Mon, Jul 16, 2007
The Business Times
(SINGAPORE) Peter Lim, the man formerly known as the 'Remisier King'
and who is estimated to be worth more than $2 billion today, reckons
the stock market still has two good years to go. But he is getting
concerned about the property market.
'The market won't collapse for the next two, three years. It's all
sentiment-driven. People are making more money, and so long as people
are spending, we are OK. But one has got to start to think how to exit
at the end of 2-3 years - 2009, before the casino starts operating,' he
said.
Mr Lim is, of course, well known as an influential stockbroker and
deal-maker in the Singapore and Malaysian markets in the early 1990s.
That was also when he made his millions, but quit at his peak to take
care of divorce proceedings.
Despite being out of the industry, it was in the last few years that
his fortunes took a leap forward, thanks to the booming stock market.
He was recently in the news for agreeing to put $150 million into
Rowsley for its reverse takeover of a China solar company.
In a near four-hour interview with BT to talk about his market views
and investment philosophy, Mr Lim said a lot of the big companies
listed on the Singapore Exchange (SGX) today have a global presence.
Like Keppel Corp, for instance; it can't fulfil all the orders for
its oil rigs. So even if there is a shift in investor sentiment and the
market corrects severely, investors can still ride out the whole cycle,
said Mr Lim - barring a global recession, of course.
The danger, he said, is in the small-cap sector. 'Some of these
stocks have gone up a lot. Much of the potential has been priced in. If
this potential is cut short by any unexpected unfortunate event, they
will come down like a rock.'
Small-cap stocks run up fast because of their small float. But when the sentiment turns, everyone is a seller, he said.
As for the property market, Mr Lim thinks prices have gone up too
fast. The sharp increase has taken everyone by surprise, even the
government. 'Actually, it's quite simple. Singapore is small. You get a
small bucket, and pour a lot of water, it'll overflow. This is what's
happening. I think the demand just comes together at the same time. I
don't think it's sustainable.'
Demand is so strong that people are knocking down buildings, and that's curtailing supply even more.
But the
thing is, the buildings knocked down will have three times more
apartments when they get rebuilt a few years down the road. 'When the
supply comes out, property prices will drop,' he said.
Comparisons have been drawn between Singapore and London. 'But you
tell me: how many en bloc (redevelopments) do they have in London? No en
blocs means no additional supply.' he said.
Mr Lim is worried about the impact of high rentals on businesses -
office rentals have gone up by 200-300 per cent in the last few years.
'Costs are going to bloat . . . most businesses' margins are going to be
eaten up by costs.'
At the moment, many individuals and companies are making money from
asset inflation, he said. 'You hope that this asset inflation becomes an
income, becomes regular. But I don't think so. These are all
situational. But it will go one day.
'I'm not a pessimist, but this is how I see it. That's why at the
end of a bull market, you see a new generation coming up. Because all
the old ones die. Now and then, you see one of those who stays - then he
becomes a legend. And if you observe those legends, most of the time,
they spend their time scolding people: 'don't gear, don't gamble'.'
And that exactly was the message that he kept harping on during the interview.
'A lot
of people get it wrong. When the bull market is here, they build debts.
Bull market is the time to build cash. Because today's market turns
very quickly. When the market turns, you cannot sell, especially for the
property market. You can only sell when things are going up.
'So I always tell my friends: 'Make sure you stay alive. The market won't die, so there's always a next time.' '
By BT's estimates, Mr Lim is worth in excess of $2 billion. He has
just under 5 per cent in Wilmar International. Based on the company's
current market capitalisation of $22 billion on SGX, that stake alone is
worth $1.11 billion. He has about 11 per cent in FJ Benjamin, and
that's worth $52.6 million. Meanwhile, his 25 per cent stake in Rowsley
has a market value of $37 million. So his Singapore equities alone are
worth $1.2 billion. On top of that, he has some Australian mining stocks
bought in the 1970s and '80s.
Mr Lim says 50 per cent of his portfolio is now in equities, another
10 per cent in properties and the remaining 40 per cent in cash. The
cash is from the dividends he received, which he has not reapplied to
the market. So all in, he's worth more than $2.4 billion.
The 54-year-old believes that the fortune he has today is
pre-destined. 'This size - substantially, it's your destiny. If today I
have $10 million, I'd say over 90 per cent is due to my hard work. But
getting it right is not $1 billion. Maybe it's $100 million. How that
$100 million becomes $1 billion, you know it's because somebody likes
you. You must believe it's somehow a path that's been drawn.'
The bulk of his net worth is in Wilmar, in which he was asked to
pump in under $10 million in the early 1990s. By the second half of the
decade, he had totally written off that investment. That was when the
Indonesian currency fell from 2,500 rupiah against the US dollar (the
exchange rate he invested in Wilmar), to 16,000 rupiah, and president
Suharto was ousted. There were riots in Indonesia. There was no way of
cashing out the assets. But in a few years, things stabilised in
Indonesia and the pieces began to come together for Wilmar. Its China
operations began to pick up, businessman Robert Kuok decided to inject
his Malaysian palm oil operations into Wilmar and palm oil prices
started to go through the roof because of the scramble to produce
biofuels.
'My Indonesian partner was asking me the other day: 'How the hell did we make so much money?' '
'Up to
a point after people tell you a story and a vision, don't write it off.
Sometimes it comes true. You just make sure that if it doesn't come
true, you don't get hurt too much,' he said.
The most important factor to consider when investing in a company is
the person running it; you look at whether the person is honest, and
whether he or she is master of their trade.
'It works. It's a tested method of assessing companies,' Mr Lim said.
Wilmar is not his only lucky break. He escaped the Asian crisis as
he had quit the broking profession in 1996 to prepare for his divorce
proceedings. And he spent the next six months liquidating most of his
stock positions. So when the crisis hit, he was mostly in cash.
He was also not in the market during the dotcom bubble as the
hearing on the division of matrimonial assets dragged on until 2001. He
thanks his lucky stars for having avoided the Asian financial crisis,
but thinks he would not have been caught in the insanity of the dotcom
bubble.
Nowadays, Mr Lim spends his time dispensing advice to deal-makers in
the industry - and sends them a bill of $300,000 or more for it. He
still gets a thrill out of structuring deals, which he says is similar
to a chess game.
He described the recent Rowsley deal to acquire a solar energy
company in China as 'beautiful', as one which allows existing
shareholders to 'lock in the upside, but hedge the downside'.
He's also having to cope with the problems of having too much money.
He worries if his children, a 15-year-old girl and 13-year-old boy,
will be spoilt by his wealth. He reckons he may give the bulk of his
money to charity eventually.
But going by the four-hour lunches that he takes - with Imperial
Treasure at Great World City being his Canteen No 1 and Kuriya his
Canteen No 2 - and sometimes squeezing in a game of tennis or two before
dinner, the money problem can't be all that bad.
HIS VIEWS ON . . .
Cutting deals
Maybe it's in the blood. It's quite exciting to pitch a deal, to
make sure that you don't catch me. It's like a chess game: you make this
move, the next one I make. I don't want to get checkmate.
Wealth
Money is a funny thing. When you don't have it, you want it. But
when you have it, you have a lot of problems. I believe that if I'd had
no money, I wouldn't have had my divorce. Things wouldn't be good, but
it wouldn't end up in a divorce.
Growing old
Once you are old, every year makes a lot of difference. Your lease gets shorter, there's no extension. You go, you go.
Death
Some of my school mates have passed away. So once you start to see
all these things, your perspective on life becomes more measured, more
considered.
Making money
It's very difficult to make money from trading. People who get rich
are those who buy a company, build it, run it. Most of the traders, they
come, they make money, because they have this gambling instinct. They
take the money and spend it. The minute they lose money, they got no
money to pay up.
The next downturn
Today's bull run can get cut short by a number of things. Just like
our recent experience with Sars, or a bomb drops on the wrong person's
head. Like anything else, the least expected thing can happen at the
wrong time. I got a feeling the next downturn will be very severe.
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