The asset bubble that is ChesapeakeEnergy Corp. (NYSE:$CHK) is continuing with its asset sales for the acreage it has amassed using massive leverage. In its most recent quarter, the company increased its output and made significant improvements in crude output but this was overshadowed by management tumult and a massive sale of its shale acreage to a Chinese firm at a price which is three times less than Chesapeake’s own estimates.
The China Petroleum and Chemical Corp (NYSE:$SNP), more commonly known as Sinopec, is purchasing half of Chesapeake’s850,000 acres of oil and gas assets at the Mississippi Lime shale field for $1.02 billion. Through this deal, Asia’s biggest refiner will considerably increase its shale footprint in the U.S. And, as I said at the outset, Sinopec won’t be paying any premium for the privilege. While some analysts have identified that the sale is $200 million below estimated value, Chesapeake itself had the land valued at an estimated $7,000 to $8,000 per acre for the property in July 2012. Calculating from the mid-point of $7,500, the asset is being sold at less than one-third of what Chesapeake valued it at less than 8 month ago.
In 2012, America’s aircraft manufacturing behemoth Boeing(BA) sold more than 600 planes, earned record revenues, had an impressive backlog of orders and a fourth quarter earnings that beat analysts’ estimates as the company increased its dividend by 10% and resumed its $3.6 billion share buyback program, but all of these achievements, including the company capturing the crown as the world’s largest aircraft manufacturer in 2012 from its European rival Airbus were overshadowed by the grounding of its new 787 Dreamliner due to battery failures.
Last year, when Starbucks (SBUX) announced its plans to expand into Vietnam by opening its first store in Ho Chi Minh City in February, it was part of its grander strategy to expand into emerging markets. In fact, Starbucks now predicts that within a couple of years, China will replace Canada as the company’s second biggest market after the U.S. The Vietnam expansion was welcomed by analysts because, unlike India, Vietnam is already a coffee loving nation and is the world’s second biggest coffee exporter – though mostly of Robusta which Starbucks does not normally serve. Yum Brands (YUM) is already operating in the country and has made expansion in emerging markets a focus of its growth strategy. The country now has also gotten the attention of Dunkin’ Donuts, owned by Dunkin’ Brands (DNKN), which has signed a franchise deal with Vietnam Food and Beverage Co. to open its first café in Ho Chi Minh City.
ConocoPhillips (NYSE:$COP) is showing renewed interest in the lucrative Asia-Pacific oil market.It is gearing up to resume its biggest Chinese operations as well as having made a “final investment decision” on the Malaysian offshore project as it divests from China’s neighbor Kazakhstan. These represent an important diversification tool as the world heads towards a stagflationary, low-growth period.
The world’s leading coffee chain company Starbucks (NASDAQ:$SBUX) is now entering Vietnam; opening its first store in Ho Chi Minh City in February. The company has been investing heavily in Asia Pacific by opening up thousands of new stores across the continent. It currently has 3,300 stores in 11 Asia Pacific nations but by the end of the current year, Starbucks will have 2,500 stores in its three biggest markets; China, Japan and South Korea which will increase its total Asian store numbers to 4,000.
Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital. (read more)
The Big Trade: Simple Strategies for Maximum Market Returns
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