harris notes, the deal was monopsony (monopoly power by the buyer) gone wild.

The reader is invited to read the Harris piece in its entirely but, even after a careful perusal, two comments remain. First, there is the question is the role of investment banks, especially in connection with the early estimates that proved to be delusionally oversized as a matter of market dynamics (though there is some question whether this particular market was distorted by anti-competition law forces). Did the banks contribute to an environment that was conducive to bubble-like estimates in the value of the portfolio? Second, is the discounted cash-flow analysis still defensible or have we reached a stage where top financial minds need to come together with IP types to develop a more valid and reliable measure of patent portfolio valuation?

Finally, for those of you too young to remember Barbarians at the Gate, see here.

Does -- or should -- expensive rebranding add value to the brand?

According to recent news pieces here and here, United Biscuits is relaunching its McVitie’s biscuit brand in what is a £12 million marketing project. The campaign “aims to evoke ‘the emotional role biscuits play in our lives” and means that all United Biscuits sweet products (with the exception of Go Ahead!) will be brought under the McVitie’s brand. This will include Penguin Bars and Jaffa Cakes.

An interesting aspect of this is that 90% of UK households purchased the company’s branded biscuits in 2012 and it currently holds 40% of the market.

So, what we have is the expensive rebranding of an already hugely successful brand. From a trade mark valuation perspective, a thought-provoking (it is hoped) question pops up: Does or can such rebranding add monetary value to the trade mark?

Readers of this blog are well aware that IP valuation is very much a subjective exercise, dependent significantly on the purposes of the valuation. While most of the valuation methods rely significantly on the market performance of the branded goods, some others attach significant importance on the investment placed on the brand, i.e, entail a cost approach. Within this prism, a significant investment on the brand should inevitably add to its value.

Truth be told, the cost approach is not typically relied upon when determining a brand’s value, but it is mostly regarded as a tool to inform or even validate other approaches. But even then, the amount of money poured in to freshen up the brand will still be part of the equation leading to its value determination. Therefore, expensive rebranding does add value to the brand, from an IP valuation perspective. But should it really? Isn’t investing a risk? And what if loyal consumers of the McVitie’s brand don’t ‘bite’? After all, they are already loyal and the brand does extremely well in the UK. Could this be an example “exposing” the artificial nature of IP valuation?

A big thank-you goes to our friend Nikos Prentoulis for preparing this item for IP Finance.

Tools to Compare College Costs

According to the College Board’s 2012 report at  www. trends.collegeboard.org, the average 2012-2013 cost for tuition and fees at public four year colleges and universities is $8,655 and $29,056 at private four-year non-profit universities. The report also states that tuition has risen about 27% higher than inflation over the last six years. While college may be costly, it still offers graduates higher earning potential than non-graduates, making it a reasonable goal for many. As with any major investment, it’s best to do research and compare options. Luckily, available online tools enable side-by-side comparison of costs, types of academic programs, graduation rates, and other important factors.
The National Center for Education Statistics provides the online College Navigator at http://nces.ed.gov/collegenavigator. This tool allows you to input the  names of specific schools (or even criteria)  to build a list of schools and obtain side-by-side comparisons.
The Consumer Financial Protection Bureau’s new database, www.consumerfinance.gov/paying-for-college, helps build a customized college financial aid shopping sheet. This database allows cost comparisons, options to pay those costs, and projected debt levels at graduation.
The College Affordability and Transparency Center at  http://collegecost.ed.gov offers links to additional comparison tools, such as the College Scorecard and the Net Price Calculator.
Purchasing a college education can indeed be the key to unlocking earning and intellectual potential! But do shop carefully and realistically to avoid buyers regret and too much debt.