Monday 30 October 2017

Update and new book

I'm very happy to announce that my book is finally published and available now on Amazon.

After months of hard work, tears, paranoia, frustration, sleepless nights and agonising over small details such as, should the book have light yellow or school bus yellow cover, I’m happy to announce that my book is finally published! I’m also excited to announce that I’m not planning on writing one more for a long time.

In all seriousness, it’s been a really fun side project and I highly encourage you to publish at least one book in your life. First, there is nothing like longform writing to clarify thoughts in your head. Second, I felt very content holding the first paperback copies in my hands and knowing that my family, friends and future children will be able to read my story one day (or use the book as a doorstop).

As I shared in a few posts before (here and here) the book is a story of an experience I had with cancer. I was 18 years old when I was diagnosed with a stage II Hodgkin lymphoma, and for a year I spent days and nights in hospitals, underwent chemotherapy and endured pain like never before.

Cancer of any kind (or any stage) cannot be taken lightly. The physical side effects are visible, often all too clearly, but cancer is much more than that. It acts on a deeper level, touching your mind, emotions and spirit. Yet it is not part of our culture to share this openly.

Eighteen and Cancer is my story of that difficult year. Through the chapters of this short book I share my experience of:
  • Understanding what fear is and how it affects my life
  • Learning that I am my own worst enemy
  • Discovering mindfulness practices
  • Losing almost everything because I got in my own way
  • Surrendering: accepting and learning to live with cancer
  • Questioning modern medical practices
  • The joy of hearing those magical words: “It is over”
  • Dealing with the void after the disease (yes, there was one)

This is it in a nutshell. This is not a three-step guide to dealing with the disease. I never had one. Rather it is a practical book for dealing with adversity. The timeline took much longer than I initially expected but it’s for the better (my editor would agree).

Perhaps the best part about the book is the philanthropic organisation I was fortunate enough to partner with. There is a wonderful foundation in Hungary, where I was born, called Bátor Tábor (“Camp Courage”) and they have an inspiring mission:

“Bátor Tábor returns cancer-afflicted and chronically ill children to their carefree childhoods. Our camp is not a summer camp in the classical meaning of the term. We place children outside of their comfort zones through special experiences. By overcoming their fears, they can recognise that they are ready to confront not only the challenges involved in their adventures, but also their illness. We put smiles on their faces; we give them power for their struggle. We change lives.”

10% of the net proceeds from the book sales will go to support their amazing mission. Take a few minutes to watch this video to get an insight into their great work. 

Thank you for reading so far and your support. I hope the book will serve you well on your journey.

P.s. I also started a new website to go along with the book and updated my Twitter feed as well.

Thursday 2 March 2017

Favourite quotes from the recent Berkshire annual letter

A bit belated but below are a selection of quotes, grouped by topic, that I liked from Warren Buffett's recent letter. There was no big change in my mind but I enjoyed reading his section on buybacks (on this topic Joe from Value Investing World has a great collection of quotes). He also really went to town on fees this time around - 5 pages, must have had a lot on his chest.

No discussion around the Kraft/Unilever process (probably too early), but in a recent FT article he hinted at a possible misunderstanding between Kraft's chairman and Unilever's CEO. It's very rare for him to single out someone by name (unless he praises), so I think there probably was some tension between Berkshire/3G given the way the deal ended up (Unilever played a great defense though). As I said in a recent post, one of the most important things I learnt last year was that business is not just about numbers and most public investors tend to completely ignore boards/managements when they are analysing a company. Here is a clear example why understanding their skills and abilities, personalities, motives, incentives and so on are hugely important. I think the single best change most investors can make is that they stop reading the "risk" section in annual reports (as a side note, actually the majority of risk factors are common sense and included by the insistence of lawyers for "backside" covering) and put more effort into understanding the people running the company, what kind of CEO is in place (a dealmaker, a numbers guy, a sales/story guy etc), what's the relationship with the board or controlling shareholder(s) (if any), what skills board members bring and so on. Sometimes you can discover fascinating information.

And now for the quotes. Enjoy. Oh and the letter is available here.

  • On Berkshire’s business model: “(1) continuing to build our insurance operation; (2) energetically acquiring large and diversified non-insurance businesses and (3) largely making our deals from internally-generated cash”
  • On retained earnings vs capital return: “It’s our job, though, to over time deliver significant growth, bumpy or not. After all, as stewards of your capital, Berkshire directors have opted to retain all earnings. Indeed, in both 2015 and 2016 Berkshire ranked first among American businesses in the dollar volume of earnings retained, in each year reinvesting many billions of dollars more than did the runner-up. Those reinvested dollars must earn their keep”
  • On market volatility: “During such scary periods, you should never forget two things: First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy. It will also be unwarranted. Investors who avoid high and unnecessary costs and simply sit for an extended period with a collection of large, conservatively-financed businesses will almost certainly do well”
  • On buybacks: “From the standpoint of exiting shareholders, repurchases are always a plus. Though the day-to-day impact of these purchases is usually minuscule, it’s always better for a seller to have an additional buyer in the market. For continuing shareholders, however, repurchases only make sense if the shares are bought at a price below intrinsic value. When that rule is followed, the remaining shares experience an immediate gain in intrinsic value. Consider a simple analogy: If there are three equal partners in a business worth $3,000 and one is bought out by the partnership for $900, each of the remaining partners realizes an immediate gain of $50. If the exiting partner is paid $1,100, however, the continuing partners each suffer a loss of $50. The same math applies with corporations and their shareholders. Ergo, the question of whether a repurchase action is value-enhancing or value-destroying for continuing shareholders is entirely purchase-price dependent. It is puzzling, therefore, that corporate repurchase announcements almost never refer to a price above which repurchases will be eschewed. That certainly wouldn’t be the case if a management was buying an outside business. There, price would always factor into a buy-or-pass decision. When CEOs or boards are buying a small part of their own company, though, they all too often seem oblivious to price. Would they behave similarly if they were managing a private company with just a few owners and were evaluating the wisdom of buying out one of them? Of course not”
  • On adjusted earnings: “Too many managements – and the number seems to grow every year – are looking for any means to report, and indeed feature, “adjusted earnings” that are higher than their company’s GAAP earnings. There are many ways for practitioners to perform this legerdemain. Two of their favorites are the omission of “restructuring costs” and “stock-based compensation” as expenses. Charlie and I want managements, in their commentary, to describe unusual items – good or bad – that affect the GAAP numbers. After all, the reason we look at these numbers of the past is to make estimates of the future. But a management that regularly attempts to wave away very real costs by highlighting “adjusted per-share earnings” makes us nervous. That’s because bad behavior is contagious: CEOs who overtly look for ways to report high numbers tend to foster a culture in which subordinates strive to be “helpful” as well. Goals like that can lead, for example, to insurers underestimating their loss reserves, a practice that has destroyed many industry participants. Charlie and I cringe when we hear analysts talk admiringly about managements who always “make the numbers.” In truth, business is too unpredictable for the numbers always to be met. Inevitably, surprises occur. When they do, a CEO whose focus is centered on Wall Street will be tempted to make up the numbers”
  • Banker fees (there is a whole section about investment management fees from page 20 onwards): “And, finally, let me offer an olive branch to Wall Streeters, many of them good friends of mine. Berkshire loves to pay fees – even outrageous fees – to investment bankers who bring us acquisitions. Moreover, we have paid substantial sums for over-performance to our two in-house investment managers – and we hope to make even larger payments to them in the future. To get biblical (Ephesians 3:18), I know the height and the depth and the length and the breadth of the energy flowing from that simple four-letter word – fees – when it is spoken to Wall Street. And when that energy delivers value to Berkshire, I will cheerfully write a big check”
  • On the current cash balance: “It’s important for you to understand that 95% of the $86 billion of “cash and equivalents” (which in my mind includes U.S. Treasury Bills) shown on our balance sheet are held by entities in the United States and, consequently, is not subject to any repatriation tax”
  • On mistakes: “I earlier described our gradual shift from a company obtaining most of its gains from investment activities to one that grows in value by owning businesses. Launching that transition, we took baby steps – making small acquisitions whose impact on Berkshire’s profits was dwarfed by our gains from marketable securities. Despite that cautious approach, I made one particularly egregious error, acquiring Dexter Shoe for $434 million in 1993. Dexter’s value promptly went to zero. The story gets worse: I used stock for the purchase, giving the sellers 25,203 shares of Berkshire that at yearend 2016 were worth more than $6 billion”
  • On his two investment managers: “Todd Combs or Ted Weschler, who work with me in managing Berkshire’s investments. Each, independently, manages more than $10 billion; I usually learn about decisions they have made by looking at monthly trade sheets. Included in the $21 billion that the two manage is about $7.6 billion of pension trust assets of certain Berkshire subsidiaries.” See page 18 for public investment breakdown
  • On insurance operations: “At bottom, a sound insurance operation needs to adhere to four disciplines. It must (1) understand all exposures that might cause a policy to incur losses; (2) conservatively assess the likelihood of any exposure actually causing a loss and the probable cost if it does; (3) set a premium that, on average, will deliver a profit after both prospective loss costs and operating expenses are covered; and (4) be willing to walk away if the appropriate premium can’t be obtained. Many insurers pass the first three tests and flunk the fourth. They simply can’t turn their back on business that is being eagerly written by their competitors. That old line, “The other guy is doing it, so we must as well,” spells trouble in any business, but in none more so than insurance”

Wednesday 22 February 2017

Books I read (or re-read) in 2016

I use books for different reasons. Sometimes, I’m looking for help with a problem. Sometimes, I’m looking for a mentor who can guide me through a part of my life. Sometimes, I want to be amazed. Sometimes, I just want to be entertained. It’s remarkable that I can find all of the above in a few hundred pages of paper that costs less and less on Amazon and if it was up to Jeff Bezos he’d hand deliver it as soon practically feasible after ordering.

Below are a selection of books (50 or so) from all that I read last year. It is quite eclectic but I look up to someone like Sir John Templeton in this regard, he'd go to unusual sources of information to find answers. Hope you’ll find some that might interest you.


  • Paul Allen - Idea Man: The other perspective on Microsoft. I appreciated reading about his relationship with Bill Gates, going through cancer and exploring different avenues in life after founding Microsoft
  • Mark Robichaux - Cable Cowboy: No description necessary
  • Peter Barton, Larry Shames - Not Fade Away: I wrote about this book at length before. Highly recommend to read it. It also inspired me to write about my experience with cancer
  • Jon Krakauer - Into the Wild: The book upon which the movie was based on
  • Chris Hadfield - An Astronaut's Guide to Life on Earth: Chris Hadfield's fantastic life story
  • Rich DeVos - Compassionate Capitalism: From the founder on Amway
  • Steve Martin - Born Standing Up: Funny autobiography from a great comedian
  • Gene Lees - Oscar Peterson: I grew up on Oscar Peterson’s incredible jazz piano music and listen to it to this day (little snippet of his genius here). Gene Lees did an excellent job with this biography book
  • Donald Trump - The Art of the Deal: “The final key to the way I promote is bravado. I play to people’s fantasies. People may not always think big themselves, but they can still get very excited by those who do. That’s why a little hyperbole never hurts. People want to believe that something is the biggest and the greatest and the most spectacular. I call it truthful hyperbole. It’s an innocent form of exaggeration -- and a very effective form of promotion”


  • Tren Griffin - Charlie Munger: From the author of the great 25iq blog
  • Max Gunther - Zurich Axioms: Why the Swiss get things right
  • Laszlo Bock - Work Rules: Insights into Google i.e. why putting bean bags and ping-pong tables into your office won't make your company like Google
  • Valerie Hansen - The Silk Road: Good background reading on the history Silk Road, especially in the context of China's expansion of the One Belt, One Road system
  • Richard Roberts - The Lion Wakes: The modern history of HSBC and the development of corporate Asia
  • Bennet Goodspeed - The Tao Jones Averages: a Guide to Whole-Brained Investing: Why the right side of the brain is just as important as the left side in investing (i.e. how to overcome the man with a hammer syndrome)
  • Matthew McCleary - Shipping Man: A good story about why in public shipping investments the public is the patsy at the imaginary poker table
  • Tim Ferriss - 4 Hour Chef
  • Tim Ferriss - 4 Hour Work Week
  • Mark Tier - Becoming Rich: Cheesy title but a surprisingly good book about the mental habits of successful investors
  • Joe Studwell - How Asia Works: Studwell writes very well about the connection of politics and business in Asia. His other book, called the Asian Godfathers is very good too
  • Jeffrey Towson - The One Hour China Book: A one hour book on China from the former right hand man of Prince Alwaleed. He is also a big Buffett fan
  • Sterling Seagrave - Lords of the Rim: One to complement Studwell’s book
  • Michael Eisner - Working Together: “The best way to have a great partner is to deserve one” – Charlie Munger. Awesome book about great partnerships such as Buffett/Munger, Bill and Melinda Gates, Grazer/Howard, Rubell/Schrager and so on
  • Peter H. Diamandis – Abundance: Why the world is not such a bad place. From the founder of Singularity University
  • Peter Maguire - Thai Stick: Surfers, Scammers, and the Untold Story of the Marijuana Trade: A different perspective on Thailand...
  • Mohsin Hamid - How to Get Filthy Rich in Asia: It is a fiction but could well be the real life story of anyone growing up in a developing country
  • Robert Kiyosaki - Rich Dad Poor Dad: Yes, I know. But still…

Psychology, mindfulness etc

  • David Buss - Evolution of Desire: Mix of Sapiens and Emotional Intelligence
  • Nir Eyal - Hooked: Book about how to build habits in your life
  • Kapleau - Three Pillars of Zen: History and discipline of Zen Buddhism
  • Phil Jackson - Eleven Rings: Marvellous book about introducing mindfulness into professional sports (and life in general) from the legendary NBA coach Phil Jackson
  • Michael Singer - The Untethered Soul: Amazing book. Highly recommend to read it after Michael Singer's other book called the Surrender Experiment
  • Jon Kabat-Zinn - Wherever You Go There You Are: Must read every year
  • Karen Salmansohn - Instant Happy: Bad day in the markets? Flip through this book

Personal development, spirituality etc

  • Robert Greene - Art of Seduction: Written well-before The Game, in the same well researched manner as the 48 Laws of Power
  • Marcus Aurelius – Meditations: No introduction necessary I believe. One I re-read every year
  • David Schwartz - Magic of Thinking Big: Cheesy title but this book is up there with Think and Grow Rich
  • Paul Arden - It's Not How Good You Are, It's How Good You Want to Be: A handbook of how to succeed in life by advertising guru Paul Arden. It's a short book that I try to read every year
  • Ryan Holiday - The Obstacle is the Way: It’s not why someone put that obstacle in our way but how we overcome it
  • Ryan Holiday - Ego is the Enemy: This books takes the theory behind Obstacle is the Way and presents a philosophical application to overcoming our own ego
  • Carol Dweck – Mindset: When you fail at something it doesn’t mean that the world has come to an end. How you get back up is the key to life
  • Cal Newport - So Good They Can’t Ignore You: Advice from Steve Martin
  • Cal Newport - Deep Work: Recommend to read Cal Newport’s books together
  • Elisabeth Gilbert - Big Magic: Oh yes. For anyone facing fear in expressing their creative work publicly
  • Dale Carnegie - How to Win Friends and Influence People: Must read for a left brained person (aham, me)
  • Dale Carnegie - How Stop Worrying and Start Living: Dale Carnegie’s less famous but very good book
  • Don Miguel Ruiz - The Mastery of Love: A Practical Guide to the Art of Relationship: Not just mastery of love but life itself
  • Kamal Ravikant - Love Yourself Like Your Life Depends on It: Often from the greatest depths of misery a new way of life emerges. At first you might not know what to make of the title but I highly recommend this very short read. A talk from Kamal on his story here
  • Adam Braun - The Promise of a Pencil: I’ve put off reading this book until the end of the year but it is a wonderful story, especially how Adam’s upbringing in the US and the formation of Pencils of Promise was influenced by his family of Holocaust survivors and Hungarian refugees
  • Neale Donald Walsch - Conversations with God: This goes deep (not in religious or dogmatic way)
  • A Course in Miracles: A daily practice in spirituality
  • Marianne Williamson - Law of Divine Compensation: One of the best known spiritual teachers alive today. I saw her giving a talk last autumn and was very impressed then started delving into her books afterwards.
  • Oprah Winfrey - What I Know for Sure: Someone gave me this very short book and I’ve been through it a few times already. Wonderful life lessons from Oprah


  • Michael Moss - Salt, Sugar, Fat: Why does it feel so good the way those Pringles crunch, and how the food industry tricked our brains into eating it
  • Mark Sisson - The Primal Blueprint: Very good book for those exploring making a change in their diet and lifestyle. From the author of Mark's Daily Apple lifestyle blog
  • David Asprey - Bulletproof Diet: Inventor of the Bulletproof Coffee. Highly recommend the podcast
  • Alejandro Junger - Clean Gut: I've binged through 5-6 books on this topic. One of the most concise books I came across on why the standard high carb diet is unsustainable
  • Nina Teicholz - The Big Fat Surprise
  • Mark Hyman - Eat Fat, Get Thin
  • Mark Hyman - The Blood Sugar Solution

Books currently on my nightstand

  • Brian Grazer – A Curious Mind: A story about a collection of curiosity conversations
  • Ryan Holiday – Daily Stoic: Daily practice in Stoicism
  • Chris Voss – Never Split the Difference: Most amazing negotiation book. Ever
  • Phil Knight – Shoe Dog: The amazing story of Nike’s birth
  • Robert Cialdini – Pre-suasion: Follow up book to Influence
  • Tim Ferriss – Tools of Titans: If you like the podcast, you’ll like the book
  • Matthew McCleary - Viking Raid: Follow up story to The Shipping Man
  • William Irvine – A Guide to the Good Life: Continued exploration of Stoicism

Saturday 11 February 2017

Dear diary, it's been a long time...

I made a New Year's resolution to start posting on the blog again, which until 28 January didn't happen. Fortunately Chinese New Year's came around and thought that I got a new shot at this (I'm grateful for a multi-cultural family). Posting has been very intermittent (it's a nice way of saying basically 0) in the past year mostly due to increased time allocated to private investments, angel investments/advisory and a book project (more on this below) among other things. I thought that it would be a fun way to kick off the year by having a recap on some of the lessons I learnt in 2016 (some by choice, while some by big slap on the face). Here it goes in no specific order:

Curiosity conversations
A couple of years ago I've adopted a practice from Brian Grazer, the legendary Hollywood producer, which he called "curiosity conversations". When he started out in life he made a practice of reaching out to people, not necessarily in his field, he didn't know (this was way before the internet) and engaging in a conversation about what they do. I thought that this sounded like a lot of fun so why not try it. Over the years I have been very fortunate to meet successful entrepreneurs, health coaches, nutritionist, doctors, spiritual teachers, real estate developers, investors, chefs, graphologists, authors, farmers, teachers, VCs, bankers, philanthropists, artists, photographers and on and on and on. The first few approaches and conversations were weird (I mean you talk to total strangers and tell them that you want to ask a bunch of questions and no you are not a reporter). But I learnt that people are really interested in people who are really interested in them. With that the weirdness disappeared.

Writing a book is hard
Really, really hard. Especially when it is about your own life. A few months ago I posted an article about the story of Peter Barton and my experience with cancer. The book is nearly completed and expected to be published in the next few months. More details to follow soon.

The right people and what you do, over money
ANY DAY! From experience more money without more meaning means more misery. There is a time and place for putting up with an awful situation for a while or as Elizabeth Gilbert calls it "eating a shit sandwhich" to get to where you want to go but for argument's sake if you find yourself saying to yourself "just one more bonus" then it's time to look at something else.

Attending your own wedding is a lot of fun
This is for sure. My wife and I got married late last year in Asia and having our friends and families join us was simply amazing. Someone said that the quality of a person's life can be judged by how many people show up at their funeral (at their own will). While this might sound morbid, looking around the room that evening and seeing people who traveled thousands of miles to be there left both of us feeling extremely grateful. OK, we did go to karaoke afterwards until 6am so maybe that's the real reason they joined. Mic drop!

The way to have a great partner is to deserve one
This is from Charlie Munger and once again he is right. I also read from a famous waterpolo player (yes, it's a very popular sport in Eastern Europe where I come from) that to be a great team player you should always give the pass you expect to receive.

Do less "low-quality more" and more "high-quality less"
After you are done testing and experimenting, find a few ideas and go deep. We have the option to do anything we want to but cannot do everything. The only way to achieve mastery in one subject is sticking with it (i.e. Buffett's idea of painting that one picture).

Give more
Yes! Whether it's time, money, love, smile or attention just do it. The more I did it last year the more came back to me in totally unexpected ways. Given the limited human interactions we now have on a daily basis people crave attention. If you can give a little more you'll be surprised what you'll get back. If you are at an airport, your flight gets cancelled and you are the 156th person who walks up to the poor flight attendant who has been taking the abuse of her lifetime for the past 30 mins yelling at her will not get you anywhere. But being emphatetic might get you a nicer hotel room for the night and an upgrade on the next flight (it happened to me on a trip to the US). This is not tactical or aimed at "getting anything out of it" but this is simply good for the soul. Imagine if you were the one taking the abuse, how would you like to be treated.

Books, books and more books
Over 60 books read last year. I find it amazing that if I spend $10 on a few hundred pages of paper I can learn to become a better investor, businessman, philantropist and so on. Living vicariously and not making the mistakes others did in front of me (or at least making better mistakes) is priceless.

2016 book summary post to come soon.

Billionaires and self made people in general think differently
I've been very fortunate to have a network that includes some seriously wealthy people. The large majority of them are first generation/self-made entrepreneurs. Despite what is thrown around in the media and self-help courses they don't go "all-in" from day 1 rather run what I call a series "controlled experiments". Their number 1 priority is protecting the downside and in case something sticks you can always add more to it (time, energy, money etc). The example that comes to mind is Sir Richard Branson's entry in the airline business. He didn't go and buy planes rather called up Boeing asked for lease terms then one by one he started taking people on flights worthy of an Austin Powers movie. Ultimately Virgin Airlines was a success, however even if he failed the downside would have been controlled.

Sometimes you have to let go temporarily of what you know to find yourself
For a long time I thought that public equity value investing was "my thing". At the beginning of 2016, I felt the urge to step away and explore other avenues of business and investing. I got involved in more PE, VC and angel type investing as well as managements/boards of companies. It was fun. What I think I missed all along was the human interaction in business. I got a whole new appreciation for how Buffett runs Berkshire and how much public investors underestimate the question of managements/boards (note to self: when there are emotions involved rationality goes out the window). Buffett was right when he said in the recently released "Becoming Warren Buffett" HBO documentary (btw, it is amazing) that you can understand investing from a book but you cannot understand people by reading books. So I learnt that value, patience and compounding work for me, however there is more than one way of expressing these ideas. What these qualities give me is a guiding principle. These give me a "why" but "how" I plan to apply them is really where the fun starts. This doesn't just apply to investing btw.

Trade expectations for appreciation
I heard this from Tony Robbins recently. Note to self: there is nothing wrong with expectations but before you go one step further make sure that you are grounded and appreciate what you do have. Expecting constantly without appreciating will drive you crazy.

Btw, Tony's I'm Not Your Guru documentary is a must watch. Looking forward to attending his UPW seminar in London this April.

Saturday 16 April 2016

Weekend reading

Bernard Arnault Full Q&A (Oxford Union)
Bernard Arnault is the Chairman and CEO of the world’s largest and most successful luxury goods conglomerate, LVMH, which controls brands such as Louis Vuitton, Fendi, TAG Heuer, Bulgari and Marc Jacobs. While growing LVMH’s portfolio of prestigious brands at a staggering pace, Arnault made notable investments in companies such as Netflix over ten years ago. In March 2015, Forbes estimated him to be the world’s thirteenth richest person.

Jamie Dimon’s 2015 Letter (JPM)
Related: Brooklyn Investor commentary

Jeff Bezos 2015 Letter (Amazon)

Sam Hinkie’s Letter – Thinking about thinking (ValueWalk)
Probably the longest ever resignation letter.

Semper Augustus Investments Group: 2015 Annual Letter (Value Investing World)

Grant's Spring Conference Notes 2016 - Bessent, Dimon & More (Market Folly)

Russia - a forgotten market? (East Capital)

Djibouti Is Hot (Bloomberg)
How a forgotten sandlot of a country became a hub of international power games.

Rising in the East (60 Minutes)
China's film industry has grown so big so fast, that it is now looking to compete with Hollywood.

This is fascinating - The brain on LSD revealed: first scans show how the drug affects the brain (Imperial College London)
"Our brains become more constrained and compartmentalised as we develop from infancy into adulthood, and we may become more focused and rigid in our thinking as we mature. In many ways, the brain in the LSD state resembles the state our brains were in when we were infants: free and unconstrained. This also makes sense when we consider the hyper-emotional and imaginative nature of an infant's mind."

The sugar conspiracy (Guardian)
In 1972, a British scientist sounded the alarm that sugar – and not fat – was the greatest danger to our health. But his findings were ridiculed and his reputation ruined. How did the world’s top nutrition scientists get it so wrong for so long?

Sunday 3 April 2016

Some Thoughts on Minor International

Minor (MINT:TB) is a Thai listed hotel and food business operator with an excellent track record. I’ve been keeping track of the stock for the last few years mostly as a spectator, for which I’ve been kicking myself but that’s beside the point. The company was formed in the late 1970s by an American businessman (now Thai citizen) Bill Heinecke, who took a $1,200 loan and over time turned it into MINT. As a fun fact, the company is called Minor as Mr Heinecke (who owns 33%, c. $1.5bn value) was still a minor when he founded it. While he is relatively unknown outside of Thailand/SE Asia his story is pretty remarkable. After the write up there are a few links to profiles, interviews and he also has a good book about entrepreneurship that I recommend reading.


MINT consists of three businesses: hotel (51% of revenue), food (41% of revenue) and retail (8%) and prior to two corporate restructurings operated with three separately listed entities, coupled with cross-holdings in true Asian conglomerate style (see structure below):

  • Royal Garden Resorts (Minor International since 2005) was founded in 1978 with one hotel on the Pattaya beachfront (now Pattaya Mariott Resort & Spa) and listed in 1988
  • Minor Food Group (MFG) was founded in 1980, with one Pizza Hut. This business grew to introduce other Western franchise concepts in Thailand (Swensen, Sizzler, BK, Dairy Queen and so on). Ultimately, Minor lost the Pizza Hut franchise and in “retaliation” formed the Pizza Company (now it’s a larger franchise in the country than Pizza Hut)
  • Minor Corp, which houses the retail business (stores of Espirit, Gap, Tumi etc) in Thailand, was listed in 1991

The first of the consolidations was in 2005 when MINT closed the acquisition process of MFG it started in 2001 (MFG’s results have been consolidated since 2004), which lead to the re-branding of RGR to MINT in 2005. Then in the middle of the financial crisis MINT announced that it planned to acquire Minor Corp and unwind the cross-holdings in an all-share deal. Following these restructurings, MINT now houses all three businesses and Mr Heinecke, who is the chairman and CEO, and his group owns 33% of the company. Below is a summary of MINT’s major moves over its history to date.

Source: Company filings

MINT has been a clear beneficiary of smart capital allocation as well as the growth in SE Asia. Since 2005 to date the share price compounded c. 24% (TSR in THB); revenue and EBITDA grew 16% p.a. and 14% p.a., respectively; while ROIC averaged 18%. Current market cap is $4.6bn (EV $5.8bn) and trades on forward EBITDA of 18x and PE of 26x, respectively so it is hard to call the stock cheap statistically.

Source: Bloomberg. Share price and TSR (THB)


What’s key for MINT are the brands it built around the hotel, food and retail businesses over the last 20+ years. Essentially these avenues allow mgmt. to reinvest capital at very high rates, with the added benefit that some of these brands “travel”. Oftentimes you find a brand, such as Tingyi’s Master Kong in China, which is the dominant one in the country but doesn’t travel well outside of the country thus the company is restricted to its home market. Now you could argue that when you rule the noodle empire in China, why would you want to go elsewhere. If the company in question is based in a smaller market or country which is saturated, expansion and brands that travel i.e. having some form of a platform, becomes very important. MINT has historically partnered with leading global brands (see Pizza Hut, Four Seasons etc) but has never been shy to apply lessons learnt from these partnerships to develop their own businesses over time (e.g. Pizza Co or Anantara). The other interesting part is that generally speaking MINT’s existing and new investments are in countries along the new Maritime Road (from China’s OBOR), which is taking everything at face value is not a terrible thing.

Hotel Business

The hotel business (previously RGR) started with one hotel in Thailand. As of 2015 it has 138 properties and over 17,000 rooms (inc. majority owned, JVs and management letting rights and managed) globally. Over the last few years this business contributed 50% to revenues and 60% to EBITDA on average.

Source: Company filings

MINT follows an “asset-right” strategy, which is a combination of direct hotel ownership as well as management contracts. Generally speaking, when the company enters a new market it starts out with management contracts to establish itself. Once it feels more comfortable, it would form a JV with a local partner and then finally own the assets outright. This is the strategy the company followed when the balance sheet was fairly levered before or when it recently entered Africa.

Source: Company filings

Of the existing 138 properties, 30 are purely managed, 49 are under management letting rights (Oaks business, serviced suites in Australia and New Zealand), 30 are in different JVs while 29 are majority owned.

The majority owned hotels contribute 45% to revenues, with nearly 5,400 rooms globally with brands such as Anantara (developed by MINT), Four Seasons, Marriott or St Regis. The most recent addition to the portfolio was Tivoli (hotel operator in Portugal and Brazil with 4-5 star properties). MINT acquired the business to use it as a platform to expand in Europe, LatAm and certain parts of Africa. The acquisition price was €290m or $330m for 2,982 rooms ($110k/key on average) or 9.6x EBITDA (MINT notes normalised 2015 EBITDA of €30m), which is neither expensive nor cheap. Local contacts confirm that the hotels are very good but nothing out of the ordinary.

The Oaks business (management letting rights) contributes 25% to revenues and is a business MINT acquired in 2011 in a bid to increase the company’s asset-light earnings stream. Oaks was under financial stress at the time due to leverage so the purchase was rather opportunistic. The all-in price was around $95m with 2011 EBITDA guidance of $35-40m. Since 2012 (first full year of consolidation) revenues increased c. 50% through 2015. The business now includes over 6,200 rooms in Australia, New Zealand and UAE.

Real estate business (Anantara Vacation Club and residential sales) add c. 20% to revenues and include the development of properties either for sale (the residential part) or a timeshare/lifestyle club (AVC). Currently, AVC has 6,900 members (majority from China) and 137 units in inventory.

Hotel management and JVs contribute around 5% to revenues each on average and include around 30 hotels (over 3,900 rooms) and 30 hotels (over 1,200 rooms), respectively.

The below slide gives an overview of the expansion plans, additionally the company plans to invest to increase it’s residential as well as AVC inventory.

Source: Company filings

Food Business

As noted above the food business has been consolidated since 2005 and it contributes c. 40% to revenues and 30% to EBITDA on average. It is a more stable business and acts as the cash cow to fund the hotel/real estate growth. It includes over 20 brands (The Pizza Co, Sizzler, BK, DQ, Thai Express etc) and over 1,800 restaurants that are either owned or franchised (roughly 50/50). In fact, MINT was one of the first companies in Thailand to introduce the QSR concept. Since 2005 segment revenues increased 4x and the company operates in four hubs: Thailand, Singapore, Australia and China. The below two charts give a good glimpse as to what’s in this business. MINT plans to increase the restaurant count by 70% from 2015 through 2020. While segment revenues have grown over the years due to the expansion of outlets the concerning part is the declining SSSG.

Source: Company filings

 Source: Company filings

Last but not least the retail business is about 9% of revenues and 3% of EBITDA on average, and includes retail outlets with brands such as the Gap, Espirit, Bossini as well as contract manufacturing of FMCG. As of 2015 the business has 269 fashion, 16 cosmetic and 22 household outlets.

Below is a selection of key financials for your perusal but I’d bring your attention to a few items:

  • Leverage: It’s high. Currently net debt/EBITDA and EBIT are around 4x and 5.5x with the average over the period being approx. 1x lower. This is the result of the breakneck speed growth. While it’s high it is not unmanageable and if the company stopped investing in growth it could technically begin to repay it
  • Share count: The reason while leverage is not higher is due to share issuance over the years. Since 2005 the diluted share count increased by 5% p.a., due to issuance for M&A, options, stock dividends (most recently in 2015) or warrants. While net income increased 21% p.a., EPS increased by “only” 15% p.a. as result of dilution
  • Free cash flow: MINT has been largely free cash flow positive only including investment in PPE. Accounting for additional investments and M&A the picture is slightly different. However, have to say that looking at the history (e.g. Oaks) most of them turned out to be accretive investments 
  • Dividend: MINT paid out roughly 35% of net income as dividend (either cash or in-kind), while DPS compounded 11% over the years. The current yield is about 1%
  • Margins: Net, EBIT and EBITDA margins averaged 11%, 15% and 23% over the last ten years and generally speaking have been relatively stable
  • Returns: ROIC averaged 18% and you can see a recovery from 2011 onwards due to a shift towards a more balanced “asset-right” strategy
Source: Company filings. Dividend payout refers to average payout


MINT is currently going through a transformation and growth phase (some say it has never been on a different one) both in its businesses as it focuses on organic growth as well as M&A, diversifying further away from its base in Thailand. Per the company’s estimate this should translate to 15-20% average p.a. growth in net income over the next five years with ROIC of over 15%.

Source: Company filings

I’m not a big fan of five year plans, mostly for the reason that nobody knows what will happen by year five and from experience with boards and managements these plans are by and large missed. What I look at instead is track record – how did a company do in various economic and political scenarios. It tells a lot about management’s ability and the company’s resilience. For MINT, given the volatility of Thailand (plenty of coups for a relatively peaceful country) it is rather easy to see. While one-off events have impacted results the company has grown right through them over the long term.

Source: Company filings

As noted above the multiples are quite rich and the highest they have ever been, well above their historical average levels. In fact, a large part of the share price performance was driven by the re-rating of the multiples which you can see below.

Source: Bloomberg

Source: Bloomberg

While I rarely come across formal guidance from Asian listed businesses, the below two charts are as far as I’ve see any go. MINT is essentially saying that their plan (and again note the above caveat) is to increase the 2015 THB7bn net income (note it includes a large write-up) by call it 80-100% over the next five years (it’s roughly a 15% CAGR).

Source: Company filings

Additionally, the chart below shows MINT’s capex requirements (the bars) and EBITDA coverage. If you take the 2020 committed capex of around THB5.5bn and the guided coverage of 4x, it would imply THB22bn EBITDA vs the THB11bn in 2015 (i.e. the same sort of growth rate as net income).

If you put the forward P/E and EBITDA multiples on these figures, assume no further dilution and discount it today, the per share value could be around THB55-60 or 50-60% higher than compared to current.

Source: Company filings

Another way to look at it is to run cash flows with different growth rates. At present I believe the market is pricing an 8-9% p.a. increase in EBITDA and FCF vs the 15% p.a. as above so you’ve a range for the valuation and what you believe the appropriate growth rate is. MINT is arguably one of the best compounding machines around but I’d say that to get to their valuation range many things have to go right in terms of timing and execution. It is not far-fetched at all (judging by track record) and if one believes in the “platform” value of MINT, i.e. the multiples of avenues for reinvestment, which has been historically demonstrated, it is certainly plausible.

I’ve been thinking about what’s the genius of Mr Heinecke. He doesn’t strike me as an “outsider” type from a financial engineering or capital allocation perspective but more so as a brand builder or entrepreneur (like Mr Branson less the hot air balloons). Mr Heinecke has been a clear beneficiary of the EM growth (particularly Thailand) but also had the savvy to build out these great platforms (sometimes opportunistically) with solid brands.

Alternative Ways of Investing in MINT

MINT is primarily traded in Thailand and there are a few illiquid ADRs here and there but largely not worth your time. If you looked carefully at the list of shareholders you’ll find that a large chunk of shares are held by Symphony International (SIHL). I wrote about this stock briefly a while ago but thought it would be worthwhile to circle back.

SIHL is a closed end fund listed in London, with its largest holding as MINT. They hold an 8% stake ($350m value), while the key person behind SIHL/chairman of the GP is also on the board of MINT. As of December 2015 the SIHL NAV is around $700m so clearly MINT is a substantial holding for the fund. Diluted NAV per share is $1.3 per share (shares trade in $); listed investments make up $0.9/sh, unlisted investments c. $0.3/sh with $0.1/sh in temporary investments, trading at an approx. 40% discount to NAV (not terribly different from historicals). Now for the famous “what are you getting for free”: if you back out the unlisted investments and cash you are still getting the listed investments at a discount.

But it begs the question why is there such a discount? To put this into context: SIHL went public in 2007 at $1/sh while the current price is $0.75/sh…clearly a very different story compared to MINT. I wrote about the reasons in the past but it’ll be a combination of the management fees, capital allocation, ill-timed rights issue, substantial options granted to the manager and limited inclination to do anything about the discount. On the upside there are the 2017 clause to distribute 80% of the NAV as well as a few large shareholders who have been active and could be further catalysts for the closing of the discount.

Further Resources
Bill Heinecke Amazon Author Page
DealBook Profile
Bloomberg Profile
Bloomberg Video Interview
CNBC Video Interview
Investor Q&A after the 2014 Results 
MINT 2015 IR Presentation
SIHL's Investments
SIHL’s 2015 Annual Report

Weekend reading

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Eiichi Shibusawa - The Father of Modern Capitalism in Japan (Undervalued Japan)


Templeton’s Emerging Markets Guru Mark Mobius Steps Down (Barron's Asia)

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An Approach to Long-Term Investing in Asia - Koon Boon Kee of The Moat Report Asia (Manual of Ideas)

A Dozen Things I’ve Learned from Chamath Palihapitiya About Investing and Business (25iq)

The Secret to Tony Robbins’ 38 Years of Success (Early to Rise)
This is powerful: "I always tell people — Life supports what supports more life. If you’re trying to support yourself, you’re going to get a certain level of insights. If you’re trying to support your family, you’re going to get a different level of insights. If you’re trying to support your community or humanity, you get insights most people never dream of. That’s really been the secret to my 38 years because those are my real goals."

How People Learn to Become Resilient (New Yorker)

Umberto Eco’s Antilibrary: Why Unread Books Are More Valuable to Our Lives than Read Ones (Brain Pickings)

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Getting to Si, Ja, Oui, Hai, and Da (HBR)

Adam Grant The surprising habits of original thinkers (TED)

We’d like to be clear that while this letter is written with an artistic audience in mind, these thoughts transcend professional boundaries and apply to all people, regardless of profession.

While it’s true that the issues facing the world are complex, the answer to peace is simple; it begins with you. You don’t have to be living in a third world country or working for an NGO to make a difference. Each of us has a unique mission. We are all pieces in a giant, fluid puzzle, where the smallest of actions by one puzzle piece profoundly affects each of the others. You matter, your actions matter, your art matters.

If you are into music, highly recommend the following video - Pharrell Williams Masterclass with Students at NYU Clive Davis Institute (YouTube)