Business

Jatukham fever shows no sign of breaking

Panya Ruengsawang (left), owner of a Jatukham amulet shop in Phuket City, discusses amulets with a customer.

PHUKET City: Jatukham Ramathep amulets and shops that sell them seem to be springing up all over Phuket, reflecting the hope that springs eternal among their devotees.

The amulets, priced from 50 baht to several hundred thousand baht, have become the latest craze – not just in Phuket but across the country and even abroad.

Nationwide, the business was estimated to be worth 20 billion baht in 2006, according to research by Kasikorn Research Center.

Shops selling the Jatukham amulets have been operating in Phuket for more than a decade, but it is only in the past several months that the number and visibility of these shops has skyrocketed, following a spate of media reports about the amulets.

In the past two or three months alone, between 10 and 20 new amulet shops and stalls have opened across Phuket, said Panya Ruengsawang, owner of one of the oldest Jatukham shops in Phuket City, on Rassada Rd near the Suriyadet Circle.

He estimates that about one million baht exchanges hands every day in Phuket’s Jatukham trade.

“When I started my shop in 1993 there were no more than three amulet shops in Phuket to serve amulet lovers. However, in the past year Phuket has seen at least 10 new shops. During the most recent Jatukham boom over the past two or three months, another 10 to 20 amulet shops have opened,” said K. Panya, 55.

Originally from Nakhon Sri Thammarat, the amulets are believed to bring good luck and business prosperity, which is why younger people and business owners are buying them, K. Panya said.

“It used to be that our customers were mostly older folks, but now we have more working men and women, along with teenagers, buying amulets. The local interest in Jatukham amulets has definitely been brought on by the national craze,” he said.

“We also have a lot of international business owners who want to take the Jatukham amulets home with them, so they are buying amulets as well. The prices are going up so quickly that sometimes I reserve a top amulet for about 100,000 baht, but before I can even put it in the customers hands the price goes up to 300,000 baht.

“The most sought-after type of Jatukham are of the original Jatukham Hluk Mueng series, produced at Wat Mahatat in 1987. Prices for these generally start at 400,000 to 500,000 per amulet because they are so difficult to find now. The Jatukham Kod Sed Thee (Megarich) is also very popular, especially in Singapore and neighboring countries. Those can fetch between 60,000 and 80,000 baht each.”

The boom in amulet shops in Phuket is helping K Panya’s shop. Although there are fewer customers, they are buying more expensive amulets.

“I don’t have as many customers as I used to because there are so many shops to choose from now,” he said. “I used to turn a profit of 800 to 2,000 baht per day, but since the Jatukham boom started three months ago, my profit jumped to 4,000 to 6,000 baht per day. Some shops have more than 10,000 baht per day profit.”

K. Panya said that he expects the prices, and profits, from Jatukham amulets to continue to increase in Phuket, especially if more miracles are attributed to them in the media.

With so may people getting in on the Jatukham bandwagon, perhaps it should come as little surprise that the government is seeking for ways to get its share of the spoils.

In late April, Revenue Department Director-General Sanit Rangnoi said the department was sending officials to check the estimated income from Jatukham transactions and was considering whether to tax enterprises related to the soaring sales of the amulets.

“There is a tremendous amount of money floating around in the amulet market. If the production of the talismans is for commercial purposes, it should be taxed. If the production is done purely out of faith, it may be exempt,” he said.

Thus far there has been no announcement that the Revenue Department was planning to move forward with the tax.

By Richard G. Watson

Hedging with asset-backed lending

Students gather in the common room at Swansea College in Wales. But when classes are over for the day, they need somewhere to lay their heads, which is where the Brandeaux Fund makes money for investors.

This week’s article will discuss two completely different Fund Management Groups with only one area in common: their head offices, which are in London.

The first group, Matrix Money Management London, has teamed up with Stillwater Capital Partners, a US-based investment house. Stillwater Capital specializes in asset-backed lending and the Matrix Asset-Based 2 Fund invests in a fund of hedge funds employing these strategies.

The fund targets a 10% annualized return with very low volatility in the range of 1-2% annualized. It has a low correlation to equities, bonds and other hedge fund strategies. The fund offers an extremely diversified portfolio with a minimum of 30 underlying managers who, in turn, will be diversified across 30 to 100 positions each. The aim of this strategy is to produce consistent predictable returns.

Asset-backed lending is a relatively new entrant to the hedge fund universe and has virtually nothing in common with most hedge fund strategies. This reflects the reality of how diversified hedge funds can be, with strategies so different that they bear almost no relationship to each other.

Asset-backed lending primarily originates loans to small- and medium-sized companies, secured against their assets rather than their operations or future business prospects. These loans are generally secured against a specific asset of the company, which is typically taken outside the corporate structure.

The borrowers generally face a liquidity constraint, which is attributable to the timing of their cash flow needs rather than to any inherent weakness in their underlying business.

Asset-backed lenders are able to negotiate pricing which more than compensates for the risks incurred. Pricing usually includes an attractive margin, which is supplemented by fees and floors on floating lending rates.

The diversification of managers and holdings can lead to around 2,000 underlying positions but also achieves a broad exposure to different industry sectors and countries.

Asset-backed lending (ABL) is increasingly being dominated by specialty finance companies like GE Capital and hedge funds as banks are increasingly unwilling to transact in lending facilities of small sizes. Banks are usually lacking in speed and flexibility in this sector. ABL hedge funds are, broadly speaking, ultra-specialized “niche” finance companies that realize the value of originating, warehousing and managing secured loans and cash-flow producing assets.

The Stillwater New Finance Funds, launched in 2004, have never dropped in value and have returned results inside their targeted range. This approach adds diversification to any portfolio.

The second fund management group, Brandeaux, was featured in last week’s article with respect to their ground rent funds. However, this is only part of their business; university student accommodation and key person accommodation being their other major areas.

The name Brandeaux has become very well known in the offshore investment world and is held in very high regard because of the level of consistency of returns to investors.

University student accommodation is a growing market with around 100 universities in the UK and a student population growing at between 3% to 5% a year.

It is at the affluent end of the market that Brandeaux offers accommodation. Brandeaux typically buys residential blocks holding between 200 and 600 beds. These are either in the format of individual self-contained units, similar to a hotel, or a mixture of self-contained units combined with three- to five-bedroom apartments. One acquisition in 2006 covered 900 beds for students at the University of Birmingham.

The tendency is now for universities to have 50-week scholastic years and there is a very real shortage of quality accommodation in this area. This ensures that the accommodation is virtually fully let – 98% in reality.

University years are broken up into three terms and Brandeaux charge students 50% of the annual fee before the commencement of the first term, 30% before the second term and the balance taken before the third term. The Brandeaux funds that specialize in student accommodation ensure future payment by bank or parental guarantees. Losses are historically only in the range of 1% to 2% per annum and this is catered for in the charging structure. Brandeaux are currently negotiating with four different groups for new student accommodation, two of these are expected to be finalized during June 2007.

The historical returns for the Brandeaux student accommodation fund average an annualized rate of 9.36% and in the latest 12 months, 10.78%. In addition, Brandeaux offer “mixed” funds which consist of 65% ground rent, 30% student accommodation and 5% key personnel accommodation. These funds are available in three currency classes: pound sterling, US dollar and euros and have been very successful. For example, the sterling fund averages and annualized rate of 10.1% and in the latest 12 months, 12.8%.

The demand for student accommodation is driven by the continuing increase in the number of students in higher education and the attraction of the UK as a leading destination for international students. Sector growth, and thus fund performance, is not correlated to the UK economic cycle or to the general UK residential property market.

Brandeaux pre-lets over 50% of its beds to leading UK universities under nomination or lease agreements, which are typically multi-year and allow for annual rental increases at market rates (5%+). Brandeaux now has 30 buildings, purpose-built to a high standard, in 13 cities across the UK.

Brandeaux entered the student accommodation market in the late 1990’s. None of its funds have ever reflected negative performance. Its website is: www.brandeaux.com

I have written about Brandeaux student accommodation in the past but with its continued, and even improving returns, it is worthy of inclusion here.

Richard G Watson runs Global Portfolios Co Ltd, a Phuket-based personal financial-planning service. He can be reached at Tel: 076-381997, Fax: 076-383185, Mobile: 081-0814611. Email: imm@loxinfo.co.th

ON THE MOVE

Dr Krittavith Lertutsahakul has been appointed managing director of Bangkok Hospital Phuket (BHP) and chief executive officer of Group 4 of the Bangkok Dusit Medical Services Co Ltd, which includes BNH Hospital in Bangkok, Bangkok Hospital Phuket, Bangkok Haad Yai Hospital and Bangkok Hospital Prapradang. He completed medical school at Chulalongkorn University and the Advanced Management Program at the Wharton School of the University of Pennsylvania, USA. Before joing BHP, he was hospital director of Samitivej Sukhumvit and Samitivej Srinakarin hospitals in Bangkok.

Dr Narong Budhraja, from Bangkok, has joined the Bangkok Hospital Phuket team as the deputy hospital director. A graduate of the Dayanand Medical College in India, he was previously at the Department of Orthopedic Surgery at BMA Medical College and Vachira Hospital in Bangkok, and was a clinical associate at the Department of Orthopedic Surgery, Faculty of Medicine at the University of Hong Kong. Before moving to Phuket he was the director of Bangkok Hospital Samui.

Scott Mawhinney, from Canada, has been appointed general manager of the Central Karon Beach Resort. He holds an executive MBA and a degree from Lausanne Hotel School. He has more than 25 years’ international experience and is fluent in English, French and Spanish. Mr Mawhinney has eight years’ experience with Shangri-la Hotels and Resorts and, before taking up his current post, was the resident manager of Shangri-la’s Al Husn A Mascate in Muscat, Oman..