AdvanLages and dlsadvanLages of sLock swap

1he mosL common sLrucLure LhaL acqulslLlons Lake wlLh large publlc companles ls Lhrough sLock swap
1haL ls Lhe acqulrlng company lssues shares of lLs sLock ln exchange for Lhe sLock ln Lhe company belng
acqulred So lf Lhe acqulrlng flrm Company A has sLock currenLly Lradlng for abouL $10 per share and
has agreed Lo acqulre Company u for $300 mllllon lL would need Lo lssue 30 mllllon of lLs shares and
parcel Lhose ouL Lo Lhe sLockholders of Company u who would Lrade Lhem for Lhelr own shares ln
Company u 1hus Company A now has all Lhe sLock hence ownershlpof Company u

1he sLock swap has some advanLages and dlsadvanLages buL Lhe former Lend Lo wln ouL 1he advanLage
for many sLockholders of Lhe acqulred company ls LhaL Lhe LransacLlon does noL Lyplcally lnvolve any
caplLal galns Lax llablllLy 1he sellers are slmply swapplng ownershlp shares 1hey have noL reallzed any
galn (or loss) unLll and lf Lhey sell LhaL sLock ln a cash LransacLlon owners are slmply selllng Lhelr shares
so Lhere are lmmedlaLe Lax consequences

Cne dlsadvanLage of a sLock acqulslLlon ls LhaL Lhe values of Lhe LransacLlon can change lf Lhe value of
Lhe sLock of Lhe acqulrlng company flucLuaLes subsLanLlally before Lhe deal ls compleLed lor example
ln Lhe above example Lhe parLles had agreed on a $300 mllllon value Should Lhe sLock markeL ln lLs
collecLlve oplnlon feel LhaL Lhls ls noL a good deal for Company A Lhe prlce of Lhe sLock may be drlven
down leL's say Lo $9 per share lf Lhe sLockholders of Company u sLlll geL 30 mllllon shares Lhen Lhe
value of LhaL sLock ls down Lo $430 mllllon uependlng on whaL was negoLlaLed Lhe acqulrlng company
may have Lo pony up more shares ln Lhls example 33 mllllon more shares Lo keep Lhe value Lhe same
hLLp//woLmedlablogspoLcom/2007_07_01_archlvehLml
Some benefits of stock swapping include:
O Trading oI stock
O nhancement oI portIolio
O #educing taxes
O ncreasing proIits
n a stock swap, the shareholders oI the new entity receive a particular number oI shares Irom the
acquiring corporation`s stock matched Ior their numbers oI stock held. Most oI the time, there is
a grace period where the shareholders must wait beIore they can sell the acquired stock. Some
employers let you trade company stock you already own to acquire option stock.
Stock swap is also used to pay oII accumulated debt. The only time this may not be done is iI the
company has declared bankruptcy and the debtor must wait until the creditor is out oI bankruptcy
court.
hLLp//wwwmergeracqulslLlonaLLorneycom/Loplcscfm/sLockswaphLml

So, who benefits from the deal?
M Libra, in its research note, said the partnership would allow AirAsia to continue what it
does best with less predatory competition, while MAS can concentrate on serving the premium
segment with better revenue yield.
t also said that there are opportunities Ior cost-savings as both airlines would be able to bargain
better Ior Iuture aircraIt purchases, as well as minimise duplication oI resources such as that in
the maintenance, repair and overhaul (M# area.
AirAsia currently outsources its M# to Singapore but the share swap deal could push the low-
cost budget carrier to use MAS services instead.
An analyst agreed the partnership will allow MAS to cut the queue Ior aircraIt such as the A380
as AirAsia is one oI Airbus` largest customers with more than 200 orders and options.
'MAS used to have clout with the airplane makers but its scant purchases over the years has
diminished that, the analyst said, pointing out that MAS will only start getting the A380s next
year, some Iour years aIter the initial delivery scheduled Ior May 2008.
'MAS can get more aircraIt, Iaster and cheaper, iI AirAsia is in the picture, he added.
n the end, he said, Malaysia will beneIit Irom having two airlines that can cater to all segments
oI the passenger and cargo market.
'Both sides can win Irom this deal as it can resolve MAS operational issues. That`s the one thing
that has dragged it down, the analyst said.
A government source agreed, saying: 'The bottom line is the bottom line must be black. There
are very Iew options leIt Ior MAS.
'The WAU and the other Iinancial Iixes didn`t keep MAS up in the air long enough. t`s up to
Tony and Kamarudin to make it work this time, he added.
hLLp//wwwLhemalayslanlnsldercom/malaysla/arLlcle/whobeneflLsfromLhemasalraslashareswap






ureman's conLrarlan sLraLegy
ersona| rof||e
uavld ureman graduaLed from Lhe unlverslLy of ManlLoba (Canada) ln 1938 AfLer graduaLlng he
worked as dlrecLor of research for 8auscher lerce senor lnvesLmenL offlcer wlLh Sellgman and senlor
edlLor of Lhe value Llne lnvesLmenL Servlce ln 1977 he founded hls flrsL lnvesLmenL flrm ureman value
ManagemenL lnc and has served as lLs presldenL and chalrman

Investment Sty|e
lL ls reporLed LhaL ureman came Lo conLrarlan lnvesLlng Lhe hard way ln 1969 ureman a [unlor analysL
aL Lhe Llme was followlng Lhe crowd as Lhe shares of companles wlLh negllglble earnlngs skyrockeLed
Pe ls quoLed as saylng l lnvesLed ln Lhe sLocks du [our and losL 73 of my neL worLh As a resulL of
LhaL palnful lesson of followlng Lhe herd he became fasclnaLed wlLh how psychology affecLs lnvesLor
behavlor and became a conLrarlan lnvesLor (lor relaLed readlng see lloJloq ltoflt lo 1toobleJ 5tocks)

ln an lnLervlew for klplloqets letsoool lloooce Moqozloe ln 2001he explalned hls approach l buy
sLocks when Lhey are baLLered l am sLrlcL wlLh my dlsclpllne l always buy sLocks wlLh low prlceearnlngs
raLlos low prlceLobook value raLlos and hlgherLhanaverage yleld Academlc sLudles have shown LhaL
a sLraLegy of buylng ouLoffavor sLocks wlLh low /L prlceLobook and prlceLocash flow raLlos
ouLperforms Lhe markeL preLLy conslsLenLly over long perlods of Llme

ub||cat|ons
O ConLrarlan lnvesLmenL SLraLegy 1he sychology of SLock MarkeL Success by uavld ureman
(1980)
O 1he new ConLrarlan lnvesLmenL SLraLegy by uavld ureman (1982)
O ConLrarlan lnvesLmenL SLraLegles 1he nexL CeneraLlon by uavld ureman (1998)

;uotes

lsycboloqy ls ptobobly tbe most lmpottoot foctot lo tbe motket ooJ ooe tbot ls leost ooJetstooJ

l potopbtose lotJ kotbscbllJ 1be tlme to boy ls wbeo tbetes blooJ oo tbe stteets

oe of tbe blq ptoblems wltb qtowtb lovestloq ls tbot we coot estlmote eotoloqs vety well l teolly woot
to boy qtowtb ot voloe ptlces l olwoys look ot ttollloq eotoloqs wbeo l joJqe stocks

lf yoo bove qooJ stocks ooJ yoo teolly koow tbem yooll moke mooey lf yoote potleot ovet tbtee yeots
ot mote

8ead more hLLp//wwwlnvesLopedlacom/unlverslLy/greaLesL/davlddremanasp#lxzz1aPolfbf[
avid reman - The Great Contrarian
Dreman, whose company now manages more than $20 billion in assets |at the time the book was
written|, embraces his contrarian reputation. He uses the word 'contrarian in the title oI several
oI his books on investing, and the jacket oI Contrarian Investment Strategies reIers to his yacht,
named The ontrarian. While there may well be a naturally rebellious side to him, there are also
some very concrete, intelligent, and observant reasons that Dreman adopted his swim-against-
the-tide approach.
More so than perhaps any other guru we`ll examine, Dreman is a student oI investor psychology.
n Iact, his Iirst book, written in 1977, was titled Psychology and the Stock Market (unless
otherwise noted, however, all quoted material Ior this chapter comes Irom Contrarian Investment
Strategies, which also deals heavily with investor psychology. This makes Dreman particularly
worth reading because he presented not only an implementable, proven strategy Ior investing; he
also addressed the psychological reasons that many investors Iail. Being aware oI these dangers
is useIul, whether you are using Dreman`s strategy or a diIIerent one.
n Contrarian Investment Strategies, Dreman essentially states that he believes there are
relatively simple, proven strategies you can use to beat the marketparticularly contrarian
approachesyet most investors 'cannot Iollow through and stick to these strategies. Why can`t
they?
According to Dreman, investors cannot Iollow simple strategies to beat the market because they
are prone to overreaction, and, under certain well-deIined circumstances, overreact predictably
and systematically. For instance, iI a stock is considered 'goodit`s one oI the 'hot stocks
you read about in the paper, hear about on cable TV, or get tips about Irom your Iriends and
coworkersinvestors consistently overprice it. I a stock is 'badits price has been dropping,
the company is making negative headlines, there are concerns about its industry`s Iuture
investors underprice it. What`s more, this overvaluing oI the supposed 'best stocks and
undervaluing oI the supposed 'worst oIten goes to extremes.
Dreman thus Iound that the market is driven by how investors react (or, perhaps more to the
point, overreact to 'surprises. These Irequent surprises include earnings reports that exceed or
Iall short oI expectations, government actions that might aIIect a stock, or news about new
products. What`s more, he believed that these surprises were oIten precipitated by analysts
mainly Wall Street analystswho were more oIten than not wrong about their earnings Iorecasts.
He writes:
There is only a 1 in 130 chance that the analysts consensus forecast will be within 5 percent for
any four consecutive quarters. .To put this in perspective, your odds are ten times greater of
being the big winner of the New York State Lottery than of pinpointing earnings five years ahead.
(Dreman`s emphasis
When you put investors` tendency to overreact together with the Irequent surprises in the market,
you get to the crux oI why Dreman believed so much in a contrarian approach. Surprises occur a
lot, he believed, and because the 'best stocks are oIten overvalued, good surprises can`t
increase their values that much more. Bad surprises, however, can have a very negative impact
on them. n the other hand, because they already tend to be undervalued, the 'worst stocks
don`t have much Iurther down to go when bad surprises occur. When good surprises occur,
however, they have a lot oI room to grow. And, Dreman Iound, the eIIect oI an earnings surprise
continues Ior an extended period oI time.
His conclusion: Buy out-oI-Iavor stocks because surprises (positive and negative ones are
commonplace. I you own Iavorites, you`ll get clobbered by negative surprises but won`t get
much upside by positive surprises; whereas iI you own out-oI-Iavor stocks, you`ll hardly be
penalized Ior negative surprises but will be rewarded handsomely by positive ones.
This sounds logical, but Dreman Iound that even people who had an idea oI this concept oIten
didn`t Iollow it. Part oI the explanation Ior that, he Iound, was that people tend to be overly
optimistic. They have unrealistic optimism about Iuture events, thinking such events will come
out better than they realistically are likely to be. n other words, they view themselves in an
unrealistically positive light and they have unrealistic conIidence in their ability to control a
situation.
For example, they may believe that having lots oI inIormation will shield them Irom surprises in
the market because they have studied everything worth studying and thereIore know all that`s
worth knowing. An example Dreman gives regarding how this overoptimism can play out is the
securities analyst who knows that high-Ilying stocks will drop Irom the skies Iaster than a
pelican diving Ior a Iish iI earnings come in below the Street`s expectations. Yet the same
analyst will still recommend high Ilyers because he is conIident he knows enough about the
stocks he has recommended so there is no chance they will experience negative surprises. That
might happen to other analysts, he thinks, but not to him. I course, given the unpredictability oI
the market and events surrounding it, there`s a good chance it will happen to him.
The bottom line Ior Dreman is that investors should never underestimate the probability oI a
negative surprise occurring, because they occur quite oIten, and can send an overvalued stock
tumbling.
hLLp//seeklngalphacom/arLlcle/118424davlddremansconLrarlanproflLs
Guru Spotlight: avid reman
While all the gurus Iollow have built their Iame and Iortunes using diIIerent investment
approaches, there is at least one striking similarity that most iI not all oI them share: They
are contrarians. When the rest oI Wall Street is zigging, they are zagging; when Wall Street zags,
they zig. By having the strength oI conviction to march to their own drummers and not Iollow
the crowd, they have been able to key in on the types oI strong, undervalued stocks that have
made them and their clients or shareholders very happy.
But while most oI the gurus upon which my strategies are based are contrarians, one stands out
among all the others: David Dreman. Throughout his long career, Dreman has siIted through the
market`s dregs in order to Iind hidden gems, and he has been very, very good at it. His Kemper-
Dreman High #eturn Fund was one oI the best-perIorming mutual Iunds ever, ranking number
one out oI 255 Iunds in its peer groups Irom 1988 to 1998, according to Lipper Analytical
Services. And when Dreman published Contrarian Investment Strategies. The Next Generation
(the book on which base my Dreman strategy in 1998, the Iund had been ranked number one
in more time periods than any oI the 3,175 Iunds in Lipper`s database.
Throughout his career, Dreman has keyed in on down-and-out diamonds in the rough, Iinding
winners in such beaten-up stocks as Altria (aIter the tobacco stock plummeted amid lawsuit
concerns and Tyco (which had been hit hard by an embarrassing Iiasco.
How and why did Dreman manage to pick winners Irom groups oI stocks that Iew other
investors would touch? Well, Dreman, perhaps more than any other guru Iollow, is a student oI
investor psychology. And at the core oI his research is the belieI that investors tend to overvalue
the 'best stocks those 'hot stocks everyone seems to be buying and undervalue the
'worst stocks those that people are avoiding like the plague, like Altria and Tyco. n addition,
he also believed that the market was driven largely by how investors reacted to 'surprises,
Irequent events that include earnings reports that exceed or Iall short oI expectations,
government actions, or news about new products. And, he believed that analysts were more oIten
than not wrong about their earnings Iorecasts, which leads to a lot oI these surprises.
When you put those Iactors together, you get the crux oI Dreman`s contrarian philosophy.
Surprises happen oIten, and because the 'best stocks are oIten overvalued, good surprises can`t
increase their values that much more. Bad surprises, however, can have a very negative impact
on them. The 'worst stocks, meanwhile, are so undervalued that they don`t have much Iurther
down to go when bad surprises occur. But when good surprises occur, they have a lot oI room to
grow. By taking a 'contrarian approach i.e. targeting out-oI-Iavor stocks and avoiding in-
Iavor stocks Dreman Iound you could make a killing.
SpeciIically, Dreman compared a stock`s price to Iour Iundamentals: earnings, cash Ilow, book
value, and dividend yield. I a stock`s price/earnings, price/cash Ilow, price/book value, or
price/dividend ratio was in the bottom 20 oI the market, it was a sign that investors weren`t
paying it much attention. And to Dreman, that was a sign that these stocks could end up
becoming winners. (n my Dreman-based model, a Iirm is required to be in the bottom 20 oI
the market in at least two oI those Iour categories to earn 'contrarian status.
But Dreman also realized that just because a stock was overlooked, it wasn`t necessarily a good
buy. AIter all, investors sometimes are right to avoid certain poorly perIorming companies. What
Dreman wanted to Iind were good companies that were being ignored, oIten because oI apathy or
overblown Iears about the stock or its industry. To Iind those good Iirms, he used a variety oI
Iundamental tests. Among them were return on equity (he wanted a stock`s # to be in the top
third oI the 1,500 largest stocks in the market; the current ratio (which he wanted to be greater
than the stock`s industry average, or greater than 2; pre-tax proIit margins (which should be at
least 8 percent, and the debt/equity ratio (which should be below the industry average, or below
20 percent. By using those and other Iundamental tests in conjunction with his contrarian
indicator tests (the low P/, P/F, P/B, and P/D criteria we reviewed beIore, he was able to
have great success Iinding strong but unloved Iirms that had the potential to take oII once
investors caught on to their true strength.
Because Dreman took advantage oI the overreactions oI others, he Iound that one oI the best
times to invest was during a crisis. 'A market crisis presents an outstanding opportunity to proIit,
because it lets loose overreaction at its wildest, he wrote in ontrarian nvestment Strategies.
'People no longer examine what a stock is worth; instead, they are Iixated by prices cascading
ever lower. Further, the event triggering the crisis is always considered to be something entirely
new. Dreman`s advice: 'Buy during a panic, don`t sell.
This type oI contrarian approach isn`t Ior the Iaint-oI-heart. You never know exactly when Iear
will subside and investors will wake up to a bargain they`ve been overlooking. And that means
the stocks this model targets may very well keep Ialling in the short term aIter you buy them,
which, Ior my Dreman-based portIolio, is what happened during the recent Iinancial crisis and
bear market. The portIolio, which had trounced the S&P Irom its inception through 2006, Iell on
tough times as Iears about the economy grew, lagging the S&P by about 15 percentage points in
both 2007 and 2008.
But, as Iears abated and the crisis passed, investors began to recognize the strong stocks they`d
been shunning. And the Dreman portIolio has reaped the beneIits, returning more than 37 in
2009 (vs. 23.5 Ior the S&P and another 10 or so thus Iar this year (vs. about 6 Ior the
S&P, putting it well ahead oI the broader market Ior the long haul. The Dreman portIolio has
now returned about 70 (more than 8 annualized since its July 2003 inception, compared to
about 18 (or 2.5 annualized Ior the S&P 500.
As you might imagine, the portIolio will tread into areas oI the market others ignore because oI
its contrarian bent. ts current holdings, Ior example, include several picks Irom some oI the most
maligned sectors Iour Irom the Iinancial sector (which is still the subject oI much investor
skepticism; three Irom healthcare (which many have shied away Irom because oI Iears about the
new healthcare bill`s impact; and even one Irom the airline industry, which has had its Iair share
oI problems in recent years, including the impact oI the celand volcano`s eruption.
hLLp//LhegurulnvesLorcom/2010/03/03/geLLlngconLrarlanwlLhLhedremansLraLegy/

hLLp//enwlklpedlaorg/wlkl/8lue_Ccean_SLraLegy





Sepang: AirAsia Bhd co-Iounders Tan Sri Tony Fernandes and Datuk Kamarudin Meranun see
buying opportunity in the recent selldown by holders oI the stock.
" think it's a silly over-reaction by some shareholders and 'm personally taking it as a buying
opportunity. Maybe can get (my shareholding back up to 20 per cent," its co-Iounder and
group chieI executive oIIicer Fernandes told Business Times yesterday.

Both Fernandes and Kamarudin hold a 13.07 per cent direct and indirect stake in AirAsia now.

AirAsia's share price has been Ialling since it reopened Ior trading on Wednesday, aIter a two-
day suspension in anticipation oI the share swap deal between Tune Air Sdn Bhd and Khazanah
Nasional Bhd.

t shed about #M1.3 billion oI its market value in the last three days. The stock closed 4 sen
lower to close at #M3.45 yesterday.

"People didn't understand. ne oI our earlier Iailures was due to the speed the deal was
concluded, we didn't have time to explain matters well to the public and Iinancial investors. We
rectiIied this, however, the Iollowing day when we actually did a conIerence call," Kamarudin
explained.

He believes that the exercise had somewhat allayed some oI investors' Iears.

"Some investors may want to take proIit, each investor has their own reason but to me 'm not
worried. We are not here Ior the short term. We are not here to trade. We are here as an
investment," Kamarudin added.

The two likened their new role in MAS to that oI AirAsia X, in which guidance is given by the
two but it runs quite independently.

Fernandes believes both MAS and AirAsia shares have the potential oI doubling.

"The Iact is we could have settled Ior a higher share swap with Khazanah Nasional but we didn't
because we are not prepared to (hold a lesser (stake than anybody else in AirAsia. We believe
there is a lot oI growth and potential in it," Kamarudin said.

hLLp//wwwbLlmescommy/arLlcles/Lon2/ArLlcle/prlnL_hLml

When l flrsL shared abouL Alraslace on 19 !une 2009 lL was Lradlng around 8M006 only now lL ls
Lradlng aL 8M0163 1hose who boughL alraslace on 19 !une 2009 would have reap a 173 proflL wlLhln
a monLh(and sLlll cllmblng) Alrasla also lncreases 26

Larnlng 173 (for alraslace) or even 26 for (alrasla) wlLhln a monLh would be an enormous
achlevemenL

ln my humble oplnlon l sLlll Lhlnk LhaL Alrasla ls sLlll worLh lnvesLlng l sLlll conslder Alrasla very cheap
compared Lo oLher alrllne sLock (MAS and 1ranmll) Alrasla ls on a sLrong upLrend 1haLs why l sLlll
havenL close my poslLlons on alraslace lL ls [usL an unreallsed proflL

Alraslace ls Lradlng aL 0 premlum 4 gearlng and wlLh 36 days Lo maLurlLy Slnce lL ls 0 premlum LhaL
make me less worry abouL Lhe decreaslng Llme value of call warranL WlLh 0 premlum lL ls llke l pay
noLhlng (8M0) for Lhe Llme value

Lach percenL lncremenL on Alrasla would be (LheoreLlcally) mean a 4 lncremenL on Alraslace and vlce
versa Slnce Alrasla (alraslaces moLher) ls on a sLrong upLrend l would llke Lo make good use of Lhe
gearlng

So far Alrasla has been maklng Malaysla proud now Lhe world knows LhaL Malaysla has Lhe world besL
lowcosL alrllne l saluLe you Mr 1ony lernandes (Alrasla founder and CLC) 1hank you for your
conLrlbuLlon Lo our counLry Malaysla 8oleh!

When my frlends ask me wheLher alrasla wlll keep on rockeLlng up

My answer Lo Lhem ls l donL have a crysLal ball on my hand l [usL know ln order Lo make proflL ln sLock
markeL we musL buy low and sell hlgh 8uy when good companles drop and sell lL when Lhey Lurn
hlgher

hLLp//caLhoonblogspoLcom/2009/07/updaLealraslace173proflLlnmonLhhLml

hLLp//wwwscrlbdcom/doc/48271898/MasxAlrasla